Marriott bets big on China
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 RitzCarlton, 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 "emerg- ing 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.