Starwood targets Chinese expansion

02 August 2011

BEIJING: Starwood Hotels, the accommodation and resorts group, plans to double the size of its operations in China, as it seeks to leverage a "once in a lifetime opportunity".

Having established a presence in the world's most populous nation 25 years ago, the company now boasts 75 hotels in the country, and anticipates adding 100 more sites to its portfolio going forward.

As part of this process, Starwood will boost its headcount from 29,800 staff today to 90,000 by 2015, mirroring its confidence in the promise held by China at a time of economic uncertainty elsewhere.

"Reading headlines, it would be easy to feel skittish about the near term," Frits van Paasschen, the chief executive of Starwood, told Dow Jones Newswires.

"At the same time though, from our vantage point, drivers of our business paint a more robust picture."

More specifically, van Paasschen suggested several shifts are reshaping the Chinese market when compared with 25 years ago.

"Our first hotels in China ... were outposts exclusively for Western travelers. But today, most of our guests are Chinese citizens," he said.

"As their nation flourishes, the Chinese people are increasingly on the move - at home and abroad."

The possibilities are also rapidly extending outside metropolitan centres such as Beijing and Shanghai into smaller outposts throughout China.

"Growth is spreading beyond the major markets to the so-called second- and third-tier cities," said van Paasschen.

Even once Starwood, which owns brands like Le Meridien, Sheraton and St Regis, has opened an extra 100 hotels in China, the scale of its local network will still only be around a third of that in the US.

More than 80% of the firm's new hotels will be in cities housing over 1m residents, although van Paasschen warned a nuanced model was essential to ensure supply did not out outstrip demand.

"That said, our occupancies continue to grow, and we have been careful in selecting the right partners and the right locations as another 300m people in China move from the countryside into cities over the next ten-to-15 years," he said.

"This is unprecedented growth in the ranks of a new class of affluent global business and leisure travelers."

More specifically, travel rates in China are climbing by between 15% and 20% per year, with the amount of internal and external trips now almost matching totals posted by America.

"There is only a fraction of the high-end hotels needed to serve this growth," van Paasschen said.

Starwood recently relocated its headquarters from New York to China for a month, reflecting a desire to gain greater insights into what is by "far and away" its fastest-growing market.

It is also taking an increasingly internationalised approach, as 100m people from the Asian state are expected to travel overseas in four years time, doubling the number of Americans doing the same.

"It's no surprise that we in the travel industry see this as a huge, once in a lifetime opportunity," said van Paasschen.

Indeed, certain Starwood hotels in Buenos Aires, London, New York and San Francisco already offer a variety of tailored services, including translation services and foods like congee and noodles.

Data sourced from Wall Street Journal/Forbes; additional content by Warc staff