Accor SA is on track to sign a record of about 125 hotel partnership projects in China this year, doubling down on its expansion in a country where tourism has become one of few bright spots amid an economic downturn.
(Bloomberg) — Accor SA is on track to sign a record of about 125 hotel partnership projects in China this year, doubling down on its expansion in a country where tourism has become one of few bright spots amid an economic downturn.
The French hospitality giant currently has more than 640 hotels across Greater China, which are either joint operations with landlords or fully franchised under its “asset-light” model, according to Greater China Chief Executive Officer Gary Rosen. It’s also in talks with potential partners to introduce the region’s first project under its Orient Express brand, Rosen told Bloomberg in an interview.
Accor has already announced its first three hotels under the Orient Express brand — known for the namesake Paris-Istanbul sleeper train that traces its history back to 1883 — in Italy and Saudi Arabia, which are scheduled to open in the coming two years.
Accor’s hotels in China range from luxury brands Raffles, Fairmont and Sofitel to mid-market chains Ibis and Mercure, and the region contributes one-fifth of the group’s revenue in Asia Pacific and the Middle East.
The company’s accelerated expansion there comes as the mainland’s domestic travel has seen a strong rebound — particularly during the peak summer season — defying a post-Covid economic slowdown. Consumers are increasingly spending on leisure and entertainment activities instead of big-ticket items amid uncertainties of a property slump and surging youth unemployment rate, benefitting industries including hospitality.
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“People’s decision making and their consumption patterns have changed,” Rosen said. “People are making choices that are a little bit reminiscent of this ‘going back to the savings’ mode. People are spending less on certain items, but what we’ve seen actually is coming out of Covid, people really have continued this pent-up demand for travel,” which contributed to a record breaking summer performance for the group in China.
Revenue per available room and occupancy rates in mainland China and Macau have returned to or exceeded 2019 levels, while Hong Kong’s have not fully recovered, he said, without elaborating.
Country Garden
Accor’s asset-light model means the group works with Chinese developers, but an increasing number of them are struggling to stave off defaults after years of excessive debt-fueled expansion. Among the company’s partnerships is a deal to franchise its Jo&Joe brand to a unit of Country Garden Holdings Co., among the most indebted property firms in the world, which had targeted opening more than 1,000 of the hotels over the next three decades.
Rosen said that while Country Garden is facing challenges in its residential businesses, there’s little impact on its hotel side, with the developer having made due payments to Accor and the first three Jo&Joe hotels on track to open this year.
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Accor has also begun working with more state-owned enterprises as those companies are taking on more projects than private developers — especially when it comes to local governments’ master plans for their cities — he added.
China’s tourism boom has contributed to a strong recovery in Macau, the world’s largest gambling hub, and the only place in China where casinos are legal. Gaming revenue in August surged to the highest since the early days of Covid and reached 70% of the pre-pandemic level. July’s hotel occupancy rate in the city was 89% — compared with 93% in 2019 — according to the latest available government data.
Accor in mid-August opened a new luxury hotel in Macau under its 136-year-old Raffles brand, at the casino resort owned by Galaxy Entertainment Group Ltd.
It’s the group’s second hotel in the city, after opening Sofitel Macau in 2008.
Hong Kong has struggled with a slower tourism recovery and resident outflow following 2019’s social unrest and three years of strict Covid closures. Still, Rosen said Accor — which opened two boutique luxury MGallery hotels in the city last year — remains positive that visitors will eventually come back as the financial hub hosts more events.
–With assistance from Shery Ahn and Haidi Lun.
(Updates from sixth paragraph with comment on summer travel, Chinese developers.)
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