Marriott International Inc plans to open one hotel every month in China during the next three years, even though it recognizes that increasing labor costs will create a large obstacle, the president of the company said on Tuesday.
The US-based lodging company has announced that it will build its 100th hotel in China - a JW Marriott Hotel with 345 rooms - in Shenyang, Liaoning province. The project is now under construction.
"China is Marriott International's most important market outside of the US in terms of hotel numbers," said Simon Cooper, president and managing director Asia Pacific Marriott International.
The company, which has 20 brands and six in China, including Marriott, JW Marriott and Ritz-Carlton, operates 56 hotels in China. And the company has plans to build 44 more.
Henry Lee, senior vice-president of Greater China Marriott International, said he expects the Chinese market to become a better place for the company to do business. He said half of the guests who stay at the company's hotels in China are Chinese.
Even so, the increasing cost of labor has become one of the greatest pressures on the hotel industry's operating margins in China and Marriott International will have to find a way to deal with that.
In a survey of 266 hotels by Jones Lang LaSalle Hotels, which offers hotel-investment services and is based in Chicago, 27 percent of the respondents said the increasing cost of labor is their top concern for the next two years.
"Hotel managers should pay more attention to revenue management and promotions for staff members, in order to improve their incomes," said Hans Galland, senior vice-president of Jones Lang LaSalle Hotels.
Labor will prove to be the source of the hotel industry's biggest troubles during the next 10 years because not enough young people are expected to be entering the labor market to meet the demand for workers, Simon Cooper said.
"We have to be more productive in how we run the business. That will be our challenge during the next five years," he said.
Cooper said Marriott hotels in China have room to reduce costs because they employ between 30 percent and 40 percent more staff members for each guest room than the company's hotels do on average in other parts of the world.
All of the company's hotels in China are full-service operations, offering lodging and catering, he said.
Acknowledging that most big cities are already saturated with hotels, Marriott International is moving into second- and third-tier cities in the third stage of its expansion into China.
Among the 26 hotel deals the company has signed in China this year, 23 will be located in second- and third-tier cities.
"We can only open new hotels in the suburbs of big cities," Cooper said. "But in smaller cities, we can find better locations."
He said the company must find partners that have strong finances and a plan to operate in smaller cities, which pose difficulties not found in big cities, he said.
It is also hard to find employees whose English is good enough to work in hotels, he said.
"We also have to spend more time in smaller cities to train staff members before opening the hotels," said Lee.
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