Inside Hilton's Hampton plans for China

Hampton Guangzhou

GUANGZHOU, China - Hilton Worldwide has a global presence, but its widely-known Hampton brand is still faceless in China—until now.

Hilton has opened its flagship Hampton by Hilton hotel here, the Hampton by Hilton Guangzhou Zhujiang New Town, located in the Tianhe Dustrict of Guangzhou.

The 223-room hotel, managed by Huanpeng Hotel Management and located near the Tianhe Sports Center business zone, was built as part of a deal with Plateno Group, a Chinese developer and operator that is opening and managing Hampton hotels in the country over a five-year period. The Zhujiang New Town property will be the brand's flagship hotel in Guangzhou.

The building, in fact, was constructed three years ago, intended to be used as office space. However, Hilton was able to agree on a design template for its Hampton brand that would fit inside the existing box, and developers were able to get the hotel up and running in nine months.

Eric Huang, GM of the hotel, told HOTEL MANAGEMENT that this is a common development practice in China, allowing developers to capitalize on existing projects as long as a plan can be formed for the property in short order.

Bruce Mckenzie, SVP, operations, greater China & Mongolia for Hilton Worldwide, described Guangzhou as one of China's four key cities, and a major development destination for Hilton in the coming years, driven primarily by growth in the midscale segment. "Guangzhou is a huge base for travel within China and internationally, and getting a Hampton in here, in this stage of the brand's life ,is a very strong position for us," Mckenzie said.

Hampton Guangzhou Lobby

Emerging Audience
The Hampton brand's push into major Chinese travel arteries, such as Guangzhou, is meant to appeal to the country's emerging middle class. According to Lee Wee-Hau, SVP of development, greater China for Hilton Worldwide, up until 10 years ago the majority of hotels in the country were at the high end and luxury level, and were built to appeal to international travelers first; meanwhile, budget, hostel-like accommodations occupied cities as the primary lodging option for the local Chinese traveler. The hospitality landscape of the country has shifted since then, with more midscale travel taking place in excess of supply.

"As the economy has grown over the past 10 to 15 years, that middle class has also grown," said Phil Cordell, global head, focused service and Hampton brand management, Hilton Worldwide. "Just as you've seen Western retail and food-and-beverage brands come [to China] because they recognize there is disposable income that can be tapped into here, so has the hotel industry seen the opportunities here as well."

Jim Holthouser, EVP of global brands for Hilton Worldwide, said the middle class has grown so quickly in China that the potential growth for Hampton in the country is limitless, in excess of the 400 hotels are planned for the country but not yet under contract. "Guangzhou is a city of 23 million people. Large cities in the U.S., like Chicago, have 7 or 8 million people by comparison," Holthouser said. "When you count the number of cities in China with 5 million people or more, the lights start coming on and the investment to get into the market starts to make sense."

Hampton China

The investment Holthouser is referring to involves Hilton's partnership with Plateno Group, which helped Hilton break into a market known for high barriers to entry. Plateno Group already operates roughly 2,000 of its 7 Days properties throughout China, giving it a commanding lead over the budget hotel space in the country. By partnering with Hilton, Plateno has access to an established midscale brand prepped to be spread throughout China, and benefits from its international recognition.

But why should U.S. operators care that Hilton is growing in China? In 2014, China exported 100 million outbound travelers, and that number is expected to increase by 25 million travelers each year. Much of that demand is being soaked up by destinations in Asia, such as Japan and Hong Kong, but Holthouser said the U.S. is an aspirational market for these travelers.

"If you are an American owner, you want this kind of infrastructure in place in China," Holthouser said. "China will overtake the U.S. travel industry on an aggregate basis, not per capita, but it will be the world's largest lodging market at some point during our carreers. U.S. owners want us to create a base here so that when Chinese travelers come stateside they have a brand to guide their purchase decisions."