Tuesday, July 8, 2014

Best Western Looking at Strong Far East Growth

You’ve probably heard this before; the most effective way to get hotels built in China is by having folks fully inculcated in the culture and politics of the region on the ground. It’s not just a good idea, it’s the only way hotel companies will find success because China is a mysterious and unusual place when compared to the western way of doing business. Plus the communist government is involved in every aspect of the economy.

For example: Did you know it is illegal for anyone except the government to own land in China? So hotel owners must secure 99 year land lease deals, for example. So in that region – as well as India and Korea – Best Western International has master franchise agreements in place to better ensure the overall company’s growth.

And it’s served the parent company well as their Chinese division is growing nicely and brining hotels to big cities, tertiary markets and exotic places such as Ulaanbaatar, the capital of Mongolia.

Recently Hotel Interactive had an opportunity to visit this division of the company, which is based in Beijing, to get a better sense of how this operation works and how it fits into the overall Best Western family.

The region is headed by President and CEO William Dong, whose master franchise agreement has him in charge of Mainland China, Hong Kong, Macau, Taiwan, Mongolia and Nepal. Here he’s cobbled together a network of 41 hotels with another 13 all-new build hotels under construction.

But getting to this point of success has been a long road for Dong as the challenges of working in this region are very different than here on the other side of the world. Just working through governmental issues are a lot more significant than what developers deal with stateside. Dong started this division of Best Western back in 2006 with just an assistant and has since built that office into a bustling organization with 21 people.

“You have to have a good relationship with the government to do business in China. In China seeing is believing. If they don’t see it they don’t know,” said Dong. And to make sure potential owners and future guests do see, hotels in Dong’s region typically offer more services and amenities as their foreign brethren.

He’s also had to deal with an ever changing thicket of government regulation, a shift of business drivers and levels of pollution that make Los Angeles look like it has the freshest air on the planet. But even so, Dong and his team have built an extensive and growing network of hotels that re a testament to this group’s skill set.

Ron Pohl, SVP, Brand Management & Member Services with Best Western International said the mix of hotels is different in Dong’s master franchise region because it’s more effective to the bottom line.

“We have found the Best Western core brand in the states is limited service, but they are often full service overseas because that is what you need to compete,” said Pohl.

In all I had the chance to visit four Best Western properties; two in Beijing, one in Shanghai and a Best Western Premier in Mongolia. All the hotels many more amenities that their U.S. counterparts such as bellman, valets, an abundance of employees, multiple full service restaurants and spas.

Overall the experience was surprisingly exciting to see how different yet similar the company’s hotel product is overseas. According to Pohl the Premier descriptor started internationally in Europe back in 2003 and has now spread – along with the Plus designation – globally. In all there are about 150 Premier hotels and 200 Plus hotels internationally.

In China, the market is changing quickly as a rising domestic middle class travels more they’re supplanting a government driven meeting’s business which has been waning and it’s changing how hotels of tomorrow will be built and managed.

During the first wave of hotel development during the 1990s, Dong said many hotels were managed by companies that brought in outside expertise. Now as the Chinese have a better sense of the business they’re running hotels in many cases entirely with domestic labor. And they’re appealing to a mostly Chinese audience.

Dong said his the hotels under his auspices are seeing less than 10 percent international guests and during the last few years he has seen hotels located in tourist areas see many more leisure domestic travelers. And they’re booking through websites or call center. “Before was all big groups where the leader would hold up a big flag. Now, as our highway system develops they are driving their own vehicles and we have seen quite a big increase of guests of this kind. Middle class income growing and more companies and government bodies are giving staff paid annual leave and they are coming to our hotels in record numbers.

China is also building dozens of airports around the country, which will further increase domestic travel.

Another interesting wrinkle was the governmental decree that government offices or agencies cannot hold meetings at hotels at the five star level so it’s changing how hotels are getting built. Newer hotels have about 50 percent more rooms on average and there has bene a shift from big ballrooms to smaller conference rooms that make the hotel multi-functional. In fact, the Best Western OL Stadium Hotel Beijing where I stayed had a floor of meeting rooms as well as executive guestrooms added to the top of the building to appeal to this new demand generator.

Though the Chinese government has tightened the money spigot that would lead to more development opportunities, Dong feels this is a great time for Best Western.

“There are many advantages for the owner to work with Best Western. [Owners] can directly benefit from having a brand and the Best Western sales system including the loyalty program and the QA system. The Chinese traveler sees a brand as a guarantee and that makes them more comfortable to book,” said Dong.

As for that Chinese citizen, Best Western is seeing a speedy maturation of their Chinese clientele and having that strong brand goes a long way to winning the customer’s business.

However, don’t confuse them with American or European travelers. This culture has different desires than travelers from other parts of the world. For example, the Chinese see a hard mattress as a sign of quality whereas Americans believe the opposite. Plus breakfast is a lot more extensive and focused on foods the typical American would balk at for their first meal of the day.

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