Accor to expand in China with 125 new hotel projects
Accor, a big player in the global hospitality industry, has China in its crosshairs for some major expansion.
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The backstory: Accor, a big player in the global hospitality industry, has China in its crosshairs for some major expansion. The nation is no stranger to a wide range of hotels, from ultra-luxurious to budget-friendly options. Accor has already established a solid presence there, boasting a portfolio of over 640 hotels across Greater China. To put that into perspective, it accounts for about a fifth of its total revenue in the vast Asia Pacific and Middle East region.
China is also experiencing a tourism boom, particularly in places like Macau, often referred to as the Asian version of Las Vegas. Macau's casinos have been making a comeback, with August raking in significant profits, even beating pre-COVID levels. With that, hotels in Macau are also thriving, with an over 80% occupancy rate in July.
More recently: Accor's strategy in China has largely revolved around collaborating with local Chinese developers. But, these developers have found themselves in hot water due to staggering debts and a slumping property market. Take the recent example of Country Garden, one of the developers facing potential defaults.
On a brighter note, in August, the French hotel giant revealed a new opening in Macau as part of its Raffles brand. This hotel is located within a casino resort owned by Galaxy Entertainment. But it’s not Accor's first rodeo in Macau, as it opened the Sofitel Macau back in 2008.
The development: Now, Accor is on the verge of finalizing deals for 125 hotel partnership projects in China this year alone, doubling down on its expansion in the country. Gary Rosen, the Greater China CEO, said during an interview with Bloomberg that the company’s current Chinese hotels are franchised through an "asset-light" approach or managed through joint operations with landlords. Accor is also in talks with potential partners to introduce its Orient Express brand in the country.
Rosen did acknowledge some challenges, particularly for property firms it partners with, like Country Garden, in the residential real estate sector. But, on the hotel front, things are looking up. Payments are on schedule, and Country Garden’s all set to open three Jo&Joe hotels this year. Plus, Accor is collaborating with state-owned companies, riding the wave of their involvement in city development plans.
Key comments:
"People's decision making and their consumption patterns have changed," said Accor Greater China CEO Gary Rosen during an interview with Bloomberg. "People are making choices that are a little bit reminiscent of this 'going back to the savings' mode. People are spending less on certain items, but what we've seen actually is coming out of COVID, people really have continued this pent-up demand for travel," which contributed to a record-breaking summer performance for the group in China.
"Soaring hotel room prices had been expected by tourists, but the hefty price increase still turned out to be a nasty surprise [to them]," said Franco Feng, chief executive of Shanghai-based travel services firm Shenxiaokou, about rising hotel prices in response to a boom in demand. "In some areas, tourists are complaining about the quality of service even after they paid a large sum of money because hotels and inns lack staff to clean up rooms or serve food."
"Some of our properties are already seeing occupancies of above 80% for the holidays, with one of them at full occupancy," said Catherine Scown, vice president of sales and hotel marketing for Asia-Pacific at Four Seasons Hotels and Resorts. "Demand for suites is also stronger for the golden week as travellers splurge on higher-end experiences, continuing a trend that we have been seeing throughout the first quarter of 2023."
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