Thai-based Onyx Hospitality Group plans a major expansion of its presence in China. It will add several serviced apartments and its first Chinese hotel. They are scheduled to open in 2017 and 2018.
Chengdu is the capital of Sichuan province in Southwestern China. It is an important centre of commerce, communications, and transportation.
With a metropolitan population topping 11 million people, Chengdu is one of the most important cities in China’s vast interior.
But there is more to the sprawling metropolis than business. The city and its surrounding areas are also dotted with temples, monasteries, historic towns, museums, and shrines.
Important heritage sites include the Wuhou Shrine, a relic from the Three Kingdoms era, and Du Fu’s Thatched Cottage, where the famous Tang Dynasty poet took refuge for four years, writing roughly 240 of his most celebrated poems.
Located 43 miles, or 70 kilometres, from downtown Chengdu is Mount Qingcheng is one of the most important centres of Taoism in China. It has several important Taoist holy sites.
The Dujiangyuan Irrigation System, located 36 miles or 58 kilometres from downtown, dates back more than 2,000 years. It has been preventing floods and irrigating crops throughout the surrounding terrain for centuries.
An important centre of Buddhism, Mount Emei is one of China’s Four Sacred Buddhist Mountains, was the site of the first Buddhist temple to be built in China.
The slopes and surrounding foothills of the mountain now house 76 Buddhist monasteries, which were built during the Ming and Qing dynasties.
Internationally, of course, Chengdu is most famous for the Sichuan Giant Panda Sanctuaries.
Covering more than 3,570 square miles, or 9,245 square metres, the sanctuaries are located between the Sichuan Basin and the Qinghai-Tibetan Plateau.
Housing 80% of the world’s giant pandas, it is the largest contiguous habitat for pandas in the world.
The Giant Panda Breeding Research Base is located on the outskirts of town. It is, without doubt, the entire region’s top tourism draw.
Chengdu is also the capital of Sichuan province, which is home to Sichuanese cuisine, one of the Eight Great Cuisines of China.
While most people outside of China tend to associate Chinese cuisine with Cantonese cuisine, the mainstay in Hong Kong and neighboring Guangdong province, Sichuanese cuisine – heavily seasoned with its emblematic numbing peppers – is arguably the most popular cooking style in China itself.
With so much going for it, Chengdu has attracted the attention of both airlines and hospitality groups. Flights to far-flung travel destinations have been launched in recent years.
And multinational hotel groups are throwing the doors open to an increasing number of hotels and serviced apartments both within the city and in the surrounding areas.
Onyx Hospitality Group
One of the latest groups to enter the fray is the Onyx Hospitality Group.
The Thai-based hospitality group has signed an agreement with Junson Capital to manage a 252-unit service apartment in Chengdu’s Tianfu New Area.
Facilities include a gym, a swimming pool, a children’s area, a lounge, a breakfast area, and a wired area with business facilities.
Because this is a serviced apartment and not a hotel, some of the other facilities you expect at a hotel – food and beverage outlets and a spa, for example – are not included.
Does the group have plans to open any more properties in China in the coming months?
Interview with Tommy Lai
I have stayed at several Onyx properties over the years, all of them in Thailand, where the group is based.
I’ve stayed at both serviced apartments and hotels. I’ve stayed at properties in both Bangkok and Koh Samui.
As a fan of the group’s hotels, I wanted to know more about the Onyx Group’s plans for China – and why it had chosen Chengdu as its first property outside of the Yangtze River Delta.
All of its previous Onyx properties were located in either Shanghai or Hangzhou, but that is about to change.
I interviewed Tommy Lai , Vice President of Onyx North Asia, by email.
Excerpts of our interview follow:
Accidental Travel Writer (ATWHK): Briefly describe the group’s presence in China: when it entered the market, how many properties it has, where they are located, and how many rooms they have.
TL: Onyx Hospitality Group first entered China in 2010 when it acquired Shama. Currently, the Group has five properties and 726 keys in the country, which are all serviced apartments located in Shanghai and Hangzhou.
ATWHK: How many hotels opened last year and in what cities?
TL: Although no new hotel was opened last year, we signed a new management agreement for a serviced apartment in Chengdu, Sichuan, under the Shama brand in June 2016. Scheduled to open in 2017, the new Shama Xiangnanli Chengdu will be a 252-unit property located in the up-and-coming state-level development zone in Sichuan province.
ATWHK: What kinds of rooms will the property have?
TL: The new-build will boast a wide range of apartment types – from studios to three-bedroom apartments, catering to all tenants’ needs from individual business travelers to families, as well as from short-stay to long-stay guests.
ATWHK: Why did Onyx decide to invest in Chengdu at this time?
TL: Being one of the largest cities in China, Chengdu has attracted more than half of the Fortune Global 500 companies building their presence there. With more and more global and national companies establishing businesses within the city, we see the demand for serviced apartment offerings like Shama in Chengdu.
ATWHK: Does Onyx have any more properties in the pipeline?
TL: Apart from Shama Xiangnanli Chengdu, in 2017 we will also be opening one more Shama serviced apartment, the Shama Daqing Heilongjiang, in the northern region of China. It will be a 101-key property located in the central business district of Daqing in Heilongjiang province.
Other China properties in the pipeline include Shama Caojiadu Shanghai, Shama Pazhou Guangzhou, Shama Yanglin Beijing, Shama Tianfu Chengdu, and Ozo Shishi Xiamen, which are all slated to open from 2018 onwards.
ATWHK: What about hotels? Do you have any plans to open any hotels in China?
