Economy

'Hotels to benefit from tourism boom'

By Andrew Moody (China Daily)
Updated: 2010-07-05 10:09

Butcher, who studied hospital management at Queensland University, began his career in restaurants before joining Sheraton, where he was involved in the opening of its Shanghai hotel in the mid-1980s.

He said the hotel industry in China was a completely different animal to what it is today.

"At that time China was not really on the radar. Then it was all about business travelers who were starting to form the manufacturing hubs in China and they were just looking for a decent place to stay," he said.

He said that since then China has been subject to a worldwide trend, which has seen the focus of the hotel industry switch to the leisure traveler.

"That has been the trend worldwide also over the past 25 years. Tourism has grown exponentially over that period," he said.

Butcher said the trend suits a five and four star hotel group such as Langham since the leisure traveler now demands the luxuries.

"Leisure guests are more demanding. They want the lifestyle product. They are happy to pay for suites," he said.

"The corporate sector no longer wants to pay for that. The business traveler just wants a hot shower, a cold beer and a place to do business. The corporates who used to pay the highest rates in a hotel now, in fact, pay the lowest."

Butcher, who went on to join Langham in 2002, says one of the dangers in China is the rush to build hotels for specific developments such as the Beijing Olympics.

"In the run up to the Olympics I was asked by journalists whether I was going to build a hotel in Beijing. I found it mind-boggling that anyone would ask that. You don't build a hotel for a two-week event. It is a 40-year deal," he said.

He said the five star market was often over-supplied in China with much "return on ego" rather than return on capital projects.

But he added: "Land can be very expensive in China and it is difficult to justify that price if you just build a two star hotel. The cost of the land as a proportion of the development is too high. A five star hotel is a longer play and it does take longer to establish itself," he said.

Butcher said the US market, where Langham has two properties - in Boston and in Huntingdon, Pasadena in Los Angeles - has been hit hard by the economic downturn.

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"The US market unlike others is very dependent on conventions such as of dentists or whatever. There is an association for almost anything and it is this market that has been particularly badly affected," he said.

On the Chinese mainland and in Hong Kong, the main focus of Langham's business is mainland tourists, which Butcher believes will make up 90 percent of those staying in its mixture of four star and five star hotels. It aims to cater for them with hotel brands that either reflect European or contemporary style, rather than the East meets West feel of many of its competitors. Butcher believes this is what many Chinese people now want.

"Why do you see the mainland tourists lined up outside Louis Vuitton? It is because they want a sense of style from Europe. So we are clear our hotels are going to be well positioned. Whereas other hotel brands are heading down another track being very Asian influenced, colonial or whatever, we are something that is radically different. It gives us a great platform," he said.

Butcher said the group was trying to develop a new silk route, opening hotels throughout China, through Thailand, India and also the Middle East. The target in China is to have hotels in at least 15 cities, including Chengdu and Chongqing in western parts of the country.

"I think eventually half of our hotels will be based in China and we believe they will appeal very much to the Chinese market we are aiming at," he said.