Marriott bets big on China

Tom McGregor

Marriott Corp is raising the stakes to expand on a grander scale its hotel presence in China. According to media reports, "Marriott International Inc announced on Tuesday that it expects to open on average one hotel per month" in the country.

The hotelier giant outlined a plan to more than double the size of its Asia-Pacific regional operations in the next few years. A Marriott press release indicates that 132 hotels are expected to open in Asia in approved deals that cover an additional 143 properties. The company would construct at least 265 hotels by 2016 with 80,000 rooms, located in 16 countries.

In recent years, Marriott has taken an aggressive approach in China's hospitality sector while enjoying remarkable success. The figures should speak for themselves.

"The company witnessed the doubling of membership in Marriott Rewards, its award-winning loyalty program in Asia last year," as reported by The Nation newspaper of Bangkok. "Marriott Rewards grew to more than a million members in China alone, a country that continues to lead the company's Asia growth."

Nevertheless, a strong record of growth in the past does not guarantee similar results for the future. For the past three decades, China has experienced tremendous economic growth rates with its annual GDP at times surging into the double digits.

Yet, times are changing and the nation is going through a slowdown of growth rates. It faces a transitional period, and Marriott will continue on with major expansion in China.

The Canadian Press reports that, "Marriott's brands include Ritz-Carlton, JW Marriott and Renaissance. The company reported $12 billion in revenue in 2011. It has 3,700 properties in 75 countries and territories."

Simon Cooper, Marriott International's president and managing director in Asia, remains optimistic. A press release quotes him as saying; "We have seen great growth across our portfolio and expect to be launching new brands in the region soon."

Marriott has already created a strong presence in Beijing and Shanghai and seeks to enter "emerging primary and secondary cities across China and further enriching the portfolio through the addition of more resorts," according to its press release.

Presently, the hotelier operates in 11 Chinese provinces and anticipates to be running in an additional 13 provinces and regions by 2016, which would include Hunan, Heilongjiang, Inner Mongolia, Sichuan, Anhui and Macao."

The key issue for Marriott could be related to its pricing charges of hotel rooms. In Shanghai and Beijing, many guests willingly pay higher lodging rates since business travelers there tend to have more money and expect to receive luxurious accommodations.

Additionally, the cities play host to numerous international and nationwide business conferences. Hence, Marriott is able to benefit significantly from the influx of visitors.

China's second-tier cities are developing rapidly, but there are fewer big spending business travelers come to these locations, so Marriott must compete for guests looking for better bargains. Meanwhile, Chinese-owned and operated hotels in the second tier cities have a bigger presence and attract more Chinese guests, since they offer more affordable rates.

Therefore, Marriott could face a tougher challenge competing for bigger market share of hotel occupancy rates in second-tier cities. Perhaps, the company should consider opening more hotels that offer fewer luxury amenities but more affordable lodging rates for travelers visiting China's second-tier cities.

Yes, Marriott's expansion would create many jobs and according to its press release, "we expect to create some 36,000 new jobs in Asia through our growth and development to increase our workforce to more than 76,000 associates in the region by 2016 – including some 40,000 in China."

That's amazing, but Marriott must maintain high occupancy rates to keep Chinese workers employed for the long-term. The company is making a big investment in China and if it pays off the company would bask in higher revenues and positive publicity. But will its lofty ambition bear fruitful results? Well, let's wait and see at least until 2016.

 

The views do not necessarily reflect those of China Daily.

McGregor@chinadaily.com.cn