Marriott, Wyndham Add Asia Hotels as Travel Grows
By Oliver Staley
April 11 (Bloomberg) -- During a visit to Shanghai last month, toy salesman Wang Zhiyong and his wife stayed at a Courtyard by Marriott, one of dozens of new hotels in the city.
``Three- and four-star hotels are affordable and quite accessible,'' the 36-year-old Wang, who's from the northern Shanxi province, said in an interview at the hotel. He paid 900 yuan ($116) a night for his room in the financial district.
Since 2000, more than 35 hotels have opened in Shanghai alone, including the Courtyard where Wang stayed. The expansion into China, which has about 12,000 hotels, is part of a push by companies such as Marriott International Inc. and Wyndham Worldwide Corp. to double their rooms in Asia and take advantage of rising affluence and increased travel.
``You have a rapidly growing economy, an expanding middle class and investment in infrastructure that makes those markets a great opportunity,'' Wyndham Chief Executive Officer Stephen Holmes, who made a five-day trip to India last month to discuss hotel deals, said in an interview.
China and India are the most attractive Asian markets, hotel executives say. China's gross domestic product expanded 10.4 percent in the fourth quarter, making the country the world's fastest-growing major economy. India's economy grew 8.6 percent, the second-fastest.
China already ranks among the top five countries in spending for business travel, according to the London-based World Travel & Tourism Council. India, now 18th in business travel, probably will rank among the top five in 10 years, while China may vault to No. 2 in tourism travel from No. 6 at present, the Council estimates.
`Geared to Penetrate'
``Every major international brand is geared to penetrate these markets,'' said Patrick Ford, president of Lodging Econometrics, a consulting company in Portsmouth, New Hampshire.
Industrywide, 481 hotels are under construction or planned for China, and 198 in India, up from 316 and 161 last September, Lodging Econometrics estimates.
Another 283 hotels are under development in the rest of Asia, with Indonesia, the Philippines and Vietnam drawing the most interest, Ford said.
Wyndham franchises 11 hotels in India and has an agreement to open 10 more Ramada Inns in the country. In China, the Parsippany, New Jersey-based company operates or franchises 84 hotels under brands such as Days Inn, Super 8 and Howard Johnson. It expects to double the number of Super 8s to almost 90 in the next year.
Doubling Up
Bethesda, Maryland-based Marriott's chains, including Ritz- Carlton and Renaissance, have 39 hotels in China and India, with another 27 planned. Hilton Hotels Inc. has 13 full-service hotels in China and India and plans to double that number. The Beverly Hills, California-based company also plans to open another 75 in India through a joint venture, plus 25 Hilton Garden Inns, a lower-priced brand, in China.
London-based InterContinental Hotels Group Plc expects to double its Holiday Inns in China, to 125, in the next 22 months.
The hotels' interest boils down to demographics, said Vasant Prabhu, chief financial officer of Starwood Hotels & Resorts Worldwide Inc., based in White Plains, New York.
China, with 1.3 billion people, is the world's most populous country, while India's population of 1.09 billion makes it the second largest. Income levels are rising in both countries, with per capita annual income up 87 percent, to $1,750, in China and 62 percent, to $730, in India from 2000 to 2005, according to the World Bank. China's urban incomes rose 12.1 percent in 2006.
Chinese Travelers
``If you thought Japanese travel in the '80s and '90s was big, can you imagine 300 million middle class people in China?'' Prabhu told investors at a conference in Naples, Florida, last month. ``That's bigger than the population of the U.S., bigger than the population of the EU.''
Increasingly, Prabhu said, the travel is within countries and regions. ``Ten years ago, two-thirds of hotel stays in China were from outside Asia,'' he said. ``Today, two-thirds come from within Asia.''
Starwood has 31 hotels in China and 18 in India. The company plans to double its properties in China in the next two to three years, spokeswoman Nadeen Ayala said.
In China, much of the development is large luxury hotels in urban centers, with 68 percent of all new projects four- or five-star hotels, Ford said. An exception is Wyndham's economy Super 8 chain, which is benefiting from the Chinese belief that eight is a lucky number. ``It's sort of a windfall for Wyndham,'' said Ford.
Evenly Distributed
In India, the development is more evenly distributed. About half the projects are for mid-range and economy hotels that will cater to the growing number of software companies in the suburbs, Ford said.
``In terms of total hotel rooms, in the five-star category it would be about 35,000 to 40,000 but if you consider across all star categories it would be more than 100,000 rooms. On average 10,000 to 15,000 rooms are being added across the country every year,'' said R.K. Gupta, who oversees $68 million of assets at Credit Capital Asset Management in New Delhi.
One of the hurdles facing foreign hotel operators is finding real estate developers who can build hotels on time and within budget, said Amit Kapoor, an analyst at White Plains, New York-based Gabelli & Co., which owns shares of Starwood.
``Asia has a different regulatory environment, and they need partners who won't get caught in the bureaucracy,'' he said.
To surmount those obstacles, companies are opening Asian development offices, such as Hilton's in Shanghai, New Delhi and Mumbai, and staffing them with knowledgeable locals.
If they bear fruit, tourists like Wang and his wife will have even more hotel choices in the coming years.
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