And oh yes, Starwood is putting more money into understanding the customer especially in China so that it doesn’t lose control of the customers to OTAs like Ctrip and ELong.
Firstly the numbers – there will be 350,000 rooms coming online in the next five years, according to STR Global. Of that, China accounts for 56% and India 21% so between those two, that’s three quarters of the new growth.
Supply in China will increase 16% over the next three to five years while India will see a growth of just under 50%.
The development is patchy across China – the secondary cities are seeing most of the explosion in growth. Sanya’s room supply will increase 108%, Tianjin 149% and Chongqing 143%. A saturated city like Beijing will only see an above 10% growth.
While the morning had opened with a gloom and doom talk by economist Richard Duncan from Blackhorse Asset Management, who said the China bubble would burst soon and the industry should brace itself for a slowdown, hotel leaders remained bullish with Michael Issenberg (pictured), chairman and COO of Accor Asia Pacific, saying, “If we followed those views, we might as well pack up and go home.”
He said that travel was growing at a faster pace than the overall economy in China and that it was aspirational. “For sure, there is a supply issue but we are very confident about China,” he said, noting that for Accor, RevPAR was up 10% in the first quarter compared with the previous quarter last year.
Miguel Ko, president of Starwood Asia Pacific, said the tide had changed. When he started out with Starwood over a decade ago, his division was four percent of the business, now it’s 22%. “In a few years, it will be the biggest division in the world and all those predictions I made when I was young and bullish will come true.”
Ko said that while the subject of customer relationship management was hardly spoken of at conferences such as this, it was the most important area that Starwood was investing money in.
“With all the investments we put in hotels, investing in consumer equity is also important. We are investing heavily and spending a lot of time on building consumer loyalty programmes in India and China.”
In China, it has launched a booking engine in simplified Chinese which was seeing real results.
“We are putting a lot of resources in understanding the Chinese consumer. We are no longer a foreign company doing business in China. We are competing with local companies such as the OTAs who have a better understanding of what our customers want.”
Issenberg said what had changed the most in customer engagement was the ability to have a dialogue which was why he said the new Ibis Novena in Singapore opened with a 98% occupancy. “Yes the market is strong but it was also we could run campaigns that had an active dialogue with the customer.”
The Ibis Novena is the second Ibis to open in Singapore – and clearly at the investment conference, the Ibis Bencoolen was the darling of investors.
Issenberg was particularly bullish about the economy sector but he recognised a reality. “In China, the local budget chains don’t even see us as competitors – and we have 50 Ibis in China.”
He said the big global brands in the mass market came out of the US mainly. In Asia, that mass market is just beginning and “mass market will change everything” in how the brands play out eventually.
“How to deal with the local competition – that’s the question for us.”
Ko predicted that there will come a day when only five or six hotel brands will make it. “The rest of them will either disappear or join the others.”
Said Issenberg, “Building brands take time and we can do more in developing our brands and making them more unique and stronger.”
And the final thing I leant – both Issenberg and Ko are incredibly loyal to their team. When asked which hotel company they would work for if they had to, both said they would have problems competing with their own teams.
Said Issenberg, “I have invested my own personal time and energy in this region, we have 50,000 employees. I couldn’t do it and compete with my own team.”
Ko said that when he was with Pepsi-Cola, he was approached by Coca-Cola. “I said no. It’s the same with hotels, it’d be hard to switch loyalty.”
Incidentally what Issenberg wants to do if he ever leaves hospitality is to get into sports – “be a coach or something like that”.
