Hyatt Hotels Corporation has signed a development agreement with China’s Tianfu Minyoun to add 50 hotels under the Hyatt Place and Hyatt House brands in the country.
The deal came after Hyatt Hotels Company said that it was looking to its select service brands to fill out its portfolio in China.
Tianfu Minyoun will be the first third-party management company for franchised Hyatt hotels in China. To support the strategy, Tianfu Minyoun has also secured a credit line of CHY30bn from Sinhuan Tianfu Bank, which will be used to fund construction and renovation loans for hotel owners.
Under the agreement, 50 Hyatt Place and Hyatt House hotels are expected to be developed by Tianfu Minyoun and in cooperation with Chinese investors over the next five years, the first of which include Hyatt Place Nanchong Gaoping, Hyatt Place Changchun Jingyue and Hyatt House Changchun Jingyue. The three hotels will be operated and managed by Tianfu Minyoun.
The hotels will be part of Hyatt’s loyalty programme, World of Hyatt.
Hyatt president & CEO Mark Hoplamazian, Hyatt Hotels Corporation. “Hyatt continues to seek innovative ways to build a diversified brand portfolio by collaborating with owners and developers who share our values and our commitment to expanding our brand growth in a country with such significant growth potential.”
Hoplamazian foreshadowed the news at the group’s fourth-quarter earnings call, where he described Hyatt’s select service business as “one of the key growth drivers of our plans in some of the fast growth countries in which we have a strong presence, thanks to our full service business, like China”.
Hyatt Hotels Corporation’s Asia Pacific group president David Udell added: “Tianfu Minyoun Hospitality has profound insights into the Chinese market and has gained crucial financial support to power our collaboration with them.
“Different from exclusive franchise and brand agency models, the cooperation between Tianfu Minyoun and Hyatt is set to make the most of both sides’ respective strengths and resources to boost the development of the Hyatt Place and Hyatt House brands in China.”
Tianfu Minyoun Hospitality is a subsidiary of Tianfu Management, which reported having invested and managed total assets of nearly CHY400bn. Chairman Zhang Jianming said: “Tianfu Minyoun is a Chinese hotel group with 20 years’ experience in operating upscale hotels. Under this exciting strategic cooperation with Hyatt, we will bring to the market Hyatt-branded hotels in innovative ways and contribute to the sustainable development of China’s hotel industry.”
The select service sector in China has attracted the attention of the other global operators, with Marriott International announcing “unprecedented growth” in its brands in the Asia-Pacific region at the end of last year, representing the most hotels signed in 2017.
The group is leaning on its Fairfield by Marriott, Courtyard by Marriott, Four Points by Sheraton, Aloft, Moxy, Element and AC Hotels flags in the area.
Peggy Fang Roe, chief sales and marketing officer Asia-Pacific, Marriott International. “The Select-Service portfolio is picking up momentum in key markets including Greater China, India and Indonesia. Travellers will have more choices in new and exciting travel locales, especially in second and third tier cities, without ever having to compromise on the brand quality and service excellence that is the hallmark of Marriott International worldwide,”
Marriott International and Dossen International Group signed an exclusive development agreement to bring the Fairfield by Marriott brand to mainland China in September 2016. The partnership is planning to open 100 hotels across the brand within five years.
According to the latest figures from Lodging Econometrics, China’s total hotel construction pipeline had 2,410 projects and 525,225 rooms in September 2017, up 7% on the year. The top hotel companies in China’s construction pipeline were Hilton Worldwide with 292 hotels and 71,895 rooms, Marriott International with 253 projects and 72,062 rooms, and InterContinental Hotels Group with 206 hotels and 56,354 rooms.
The largest brands in the pipeline for each were Hilton’s Hampton Inn & Suites with 113 hotels and 17,130 rooms, Marriott’s full-service hotel with 51 projects and 16,227 grooms and IHG’s Holiday Inn Express with 62 hotels and 13,929 rooms.
HA Perspective [by Katherine Doggrell]: The global operators are rapidly pairing up with likely partners in China and hoping to reap the rewards as the country matures and domestic travel builds.
China Lodging’s CEO Jenny Zhang commented at the end of last year that the company was looking to grow revpar across its portfolio, encouraged by analysis comparing ADR in China and the US, which she said indicated that ADR for hotels in China was “significantly underpriced”. Zhang said that year-on-year ADR for the third quarter had grown “less than the Tall cup of Starbucks’ latte in China. We believe such price increase is totally affordable to the Chinese consumer who is experienced their big tide of consumption upgrades”.
The select serve and midscale markets now represent the battle ground for expansion, with China Lodging itself leaning on its AccorHotels brands, including Ibis. Zhang said that, having seen the net addition of branded hotels start to slowdown in 2016, this was expected to continue this year, driven by escalating rent and the funding costs, which she said could pose “competitive challenges for many smaller and individual players from entering into the lodging market”. Time to pick a buddy.