Thursday, May 20, 2010

Luxury hotels beefing up China presence

Country one of the largest markets for high-end goods and services

High, high up, on the 118th floor of Hong Kong's tallest building, a deep concrete pit awaits mutation into a swimming pool. Hard-hatted, dust-covered workers swarm about a site that will soon house six dining venues, a spa, a gym and 312 rooms with views of Hong Kong and the surrounding islands.

The opening of the Ritz-Carlton, which will be the world's highest hotel - with an alfresco rooftop bar 490 metres above sea level - is still about six months away.

But already, the hotel has 20 bookings for wedding receptions and is getting six or seven more enquiries a day.

No wonder, really. As the global economy claws its way precariously back towards more normal growth, few places have regained their confidence - and the willingness to splurge on luxury goods and services - more quickly and firmly than China, including Hong Kong.

'People book much further out here than in other parts of the world. With weddings, it's partly to do with securing special locations on auspicious dates, but it's also a sign of the confidence people have here,' Mark DeCocinis, Ritz-Carlton's regional general manager, said in a recent interview at the construction site in the International Commerce Centre.

'The Asian hotel market has come back stronger and more quickly than other parts of the world - and China is leading the way.'

New luxury hotels have been popping up all over the world. The Armani Hotel Dubai opened last month in the world's tallest building, the Burj Khalifa. But the pace of growth has been strongest in Asia.

Asia's hotel boom has not been as easy as just build it, and they will come. A race to open hotels in Beijing to coincide with the 2008 Olympic Games contributed to a slump in average room rates and many empty rooms once the Games were over.

In Shanghai, where the World Expo opened this month, about 20 upmarket hotels will open this year, according to, an online database. The sheer volume of new rooms has raised concerns of potential oversupply.

It is a risk many hotel executives are willing to take. For even though much of the country's giant population struggles to make ends meet, China is rapidly becoming one of the world's largest markets for high-end goods and services.

By 2012, according to a study published by McKinsey last year, China will have more than four million wealthy households - defined in China's case as having an annual income of more than 250,000 yuan (S$51,000), or about US$37,000. Only the United States, Japan and Britain will have more wealthy households by then.

Consumer confidence across Asia was hit badly as the global economic crisis rippled around the globe. But confidence and spending began to recover towards the end of last year, and travellers took to the road again.

While business continues to languish elsewhere, here in Asia, hotel revenue has been rallying and is now not far below where it was just before the crisis hit, hotel executives say.

'We're not quite back to where we were two years ago - but we're close,' Robert Murray, who heads the greater China business of the French hotel giant Accor, said during a recent visit to Hong Kong.

Room rates, deeply discounted by many hotel operators as the crisis struck, have been slow to come back up, executives acknowledge. 'But in terms of occupancy rates, we are already back where we were,' said Mr DeCocinis.

Anticipating Asia's rapid growth, the hotel industry has been racing to bulk up its presence in the region.

Ritz-Carlton, which had only one hotel in China four years ago, plans to have eight by the end of this year. In addition to the site currently being completed in Hong Kong, another Ritz-Carlton, with 285 rooms and a ballroom of 1,135 sq m that seats more than 840 guests, is due to open in the skyscraper-studded Pudong area of Shanghai on June 21.

Across the Huangpu River, the luxurious Peace Hotel, which has been a Shanghai landmark for more than eight decades and is now operated by Fairmont Hotels & Resorts, is soon to open after a multi-year renovation. And Accor, whose brands include Mercure and Sofitel, plans to open up to 45 hotels in the Asia-Pacific region this year.

The openings illustrate just how promising luxury operators believe China to be. China's rich people trust foreign brands, cherish service and like to display their wealth, including by dining out - all good from the point of view of hotel operators and luxury retailers.

'China is our top priority globally now,' said Benjamin Vuchot, the Asia-Pacific chief of Van Cleef & Arpels, the French purveyor of exclusive jewellery, which is expanding aggressively in the region.

'The world is seeing a fundamental shift in the balance in spending power towards Asia,' he added. 'We're getting ready for that.'

Never mind that jewellery and top-notch timepieces like those sold by Van Cleef & Arpels are subject to a luxury tax of up to 30 per cent in mainland China, or that hotels like the Ritz-Carlton or the Fairmont Peace Hotel will charge top dollar for a night.

Ritz-Carlton, which caters to the top 5 per cent of business and leisure travellers, is confident that Chinese high spenders will come flocking.

It plans to open up to another 10 hotels and resorts in Asia in the next five years. Of those, five could well end up being in second-tier Chinese cities like Chengdu and Qingdao, Mr DeCocinis said. -- NYT

Source: Business Times, 20 May 2010

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