GLOBAL REPORT—Spain’s Meliá Hotels International is expanding its footprint in the rapidly growing Chinese market through an agreement with local real estate giant and nascent hotel company Greenland Group in a deal for the two companies to operate hotels in each other’s home markets.
Under the agreement, Greenland will own Meliá-flagged properties in China while the Chinese company will manage hotels owned by the Spanish partner in Europe.
“In the new world tourism paradigm, China will soon become the largest market on the planet for both inbound and outbound travel,” said Meliá vice chairman and CEO Gabriel Escarrer in a press release announcing the deal.
“The presence of the Meliá brands are therefore key to our success in the Asia/Pacific region and for our business and resort hotels in the rest of the world,” he added.
In launching the agreement in Europe, a Meliá property in Frankfurt will be rebranded under the still-to-be-decided Greenland name and managed by the Chinese company. The hotel was chosen because of the city’s importance in the business travel segment.
This will not necessarily be the model for all the hotels that Greenland will be expanding through the rest of Europe, Luis del Olmo, Meliá’s executive VP of group marketing and Asia/Pacific, told HotelNewsNow.com. He added that the companies are still working on coming up with a brand name.
He said it’s still unclear how many hotels Greenland would open in Europe, but the Chinese company is interested in cities that have direct flights to China.
“This is the first time Greenland will be involved in this kind of agreement outside of China,” del Olmo said. Greenland is also believed to be one of the first Chinese hotel companies to open properties in Europe under its own shingle.
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Luis del Olmo Meliá Hotels International |
Greenland did not return several requests for interview.
“Greenland will ‘Chinasize’ the hotels, which involves things like having Chinese-speaking staff and Chinese-language informational materials,” del Olmo said. “And it can mean simple things like guests finding instant noodles in the mini-bar and providing Chinese food from room service.”
Leverage new demand
Travel sector experts said the agreement made perfect sense as China becomes one of the main source markets for destinations in Europe.
“Germany, France, Italy and the United Kingdom are the main destinations for Chinese business and leisure travelers coming to Europe, and three million Chinese traveled there in 2010,” said Xu Jing, the Asia/Pacific regional director for the Madrid-based United Nations World Tourism Organization.
“But European hoteliers and tour operators are still not doing enough to attract the Chinese visitor. Yes, compared to five years ago there is a much stronger realization that China is the world’s largest potential source market, but that does not mean the sector is adequately exploiting it.
“Initiatives like that of Meliá and Greenland are the right way to correct this, as hotels in Europe need to better understand the expectations of Chinese visitors who have been spoiled by the level of service in Asia,” he said.
“When a high-level official Chinese delegation or a group of luxury travelers visit Europe, they complain of things like no porter to carry their luggage or having to spend 10 minutes at reception filling out forms before they get their keys,” Xu said.
Providing Chinese food is another strategic move, he noted, comparing it to European travelers in China who, after three meals a day of local cuisine, want something familiar like a hamburger or a steak.
Establishing a Chinese footprint
Regarding Meliá managing Greenland-owned hotels in China, del Olmo said the first two, under the urban business hotel brand name Meliá, will open in Jinan and Tianjin—two fast-growing cities located along the Shanghai-Beijing corridor.
“We are also planning on introducing our Innside brand into China through this agreement and eventually our Paradisus luxury resort properties,” he said. “Greenland is developing 60 new hotels in China and the opportunities there are vast.”
Meliá opened its first hotel in China three years ago, the luxury Gran Meliá Shanghai. The company is finishing work on the Gran Meliá Xian and the Meliá Chongqing.
Zoe Wu, the director of the China office of global hospitality consultancy Horwath HTL, said the category of hotels the two groups will establish in China have good growth prospects.
“The high-end, 4-star category definitely has growth potential in China once the hotel market matures and becomes more segmented,” she told HotelNewsNow.com via email.
“There are plenty of opportunities in secondary cities. However, the brand needs to have a flagship hotel in one of the major key cities in order to attract the interest of local owners and developers,” she added.
In addition, new projects in major cities that are saturated with brands will be looking for additional options, which will create opportunities for foreign hotel companies like Meliá, Wu said.
The agreement also entails cooperation in the areas of training, global hotel distribution systems and procurement, del Olmo explained.
“Concerning this last point, Greenland can help us with improved procurement access to everything from hotel amenities to equipment,” he said.
Commenting further on the agreement, Meliá CEO Escarrer said: “Given the unprecedented dimensions of this change in a business which is already complex and specialized, global hotel chains and the country’s powerful business groups must seek partnerships if we are not to miss the boat and hence continue to grow.”
This is Meliá’s second deal with a large Chinese partner. Three years ago, the group signed a long-term accord with Jin Jiang International Hotel Company to cooperate in marketing, sales, operations and development in both their respective markets.