Breaking China: Hilton’s Plan to Capture the Biggest Midscale Market Ever

Shortly after Lodging‘s interview with Chris Nassetta in late October, Hilton announced an exclusive licensing agreement with Plateno Hotels Group, a Guangzhou-based development and management company, to fast-track the growth of Hampton by Hilton in China. With this agreement, Hilton aims to leverage Plateno’s local expertise to meet the projected demand in the mid-market space with one of its core brands. “If you’re going to grow in a big way, you have to do it with people who have local know-how,” says Jim Holthouser, Hilton’s EVP of global brands. “Plateno has a proven track record of developing hotels in China.”

A big component of the Plateno Hotels Group is the 7 Days Inn economy brand that in the course of eight years grew from one hotel in Guangzhou to about 2,000 hotels in 230 Chinese cities with over 190,000 rooms. The development milestones for this deal are equally aggressive, with a goal set for Plateno to deliver more than 400 hotels and to open the first one by the end of 2015.

“The Chinese middle class is growing in affluence and growing in appetite for travel,” Holthouser says. “They’re looking for more, and there’s virtually no product. Therein lies the opportunity.” While Plateno will direct the development and management of these hotels, Holthouser notes that Hilton will review every deal that Plateno does. “We’ve spelled out very clearly in our agreement our rights to control the quality of the Hampton brand—we have standards and a quality assurance process, and we will remove hotels if we need to,” he says. “And we feel that Plateno has the same commitment to quality and doing things well that we have ourselves.”

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Since Plateno’s Hampton pipeline will be primarily new builds with a few adaptive reuse projects, Hilton has designed a new prototype for this market. It has the same look and feel as current Hampton properties in 17 other countries around the world, though the guestrooms will be a little smaller than they are in the United States.

“The Chinese Hamptons will have a little snack bar, similar to what we do in Europe,” Holthouser says. “And breakfast will look different, because the target for this is really the three-star domestic traveler. Instead of having serving dishes full of eggs and meat, we’re likely to have congee and serve tea and soy milk—all the staples of the Chinese diet.” Other key differences will be the fitness center and laundry services, Holthouser says. “Chinese travelers
aren’t accustomed to washing their clothes in public washrooms that other people have used.”