Hilton's rapid China expansion and downmarket play may tarnish image

Hilton has opened 35 hotels in China under four of its 10 brands including 18 Hilton hotels, 12 Double Tree properties, four Conrad hotels and one Waldorf Astoria. The company's expansion in China has outpaced that of many other international names, but some observers suggest the rapid pace presents undue risks, Shanghai's National Business Daily reports.

Globally, the Hilton Group opened 171 new properties with more than 28,000 more rooms last year, and it plans to build many more, leading all global hotel brands, the newspaper said.

"Hilton entered China with intelligent luxury positioning, totally changed from its previous insistence as a top-class hotel chain," the report said, citing Ya Yu, a senior analyst at Meadin.com, a site which covers hotel industry news. Most of the time, lowering standards to seek a greater share of the market can work but whether hotels will have enough guests to support their operations is still in doubt and such a practice may damage Hilton's image, the report said.

Hilton plans to open nine hotels in the country this year and ten more next year, with more than 110 new developments proposed, the report said, citing Bruce McKenzie, vice president of Hilton's greater China and Mongolia region. "We believe China will become the second biggest market next to the United States," McKenzie said.

Building a Waldorf in Shanghai, the first in Asia, instead of Tokyo or Hong Kong, carries special significance for Hilton because once it stands firm in Shanghai, the rest of the Chinese market will open up, Ya said.

The company also plans to enter second- and third-tier cities with its other mid-level brands. It will also introduce its Hampton Inn hotels aimed at the business executive mar! ket in the next two years, the report said.

The average RevPAR, or revenue per available room, of Shanghai's five-star hotels reached 565 yuan (US$ 91) in 2012, down 3.9% from 588 yuan (US$ 94) in 2011, figures show. The average charge per room in 2012 was 956 yuan (US$ 154), down 5.2% from 2011, probably due in part to overexpansion, the report said.

The sheer pace of Hilton's rapid expansion in China —much faster than most international hotel brands— Ya believes is causing a tension between seeking short-term profits and preserving its strong brand image over the long term. It's hard to say whether Hilton's plans for hotels in second-tier cities matches its brand positioning, Ya said.

Source: Want China Times Read More @ Source