Yes, in the second quarter of 2017, we will introduce our first Amari hotel in China, Amari Yangshuo, which is situated right next to the popular West Street in Guilin in Guangxi province.
ATWHK: Why is your hotel group investing in so many serviced apartments in China at this time?
TL: We see great potential in the serviced apartment industry in China as urbanization and industrialization create vast numbers of attractive opportunities for foreign investment, together with the raising of down payment requirements for second homes, and the banning of the purchases of second and third homes in some parts of China.
All of these have resulted in a higher demand, both by expats and locals, for long-stay apartment services.
ATWHK: Serviced apartments are targeted primarily at long-staying guests. What about China’s tourism industry?
TL: Tourism continues to be a very important industry in China’s economy, accounting for 10.8% of the country’s GDP (gross domestic product) and surpassing the contributions of some of the key industries such as education, automotive, and banking.
In particular, domestic tourism within the country has been booming for the past few years.
According to the latest statistics from the China National Tourism Administration, China’s domestic tourism industry earned about RMB$3.9 trillion in 2016, with a year-on-year increase of 14%.
Domestic tourists made 4.44 billion trips last year, 440 million trips more than a year ago. It is expected that this figure will jump to 4.88 billion in 2017, with revenue increasing by 12.5% to RMB$4.4 trillion.
ATWHK: What does the future hold for China’s hospitality industry?
TL: A study by A.T. Kearney Korea predicts that hospitality in China will become a US$100 billion industry within 10 years, with tier-two and tier-three cities destined to see the most growth.
As such, our China development plan focuses more on the further expansion of our serviced apartment brand, Shama, in key commercial cities, catering to the needs of both overseas and domestic business travelers.
In addition, we plan new launches of our Amari and Ozo brands to offer different types of accommodation options to leisure travelers visiting the lower-tier cities.
These untapped destinations are now more accessible than ever with the growing number of air routes and high-speed trains.
ATWHK: How do multinationals view China?
TL: In general, the mainland’s hotel market is facing fierce competition among local and international hotel brands, slower local economic growth, increasing operating costs, and the government’s policies to curb the consumption of luxury goods and services.
ATWHK: What parts of the country are hot?
As many of the hotel brands believe that whilst the tier-one cities have reached saturation points, there is vast potential in the tier-two and tier-three cities, more and more of the brands are now targeting these cities.
In addition, there is a growing number of routes that connect these tier-two and tier-three cities with international destinations, making these untapped destinations more accessible than ever.
Moreover, many of the lower-tier cities still have vast areas available for developing new hotel projects, and at the same time, the local governments and developers are looking to build landmark structures in order to boost the images and reputations of their cities, providing hoteliers like us a good opportunity to expand portfolios in the country.
ATWHK: How was business in 2016 compared to the year before?
TL: Our properties in China maintained a competitive position within the market in 2016, recording an average occupancy of 80%.
ATWHK: What are your projections for 2017?
TL: As all of our operating properties are situated in dynamic cities and locations, we expect a moderate growth of 5% to 7% in our revenue.
ATWHK: What challenges and opportunities does the hotel industry in China face?
TL: Offline vs online and OTA vs direct booking
The continuous business shift from offline to online and mobile is a big change and challenge for the hospitality industry in both China and around the world.
In China, as of June last year, the number of mobile internet users reached 656 million, which was an increase of 36.56 million from the number of users at the end of 2015.
More than 263 million have used a travel booking app for booking travel and vacation products.
Many hoteliers nowadays are investing heavily in their own websites and mobile apps to push for direct booking, however, this leads to another challenge – direct competition with online travel agencies.
Simply looking at Ctrip: no one would have expected it to grow exponentially over the past decade and to account for a significant portion of the market share, but this is a double-edged sword.
Considering the commissions or margin bidding, if the hotels are not careful in keeping an eye on the distribution costs of offline versus online, and of OTA versus website direct booking, the hotels might generate lower revenue on average from all channels.
ATWHK: What impact is Airbnb and other home-sharing platforms having on the industry in China?
TL: Over the past four to five years, there has been a rise in a new type of accommodation for travelers – home-sharing. Platforms such as Tujia and Xiaozhu have been successful across China.
Take Tujia as an example. It has a listing of 450,000 properties in more than 300 cities – which is much more than the number of keys owned by a single hotel brand within the country.
In addition, Airbnb just set up a China entity late last year, with more and more Chinese hosts signing up to share their spaces.
Although competition has become keener than ever, this is, in fact, a positive trend, which helps expand the awareness of the hotel industry and reminds the hoteliers that travelers are eager for fresh new things.
The rising popularity of Airbnb has also led to an increase in demand among travelers for serviced apartments, which offer a home-like feel with the consistency offered by a professional hotel operator.
So, rather than fearing these non-standardized competitors, we should embrace them, be responsive, and react to them quickly.
ATWHK: It has been said that China is a country with 1.3 billion people yet it has a talent shortage. What impact does this ‘talent shortage’ have on the hospitality industry?
TL: People are the biggest and most important asset for a hotel. Finding people with the right skills sets, then empowering them, grooming them, and retaining them remains our highest priority.
As the China hotel and tourism industry grows rapidly, the demand for qualified workers increases as well.
There are few educational institutions in China focusing on hospitality and tourism.
Therefore, we will need to have a very comprehensive learning and development system in place to make sure that all our team members are well equipped to create and deliver service that exceeds our guests’ expectations.
Tommy Lai is the Vice President of Onyx North Asia. He is based in the Hong Kong office.
In this role, Tommy heads the business development for Greater China, as well as the operations of all brands in this region.