China hotel market set to recover within five years...

…and other dispatches from the China Hotel Technology Alliance’s Annual Conference

Jing Zhu, Chairperson of the CHTA
at the opening of the conference

Well attended and organized, CHTA’s third annual conference was held last month in Macau. The overall theme was ‘Creating Value’ and while there were the occasional dull spots, overall the event delivered on what it set out to do.

China Hotel Market is set to recover within Five years

One of the first keynotes dealt with the China market recovery which was pinpointed to occur sometime within the next five years (let’s hope it is earlier rather than later…). Singled out as one of the key factors to set the scene for recovery were international brands, which need to be more flexible in terms of brand standards in China, rather than pursuing a cookie cutter approach to be successful.  

Talking about Millennials - again

Chinese Millennials -
not so different

There is of course no event worth its money that would not bring up the mystical Millennials, and at CHTA’s conference, it was Sunny Wang, Executive Director at HFTP’s Asia Research Centre – herself a Millennial – who took the stage to give us Baby Boomers and GenXers a lesson in all things Millennial. The most interesting for me was her assurance that Millennials are generally happy to play with technology in the room as a novelty factor, even if the technology is not essential. While this shouldn’t tempt hotels to over stack their rooms with gadgets, it is an affirmation that IPTV, second screen, Airplay and Miracast do matter, and will matter even more in the future.

But unlike the Millennials in the Middle East which are unexpectedly brand loyal, Chinese Millennials don’t seem to have a specific trait that makes them different from their peers in other geographies. However, speaking with one delegate from Singapore on the sidelines, he professed that unlike Millennials elsewhere who are generally lone wolf travelers, Millennials in Singapore like to travel in small groups of friends. This type of information has great value to hotel developers as it guides what types of rooms they should cater for, so I hope that someone in due time will make an effort and dissect Millennials likes and dislikes a little more granularly along the geographic divide, rather than just focus on general habits.

With Millennials gradually coming into force, some predicted the hotels of the future will be more like real estate that happens to have some hotel rooms, with rooms being re-purposed as offices, meeting and events spaces and the likes, and sometimes as a place to rest your weary head. While this may sound far-fetched now, one cannot help but wonder what our world will look like once the Millennials have well and truly taken over. As I said before, the 5-star hotel as we know it, for one, will be a thing of the past. And so perhaps will the hotel as we know it, who knows…

Creating Value in a Hotel with IT

The 'Creating Value' panel at the

3rd Annual CHTA conference in Macau

Hotels are run in a very old fashioned way, forcing people to speak to staff for requests rather than fulfilling them through self-serve options. This was the consensus during a panel discussion featuring eminent speakers from the likes of Peninsula, Banyan Tree and Westin hotels. So whatever happened to the coveted ‘personalised touch’? Again, blame the Millennials, but it is undeniable that there is a push away from person to person interaction to self-service – and thank heavens for it, too, if you ask me.

But the far more interesting question posed at the panel was what is stopping hotels from implementing IT to create value? While cost of course is a major factor, blaming the rapid evolution of technology is somewhat less convincing. 

We are on a kind of plateau at the moment when it comes to underlying technology developments. The one thing that’s continuing to change fast is consumer electronics, so as long as hotels underlying technology infrastructure is robust, enabling guests to interact with the hotel’s technology using their own devices should not be a major undertaking.

Finding the right talent to implement and support technology and getting staff to embrace technology rounded off the list of challenges identified by the panel. Nevertheless, the audience vote on whether IT can be a direct source of revenue at the end of the panel was an encouraging 75% yes.

Welcome to Modern Airtravel

Flight delays are a pain, no matter how you look at it. But while being annoyed over frequent flight delays used to be synonymous with US airtravel, this has now alarmingly spread across Asia. Or, to be more precise, China and Hong Kong. On a recent 9.20am flight from Chek Lap Kok to JFK, all looked promising with the plane parked at gate 4, which, as the pilot happily announced as we finished boarding, would ensure a quick taxi to the runway. Half an hour later, our pilot, now a little less happy, announced that pushback

would be delayed due to the airport being 'very busy'. When we finally pushed back and headed to the runway, almost an hour after schedule, there were still 13 planes in front of us in the take off queue, which meant another 20 minutes before we were finally airborne. While this type of delay is particularly annoying when you have a 16 hour flight ahead of you, it is even a greater inconvenience when the delay represents almost half the scheduled flying time of a 3 hour intra-regional flight. Unfortunately this type of delay has become a reality for far too many flights in and out of Hong Kong.

Will a new runway solve the delays?

With close to 60 million in passenger traffic in 2013, Hong Kong's airport is certainly bursting at the  seams, which is the type of evidence usually brought forward by people who are in favour of building a third runway at Chek Lap Kok, something that is hotly debated right now. If only it was so easy. "Hong Kong on a sunny day can just cope," a pilot friend of mine I questioned about the delay situation told me. "A few drops of rain though and the delays start," he said. I asked him whether he thought a third runway would ease the pain but he thinks not. "It's not the lack of runways that's the problem. It's the lack of airspace." So in other words, unless you somehow have a magic wand that enables you to build more airspace to handle the increased plane movements a third runway would bring, the situation will not improve.

Bring on the Big Planes

A much better way of coping with the overstretched airport could be to reduce the flight frequency by forcing airlines to use bigger planes to fly with less frequency. For example, Cathay Pacific currently flies eight non-stop flights a day to Singapore, typically all on 777's or A330's. While this is very convenient for frequent travelers there (like me), the same load could be achieved with flying, say, four times a day with A380s. It's less convenient, sure, but if the pay-off is schedule frequency versus increasingly annoying delays, I think I'd opt for the former - being able to rely on a schedule is far more valuable than being at the mercy of unpredictable delays. There would have to be some sort of regulation that the Airport Authority and (ultimately) the government would have to impose for airlines to comply though. But knowing how difficult it is to get any legislation approved in Hong Kong, I won't hold my breath.

