Why Barcelo signed a franchise agreement with Plateno Hotels

(Portofino Resort Tangalle)

Barcelo Hotels & Resorts has signed a franchise agreement with Plateno Hotels, with plans to add 100 hotels in 10 years.

The move will allow the group to expand in China, where Spanish rival NH Hoteles has stolen the march through a joint venture with shareholder HNA Group.

“Our aim is to reach a minimum of 100 properties within 10 years, in tourist areas and urban areas alike,” Raul Gonzalez, CEO EMOA, Barcelo Hotels, said. “Negotiation procedures are under way and agreements with the first franchisee could be confirmed during the second half of 2016.”

The CEO told the local press that the deal may be extended to Australia, the Philippines, Thailand and Malaysia. As part of the agreement, guests will have access to Plateno’s customer loyalty program, which has more than 80 million members (98 percent of Plateno customers) and is the largest in China.

The deal is Barcelo’s second move on China. In 2013 the company signed a deal with Chongqing Kangde Industrial to look at strategic options together, which resulted in, not development, but the sale-and-manageback of a hotel in Tenerife.

The deal sees Barcelo follow domestic rival NH Hoteles which, together with its major shareholder HNA, has created a joint venture based in Beijing through which they intend to manage between 120 and 150 hotels in China by 2020. Meliá has two hotels in China: the Meliá Jinan and the Gran Melia Xian and a pipeline of six more due this year.

Plateno is controlled by Jin Jiang, which acquired an 81 percent of Keystone Lodging Holdings for $1.3 billion in September last year. Keystone owned Plateno, which itself owns Chinese budget hotel group 7 Days, having taken it private in 2013.

The deal gave Jin Jiang more than 2,000 hotels and, including Barcelo, 15 brands, with Maison Albar, Portofino, H12 Hotels and Ameron, which provide full-service luxury lodging; ZMAX, James Joyce Coffetel, Lavande Hotels, Xana Hotelle, Pin Hotel and Lohap Hotel all providing a midscale select-service lodging experience; and 7 Days Premium, 7 Days Inns, IU Hotel and Pai Hotel.

The deal between Plateno and Hilton Worldwide has allowed the latter to claim the largest pipeline of the all the global operators, according to a note from Jefferies, with 114,272 rooms targeted over the next five years, moving it up from having had one of the smallest portfolios.

The investment bank noted that the expansion of the midscale sector in the country was helping to drive a move towards greater franchising, commenting: “As the main growth opportunities move into the midscale we expect the industry will see a marked shift towards the franchised model and the hybrid “manchised” approach. “The manchised model is where the hotel company manages the hotel and collects fees from franchisees, thus offering a lower level of risk than a managed hotel whilst retaining a guaranteed level of operational performance and customer care.”

Ensuring locally based operators maintain international midscale standards while making the transition into the midscale will, Jefferies said, be a critical determinant of brand success. Both Hilton and Barcelo (and, before them, AccorHotels) are collaborating with domestic partners to bring their ambitions to fruition.