Starwood Caters to Chinese Travelers; CEO Frits Van Paasschen Discusses Strategies to Meet the Shifting Demands of Chinese Travelers, Expansion Plans in Asia

Starwood Caters to Chinese Travelers

CEO Frits Van Paasschen Discusses Strategies to Meet the Shifting Demands of Chinese Travelers, Expansion Plans in Asia

LAURIE BURKITT

June 1, 2014 2:30 p.m. ET

When Frits Van Paasschen launched a special hotline several years go for Chinese travelers to conveniently use Mandarin to make their bookings atStarwood Hotels & Resorts Worldwide Inc., HOT +0.66% there was one thing he didn’t think to add: English.

But as it turns out, Chinese travelers—the business ones in particular—frequently demand to speak English when they call the Chinese hotline, said Mr. Van Paasschen, Starwood’s chief executive. So the hotelier, which runs more than 1,000 hotel brands across the world including Westin and St. Regis, is adding more English speakers to its Chinese staff.

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Starwood Hotels & Resorts Worldwide Chief Executive Frits Van Paasschen. Starwood Hotels & Resorts Worldwide

Catering to the shifting demands of Chinese travelers has become a top priority for Starwood, said Mr. Van Paasschen. The country’s travelers have catapulted China to its ranking as the world’s fastest-growing travel market. By 2030 China’s urban travelers will take 1.7 billion trips annually, up from 500 million in 2013, according to consultancy Boston Consulting Group. They’ll spend $1.8 billion on travel and tourism by that time, seven times last year’s expenditure, according to BCG.

Mr. Van Paasschen recently spoke with The Wall Street Journal about strategies to lure Chinese travelers and expand in Asia. Edited Excerpts:

WSJ: Some believe that in many Chinese cities there’s been oversaturation of the hotel market. How are you planning growth with that in mind?

Mr. Van Paasschen: In 2013, we had a 20% increase in our overall room count in China and in spite of GDP growth rates decelerating, we saw an increase in our overall occupancy. With investments in call centers, digital and loyalty cards, our hotels here are outperforming their competition. What’s interesting about China is that because the largest cities are now cost-prohibitive, market forces are moving many to smaller places. And our growth is mirroring that.

It’s also mirroring a demand for resort destinations. Relative to the number of people who can now afford to go to resort destination, there’s a supply and demand imbalance. If you look at Hainan Island, in the south of China, it’s one of the only temperate-climate destinations built up for year-round use. And we’ll have more hotels there than in Hawaii. The demand for those kinds of locations is outstripping supply.

WSJ: How have Chinese travel patterns changed your expansion plans outside of China?

Mr. Van Paasschen: For Asia Pacific we have more than 200 hotels in the pipeline, 70 expanding beyond China on an existing base of around 132. That’ll include expansion everywhere from India to Australia, where we’re seeing the largest growth in a decade due to Chinese travelers.

We’re seeing growth in the Maldives, in the Indian Ocean and the Emirates, but there are other places now where we’ll be expanding. As more travelers begin to break from tour groups, there is a high percentage of people who are increasingly adventurous, so we’re looking at Sri Lanka as being a very interesting market. Myanmar, with fits and starts, will also be an interesting market. Cambodia opportunities are expanding and there’s a demand in the Philippines for resort locations.

WSJ: In what ways is Starwood trying to woo Chinese travelers?

Mr. Van Paasschen: Statistics show that China has 100 million outbound travelers and 25 million are leaving the country for the first time. We all know the trepidation that comes with the first trip abroad. Anything you can do to make that more familiar will help. So we provide slippers for Chinese travelers and those touches. We also launched a personalized Chinese travel program a few years ago, which has a call center in China, our largest one in the world. Chinese associates can help with any of our properties at any time of the day.

WSJ: How are you looking forward, beyond the base level of offering Chinese slippers and adding Chinese cuisine in the dining room?

Mr. Van Paasschen: We’re launching personalization to help guests pick their preferences when they’re booking their rooms. This is in Chinese and numerous other languages. If you were making a reservation at a property where you don’t speak the language, you can register your preferences ahead of time, choosing options like whether you want a room next to an elevator or a corner room or a quiet room.

WSJ: China has experienced a corruption crackdown that’s hit the luxury sector and some companies are now pulling back. Why is it important to you that you continue to develop hotels in the country?

Mr. Van Paasschen:We have more luxury hotels here under construction than open. That’s a reflection of the fact that every day more Chinese are entering a level of income or are finding themselves at a level of business where they stay in luxury hotels. Five years ago, during the financial crisis, I was asked time and again if luxury was dead, but since then our luxury properties have doubled from 80 hotels to 160. And those hotels are performing better now. The growth of the luxury business here is a function of the development that’s still happening and a growth and demand for luxury travel.

WSJ: Is there a turn from the luxury goods rather than the luxury experience?

Mr. Van Paasschen: We see continued growth in luxury demand for hotels in China. Your average Chinese millionaire has a closet full of shoes and two cars in the garage, but they have no end to the number of experiences they can have. What we find is that luxury travel and luxury experience beget more such experiences.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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