A grand opening

Following the recent opening of two Sofitel Hotels in Nanjing, Senior Vice President of Accor Asia-Pacific and Greater China CEO Brian Deeson talks to EuroBiz about the chain's remarkable growth and the great potential for the pre-2010 China market

----By Jody Braverman

The recent opening of two Sofitel hotels in Nanjing at the beginning of the summer - the Galaxy hotel downtown and the Nanjing Golf Resort just outside the city - was an opening to beat all openings; high-ranking city officials gathered on the grounds of the downtown location during the day where they handed over a key to the city; at night under the stars on the sprawling grounds of the golf resort, chefs rolled out delicacies from the kitchen to feed the hundreds of guests that mingled on the back terrace overlooking the lake and the 27-hole golf course. Servers dressed in French Victorian costumes floated among the crowd serving champagne, and a full orchestra performed for the VIPs. The night was capped off by an impressive show of fireworks that lit up the sky heralding a bright future for the Nanjing hotels. But the present is equally bright for Accor brands across the country, says Senior Vice President Asia-Pacific and CEO Greater China Brian Deeson, who came to Shanghai from Accor's regional headquarters in Bangkok at the beginning of last year. And with the growth in travel and the upcoming Olympics, it's only getting brighter.

EuroBiz: What does Accor do in China?

Brian Deeson: Accor has two different business; one is managing and investing in hotels in China and we are also responsible for outbound business from China into the rest of the world network, so tourism, leisure and business travel. The big one obviously for us is the growth of hotels here in China.

EB: Accor has several different brands - which are present in China?

BD: We have different brands and different strategies for each brand. We have 14 Sofitels now, and another 15 in development in China; the vast majority of them are mixed-use developments with a hotel element. That would pretty much be the universal trend here with hotels anyway. The new builds tend to be mostly not freestanding. For example, in Nanjing, the resort is a freestanding property but it's anchoring a residential development, and then downtown is part of a mixed-use development with the shopping centre underneath and the offices as well. So these are the international five-star hotels. The next brand is Novotel, which is an international four-star brand, more of a young, business-type - but not only business, we have leisure hotels as well. Our third major brand is Ibis, an economy brand in which we are wholly invested. We only have three open at the moment in China - in Nanjing, Chengdu and Qingdao. This is probably our fastest- and most aggressively growing brand here, and we have something like 30 sites under development now already. We're going to grow that brand extremely aggressively, and by 2008 we will certainly have 50 hotels. If all goes as planned, by 2010 we'll have over 100. These are hotels typically of 150-200 rooms, maybe in industrial parks or high-tech areas. But we've signed one in Shanghai in a CBD location, so that's also what we're looking for. It's an economy brand - the European equivalent of a motel - so the first three were test hotels really, pilot hotels, and now we're starting to roll it out very aggressively. We then have two more brands - one is Grand Mercure, and this is what I would call a local five-star brand, as opposed to an international five-star brand, according to standards. It is more consistent with local standards rather than Sofitels which are consistent with international French-style, five-star international hotels. We have two of those operating right now in Xi'an and we just announced one in Shanghai, in which we are taking over another hotel and converting it to a Grand Mercure. Our fifth brand is Mercure, which is a local four-star brand, so it falls just below a Novotel. So again they're geared at the middle-market Asian traveler, predominately a regional or local traveller.

EB: Which one of your brands is doing best in China?

BD: It's a bit early to say, but I would say the biggest brand that we have currently is Sofitel; they're bigger hotels, they're in more prime locations, they're doing very well indeed. We think they'll probably be a great success, in terms of overall contribution to the company. Bear in mind we don't own them - we only manage them, - thus we're only getting fee income rather than a share in profit. It's hard to say which one is doing better, but I'd say certainly Sofitel. But we think our biggest brand will be, by 2010, our economy brand, the Ibis.

EB: How long has Accor been in China?

BD: Since 1984. The first brand we had here was Novotel, and then came Sofitel - the first Sofitel was the Hyland in Shanghai, which has just been renovated. And then following the Sofitel, Ibis is a comparatively new brand - I think the first one opened about three years ago.

EB: How are the five-stars doing right now?

BD: China five-star hotels are doing very well; it's still a period of growth - travel is growing very rapidly; there's a lot of demand out there, you know, people are ready to pay for five-star hotels. Generally in China five-star hotels are a good value. They're not expensive by international standards and they're doing well and with a good mix of both domestic and international business.

EB: Your five-star hotels are mainly in which cities?

BD: We have quite a range; we have Sofitels currently in Shanghai, Beijing, Hefei, Chengdu, Nanjing, Xiamen, Xi'an - generally either primary or secondary cities - but we have a few outside too. We have a Sofitel in Hainan, we have other resort properties as well, which is probably the new trend - a lot of our hotels are probably going to be resort hotels, so there's big growth there. It's a good mix, a good range.

