Last fortnight, Indian Hotels Company (IHCL) finally announced its foray into China, just ahead of the Olympics. The surprise? It prefers to give the Olympics a miss. The company that owns the Taj brand will manage two hotels that will come up much after the games are over and are located in tourist hot spots.IHCL is aiming for the tourist business of China first, and may look at the business traffic later. With an eye on the Olympics, the Chinese hotel industry has gone into overdrive to create capacity. This has inevitably resulted in a glut. Some 4,20,000 people visited Beijing in August 2007, and that number is expected to go up by 10 per cent only in August 2008.
While that means 42,000 more guests in the country, already 13,000 new rooms have been built in Beijing, with another 30,000 on the way. Even in early July, Chinese authorities said that 50 per cent of the four-star rooms for the Olympic dates were still available.
IHCL is clearly thinking beyond the Olympics. It has announced a tie-up with Zhong Qi International Investment Company to manage two of the latter’s upcoming properties. The first one is a 46-room hotel close to the tourist destination of Temple of Heaven in southern Beijing. Another 60 rooms will be added soon. The second location is Hainan Island, where a 500-key resort is being developed. Hainan is known as the Hawaii of the east.
The Hainan province was created as a Special Economic Zone to develop the potential of its natural resources. The province played host to the Miss World pageant in 2007. Says R.K. Krishna Kumar, Vice Chairman, IHCL: “China is one of the major tourism hubs worldwide, witnessing more than 8 per cent growth…it is critical for Taj to have a presence in this country.”
Raymond Bickson, Managing Director, Indian Hotels, who hails from Hawaii, told Business Today: “The area has the same pristine beaches that you find in Hawaii or say Bali. I do not know how it got the name—but coming from Hawaii—it is easy for me to sell the Hawaii of the East.”
An interesting development followed the signing of this agreement between Indian Hotels and Zhong Qi. Days after the announcement, the Chinese government faced allegations of tapping into the Internet usage of all hotel guests. A US senator alleged that the Chinese government has ordered all foreign-owned hotels chains to install special equipment to monitor Internet usage by guests. The Chinese authorities said these are normal security arrangements. These are issues that IHCL will have to learn to deal with when doing business in the dragon’s den.