Over the past 10 years, HOTELS Magazine’s HOTELS 325 rankings of the world’s biggest hotel companies have seen consolidation and new players from China emerge.
While in 2003 there were no Chinese companies among the top 25 largest hotel companies worldwide by total guestrooms, in 2013 there were five, according to the most recent HOTELS 325, published in the July/August issue of HOTELS.
Likewise, the 2003 rankings included two separate Hiltons, as well as both Cendant and Wyndham International, which today are merged and known as Hilton Worldwide and Wyndham Worldwide.
To help us look into the crystal ball to consider the continued growth of Chinese companies and potential consolidation, HOTELS spoke with Simon Turner, president, global development, Starwood Hotels & Resorts Worldwide.
HOTELS: Do you expect to see consolidation among the brands?
Turner: I think there are going to be opportunities for consolidation. The benefits of scale are huge and that inevitably will lead to additional consolidation.
HOTELS: What about brand proliferation?
Turner: We’re at a time in the cycle when new brands will be created. However, the hotel industry has a history of failed brands, and you’ll see some stall out and not get critical mass. There are others in the business that have more brands, but that is a strategy for others, not us. Having 20 brands makes it difficult to have distinctive brands. If we were to go from nine brands to 10 brands, we would do that with considerable thought and consideration.
HOTELS: The Chinese brands have been growing very rapidly. Looking ahead, do you see most of their growth continuing to be inside China or do you anticipate they will begin large-scale expansion overseas?
Turner: Let’s look at this from a Chinese consumers’ perspective. If you are a Chinese brand and you don’t have a foothold outside of China, you are starting at a disadvantage. If I’m a fledgling Chinese brand without the panache of a Western brand, I would put money on the Western brand getting the customer.
This is because Chinese consumers tend to embrace fairly readily Western brands. There is an appeal being a Western brand in the eyes of a Chinese consumers and yet an enormous amount of familiarity because of the presence the Western brands have already established in China. For example, Starwood is within a couple properties of having 150 hotels in China and at some of the hotels in China the guests are 90%-95% Chinese nationals. The rate of growth of Starwood Preferred Guest signups among Chinese is one of the highest in the world.
HOTELS: Which regions/segments do you think will drive the most pipeline growth moving forward?
Simon Turner: One of the things we do from a growth standpoint is to take a balanced approach. We don’t want to put all our eggs in one basket as there are upswings, leveling offs and downturns throughout the world. If you look back at 2013, for the most part our growth was 40% in the Americas, 40% in Asia Pacific and 20% in EMEA. In an ideal world I’d like to see that be a third, a third, a third. From a brand standpoint, the brands we signed the most were Four Points by Sheraton, Aloft Hotels and Le Méridien in North America and China.
For the first half of this year, North America is really, really strong and there we are moving past conversions, where we have had a lot of success, to more new-builds as construction financing has returned. It will take another year or so for momentum to gather in Europe.