IHG adapts in China

30 March 2011

BEIJING: InterContinental Hotels is creating a new premium brand to serve Chinese consumers, a move the company believes could provide benefits inside and outside the country.

The latest addition to IHG's portfolio will primarily cater for people travelling on business, employees of state-run organisations and government officials, described as the "emerging affluent class".

"Our first hotel is coming online 2012, 2013," Keith Barr, IHG's chief executive, Greater China, told Reuters.

"There is rising demand for something that is truly Chinese - and not the Western view of what is Chinese."

"They want the assurance of an international brand … but they are very proud to be Chinese."

Many features of these "upper upscale" hotels are set to diverge from designs elsewhere, boasting extremely luxuriant lobbies and a reduced bar, as teahouses become the main areas for socialising.

Restaurants will also be open all day, carrying menus tailored for local tastes, and more private dining rooms than is usually the case.

"There are thousands of years of history that have shaped their culture, their backgrounds and their beliefs - the way that you should arrive at a hotel and be treated, it's just different," said Barr.

In the longer term, this chain could be introduced to increasingly wealthy lower-tier cities, as improving rail and air links bring the country closer together.

Alongside offering potential to expand in China, this network equally presents international possibilities as rising numbers of Chinese consumers make professional and personal visits overseas.

"There are going to be 100m Chinese tourists travelling abroad in the near future and if we build a brand locally here that really resonates with them, it will be prudent business for us to move that brand outside of China over time," Barr continued.

While the firm's new sub-unit has not yet been named, IHG previously witnessed the difficulties that come from simply translating existing banners into Chinese.

When rendered in Mandarin, Holiday Inn Express appeared to be competing against budget specialists like Home Inn and Motel 168, meaning it has replaced it with a name translating as "Smart Choice".

IHG, which entered China in 1984, is currently the biggest operator in the hotel field, possessing nearly 50,000 branded rooms, roughly 10% of the total.

It added 7,253 extra rooms last year, representing 20% of its global figures on this measure, including two flagship InterContinental hotels in Shanghai and Nanjing, and seven Crowne Plazas.

The British corporation generated over $1bn (€711m; £627m) in gross revenue from China in 2010, and anticipates doubling its size in the next five years.

As part of a $100m worldwide advertising initiative, InterContinental launched its first ever brand campaign in China, promoting sites like those in Sanya Resort, Shanghai Expo and Nanjing.

This effort reached an estimated 25m people in the world's most populous nation, and incorporated the first ever photo exhibition staged on the Great Wall of China, featuring pictures taken by consumers.

IHG now has more than one chain operating in major cities like Shanghai and Beijing, but also in larger second-tier markets such as Chengdu, Chongqing, Guangzhou, Suzhou and Tianjin.

With a presence in 44 cities in China, it expects to be running 300 hotels in five years time.

Data sourced from Reuters, Financial Times, IHG; additional content by Warc staff