Best Western Tries New Licensee Model In Asia

By Staff -- HOTELS Magazine, 1/1/2007

Part of Best Western’s luxury Premier brand, the Best Western Qingdao Kilin Crown Hotel is among the brand’s flagship properties in China.

PHOENIX, ARIZONA Unlike Americans or Europeans, who might budget for a night at a roadside hotel as part of a 600-mile (966-km) drive, apparently Chinese travelers on the road are more focused on the task at hand, driving for as long as necessary to get from Point A to Point B. At least that is what Best Western International (BWI) Chief Executive David Kong has found to be the case over the past four years as he mapped his brand’s future in the world’s hottest hotel market. As a result, for the time being Kong is strictly sticking to membership development in China’s 4- and 5-star city center markets and just signed a master license agreement with William Dong—who has been working with the brand in China for four years—to double the brand size beyond its current 30 hotels (16 currently under construction) over the next two years.

“Best Western International’s customers want to go to China, and the reverse is true, as well,” Kong says. “We are building our brand properly, creating great awareness and presence in China. First impressions are important, so we need to fi nd local partners who are well funded to build luxury hotels, and these people are not interested in budget hotels.” Hence, plans for roadside hotels are on hold as BWI, with more than 4,200 hotels, tries to further grow its more upscale portfolio, waits for the country to build better roads and for the culture to understand the joy of the more traditional “road trip” that includes overnight stays along the highways.

For now Dong, who was an integral partner in developing the fi rst 30 Best Western’s in China, will manage all of the existing 30 sub-licensees in China. As further incentive in a market sometimes known for complex and vexing ownership structures, Dong also will have the chance to fi nance further development. “I have seen wide acceptance of the Best Western brand by owners and investors,” Dong says. “The unique, non-profi t membership business model is a strength because it offers more fl exibility than other brands. Best Western also has strong quality controls in place.”

While BWI typically has not created this type of arrangement, Kong says, “We have talked about partnering in a different way to get him more engaged and continue to work with the brand,” says Kong. “This also helps decentralize the organization and provide a better way to work with regions, creating fewer hurdles and unleashing the potential of the brand in the marketplace.”

Growing the BWI brand in major and secondary markets always raises the specter of potential overbuilding in China’s competitive environment. Kong is not worried. “Our hotels are generating good revenue and doing very well in their competitive set,” he says. “One or two hotels have room for improvement, but for the most part our owners rave about the benefi ts of the brand and what we are generating.”

BWI continues to target major Chinese markets with GDP growth of at least 15%. In cities such as Shanghai, however—where BWI will have fi ve hotels open within a few months, Kong is not considering further inquiries as he says it is incumbent upon the brand to be responsible to existing members. The fact is, the Shanghai market is reaching capacity and 2006 citywide RevPAR might have slipped just a bit.

License Deal Has Legs

While China will continue to be BWI’s major growth vehicle in Southeast Asia, Kong believes the master licensee vehicle has legs in the region. In fact, he recently signed another such agreement in India, where the licensee also will be more of an active investor in individual projects.

BWI had 20 hotels in India at the start of 2006 but was not satisfi ed with the quality of many of them. Kong cleaned house with only six remaining by early December 2006, and now he suggests the brand will add 10 to 12 hotels a year in India for the next few years, including 4- and 5-star products in major markets and 3-star hotels in tertiary markets. “We think the timing is great,” Kong says. “We only wish we started this step in the process sooner.”

Kong also cites Korea and Thailand, where the brand had minimal presence four years ago but 13 hotels in each market today, as growth targets. “And now we see Japan as a great opportunity because the economy has come back,” says Kong, who has been at the helm of BWI since September 2004. “The bank has been holding many assets and now there is a lot of interest in those assets, which is very encouraging for us.”

Asked if he had a message for hoteliers and partners in Asia, including India, Kong says, “Focus on customer care as our customer is a global customer. It is very much a focus of our organization and this year we will spend a couple of million dollars in training for hotels in North America. We are asking our affi liates and master licensees in other countries to focus on the same thing.”