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From China To The World, Wanda Hotels' Rising Ambitions

Wanda, rising in the world's skyline
Wanda, rising in the world's skyline
Li Juan

BEIJING — With a generous chin and a rich voice, the German vice president of Wanda Hotels & Resorts also speaks fluent Chinese.

Ilja Poepper is one of several top foreign managers of Wanda — a Chinese conglomerate with various interests, including commercial properties, entertainment and hotels — who were specially recruited over the past two years in an effort to rapidly become a high-end global hotel brand.

This is a whole new strategy after having employed the model typically used by China's other high-end hotels: to build new properties, and then just entrust them to international hotel management companies to run them with their names.

Wanda now hopes to become entirely responsible for all its own hotels, from construction to operation. According to the current plan, Wanda group will own more than 100 hotels by 2015, half of which will be the group's own brand.

"Wanda has the best chance to become China's high-star hotel "standard-bearer,"" says Zhao Huan Yan, a Ramada hotel consultant.

But Wanda's ambition doesn't stop here. Wang Jianlin, Wanda Group chairman, Wanda wants it to become one of the world's leading luxury hotel management companies over the next three to five years. Last June, Wanda invested nearly 700 million pounds ($1 billion) to build a five-star hotel under its own brand in central London. Rumors have been circulating that Wanda is looking for an international hotel brand acquisition opportunity.

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Wang isn't looking back — Photo: WEF

A map of China in Ilja Poepper’s office is dotted with lots of colorful pins. Each pin represents a Wanda Hotels & Resorts brand hotel. "My pins are going to run out soon," he says with a smile. Since the hotel's new brand-focused management was established in July 2012, it has continued to grow with hurricane speed — six branded hotels were opened in that first year, followed by another 15 in 2013.

Of the 18 hotels Wanda is building this year, all but one will also be operated by the company itself. For this, Wanda didn't hesitate to poach talent with high salaries from other hotel chains. Many of them are senior foreign managers who have years of experience working for renowned international chains.

As Wanda group's data shows, it will own 71 hotels by the end of this year, including 34 with its own brand. Chairman Wang Jianlin"s stated aim is to open about 20 new Wanda brand hotels per year, and to make it the largest five-star hotel chain in the world over the next few years.

While other Chinese commercial properties owners usually only work with one or two international hotel management companies, Wanda chooses to cooperate with several at the same time. Of the world’s six leading hotel chains, Wanda has established collaboration with Accor, Intercontinental, Hyatt, Hilton and Starwood.

This strategy has paid off. Not only does it help teach Wanda the pros and cons of each group, as well as their pricing policies, it also gives the Chinese company the opportunity to choose the most favorable partnership requirements.

And the most far-reaching gain is that through these interactions and deals, Wanda had the opportunity of comparing and learning the different management models and styles of these global leaders.

Marriot is the only major hotel chain which hasn't cooperated with Wanda. "Because we saw very clearly right from the start that Wanda's aim is to get married so as to get divorced. All it wants is to obtain your experience," a Marriot senior manager told Economic Observer.

For Ilja Poepper, the biggest advantage of having Wanda's own brand is in the execution. Being the hotel owner and management company at the same time means that "after a meeting of a few executive officers or several telephone calls things can be put forward and executed right away," instead of going through several layers of hierarchy before reaching the headquarters like in the multinationals.

The challenges

Wanda's challenges lie in software rather than hardware. "The hotel industry is a service industry," says Wang Rong, Roland Berger Strategy Consultants partner and vice president for the Greater China region. "Chinese hotel support hardware can be grandiose, and individually some of them are even comparable with foreign brand hotels. However, at the brand management and operation management level, Chinese hotels are still a long way behind the international leaders."

Wanda must also figure out how to find its own customer base without support from the international hotel groups. Apart from launching its own central reservation system (CRM), setting up its global sales offices and establishing a global distribution system (GDS), it also needs to come up with a concrete sales strategy to obtain and retain key customers.

In China catering usually makes up an important part of increasing a hotel’s revenue. In the second and third-tier cities, room booking is usually driven by food and beverage consumption. Catering revenue can account for more than 60% of a hotel’s total turnover.

The comprehensive resources of the Wanda group also offer its own hotel brand some strong backing since these hotels are usually located around a Wanda Plaza, and can form complementary linkage effect with the group’s department stores and cinema chain.

Still, there are serious concerns about the ambitious pace of Wanda’s expansion. The company likes to compare itself with the Shangri-La group because the latter is not only an owner and management company, it is also the most outstanding among its peers for its catering department.

However Shangri-La has had some 50 years of history, and has just over 70 branches in the world. In China it owns fewer than 50 hotels with an average increase of only 1.6 hotels per year. Meanwhile Wanda’s current plan has a development speed 10 times that of Shangri-La.

As an example, it took only five months for Taiyuan Wanda Wenhua hotel to be ready for business, including the recruitment of the 500 personnel. This would have usually taken another hotel one to two years.

Such speed is likely to come at the expense of quality. In November 2012 Wanda Changbaishan Resort Hotel opened on schedule. But when the first batch of customers arrived they found that the smell of the furnishing materials was still lingering.

“High-end hotels make the difference with their management and services. It’s impossible to develop a brand without spending eight to ten years," said industry expert Wang Rong. "If you want to be good, the most common approach is to go a bit deeper and slower."

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