Hotels are booming in Sanya, Hainan province, China’s top beach destination. [Photo/China Daily]
CEO considers options from many angles before deciding on investment

Sunny Bay is not on the itinerary for many visitors to Sanya, Hainan province – the country’s top beach destination.

It is secluded from all the fuss and buzz at other bays. Yet it is ideal for Mark Hoplamazian, president and chief executive officer of Hyatt Hotels Corp.

"It is remote but absolutely beautiful," said Hoplamazian, who travels three or four times to China every year as new development and infrastructure increase.

Next year, two Hyatt hotels will open for business in Sunny Bay. Unique locations and iconic properties are the CEO’s pride.

"We have great presence in prominent locations," said the 49-year-old, speaking in the meeting room of Park Hyatt, the tallest skyscraper in the central business district overlooking Beijing’s Chang’an Avenue. It is near the Palace Museum and the China Central Television complex.

"It is central to the reputation of our brands. Staying at Hyatt property means people are staying at the best hotels in the city."

The Chicago-based hotelier currently operates 19 properties in the country under the brands of Park Hyatt, Andaz, Grand Hyatt and Hyatt Regency. More than 30 hotels are under development.

On the Chinese mainland, where there are 31 provincial-level capitals, the number is modest, said Yang Honghao, a researcher with China Tourism Academy.

Yang co-authored a development report on China’s hotel industry. In it, he listed 60,000 hotels, of which 14,000 were star-rated.

By the end of 2010, nearly 70 international hospitality brands from 41 countries and regions had entered the Chinese market, managing about 20 percent of the country’s top-end hotels and taking 80 percent of the profits.

Hoplamazian said competition comes down to quality of service.

"With a goal to be the most preferred but not the largest hotel brand in the world, Hyatt cannot waste time and effort on projects that will not be successful. Neither can we expand at the expense of providing a great experience for our guests," Hoplamazian said.

The CEO visited Beijing to attend the 2012 Beijing Architecture Forum. The event on May 24 coincided with the Pritzker Architecture Prize – often called the "Nobel Prize of architecture". The forum was co-hosted by the Beijing municipal government and Hyatt.

"Architecture and design can improve the lives of the people who visit our hotels, and live and work in the communities where we operate," Hoplamazian said. 

Since becoming head of Hyatt in 2006, Hoplamazian has turned in what many regard as a sizzling performance.

He took the company public in 2009. A year later, Global Hospitality Services – a leading hotel consulting and services organization – credited his leadership with lifting the stock price 39 percent and growing earnings before income tax, depreciation and amortization – a key performance and compensation measure – by 143 percent from the year before.

Having served as an adviser to various Pritzker family-owned companies including Hyatt Hotels Corp, he said it was a wonderful opportunity to oversee many businesses.

"(The experience) provided a great perspective," he said.

But in his first year as the head of Hyatt in 2006, he recognized that he didn’t know the business very well. He then spent a full year learning it.

"In my view, it is the best thing I could have done," he said.

"With fresh eyes, I asked a lot of questions. I learned a lot while others learned with me. That inquiry in coming into the company that way made a difference."

Chinese market

China remains central to Hyatt’s global growth strategy, Hoplamazian said. The group’s Asia-Pacific results were driven by strength in China, according to its annual report for 2011.

With a booming demand and a relatively limited supply, China is at a wonderful stage of development, Hoplamazian said.

Compared with the mature market in the United States, he said a forward-looking mindset should be adopted in China.

"In China, you look at the evolution of the local economy and what kind of business and leisure travel you can expect from that," he said.

Take the city of Chengdu, in Sichuan province, as an example. Work started on building some hotels five years ago when the market probably would not have supported it. By the time they were open, the economy had accelerated so much these hotels became a success, he said.

A long-term perspective helps a hotel management make wise decisions, said Hoplamazian.

He said building a hotel which stands for decades requires long-term vision. "What happens next year, or in a very short period of time, if one makes a decision based on that – it is not wise to do that in our business," he said.

In the robust hospitality market in China, it is a challenge for a hotelier not to be excited about the opportunities. But Hoplamazian takes a more careful approach.

"We don’t jump on any property or opportunities that are thrown to us," he said. "We take time to think about how we can best represent our brand."

A full assessment in new development is also critical. At the beginning of a project, Hyatt analyzes every single hotel transaction to ensure the hotel itself will be a success commercially and financially over time.

Understanding local partners also consolidates their presence in a foreign market.

"It is a marriage, not a trade," said Hoplamazian. "We and our partners will be together for decades. You don’t do every deal presented to you. We take a very careful approach to make sure of its success."

Expansion plan

With the support of local partners, the US hotelier has expanded to many second- and third-tier cities, a major driver of the company’s growth in China. They include Changbaishan in Jilin province and Hangzhou in Zhejiang province.

"I don’t think they are second- and third-tier cites," Hoplamazian said. "From my perspective, they are big, vibrant cities, with significant economic activity and large populations. They are really great opportunities."

Hotel brands with selected services – namely Hyatt Place and Hyatt House hotels – are on the top of the agenda in Hyatt’s blueprint for China over the next several decades, said the president.

The group has two Hyatt Places and one Hyatt House being built in Shanghai.

"We will build an increasing number of Hyatt Places and Hyatt Houses," said Hoplamazian. "This is the biggest growth area for us in the next 10 to 20 years. This trend is very clear."

The rise of China’s middle class and affluent families is the reason why Hyatt chose to expand hotels with selected services.

After rapid development in 2010, high-end hotels, which have increased in number to more than 600, are close to saturation point, according to a development report on China’s hotel industry.

The next step for high-end brands is not growing in number but in specialized services, the report said. The rise of the middle class will create demand for medium-end hotels.

"The number of markets we can serve with these brands is significantly larger than the market we can serve with our full service brands," said Hoplamazian. "The cost of building them is lower." 

SOURCE: China Daily
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