A cautious approach

Why did you choose Tianjin and Xian for your hotels?

Edward Tai: Both Tianjin and Xian were chosen because during the earlier days of Hyatt's development in China, the company's targets were major cities and resorts.

Tianjin was chosen for its proximity to Beijing and its role as a major busy harbour/port. The city was also aggressively developing itself as an important centre for industry and commerce, with various joint ventures set up by international firms.

Xian, which had been China's ancient capital for 11 dynasties and home of the world-renowned Terracotta Warriors, is and continues to be an international tourist attraction. The city has been developed in recent times to become an industrial base, thus attracting both domestic and ' international business travellers.

A number of the world's major hotel chains have many more hotels in China than Hyatt. Why has Hyatt been so reticent?

Edward Tai: While we remain anxious to develop more hotels in China, we have maintained a smaller number of properties, compared to other major hotel chains, for a number of reasons.

Firstly, we tend to be more cautious in our selection of partners as past experience has shown us that some local owners tend to want a major say in all management decisions. This, combined with the lack of expertise in the industry as well as various indigenous practices (such as mandatory hiring of employees, regardless of suitability) hindered our efforts to effectively maintain Hyatt's high standards in the management of hotels.

Although China was already beginning to sport a more receptive attitude to new/foreign ideas, international management styles were still relatively new and hence, in several cases, it was difficult to mutually agree on management terms.

In other locations, Hyatt was reluctant to manage either due to the unfeasibility of the market situation (such as an oversupply of hotel rooms) or the requirement to take equity participation. The latter is contrary to Hyatt's corporate policy.

Does Hyatt have any plans for expansion? If so, where in China does it plan to move and why?

Edward Tai: Hyatt definitely has plans for future expansion. We do foresee a new wave of opportunities given the fact that in recent times, China has embarked on a more open-door policy.

Our main areas of interest now include Beijing, Shanghai and Guangdong. We're also looking into the secondary cities and those where special development zones are planned such as Shenyang and Dalian.

Despite an overabundant supply of hotel rooms in the capital, Beijing, we still hope to see a Hyatt hotel there, if only to establish a strategic presence. The same applies to Shanghai. However, with the city and the neighbouring port area now receiving such an enormous amount of foreign investment, Shanghai may soon – if it hasn't already – see an inadequate amount of hotel rooms.

What type of traveller is Hyatt aiming to attract? Do you feel that business travel or tourism will be the more important for Hyatt in the future?

Peter Chau: We aim to attract business travellers. It is a market which will continue to be of greater relevance and importance to our business.

What is your marketing strategy in China?

Peter Chau: Direct sales calls to targeted corporate clients who are FITS, embassies (especially the trade offices of embassies which organise incoming visiting trade missions), associations and companies which may have executives who are long stayers. Most of our direct sales calls or blitzes are to major urban centres such as Beijing and Shanghai. We also maintain a Hong Kong sales office which covers the Hong Kong market.

With two hotels in China and three others in Hong Kong and Macao, we use the network to cross-sell each other. We are also using direct marketing increasingly to communicate with our clients.

What idiosyncrasies of the Chinese system have proved most obstructive to your business?

Edward Tai: As mentioned earlier, some partners in China whom we've encountered, have sought heavier roles in all decision-making processes. From their viewpoint, this was justifiably so since property construction costs were coming mainly from themselves.

The general attitude was also that they could easily "learn the trade" and therefore, it was a prevalent practice to have local "understudies or shadows" working alongside international expatriate staff. In many of these situations, unfortunately, these local candidates possessed little or no experience, lacked the interest to learn and sometimes probably secured their positions solely due to their connections with the local owners.

How important is the patronage of local Chinese to your hotels? How important will this market be to you in the future and what is Hyatt doing to encourage it?

Peter Chau: From the point of view of the Hyatt Tianjin, the patronage of local Chinese is a very important trend especially for our restaurants and banqueting business. This trend is becoming more evident as government officials and even local private entrepreneurs expand their entertainment spending.

To encourage this market, our hotel practises sensible pricing, and most recently, we waived the RMB surcharge.

What are Hyatt's main aims in China in the future?

Edward Tai: Our main objective will be to look into the development of more hotels in major cities as well as other fast-developing areas and resorts. However, we'd take a more gradual approach in our expansion plans as we want to avoid the opening of numerous properties at or around the same time. After all, opening and managing a hotel in China is, more often than not, a greater and sometimes more difficult challenge than doing the same in another country. *

Addresses:
Hyatt Tianjin, Jie Fang North Road, Tianjin, 300042, China. Tel: +8622 30 1234/318888 Fax: +8622 31 1234/31 0021.
Hyatt Regency Xian, 158 Dong Dajie, 710001 Xian, Shaanxi. Tel: +8629 333888, Fax: +8629 335962