Hyatt Hotels, one of the world’s largest luxury hospitality companies, plans to double its capacity in regions that include China within the next four years, according to the head of the company’s Asia-Pacific operations.
A key part of the hotel group’s strategy is domestic tourism in China, as data from the newly formed Ministry of Culture and Tourism shows the travel bug is beginning to hit a tipping point, according to David Udell, president Asia-Pacific, Hyatt Hotels.
The ministry announced that domestic travel within China had grown to 5.54 billion trips in 2018, a rise of 10.8 per cent from 2017. The travel boom generated revenue of US$764 billion, a 12.3 per cent rise from 2017. Chinese international travel also saw a significant increase in 2018, with the number of outbound trips from the mainland rising to 149.7 million, a 14.7 per cent increase on year.
“As of May 2019, we have 74 hotels or 21,021 rooms in Greater China today, and we plan to double our presence in China over the next four years, with a pipeline of 27,000 rooms, which represents nearly a third of our global development pipeline,” Udell said.
Hyatt chief executive Mark Hoplamazian told CNBC last week that China’s domestic tourism market was of vital importance, noting that domestic tourists accounted for an important share of occupancy at its hotels in the mainland.
As part of the planned expansion, he said Hyatt planned to hire “tens of thousands” of new employees on the mainland.
Among new locations, the hotel group plans for Grand Hyatt properties in Hefei, the capital city of Anhui province, the Shenzhou Peninsula in Hainan province, and Jeju Island, South Korea.
It also plans to open Park Hyatt properties in Jakarta, Kyoto, Shenzhen, Niseko and Suzhou.
Hyatt also said next year it plans to open it boutique hotel brand, known as Andaz properties, in Bali, Shenzhen and Xiamen.
Hyatt, which is headquartered in Chicago, said its luxury brands are the focus of the company’s Asian expansion.
In February, Hyatt announced a joint venture with BTG Homeinns Hotel Group, a Chinese travel services provider and hotel operator, to develop a hospitality brand to service the upper-middle segment of domestic Chinese travellers. The joint venture plans to open new hotels in China’s major cities over the next five years.
“This joint venture with BTG Homeinns is part of our strategic initiative in strengthening our representation in the underserved upper-midscale segment,” Udell said.
In 2019, Hilton Hotels chose Chengdu to launch its new Canopy-by-Hilton brand in Asia-Pacific, which aims to create a hotel experience for guests wanting local flavour.
Hyatt is not alone in its expansion plans for China.
In April, Intercontinental Hotels Group announced the opening of a hotel in Zhuhai, adding that it has another 341 hotels in the pipeline for China, mostly targeted at second and third-tier cities.
Most Hyatt hotels are managed by Hyatt working in partnership with separate owners. Only a small percentage are wholly-owned hotels, and those are usually flagship properties.
The company has reported growth in its franchised operations, where a third party owns and manages the property, paying a franchise fee to Hyatt.
In 2018, such fees from management and franchise agreements represented more than half of Hyatt’s global gross earnings. The model underscores Hyatt’s growth strategy in Asia-Pacific that is focused on management and services, rather than capital-intensive assets.
Revenue for Hyatt has remained flat in recent years. The company reported revenue of US$4.46 billion in 2017, compared to US$4.45 billion in 2018. Hyatt declared net income of US$761 million in 2018, up from US$390 million in the prior year. Hyatt’s New York-listed shares have underperformed the S&P 500 since 2013. They ended Thursday trade at US$72.59 apiece, easing 0.4 per cent during the session, and bringing its losses for the past year to 13.5 per cent.
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