Ritz-Carlton to Expand in China Even as Government Cuts Expenses
Ritz-Carlton, the hotel brand owned by Marriott International Inc. (MAR), said demand for luxury hotels in China will withstand an economic slowdown and government spending curbs.
About 10 percent to 15 percent of the 200 new luxury, lifestyle hotels that the Marriott group will add in the next three years will be under the Ritz-Carlton brand in the Asia-Pacific region, said Victor Clavell, vice president for the chain in the region. The brand has 10 hotels in China, its fastest-growing market in Asia, while more than 20 are under construction, he said.
“There’s huge demand for luxury brands,” Clavell said in an interview in Shanghai yesterday. “Obviously, there’s a little bit of projection on the slowing down of Chinese economy, but it’s still growing at a much faster pace.”
The world’s second-largest economy grew at its slowest pace in six quarters in the first three months of this year, while the government banned officials from spending money reserved for meetings on banquets or luxury accommodation, as the Communist Party battles public discontent over wasting of public funds.
“It’s very difficult to evaluate to what degree have these campaigns affected hotels,” Clavell said. “In capital cities, hotels have noticed more, especially in food and beverage, but I wouldn’t say this is something that would affect our future or growth that significantly.”
Most hotels in China have a banquet-style Chinese restaurant used for meetings or weddings that draw local demand, and government spending limits may put a dent on food and beverage revenue for hotels in the long run, wrote Bloomberg Industries analysts led by Margaret Huang in a May 19 report. Five-star hotels make up 6 percent of the total hotel market in China, the analysts said.
Ritz-Carlton will also focus on adding more resort-hotels in Asia to cater to middle-class travelers, Clavell said. It will open three new Ritz-Carlton hotels in Bali, Indonesia, in the next three years, he said.
The brand’s most profitable hotel is in Sanya, on China’s tropical island of Hainan, according to the Ritz-Carlton.
Ritz-Carlton has 86 hotels around the world and will reach 100 in the next two years, Clavell said.
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