In March, China’s HNA Hospitality Group announced a joint venture with Spanish-based hotel chain NH Hotel Group, following the strategic MoU signed between NH and HNA as part of the bilateral trade summit between Spain and China. The move will see the creation of a joint office and Chinese brand name, Nuo Han.
The joint venture is aiming to build a portfolio of NH Hotels and NH Collection brand hotels in the midscale and upscale segments in China owned by HNA or by third parties, with 120 to 150 NH-branded hotels opening by 2020. NH Group also announced two new NH-branded hotels that will enter the China market before the end of 2016.
HOTEL MANAGEMENT spoke with NH Hotel Group CEO Federico J. González Tejera about the development of the JV, and the company’s future in China.
1. HM: What's the story behind the JV?
González Tejera: This journey began several years ago. NH Hotel Group, with close to 400 hotels in 30 countries and a competitive operating model leader in the urban segment, has the capacity to attract global leading partners in the hotel sector. In this sense, in 2013 the Board of Directors of the Company approved the entrance of HNA Group in the shareholding of NH Hotel Group.
In 2014, as part of the bilateral trade summit underway between Spain and China with a view to bolstering commercial ties between the two countries, Spanish President Mariano Rajoy and his Chinese counterpart Li Keqiang presided over execution of a strategic memorandum of understanding between NH Hotel Group and HNA, marking a significant step ahead in the framework agreement reached by the two companies the year before. Our intention was setting up a jointly owned company to build a portfolio of hotels in the middle and upper-middle segments in China to become a leading company in this country.
The JV launched with a target of developing 120 to 150 properties by the year 2020. I'm fully convinced of the positive impact and benefits of leveraging the synergies between the two companies, such as the chance for NH to get into one of the world’s biggest markets.
2. HM: How were these airport locations chosen? Will the upcoming hotels mostly be around airports?
González Tejera: The JV will manage hotels owned by HNA or third parties. Currently HNA is building two new airport hotels in Sanya and Haikou of Hainan province. NH Hotels is well suited for both locations. The NH Sanya Phoenix Airport will have 334 rooms, while the NH Haikoi Meilan Airport will have 1,001 rooms, making it the largest NH Hotels branded hotel in the world. But it doesn’t mean the upcoming new China hotels will be only around airports, our plan is to build hotels in prime city center locations, which is what NH is known for around the world.
3. HM: What is China's midscale hotel scene like? Why is this market so appealing for NH?
González Tejera: The midscale market is still a huge opportunity in China. China government have launched urban developments in the whole country, which means there is more demand for business and city hotels especially in second- and third-tier cities, where international chains are not so present. And the middle-class boom with more than 100 million Chinese citizens is expected to be the key driver of an increase of high level consumption in travel and hospitality. They are pursuing better value for money and hotel experience. We definitely can take advantage of this development in the Chinese market.
4. HM: How will Nuo Han reach 150 hotels in four years?
González Tejera: The plan is to develop 120 to 150 hotels by 2020, and we have a strategic development plan to achieve this goal. We have a flexible business model for our owners and partners and we are very experienced in both new and conversion projects. Our team of architects and engineers specialized in the hotel sector can help to fully maximize the projects, from the conceptual design, through project development right up to its execution. Our organization is strengthened by using of efficient management tools and a powerful distribution and sales network which allows us to be highly competitive.
5. HM: Considering the recent challenges China's economy has faced, why was this the right time to form this JV?
González Tejera: China is the second-largest economy in the world and sets its year-on-year GDP growth rate for this year in a range between 6.5 to 7 percent. The travel and hospitality market keeps growing especially the high demand for midscale brands.