EB: How are the hotels in the interior regions doing?

BD: Well Chengdu, which I guess is probably our farthest west, is doing extremely well. There's good solid occupancy, a good mix of leisure and business travel - more business travel, but there is a fair amount of leisure travel there with the pandas and such.

EB: Which one of your hotels is not doing well?

BD: One of our most challenging is probably Sofitel Boao, because it's a freestanding resort on Hainan Island built for the meeting and convention market. If there's not a big convention over there then it tends to be a little empty. People tend to be over at Yalong Bay on the other side of the island and Boao doesn't quite attract because it really is a stand alone resort. But it really is very wonderful, and it's getting better slowly. It has two golf courses and a major spa - good leisure facilities that are very elaborate and very beautiful - but it's all by itself and there's not a great deal of culture.

EB: Are you seeing any problem of oversupply in the larger cities?

BD: Probably the one this year that has not been growing as fast as it was is Shanghai, and that's because Shanghai also gets a fair amount of business which is meeting-related and conference-related. We're seeing some moves into the major convention and exhibition centre in Pudong for example, so some of the hotels in Puxi are not doing quite as well, and also some of the major exhibitions have moved to Hong Kong. There is much more competition within cities so growth has slowed, but generally things are going very steadily, but not the big growth that we thought we would do next year.

EB: How do you see growth in the next five years?

BD: There are a fair number of new hotels planned to come on board, but I think that Shanghai has got great pent-up demand. There are a lot of times here when you can't get a room; I think that will get a bit easier so there will be more of a supply/demand balance. Things will be pretty good out there until at least after the Shanghai World Expo in 2010, and of course it's hard to know what's going to happen after that, but it's possible that there will be a slowing down.

EB: What are your immediate plans for openings?

BD: The next opening we have is a Sofitel in Suzhou, which is opening at the end of September, and we'll also have the Novotel Baiyun Airport in Guangzhou. We'll open those on the same day, the 28th of September. We have a Mercure opening in Suzhou right at the end of the year, we have a Grand Mercure opening in a city just south of Beijing. We just opened one in Hangzhou - we have two Sofitels in Hangzhou now, one just opened a few weeks ago. In Beijing we have a Sofitel coming in next year which is obviously a very important one with the Olympics coming, and we have another Novotel coming up in Beijing this year which will be our fourth.

EB: How many hotels will you have in Beijing by the Olympics?

BD: We're still looking at some that may come in, but we'll have at least seven - five Novotels, one Sofitel and one Ibis.

EB: Why did you decide to open the two hotels in Nanjing on the same day?

BD: Well, it was an unusual thing to do. They're the same owner, so it was convenient to do it that way and we wanted to show the difference between the city hotel and the resort property which is why we did the opening in the city during the daytime and then moved out to the resort in the evening. It was a nice contrast.

EB: What was the idea behind opening a golf resort outside Beijing?

BD: Our research from around the world shows that there's a big demand for resort cities in the local market within the radius of three hours' drive. That's statistically the same in Australia, Europe and America, and that's about as far as people like to go if they're going for a conference or a weekend or even for an overnight. So we believe there's a big market. Suzhou falls into the same category - it's a hotel that will get a fair amount of leisure business. Hangzhou also falls within that three-hour radius and Nanjing, so we believe that there's a very high demand for that type of property. Actually, in Shanghai it's hard to know where to go on the weekends - we don't have beaches - so we believe that's the big market in the future that these hotels will really attract a good business in meeting type conferences during the weekdays, and then on the weekends there'll be the fill out from the local market. Beijing we think has the same trend, but of course they don't have the same climate. We're not finding so many of these resort opportunities outside of Beijing but I think that will come.

EB: What ideas do you have for resorts in northern climates?

BD: There are some people now looking at some ski resorts north of Beijing which we think is a very interesting market for the winter. This also applies near Chengdu - there is a possibility there for ski resorts. But our feeling is that in the north it will tend to be more culturally oriented because there are a lot more opportunities there for culture. In fact for one of our corporate social responsibility projects we're involved with a charity working together with some villages outside Beijing where we're helping them to turn themselves into a place where people can stay and see how people live in the villages. We're training the staff and we're providing them with some training on what the expectations of visitors are and helping them set them up. We're getting a tremendous amount of inquiries from people in Beijing - you know these will only be RMB50 for the experience - but just by word of mouth people are hearing about it and we're getting calls from a lot of people asking if it's available. We're quite startled as we didn't expect people to be interested in that quite so quickly. So I think it shows again that there's a big demand for places to go outside the cities on the weekend.