IF Michael Meade feels he is under siege, he shows little sign of anxiety. Shanghai-based Meade, Jin Jiang International Hotel Group senior vice president, sales and marketing, is only too aware that international hotel companies are massing in great numbers to snare a share of the China action.
The InterContinental Hotels Group plans to almost double the number of hotels it manages in Greater China over the next two years. Starwood has expanded its footprint in China aggressively in the past 24 months.
Marriott International will open its 11th hotel in Beijing in 2008. Along with the luxury brands, a host of mid-tier and economy chains are unwrapping huge expansion plans to cater for the ongoing surge of China’s domestic travellers.
It is against this tide of expansion that Jin Jiang International Hotel Group – still 75 percent owned by the government of Shanghai – is preparing to ensure that it does not lose home ground advantage.
Jin Jiang International Hotel Group has more than 270 hotels with 53,000 rooms in operation or under development, including the fast-growing Jin Jiang Inns budget brand.
The funds for expansion have come largely from Jin Jiang International Hotels Group initial public offering on the Hong Kong stock exchange that raised approximately RMB2.4 billion (US$30m)
Part of the IPO proceeds will be used to renovate the iconic Peace Hotel, as well as two more Shanghai properties, Cypress Hotel and Jin Jiang Tower. The US$63.6 million renovation of the Peace Hotel is underway and when complete in 2010 the hotel will reopen as a joint venture between Jin Jiang and Fairmont.
Jin Jiang is also receiving some outside help. Starwood Capital is making a US$30 million strategic investment in the group to become its largest outside shareholder. Meade said there is intense growth in the economy hotel sector where competitors to Jin Jiang Inns include Motel 168, Home Inns, the US Super 8 chain, Holiday Inn Express, Accor’s Ibis hotels and GreenTree Inns. With 110 budget hotels in operation, Jin Jiang Inn will add 180 more by the end of this year, and aims to have 600 hotels and inns by 2010. They will be a mixed of owned, leased and franchised properties.
“We have set an aggressive strategy for growth in the next four years,” said Meade. “At the economy end, the domestic market is price sensitive with an average room rate around US$30. Everything is related to average earnings in China.
“At the top end, we’re playing in the international market and our strategy is to go into the provincial cities with five star properties and, price-wise, slot in at the lower end of five star rates.” Meade said the recent IPO was “a step towards” expansion for Jin Jiang outside China but no date had been set for the company to enter the international arena. “We’re looking and exploring,” he said.
Jin Jiang has introduced a new online distribution strategy including the launch of the Central Reservation System (JREZ). It has also signed with Expedia, and will make its entire inventory of hotels available to Expedia customers.
Last year Jin Jiang hotels averaged 75 percent occupancy and saw RevPar increase by eight per cent. “We’re looking at a similar increase in RevPar this year and in a market that will be over-supplied we are expecting to increase market share, through branding, distribution and promotional initiatives,” Meade said.
