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Global hotel chains are going beyond kettles and congee to warm the hearts of Chinese domestic travelers, a market worth a reported $734 billion (RMB5.05 trillion) last year.
A key question remains whether it is better to launch a dedicated brand in China, or adapt a chain’s existing brands to the local market, which is expected to bloat even more as a government policy to boost domestic consumption continues.
Hyatt Hotels and Hilton are examples of two global chains with differing approaches to the same end point of snaring a bigger share of Chinese domestic travelers, whose preferences are continually evolving.
Despite having 19 brands globally, and a track record of 50 years in China with 74 operating hotels and more than 100 hotels in the pipeline, Hyatt is seeding a new homegrown Chinese brand, UrCove (pronounced as “your cove”), in partnership with BTG Homeinns Hotels Group.
Stephen Ho, Hyatt’s president of greater China for global operations, said both Hyatt and HomeInns believe there is a need for a China brand as it is “unique,” born out of an “unprecedented” marriage of Hyatt’s international quality and the local insights of Homeinns, China’s largest hotel chain.
“Our partner made it clear in our earlier discussions that they don’t want to become another ‘surrogate mother’ to our brand, like other tie-ups between local and international operators. We share the same view that a new brand is the best option to penetrate this high growth segment effectively,” Ho told Skift.
But while Hualuxe targets upscale domestic travelers with a brand that is steeped in Chinese etiquette, culture, and heritage, UrCove homes in on young and rising middle-class leisure and frequent corporate travelers with hotels that offer good location, modern design, functionality, practical amenities, F&B excellence, and technology staples such as mobile experience, connectivity, and digital payment options.
Ho said this rising middle-class segment is “underserved.” In their private lives, the customers are “internationalized, independent, and tasteful” and would use premium hotels for personal stays. But on business trips, they usually have to settle for a compromised stay in midscale hotels due to limited corporate travel and entertainment budget.
Chinese Mind Reading
Hilton, on the other hand, prefers to stick to its existing 17 brands, of which eight have already been deployed in China, and “localizing” them to suit market needs and preferences.
It is upping the localization technique, as seen in utilizing neuroscience research to look into the minds of Chinese travelers when launching its Canopy by Hilton brand in China.
The research, conducted by Kantar and Nielsen, monitored the brain activity of Chinese travelers through EEG sensors and tracked eye movements to pinpoint what resonates with them. Some 1,000 Chinese citizens of different ages and regions who have stayed in an upscale hotel at least once were surveyed.
While this mind reading hasn’t produced mind-blowing findings, it has helped Hilton to ensure that Canopy resonates with the market.
Among the findings: Over 80 percent of respondents are keen to explore local cultures. Fifty percent said they prefer hotel walls to be curated with local items, and 48 percent favor unique and stylish design decorations. Over 60 percent prefer thoughtful, personalized perks over opulence.
Daniel Welk, Hilton’s vice president of luxury and lifestyle, Asia Pacific, said these findings show a shift in Chinese travelers’ traditional mindset of sightseeing at iconic landmarks, to distinctive experiences that embrace local cultures and communities — even at home.
The first Canopy by Hilton in China, which opened in Chengdu in January, incorporated the findings by showcasing local artists’ work and aesthetic touches that allude to Chengdu’s history as a meeting place of arts and commerce along the Silk Road. It offers guests a pack of mah-jongg pieces as a welcome gift, a throwback to the local tradition of playing the game with friends, families, and even business partners. It also provides free use of bamboo bikes to explore the neighborhood.
Vast and Exciting
Global chains are eager to get it right in China because the potential is vast and exciting. Hyatt cited China’s culture and tourism ministry’s figures that show domestic tourism revenue rose 13 percent in 2018, over 2017, to $734 billion (RMB5.05 trillion).
Further, China’s middle class will account for over a third of its population by 2030, with a disposable income of about $10,000 per year (RMB67,000).
The country’s population is expected to reach 440 million by next year, giving rise to opportunities for global chains to reinvent the product in every segment of the market, from budget and midscale to upper luxury.
There is also a need to endear domestic travelers to the chain for their outbound travel dollars.
Hyatt, which aims to double its presence in China, believes UrCove is an avenue to gain deeper China insights, build brand awareness and grow loyalty with a new set of travelers.
“Ultimately, we want to introduce Hyatt to consumers that might not be familiar with our brands today. Bringing Hyatt to the fastest growing segment is the logical way for us to grow our customer base and presence in this very important market,” Ho said.
The first two UrCove hotels are expected to open in Shanghai and Beijing by late 2020. Ho expects to open more UrCove hotels in other cities like Guangzhou and Shenzhen.
While chains have been catering to Chinese needs by providing kettles in-room and congee and dim sum at breakfast, such efforts are no longer enough.
“Chains need to take a more holistic approach than just offering Chinese elements within the hotels, which is already the norm,” said Cetin Sekercioglu, CEO and co-founder of Upgrading.cc, who has years of experience in China from his previous stint with Shangri-La Hotels & Resorts.
“The emerging Chinese millennial travelers and those with higher spending power, for example — they will prefer a uniquely local experience over the familiar one; pork knuckles and German beer over congee and chicken rice,” he quipped.
Chains therefore have to constantly relearn as the market evolves.
Sekercioglu veers toward a dedicated China brand as the winning strategy. “There should be differences between hotels in China and outside of China. If you have a brand specifically targeting at Chinese guests, you will get good response.
“F&B, for instance, plays a big role in China. There are so many good restaurants available in every city, all within a short distance from hotels. Therefore it is crucial that the hotel is able to create a perception of difference in product, service, people, image, and connectivity,” he said.
It is interesting, however, that global chains aren’t exactly rushing in to launch new China brands. UrCove is the first new China brand by an international chain in recent years. IHG’s Hualuxe has had good traction since launching seven years ago, with eight hotels opened — but that’s still far away from its stated goal in 2013 of bringing the brand to 100 cities in China eventually.
It shows while the market is huge, so is the competition and challenges.