Asia’s intra-regional travel is booming, and tourist arrival numbers are in the pink of health. It is not surprising, therefore, that the demand and supply of hotel rooms in the region are also increasing.
However, the wheels are turned not just to large chain hotels as it might have been in the past. These days, boutique or independent hotels are gaining more attention from tourists as well as investors.
Hotel Supply Races Ahead in China
In China, despite the room glut it is facing — the number of hotel rooms jumped 11% annually on average from 2.02 million in 2009 to 3.37 million in 2015, according to The Wall Street Journal’s calculations from National Bureau of Statistics data — boutique hotel operators are sprouting everywhere.
In Asia, the list of boutique hotels is long, despite some cities experiencing a room glut, or the onslaught of one. Shanghai’s Cachet Hospitality Group currently has hotels in Shanghai, Los Angeles, Bangkok and Cabo San Lucas, Mexico. In China, it has plans to expand into Shaoxing, Kunming, Hangzhou, Chengdu and Wuhan.
Though it conceded hotel owners in China are “facing hard times,” Cachet is convinced the new demand is for accommodations that pay more attention to consumers’ individual tastes.Independent, boutique #hotels factor in supply growth in #Asia-Pacific Click To Tweet
“Chinese consumers have seen huge growth in purchasing power; they are in tune with entertainment trends, and they want to stay in a place where they can brag to friends,” Yvonne Choi, Cachet’s chief marketing officer, told the Wall Street Journal.
In the same report, Urban Resorts Concepts CEO and co-founder Markus Engel expressed similar optimism for providing travellers with “authentic local experiences,” despite room supply outpacing demand.
Shanghai-based Urban Resorts Concepts manages the The PuLi Hotel and Spa in Shanghai’s Jingan District. It is introducing more hotels to Beijing and Xiamen as well as Kuala Lumpur, the Maldives and Lombok, Indonesia.
More Mature Boutique Markets in Asia
Other countries in Asia have seen this trend toward boutique and independent hotels for some years now. In Singapore, the growing shift away from large chain hotels was evident a few years ago already.
“Earlier, the bigger the hotel, the better it was. Today, the more boutique the hotel, the better it is,” said Arthur Kiong, chief executive officer of Far East Hospitality that operates some of the leading boutique hotels in Singapore.
He was quoted in Singapore’s TODAY newspaper saying hotels seen more in advertisements used to get more business, but these days, less is almost better and online reviews and third-party opinions carry more weight.
In a very telling statistic, three of the five top hotels in Singapore listed in TripAdvisor are local boutique or independent hotels.
“People want to buy meaning,” Kiong added.
Hong Kong has seen the same. A few years ago, it saw a flurry of boutique hotels open, including those by Hong Kong-based chain Ovolo that has since gone on to operate five hotels in Hong Kong and four in Australia. Millions of dollars have been poured into the refurbishing and building of “lifestyle” hotels to help meet the new demand.
The Challenge to Revenue Managers
The shifting of consumer preferences, coupled with the constant change in the balance of demand and supply, requires swift responses from revenue managers. According to Philip Niemann, Duetto’s director of customer success in Asia-Pacific, new entrants such as these boutique, independent hotels into the market could lead quickly to an increased pressure on pricing.
“Revenue leaders should focus on retaining existing clients, and think about how they can prevent their customer base from trying the new hotels that have newly entered the market. This could, for instance, be done through creative loyalty marketing, one-to-one pricing,” said Niemann.
Creative thinking on some old processes have to be the order of the day, he added.
“Hotels have to be more creative,” he said. “Look at geo-specific pricing strategies to ensure that hotels are not diluting their overall rate production. Re-evaluate the competitive set to ensure you are comparing pricing strategies against the same properties that your customers are looking at.”
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Tags: APAC, Asia, Asia-Pacific, boutique hotels, Cachet Hospitality Group, China, comp set, competitive set, Duetto, Far East Hospitality, Hong Kong, hotel demand, hotel loyalty, Hotel Revenue Management, hotel revenue strategy, hotel supply, Independent Hotels, Philip Niemann, pricing, Singapore, Urban Resorts Concepts