Hampton, Plateno unite to master midscale in China
 
Hampton, Plateno unite to master midscale in China
31 MARCH 2016 10:02 AM

The opening of Hampton by Hilton’s flagship property in China signals the start of a partnership with Plateno Hotels Group that could result in the development of 400 Hampton hotels during the next eight years.

GUANGZHOU, China—Last week’s opening of the Hampton by Hilton Guangzhou Zhujiang New Town was more than just a standard unveiling of a hotel. It marked the ceremonial beginning of the brand’s foray into the vast potential of the Chinese market as well as its partnership with Plateno Hotels Group.

Lauded as the brand’s flagship hotel in China, the property is the second Hampton located in the country. (The first Hampton in Sanya Bay, Hainan, opened in December.) The 223-room Guangzhou hotel is the cornerstone of a deal with Plateno Group that calls for 400 Hampton hotels in China over the next eight years, said Gloria Wang, Plateno’s president of Hampton by Hilton China, during an interview with Hotel News Now at the opening of the hotel.

Plateno Group is the master developer of the Hampton brand in China. The Guangzhou hotel is owned by Jiaguan International Hotel Company Limited and managed by Huanpeng Hotel Management (Guangzhou) Limited.

The push toward midscale
China is no stranger to Hilton Worldwide Holdings, as Hilton has more than 17,000 rooms in the country represented by its Hilton Hotels & Resorts, Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts, DoubleTree by Hilton and Hilton Garden Inn brands. But the entrance of Hampton by Hilton, which has more than 2,000 hotels in the United States, will take China to a new level because of its midscale offering, according to sources.

“There is a window to put a dent in mid-price product in China, and that window will close relatively fast,” said Jim Holthouser, Hilton’s EVP of global brands. “If you develop the traditional way, you miss that opportunity.”

“This middle market has emerged as a huge opportunity,” said Bruce McKenzie, Hilton’s SVP of operations in Greater China and Mongolia. “People are going to rush to fill it. The opportunity to partner with Plateno for speed is important.”

China’s emerging middle class is steering Plateno Group toward midscale hotels. Since its 2005 launch, Plateno developed more than 2,100 budget-segment 7 Days Inn hotels. The deal with Hilton will help the company change its approach, according to Wang. Since 2013, Plateno has committed to developing five midscale brands in China, including four of its own (Lavande Hotels, ZMax Hotels, James Joyce Coffetel and Xana Hotelle) and Hampton by Hilton.

“We aim to be less budget and more midscale,” Wang said through an interpreter. “The growth of Hampton by Hilton is in line with that strategy.

“The consumers have grown, too—not just in terms of age, but consumption ability and income as well. This is why they have turned to midscale hotels.”

Lee Wee-Hau of Hilton Worldwide Holdings talks about expansion in China during an interview at the opening of Hampton’s flagship hotel in the country. (Photo: Jeff Higley)


Data from STR, the parent company of Hotel News Now, indicated there are approximately 1,800 midscale hotels comprising 292,000 guestrooms in China. The executives believe that total will quickly multiply. 

“Considering that China is such a huge market, 400 (Hamptons) is a small number,” Wang said.

“Think of it as a pyramid,” said Lee Wee-Hau, Hilton’s SVP of development in Greater China, who noted that the base of the pyramid can be filled with the midscale segment. “That speaks to the whole rationale of partnering with a proven track record in China versus doing it ourselves organically.”

A perfect match
Prior to the midscale segment’s emergence a decade ago, China’s hotel market was either basic, hostel-type accommodations or 5-star hotels, which opened the door for Western brands such as Hampton, according to Phil Cordell, Hilton’s global head of focused service and Hampton brand management.

“Very few Western brands have pioneered in a big way in this midscale space,” he said. “Other brands are here, but they’ve tried to grow more organically.”

Cordell added that partnering with Plateno was a necessary step.

