A Popular Summary of the Key Points
Over the past 20 years, China's hospitality industry has rapidly expanded by leveraging domestic franchise models and directly acquiring established overseas brands, achieving the same level of room capacity as its international counterparts in just one-fifth of the time. Brands like Huazhu and Jinjiang have climbed to the top ranks globally. However, this growth driven by capital has reached its limit. The globalization of Chinese hotels has entered a new phase: the focus is no longer on owning the most properties or having the highest rankings, but on overcoming three critical challenges that no one else can do for you—learning to effectively integrate acquired overseas brands, gaining the trust of international investors, and translating Chinese-style services into a language that resonates with global customers. The real bottleneck is not a lack of funds or resources, but the absence of an internal organizational system that complies with global standards.
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Detailed Explanation of the Key Points
1. The First Half of China's Hotel Globalization: A Fast Track That Was Like “Cheating”
International hotel groups took fifty to sixty years to build their global presence by expanding into different countries and establishing a good reputation. In contrast, Chinese hotels took two decades to follow two unique paths: first, by opening franchises domestically at a rapid pace, similar to expanding a chain of convenience stores, and quickly establishing a base of hundreds of thousands of rooms; second, by using their financial resources to acquire established European hotels. With the signing of acquisition agreements and a few photos, these Chinese hotels immediately appeared on global rankings.
However, this approach has its drawbacks. While the brand reputation improved, the underlying quality didn’t keep up. When the initial excitement wore off, problems emerged: the acquired overseas brands lost their original essence, and the customers who knew the brand well left. In essence, the hotels ended up with just empty brand names on the charts.
2. Don’t Rush to Take Control After an Acquisition: Being a Wise Major Shareholder Is Crucial
There are two contrasting outcomes in hotel acquisitions worldwide. One scenario is where the buyer is too dominant, replacing the existing management and changing all the brand’s traditions, leading to the loss of the brand’s identity and customer base. The other approach is to act as a wise major shareholder, leaving the existing management in place, preserving the brand’s headquarters and service standards, and providing financial support, supply chain, and membership systems. This strategy has been successful for companies like Thai businesses that acquired Spanish NH Hotels and Fosun that invested in Mediterranean clubs.
Huazhu’s and Jinjiang’s experiences with acquiring German and French brands show this approach. They kept local staff in front-of-house positions and shared back-office capabilities, allowing the brands to maintain their uniqueness while leveraging the group’s resources. For high-end luxury brands, maximum freedom was given, while mid-to-high-end brands could integrate more group resources. It’s essential to clearly define brand independence in the company’s policies, such as granting the local board independent decision-making powers and protecting the brand’s service standards from arbitrary changes by the parent company.
3. To Attract International Capital, Be Transparent with Your Financials
The valuation of hotel groups varies significantly in overseas markets. International investors consider factors like ESG (environmental, social, and governance) in addition to financial performance. While Chinese hotels are producing increasingly detailed ESG reports, they often lack transparency. For example, some reports only include data from directly operated properties and exclude franchisees, while others include all franchisees for environmental statistics. To attract investment, it’s necessary to provide comprehensive, accurate information that demonstrates transparency and compliance with global standards.
4. Our Excellent Services Need a “Translation” to Be Understood Globally
Chinese hospitality practices, such as warm hospitality and attention to employee well-being, are unique but not easily understood by foreigners. To make these values appealing to international customers, they need to be clearly communicated. Brands like Shangri-La have transformed their “Asian hospitality” into tangible, measurable services that resonate with global consumers. Japanese brands like Anman and Starwood have successfully translated their Eastern aesthetics into high-end vacation experiences. Chinese hotels, on the other hand, often copy Western templates for their marketing and ESG reports, missing out on the opportunity to showcase their unique strengths.
5. Every Upgrade Comes with a Cost
None of the challenges mentioned can be overcome without a cost. Giving overseas brands independence may slow down profit growth in the short term, as unified procurement and membership systems are less profitable. Acquiring franchisees may lead to concerns about data privacy and increased costs. Building a translation system for services may seem like a wasted effort in the short term. However, these sacrifices are necessary to establish a global presence. With the world’s most comprehensive hotel supply chain and the largest domestic market, what’s needed is the ability to transform these local strengths into globally recognized capabilities. Those who are willing to make these initial investments will gain a greater say in the global hospitality industry.
In summary, the globalization of Chinese hotels requires a balanced approach that combines local expertise with global best practices, transparency in financial reporting, and a clear commitment to maintaining brand independence and quality standards. Only by addressing these challenges can Chinese hotels truly compete on the global stage.