As major Chinese hotel developers abandon international brands, how will Marriott fare?

China is Marriott’s largest single market outside of the U.S.[1] China alone accounted for a full 20% of the global hotel development pipeline as of early 2018.[2] Marriott needs in-country partners in order to benefit from the Chinese hospitality industry’s rapid growth.

Two important hotel developers in China, Greentown China and Wanda, have indicated that they are moving away from international brands including Marriott, narrowing the range of partners for Marriott in China.

Greentown Executive: International Brands Have Not Adapted to China

Greentown Asset Management is a subsidiary of Greentown China.[3] (Greentown China was featured in our previous post as one of the key Marriott hotel developers in China.) Greentown China is the tenth largest real estate developer in China in terms of contracted sales.[4]

In a recent opinion piece, Xiang Xu, deputy general manager of Greentown Asset Management, discussed how Chinese hotel brands are ending the domination of the high-end Chinese hotel market by international brands like Marriott, Hilton, and IHG.[5]

According to Xu, international brands have been dominating the Chinese luxury hotel segment. One of the main phenomena observed by Xu is that foreign branded hotels have struggled to adjust to the current Chinese market.[6] He argued that international high-end hotels were introduced to China during the Deng-era economic reforms, and they were primarily catering toward foreigners visiting China.[7]

He added that in recent years, local customers became the core of the high-end hotels market in China.[8] Despite this, many international hotel brands did not update their management models, leading to gaps between what they offer and customer demands. Xu concluded that this created an opportunity for Chinese hotel companies to break the dominance of international luxury hotels by better capitalizing on future market trends. [9]

These comments come as Greentown’s mix of in-development hotels dilutes the presence of Marriott hotels compared to its current mix. On its website, Greentown Asset lists 12 current operating Greentown hotels, 9 of which are Marriott hotels.[10] But of the 12 Greentown hotels in development listed on the company’s website, only two of them are Marriott-branded.[11]

Chart: Percentage of Greentown hotels by brand, Existing vs. In Development [12]

Wanda sold Marriott hotels, plans to dissolve foreign hotel partnerships and rebrand

The Chinese developer Wanda is the leading player in China’s luxury hotel market, according to Nikkei Asian Review.[13] Through sales and announcements of their future projects, they have distanced themselves from international hotel chains.

Wanda was formerly the owner of 10 Marriott hotels, which the group sold to R&F Properties in January 2018.[14] [15] [16] On April 7th, 2018, Nikkei Asian Review reported that Dalian Wanda planned to dissolve its partnership with foreign hotel chains, rebrand jointly run properties, and operate them as its own.[17]

In a statement announcing the rebranding of a Beijing hotel, Wanda declared, “To break the dominance that other international brands held in the high-end hotel market, however, Wanda founded Wanda Hotel and Resorts Co., Ltd. in 2012, sparing no effort in building self-owned hotel brands such as Wanda Vista. Since this time, Wanda has gradually begun to withdraw management authorizations granted to international groups, and has steadily worked to develop self-owned premium hotel brands.”[18]

The actions of these major players in the Chinese hotel industry narrow the range of partners for Marriott to work with in China.

 

[1] Hotel News Nows (2017, June 20th), 5 things Marriott’s Sorenson has to say about hotels, retrieved June 10th, 2018, http://hotelnewsnow.com/Articles/146865/5-things-Marriotts-Sorenson-has-to-say-about-hotels

[2] Lodging Magazine (2018, March 8th), The Top World Regions and Markets for Hotel Construction, retrieved June 10th, 2018, http://lodgingmagazine.com/the-top-world-regions-and-markets-for-hotel-construction/

[3] Greentown China, 绿城资产管理公司, retrieved June 10th, 2018, http://www.chinagreentown.com/asset

[4] South China Morning Post (2018, January 2nd), Top Chinese developers tighten grip on housing market despite overall slowdown, retrieved June 10th, 2018, http://www.scmp.com/property/hong-kong-china/article/2126531/top-chinese-developers-tighten-grip-housing-market-despite

[5] The Economic Observer (2017, November 10th), 五星级酒店的中国破局者, retrieved June 10th, 2018, http://www.eeo.com.cn/2017/1110/316480.shtml

[6] The Economic Observer (2017, November 10th), 五星级酒店的中国破局者, retrieved June 10th, 2018, http://www.eeo.com.cn/2017/1110/316480.shtml

[7] The Economic Observer (2017, November 10th), 五星级酒店的中国破局者, retrieved June 10th, 2018, http://www.eeo.com.cn/2017/1110/316480.shtml

[8] The Economic Observer (2017, November 10th), 五星级酒店的中国破局者, retrieved June 10th, 2018, http://www.eeo.com.cn/2017/1110/316480.shtml

[9] The Economic Observer (2017, November 10th), 五星级酒店的中国破局者, retrieved June 10th, 2018, http://www.eeo.com.cn/2017/1110/316480.shtml

[10] Greentown China, retrieved June 10th, 2018, http://www.chinagreentown.com/asset/bussiness/Estate

[11] Greentown China, retrieved June 10th, 2018, http://www.chinagreentown.com/asset/bussiness/Estate

[12] Greentown China, retrieved June 10th, 2018, http://www.chinagreentown.com/asset/bussiness/Estate

[13] Nikkei Asian Review (2018, April 7th), Dalian Wanda to end partnerships with foreign hotel chains, retrieved June 10th, 2018, https://asia.nikkei.com/Business/Companies/Dalian-Wanda-to-end-partnerships-with-foreign-hotel-chains

[14] 招商证券股份有限公司, 关于大连万达商业地产股份有限公司公司债券重大事项临时受托管理事务报告, retrieved June 10th, 2018, http://www.cninfo.com.cn/finalpage/2017-08-07/1203767583.PDF

[15] People.cn (2017, November 24th),“世纪交易”再生变:富力收购万达酒店资产总价下降至189.5亿, retrieved June 18th, 2018, http://house.people.com.cn/n1/2017/1124/c164220-29666477.html

[16] Caixin (2018, March 20th), R&F Expects $126 Million Revenue This Year From Former Wanda Hotels, retrieved June 10th, 2018,  https://www.caixinglobal.com/2018-03-20/rf-expects-126-million-revenue-this-year-from-former-wanda-hotels-101223819.html

[17] Nikkei Asian Review (2018, April 7th), Dalian Wanda to end partnerships with foreign hotel chains, retrieved June 10th, 2018, https://asia.nikkei.com/Business/Companies/Dalian-Wanda-to-end-partnerships-with-foreign-hotel-chains

[18] Wanda (2017, December 29th), Sofitel Wanda Beijing Renamed Wanda Vista, retrieved June 18th, 2018, https://www.wanda-group.com/2017/latest_1229/1799.html