The Wall Street Journal-20080129-IHG to Franchise Hotels in China
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IHG to Franchise Hotels in China
Full Text (428 words)BEIJING -- InterContinental Hotels Group PLC will begin franchising its Holiday Inn Express hotels in China for the first time as it seeks to accelerate its already rapid growth in the country, the U.K.-based company's chief executive said.
IHG, the world's largest hotel operator by number of rooms, is now in final negotiations with potential partners who would manage some of its future Holiday Inn Express outlets, InterContinental Hotels Chief Executive Andrew Cosslett said yesterday in an interview.
The British hotel giant has avoided franchising in China until now -- even though 90% of its hotels in the U.S. are operated as franchises -- because it wanted to establish its brand using international management, Mr. Cosslett said.
Now, after three years of planning and almost 24 years in China, the company intends to announce its first franchise partnerships over the next few months. Moving to a franchise model could enable faster expansion in China for IHG, the CEO said.
The company plans to open 50 new hotels in China this year, on top of 81 hotels it currently has in Greater China. By comparison, IHG opened 17 new hotels last year. IHG will continue to manage its existing hotels, its luxury brands InterContinental and Crowne Plaza, as well as its Holiday Inn properties, in China.
World-wide, IHG is still in the preliminary stages of a global $1 billion revamp of its Holiday Inn brand. The Asian-Pacific area is IHG's fastest-growing region and accounts for 15% of the company's total rooms. China has the highest number of hotels for IHG in the region, fueled in part by growing demand at resort hotels and vacation properties.
IHG expects an additional boost of international travelers in China because of the Olympic Games in Beijing this August. But Mr. Cosslett said leisure and business travel are growing substantially even without the Olympics. "The inbound traffic just into Beijing has been going up 10% to 12% [each year] in the last few years," he said.
Among the properties IHG expects to open in China this year is the largest Crowne Plaza hotel in the world, with 1,500 rooms, which is under construction in Chengdu, a quickly developing second-tier city in China's interior. Mr. Cosslett said demand for hotels in second- tier cities is high. For example, a convention center managed by IHG has hosted 700 conferences in the 18 months since it opened.
"It's not a question about filling" the hotels, "it's a question of expanding to deal with the next wave of increase that is definitely going to happen," Mr. Cosslett said.
