I have been straying a little from the technology side of
things lately, and this blog, too, won’t mention technology. But I want to
riff a little longer on the relationship between China and the hospitality
business which is at an interesting inflection point.
The other week I wrote about international hotel chains’
efforts to create China-centric brands that are designed around, and explicitly
target, Chinese travelers. There are, however, also a number of home grown
brands that are trying to muscle their way into the native luxury market. The Tangla
Hotel Tianjin, for one, is the first mainland Chinese hotel to be given the
(ironically) American Academy of Hospitality Sciences' International Six Star
Diamond Award. Steven Song, chairman and president of the hotel’s owner HNA, believes
the award shows that China is able to develop top hotel brands which can
compete with foreign names such as Hilton and Starwood.
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| The Tangla Hotel Tianjin |
While it is certainly commendable, it remains to be seen
whether Tangla will be the new Hilton: after all, building an internationally
recognisable brand takes years, a lot of marketing dollars and above all, consistency
of excellence. However, it is also worthwhile looking at the bigger picture,
particularly where the luxury market is headed. Does China need a home grown
luxury brand?
The first impulse answer would be: why not? Why leave the
field of luxury travel, particularly in their own country, to big North
American companies?
China, of course, has a lot of catching up to do. After
being under an austere brand of Communist rule for the best part of the 20th Century, the switch to a firmly capitalist ideology has seen China's (just like
Russia’s) population experience a dramatic shift from poor to middle class
(and beyond) in just a few decades. The result is a socio-economic catch up, pursued by the middle class in particular with understandable vigor. Their long
deprived craving for conspicuous consumption has manifested itself in equal
shares in mushrooming luxury boutiques and a burgeoning counterfeiting culture.
So with Chinese appetite for western luxury goods rampant, wouldn’t it be natural to add western luxury hotel brands to that list? The answer is yes, of course.
A recent study by Digital Luxury Group puts Sheraton, Hilton and Shangri-La on top
of a list of the most-searched luxury hotel brands by Chinese travelers from
January to March 2012; rounding out the top 10 where InterContinental, Westin,
Four Seasons, The Peninsula (a Hong Kong-founded brand), Kempinski, Nikko and
Ritz Carlton. With not a Chinese brand in sight, it suggests that home-grown
luxury brands are facing an uphill battle to gain traction and be able to claim
an equal standing with their long established overseas peers.
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| Image courtesy of MO Luxury |
The Boston Consulting Group provides an interesting twist to
this with a recent study on the state of the global luxury market. The study
found that while the sentiment is shifting from owning luxury to experiencing
it, Russian and Chinese tourists are still much more inclined towards product
luxury than some of the more mature markets, which have retreated to a
‘lux-redux’ since the financial crisis took hold. Hotels are, of course, the
ultimate luxury experience, but signs are that Chinese travelers may switch
from buying to experiencing luxury sooner rather than later.
In line with the stalling property and construction market,
which has been fueled and underpinned by the Chinese economy for decades, falling
corporate profits and foreign direct investment and even official GDP numbers
(see a great article on this here) have dampened the Chinese appetite for luxury goods. In fact, many foreign
brands in China are already feeling the pinch of overexposure.
Will these trends jolt Chinese into a more experientially
focused ‘lux-redux’ mode as it has affluent people elsewhere in the world?
Common sense would suggest so, at least if there is no upswing in the short to
medium term.
This may be soothing news for hotels actually: a study on Consumer Buying Behaviour in the Recession suggests that as a consequence of a
recession people tend to be partial to treating themselves. However, the same
study also found that one of the main consequences of a recession is that
consumers from all countries and all social classes are unafraid to change
their traditional brand preferences.
This should be music to the ears for the Tangla Hotel and
other home grown brands in this space as it may present an opportunity for them to truly break into the luxury market at home.
