Jerry Huang’s career with InterContinental Hotels Group (IHG) may have led him to the executive suite, but it began on the ground floor. Since joining IHG in 1988 Huang has served as the acting general manager of the Holiday Inn in Harbin, the resident manager of the Holiday Inn in Dalian, and the executive assistant manager of Crowne Plaza Shanghai. He now serves as senior vice president of operations for IHG Greater China, overseeing the local operations of four brands: InterContinental Hotels & Resorts, Crowne Plaza Hotels & Resorts, Holiday Inn Hotels & Resorts and Holiday Inn Express. Huang spoke to CHINA ECONOMIC REVIEW about IHG’s expansion plans in China and how it will weather the current economic crisis.
Q: You recently signed a deal to manage two new hotels in Wuhan. What will this development entail? Why did you choose Wuhan over other Chinese cities for your expansion?
A: We will manage the InterContinental Wuhan and Holiday Inn Wuhan New City, which have a combined total of 1,300 rooms. They will be located at the 1 million-square-meter Wuhan New City International Expo Centre, the largest facility of its kind in Central China. They are expected to open in 2012. Wuhan is a growing base for the automotive industry, and this, combined with its rising status as a regional business center, will drive demand for the meeting, incentive, conference and exhibition market, and provide a solid revenue stream for both new hotels. The central and western areas of China represent huge potential for the hotel industry. We have already have a strong presence in Chengdu and Chongqing.
Q: What other areas are you considering expanding into?
A: To date, our footprint has spread to more than 30 cities in China. We are the first among all the international players in the industry to enter the second- and third-tier cities, which we think have great potential for growth.
Q: How has IHG’s China business been affected by the global economic slowdown? Have any of your brands proven more resilient than others?
A: In the past few months, we have seen a slight slowdown in our sales. However, we are very confident in our business from a long-term perspective, especially in the rapidly growing China market. We do see some guests cutting their travel budgets, but the number of high-end consumers remains stable. Mid-range hotels will play a key role under these circumstances. We are the leader in this segment with our Holiday Inn and Holiday Inn Express brands. Last November, we brought our fifth brand, Hotel Indigo, to Shanghai. It’s our first Hotel Indigo in the Asia Pacific region and is expected to open in 2010.
Q: How much have you grown your business in China and what is your growth forecast for 2009?
A: We’ve kept a fast pace of growth in China, especially over the past few years. In 2003, we had only 47 hotels open, but now we have 114 and around another 100 in the pipeline. Almost half of the international hotel rooms in development in China are under IHG’s brands. For 2009, we will continue our growth in this part of the world. We have started a program to re-launch our Holiday Inns, which aims to engage guests with a new look. The re-launch will incorporate a new service promise, a redesigned welcome experience as well as upgraded guestrooms with signature bedding and bathroom products.
Q: What challenges will hotel groups such as IHG face in 2009?
A: Chinese customers are becoming increasingly mature and sophisticated, and therefore IHG is facing more diverse demand with a higher expectation of quality. As the economy slows down, travel patterns may change, but people will not stop traveling. They will also seek out hotels with extra value. All our hotels aim to create added value for our customers. For instance, we have the world’s largest guest loyalty program, which has much more point redemption benefits than any other program of its kind in the industry. Our 1.4 million members in China alone already have built a solid foundation for our business.
Q: From a strategic point of view, are you looking into different types of projects now versus pre-economic slowdown?
A: We overtook previous downturns by investing ahead of the curves – in our distribution networks, brand building, systems and people – all with a long-term perspective. Although we have seen some slowdown or decrease in trading in the past several months, as I said, we don’t anticipate a big impact in the long run, especially when governments of countries are enacting stimulus measures. The fast development of infrastructure in China will further boost the growth of its tourism and hotel industries. And with the World Expo 2010 coming up in Shanghai, China’s hotel industry will soon have another growth wave.
Q: Yet there is a lot of talk about overcapacity in the hotel sector for tier-one cities such as Beijing and Shanghai…
A: The hotel markets in Shanghai and Beijing are not yet overcrowded. We see the markets as having great potential, as the large-scale infrastructure construction arising from the Beijing Olympics and the Shanghai World Expo will generate both inbound and outbound tourism in local markets. We currently have 17 hotels in Beijing, 15 in Shanghai and there are still 25 hotels in the pipeline in those two cities. We are very confident in the markets in both cities.
Q: What about tier-two cities? Is the demand there for high-end hotels at present?
A: China is one of the fastest growing tourism industries in the world. In the next 10-15 years it will overtake the US and become the number one inbound tourism market, with over 183 million trips per year. In the 1950s, the challenge for the US was connecting 44 cities with a population of over 1 million. China currently has more than 166 cities with a population of over 1 million. New infrastructure means people travel more and therefore need hotels. All these factors present great opportunities for the hotel industry to grow, not only in big cities but more importantly in this vast number of second- and third-tier cities.
Q: How do you find enough good quality staff to meet the demands of this growing market?
A: People are a key reason for our success here, but they also pose challenges for us and our peers. We opened the IHG Academy, an educational institution in partnership with major Chinese universities and colleges. There are 24 IHG Academies now, which provide us around 5,000 graduates annually. Furthermore we also provide on-the-job training for our local staff, which raises the industry bar for services.