The hotel sector’s rush to be bullish in China has seen a new entrant to the race in the form of Sol Meliá, which has signed a deal with domestic group Jin Jiang International Hotel Management Company.
The agreement is a two-way arrangement, with Jin Jiang regarding it as a first step in its development strategy within Europe. Initially, it will see the two groups co-operate their marketing, sales and operations regarding 12 hotels – six from each group – but Sol Meliá said it hoped it would lay the foundations for a long-term partnership including management and development.
Sol Meliá opened its first hotel in China last year, in Shanghai, and is looking to Jin Jiang to provide local knowledge to build its position in the country through effectively providing a ready-made team on the ground.
One of the first actions will be to create mixed teams from each group, ensuring the cultural adaptation of the reception areas, rooms, and food and beverage services to European and Chinese tastes.
Jin Jiang is the larger group by size, owning, managing and franchising more than 700 hotels with approximately 100,000 rooms as the biggest operator in China, but it is limited to that one country. Sol Meliá, in contrast, has more than 300 hotels with 76,000 rooms, but covers 26 countries. The groups respective brand stables are not expected to change, but Sol Meliá is thought not to have ruled out co-management of hotels in China in the future.
The Spanish group said that the alliance was viewed as a partnership amongst equals "given that both companies are leaders in their respective markets and are of a similar size, in addition to the fact that the hotels included in the agreement have similar quality standards" indicating that further down the line greater diversities would have to be addressed.
The groups are so far showing caution in their dealings, but, if initially successful, Sol Meliá executives have told the press that they expect to share common investments and commercial policies. There has so far been no hard cash investment, with the first move being to establish a solid working relationship, as illustrated by Gabriel Escarrer, Sol Melia’s vice chairman and CEO, who said the agreement "aims to do away with the idea that European and Chinese business cultures are separated by immovable barriers such as mistrust".
Jin Jiang has been less vocal, with a short statement from Yang Wei Min, MD and CEO commenting that new alliance would "help extend our knowledge about new markets and help export our hotel and management culture to leading European cities, in line with the growing importance of China as a feeder market for European destinations".
Future issues for what Escarrer describes as the "shared challenge" are likely to be the companies’ relationships with other groups in the sector. While this is Jin Jiang’s first such agreement in Europe, shortly before the announcement with Sol Meliá it unveiled the management team for its joint venture with Interstate Hotels & Resorts – Interstate China Hotels & Resorts Company. The jv was created last year to "pioneer" third-party hotel management in the country. It was the first third-party, independent operator in China, sitting between brand and owner.
HA Perspective: The issues of how European hotels will cope with the cultural differences around the expected influx of Chinese guests have started to come to the attention of operators. At the other end of the deal, companies including InterContinental Hotels Group have expressed concerns around finding the volume of skilled staff required to meet their expansion targets in China.
Sol Meliá and Jin Jiang are hoping to address these problems with local help. But whether the Sol and Jin Jiang deal is much more than a toe-in-the-water for the Chinese company is questionable. Something of sufficient scale to match the scale of potential in China is really needed.