Marriott International Inc (NASDAQ:MAR) has struck a deal with China-based Eastern Crown Hotels Group to add a minimum of one hundred hotels under its mid-tier Fairfield brand. The company was looking to address the issue of young professionals in China looking for affordable accommodation during their travels. The hotel firm was looking to double its capacity and target middle class travelers.
Combination Of Knowledge And Expertise
Eastern Crown Hotels CEO Cheng Xinhua, said that the agreement with Marriott would integrate its knowledge with the latter’s expertise and quality. He termed the joint venture as a start of a fruitful alliance. The Chinese hotel chain has over 700 hotels either in operation or in development stage in both Malaysia and China.
As for Mariott, it already has hotels in China though with different brand names. These includ JW Marriott, Courtyard, and Ritz-Carlton. However, the rooms in these hotels are bigger and expensive, which would not be attractive to the mid-tier segment. The Fairfield rooms would be cheaper in China just like they are in America. The new hotel rooms in China would carry the Fairfield logo. A handful of rooms are scheduled to be open before year end.
Strong Double Digit Growth
Macquarie Securities Group analyst Chad Beynon, has said that in China, hotel rooms were witnessing a YoY growth of 10% in the last decade. He also said that the objective of the industry was to increase the capacity to six million by the end of the decade from about 2.5 million rooms currently. Marriott International expects approximately 90% of customers to be Chinese for its Fairfield rooms. This is higher than the current 50% at its hotels in Shanghai or Beijing.
While Marriott would design the rooms of the new Fairfield hotels, the construction part would be undertaken by Eastern Crown as the latter can do it at a lower cost. Though the economy has slowed down in China to some extent, Mariott believes that its current hotels in the region performed strongly nonetheless.