Q: After the 2008 Olympics, will there be enough demand to sustain the huge supply of luxury hotel rooms in China?
A: After the Beijing Olympics and Shanghai World Expo, supply will temporarily exceed demand. As a result, hotels that don't meet guests' expectations for services and facilities will not survive. It's not that five-star hotels will survive and others won't – hotels have to meet clients' expectations according to their ranking. This is the beginning of real competition in the Chinese hotel market. However, demand from Chinese businesspeople should increase over time, and demand and supply should be balanced eventually.
Q: What's your outlook for the China hotel market?
A: In the short term, the Olympics, the World Expo and an increase in tourism in China are causing more demand for hotel rooms. So to fuel that demand, a lot of new hotels are being built. But China is no longer one big monolithic market, but rather is segmented into many different lifestyle categories, and that includes a fast-growing number of wealthy Chinese consumers. The growth of the luxury travel market is strong throughout Asia. Studies done by the hospitality industry show that the growth of travel by high net-worth individuals (people holding at least US$1 million in financial assets) in China is particularly strong, with 10% per year predicted annually for the next 10 years. Chinese tourism is expanding very rapidly.
Q: What trends do you see in the lodging habits of business travelers in China now?
A: Chinese businesspeople at a certain level in their companies are now making hotel choices based not on price but on brand status and on image. It simply won't do to be seen staying in a lower ranked hotel – it would make the individual appear to be in a lower position than he is in his company, or harm the image of the company itself, making it look unsuccessful.
Q: What strategies do you have for Nikko Hotels in China?
A: As a neighboring country, we are eager to expand our operations in China. We formed a joint venture in April 2004 with Beijing Capital Tourism Company to provide hotel management services for hotels with four and five-star hotels in China. The company has targeted the 13 cities in China where Japan Airlines has air routes, as its first priority. We will look first for opportunities for expansion in those 13 cities, which include Beijing, Shanghai and Guangzhou. We currently have two hotels in Beijing, one in Dalian, one in Hong Kong, and are scheduled to open a new hotel in Tianjin in April 2007. All these are designed and operated as five-star hotels.