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Column
‘India And China Represent The Biggest Market Potential In Inbound And Outbound Travel’
China and India have been the emerging markets of late and
globally these two countries are drawing a lot of attention in every arena and
the hospitality industry is no exception. Andrew Clough, VP of Development,
Hilton International Middle East & Asia Pacific writes about both the
markets and the potential they hold for Hilton
Neither China nor India is sleeping. Both countries are very much awake and
powering full steam ahead. The economic trajectory of both countries has been
set and in line with this, the hospitality industry promises to grow at very
healthy rates fuelled by an expanding middle class, easier access to visas,
and an open skies policy and a growth in low cost carriers that makes travel
far more accessible.
Comparisons between China and India are obvious, given their population sizes
and similar stages of economic development. However, in terms of travel, China
is marginally ahead of India with a more developed infrastructure, a larger
outbound market and a slightly more mature air traveling public (140 million
domestic air passengers on 750 aircraft compared to India's 15 million on 164
aircraft as at early 2005). Both markets represent the biggest market potential
in terms of inbound and outbound travel. It's easy to see why hotel companies
are heading there.
Additionally, there is a second less obvious reason for Hilton to stake out
a strong presence in these markets. Globally, the hospitality industry is growing
at solid rates and many industry players are predicting a labour crunch in the
not too distant future. If we take Hilton in Asia Pacific alone, we now have
50 properties open or in pre-opening stage, and the aim is to double our portfolio
in the next three years.
That means another 50 General Managers, 400 department heads and thousands of
new staff. Both China and India, especially English-speaking India which is
renowned for exceptional hospitality standards at reasonable rates, will provide
us with a pool of talent to underwrite the planned expansion. By being in India
and grooming a pool of team members to the standards of Hilton globally, we
aim to "export" these qualified people abroad in middle management
and senior positions.
Outbound China
Similarly, to meet the anticipated boom in outbound Chinese travellers, hotels
all over the world will require Chinese speaking staff to ensure guests are
comfortable and well cared for, in a way that we saw Japanese guest relations
officers and front office managers implanted throughout the key Japanese destinations
in the early 1990s.
Hilton is already benefiting from a burgeoning Chinese outbound market and in
terms of Asia, we have seen digit jumps this year into Hiltons in Singapore,
Petaling Jaya, Kuala Lumpur, Osaka. Within Singapore there has also been a slight
change in the profile of the traveler with more leisure travellers returning
on an FIT basis to do their own thing.
Interestingly we are also seeing increases, albeit off a small base, into Hilton
Maldives Resort & Spa and Hilton Hua Hin Resort & Spa. Both are luxury,
high end resorts (Maldives starting at US$275 a room, but averaging way above
this) and target the ultra FIT traveler. Prior to the tsunami, Hilton Phuket
Arcadia Resort & Spa reported a swift growth in conference delegates from
China, where we were taking 200-300 rooms/night for 3D/2N conference. We are
again bidding for business to this market.
Outbound India
The number of Indians staying at our Hiltons outside India is up 23% in the
year to date September 2005. This proves that our stronger brand presence is
helping business everywhere. Key hotels benefiting from the Indian traveller
include Hiltons Colombo, Petaling Jaya (KL), some of the Hiltons in London,
Paris, Makkah, Cairo, and Shanghai. Top 3 Source Markets are Bangalore, Mumbai
and Delhi.
Hilton's growth in India
Eighteen months ago Hilton had no presence in India. Today we have hotels in
8 locations throughout the country and have five management contracts signed
for additional new builds (Bangalore, Chennai, North Mumbai by 2007 and a retreat
in the hill station area outside Pune). It's no secret that Hilton wants to
be a lead player in this market and to have multiple of the number of hotels
we have now.
We are adding more resources to the development team there and actively pursuing
the expansion of all three Hilton brands Conrad, Hilton & Scandic. You could
say that we are now laying the foundation for a beefed up portfolio for the
future.
We hope to at least treble the number of operating hotels. Most of the growth
will come from greenfield (new build) projects through management contracts.
Growth in China
China is one of the most attractive markets and has enormous potential for Hilton
in terms of both outbound and inbound tourism. As the first international hotel
group to establish a five star hotel in China, when it opened the Hilton Shanghai
in 1988, Hilton enjoys a strong brand awareness in this market. Today, we manage
five properties in China in the cities of Beijing, Shanghai, Nanjing, Chongqing
and Shenzhen.
In terms of growth, our short term strategy for China is to expand our brand
into gateway cities with cultural attractions and historic attractions that
appeal to the international leisure traveller and into cities with clusters
of multi-national corporations that attract corporate travellers. Over the medium-to-long
term we will review opportunities to strengthen our presence in secondary cities
with proven capability of sustaining an international hotel brand and which
can be profitable for our upmarket Hilton brands. The development of our luxury
brand, Conrad, will be opportunity driven and will be isolated to the largest
cities and major resort destinations. As with our Asia business model, expansion
will come through management contracts. We expect to have dozens of Hilton family
of brand hotels in this country but the time frame is not set.
China has perhaps more competitive congestion thanks to a combination of domestic,
regional and international players operating in the one market. There are more
people running to the table and it's marginally more difficult to get a spot.
As such, the risk for companies is not setting up locally-based and well experienced
teams early to pursue leads and deals and to guanxi network.
In China there is a risk of over investment and the tendency to simplify the
market into one generic block. Each region has its own risks and returns, in
the same way that it has it's own cultural differences, and must be reviewed
on its own merits. There are a lot of property developments in which the owners
themselves are not getting a return on capital, let alone the operators. Finally
in China, the legal environment is different and it's crucial that operators
have their own local knowledge.
Hilton's expansion in the China and India market will follow a management contract
model.
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