The secret of airtavel in China: Stoicism

Of course, if you are a frequent flier to or within China, this will seem like peanuts to you. Delays within China are frequent and unpredictable, mainly due to the Chinese government (and the PLA) closing airspace on a whim, for anything from VIP flights to military exercises. On a recent trip to Shanghai, my flight got cancelled. My flight back was 30 minutes late and the flight scheduled before mine and after both got

Inner calm: Marcus Aurelius,
famous stoic philosopher

cancelled. So I guess I was lucky. A friend, on a recent flight back to Hong Kong from Wuhan, was not so lucky. His plane had already taxied halfway to the runway when it was suddenly announced that there would be a delay. Of three hours. Thankfully the entertainment system was switched on and the meal service started to pass the time, but I would not have wanted to be on that flight, either as passenger or as crew. According to some reports, airlines flying frequently in and out of China now provide special training to cabin crew to deal with passengers becoming irate because of delays. Perhaps they should also hand out a booklet about the benefits of stoicism to the passengers, at least until Xi Jinping tackles this particular issue. After he so successfully outlawed expensive gift giving and lavish banquets, let's hope the issue of flight delays is also on his agenda.

Luxury and the Chinese Traveler

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.

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. 

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.

Do we need hotel brands for ethnic travelers?

“East is East and West is West, and never the twain shall meet,” Rudyard Kipling wrote more than a hundred and twenty years ago and it seems that, despite all globalization efforts, he may be right. At least if you look at the recent moves by international hotel groups such as Intercontinental to introduce China-centric hotel brands.

IHG's Hualuxe... designed to offer a traditional experience
to Chinese travelers

At the recent ANZPHIC conference in Sydney this point was hotly discussed and it seems to me that both sides have a point. On the pro side, the arguments include that Chinese travelers crave cultural familiarity in everything from food to design and service. Given that China is expected to overtake Japan by 2013 as Asia's largest travel market and is set to become the world’s largest business travel market, after the US, by 2015, it seems a wise move to tap into this coming wave of travelers with a brand tailored exactly to their needs. And these needs, apparently, include anything from daily tai chi sessions, complimentary head and shoulder massages, a 24-hour congee menu, to specifically grand entrances and tea rooms rather than boozy sports bars. 

But does this craving for familiarity really warrant a completely different brand? KP Ho, Executive Chairman of Banyan Tree Holdings begged to differ during an interview session at ANZPHIC. He warned of the compartmentalisation of travel if hotels are specifically targeted at certain nationalities and I think he may have a valid point. The craving for familiarity is certainly not a Chinese monopoly but something that is woven deeply into our social fabric, no matter what nationality you are. And so the question is: do we really want to have hotel brands that only cater for Chinese, only for Russians, only for Germans, etc?

But this is of course a numbers game, and at least for now, China is the country with the most of everything: people, growth and travelers. This poses a natural attraction for anyone keen to grow their business and as a growing travel segment the temptation is to pander to them and them alone.

If we talk about ethnic segments with economies of scale however, what about religious groups? A new study shows that Muslim tourists globally represent a major niche market worth US$126.1 billion in 2011 which is set to grow to US$192 billion by 2020. The travel industry is already responding to this trend by providing Halal foods, prayer rooms and spas adapted to religious requirements. But would it also be worth considering building hotels that are built to strict Muslim standards? Incidentally, China has a sizeable Muslim population of around 20 million, or 1.5% of the total population, which just highlights how complex the whole issue of exclusively catering for individual groups’ demands can get.

But there are already examples out there where providing a familiar experience is handled in a very subtle way. Accor has been a champion of taking the French way of life to the world for a long time. Whether you check into a Pullman Hotel in Bangkok or a Sofitel in New York, you will be greeted with a warm “Bonjour” and can enjoy a croissant for breakfast that would do any boulanger back in Paris proud. That’s why Accor hotels tend to attract a lot of travelers from France, which in turn validates the whole French experience, but without alienating non-French guests.

But let’s get back to Banyan Tree’s KP Ho: his response to his peers’ push to open China-centric brands was that cultural preferences are much better served through electronic means such as CRM and PMS, and I have to say that I wholeheartedly agree.

The personalisation tools offered through intelligently integrating with the hotel’s PMS system which holds the vital customer data offer many more opportunities to provide an atmosphere that is not only tailored to collective ethnic preferences, but to a guest’s individual tastes, without sacrificing or alienating others’.

The way the China-centric brands tailor their hotels to make them more familiar to the Chinese traveler seems to me not very dramatic: grand entrance ways, the above mentioned tai chi and wooden floors instead of carpet, as one panelist at the Sydney conference mentioned doesn’t sound particularly Chinese to me. Plus, decent congee has been on the menu in all better hotels in the region for years.  

But a capable PMS and CRM system that is intelligently linked to in-room facilities can achieve a much more familiar atmosphere. Being greeted on the in-room TV in your preferred language upon entering the room, saving TV channel preferences in the system to have your personalised line-up ready whenever you check-in, or even tailoring the in-room dining menu to reflect your favourite choices are all means by which a hotel can make their guests feel more welcome and at home.

Just make sure you get it right: there’s nothing more annoying than being greeted in the wrong language or by the wrong name, something that happens to me depressingly often. Being addressed as “Mr” Anke Gill, instead of “Ms” smacks of laziness (I guess you’ll have a 50% chance of getting it right). But being addressed as “Gill” instead of “Anke” by the in-room entertainment system is pretty irritating when Google can give you a hint in less than 30 seconds. I guess the lesson here is that the technology is only as good as the people operating it and their respective understanding of target demographics.