Accor is one of the world's largest hotel groups in the world. Now it has recognized a huge gap in the market for economy hotels in China and has rushed to fill it with its Ibis brand.
Ahead of the game
Accor was one of the first international hotel management groups to enter China in 1985. Accor Managing Director Asia Pacific, Michael Issenberg said the expansion was well timed to take advantage of China’s growing domestic travel market while putting Accor hotel brands prominently in the minds of China's potentially huge outbound traveling public.
China currently does not have any internationally branded three star brands operating in the market and while there are some individual domestic three star hotels, they do not have the same appeal and benefits such as a reservation distribution system support that an international brand name commands. "That’s why I am so confident about the future of the sector. The rapidly growing number of travellers in China and Korea aren't suddenly going to start staying in five star hotels, just as they won't start flying first class," says Issenberg.
Targeting the middle-class
Over 2,500 of Accor’s 4,000 hotels are in the economy hotel sector and the group's balanced hotel portfolio has been a principal reason for Accor outperforming its global hotel competitors over the past few years. "It was appealing to see during the war in SARS and Iraq, the hotels that made money were the three star properties. People used the hotels because they had to travel, not because they wanted to travel, and consistently, that is where Accor makes its money. We only have 160 Sofitels out of the 4,000 hotels in our portfolio, only 160 in the five star bracket. The lower down you go, the more money you make, ultimately, the biggest potential is in the three star market," says Peter Hook, General Manager, Communications.
Transparent pricing
"The thing with Ibis is that everyone knows the price. There are no price variations and everyone pays the same rate, that is why it has been so successful," Hook continues. With yield management and other marketing strategies these days, one hotel room can have rates ranging from US$60-US$300, depending on a variety of factors. "Ibis is all about being price transparent, the rate is posted outside the hotel, and guests can make their own judgement. The same happened with our other brand Formula One in Japan. When we first introduced it, no one knew what the brand was but it was doing 83-84 per cent as soon as we opened because people drive by see the price and make their decision".
While SARS had a devastating impact on the country's travel sector, it doesn1t diminish the fact that the country still offers the greatest potential for future growth, especially with the 2008 Olympic Games coming up. "What stands out most here is the vibrancy, look how quickly Asia has picked up after SARS. Much quicker than America after Iraq, and that conflict never actually touched America's shores," says Issenberg.
"All indication of market research tells us that China will be gong through a boom period next year, not only in the international travel market, but the domestic market is expected to double. Hainan has just declared an open skies policy which shows that China is picking up and SARS is behind us," says Reggie Shiu, Senior Vice President China. "Also, looking at all the new policies implemented by the Central Government such as allowing individual residents of Beijing, Shanghai and Guangzhou to travel freely to Hong Kong on a FIT basis. It is exciting news for us."
With the lifting of the World Health Organisation travel advisories around Asia, Accor has seen business quickly approach pre-SARS levels around the region. Hotel occupancy in China increased by over 23 per cent, while Hong Kong occupancies grew by a substantial 28 percent in July. "We are surprised and pleased by the rapid turnaround of hotel occupancy rates in China. Business in China and Hong Kong was hit the hardest by SARS, so the dramatic improvement occupancies highlight the underlying strength of the market," says Issenberg.
With a series of crisis that have had economical, political and more recently medical origins, hoteliers and tourism boards have to work harder to lure travellers back to their nations. Just when you think a destination has settled down, something else happens scaring potential hotel stayers back into their shells. Accor seem to have their finger on the ball by investing the time to study travel habits of their guests thereby providing them with a product that they need and is beneficial to the brand as well. As Issenberg puts it, "I feel the secret of succeeding in Asia is taking the time to build infrastructure. So many companies are seduced by the vast population sizes, but they are not prepared to invest the time and resources building up their base. Not surprisingly, there are generally some nasty and unexpected surprises that tend to destroy the initial optimism". |