“We had a product that we thought was appropriate for the market,” he said. “We realized in this segment, a newly growing segment in a new, large market such as China, there was an area of expertise we didn’t have. Knowing that 90% of your demand is going to be domestic Chinese travelers, you have to make sure to realize that you don’t know what you don’t know and bring in a partner that does know.”

The Hilton-Plateno relationship was hatched in 2013 when Wee-Hau started the conversation. Things evolved quickly and when the principals met at a Hampton by Hilton property in Berlin in the spring of 2014, the partnership was sealed.

Hampton’s “friendly, authentic, caring, thoughtful” mantra won over the Plateno Group’s executive team from the start, according to Wang.

“The reason both sides signed a deal very quickly is both sides see eye to eye in service culture and corporate culture,” she said. “The reason we grabbed the F.A.C.T. concept so quickly is because it has been so pervasive in the Hampton culture globally, not just in (Cordell) but in his team members.

“While there are lots of fancy hotels in China, there are few which can provide customers with good experiences and good F.A.C.T. elements,” Wang added. “F.A.C.T. will be the winning element.”

While offerings might be different for cultural reasons, brand standards for Hampton by Hilton properties in China are the same as they are in the U.S., according to company executives. (Photo: Hilton Worldwide Holdings)


Compromises between Hilton and Plateno
Signing a deal that ramped up its brand expansion in a country destined to become the world’s No. 1 economy was a two-way street, according to Hilton executives. There had to be some give-and-take to get the deal done.

“We had to make a few trade-offs and concessions for speed,” Holthouser said. “You just don’t have a decade to build infrastructure.”

To ensure a quicker launch, the Hampton by Hilton properties in China will be operated on Plateno’s in-house property-management system rather than Hilton’s proprietary OnQ platform.

“Had we waited to develop all the technology needed to develop this kind of hotel it would be two or three years for development,” Holthouser said.

Another compromise comes with guest loyalty, as Hampton has developed a program unique to its China properties.

“The Chinese customer doesn’t view loyalty programs the same way Western customers do,” Holthouser said. “There’s an expectation of immediacy of award, largely in the form of a discount.”

The company is working on ways to convert Hampton loyalty currency in China to the HHonors currency, and vice versa, Holthouser said.

“That’s not built yet, but our scientists are figuring out how to do it,” he said.

And while the brand’s core standards are adhered to, there needs to be some flexibility to account for cultural differences, executives said.

Hampton’s core fundamentals, such as a hot breakfast, a clean white bed and some version of the 100% satisfaction guarantee, will remain, Cordell said.

“What it looks like in Europe might be different than what it looks like in China and that might be different than what it looks like in the U.S., but it has the same core,” Cordell said. “The key is translating those core brand things into what makes it right for the market.”

Holthouser agreed.

“Define the brand well, establish pillars, and it doesn’t matter if it’s exactly the same,” Holthouser said. “Provide the pillars and you get high marks for consistency. Our standards haven’t changed. We’ve learned from international experience to have a bit more flexibility in what a building could be.

“‘Consistency’ doesn’t have to mean ‘cookie cutter.’”

Going forward
There will be few conversion opportunities from other brands, Cordell said, simply because the supply doesn’t exist. The Guangzhou property is housed in a building constructed three years ago that was still waiting for an eventual tenant. Cordell said he expects there will be a fair number of similar situations going forward, which helps put the expansion on the fast track because such facilities can be fitted for a hotel in nine months.

“Plateno has ability to go in and find these; the infrastructure already exists,” Cordell said. “In an ideal environment their model is to go from a shell to an open hotel in 210 days.”

Tapping into local builders and suppliers is key to that strategy, which is another of Plateno’s strengths, Wee-Hau said.

During the opening ceremony, Wang said there are already 35 signed contracts for Hampton by Hilton hotels in China.

Editor’s note: Hilton Worldwide Holdings paid for all travel expenses for the opening of the Hampton by Hilton Guangzhou Zhujiang New Town, where the interviews for this article were conducted. Complete editorial control was at the discretion of the Hotel News Now editorial team; Hilton had no influence on the coverage provided.

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