Hyatt Forms New Joint Venture In China To Expand Footprint

Hyatt has just announced a new strategic joint venture with Homeinns Hotel Group in China. The intent is that these two companies will create a new hospitality brand in China, to be named later, which is intended to be in the upper-midscale segment.

For some context, Hyatt currently has around 70 hotels in China, with dozens more in the pipeline. Meanwhile Homeinns, which is owned by Beijing Tourism Group (BTG), is one of China’s largest and fastest growing hotel chains, though mostly in the economy market.

BTG has about 3,900 hotels in more than 400 cities. While Homeinns is an economy brand, over the past few years they’ve opened around 600 midscale hotels in China, with their expansion of Yitel Premium, Homeinnplus, and Homeinn Selected.

The intent with this joint venture is to take advantage of Hyatt’s global experience in premium hospitality, and Homeinns’ scale as one of China’s largest hotel groups. This hotel group is targeted mostly at the domestic market, rather than at international travelers coming to China.

Here’s what we should expect from this joint venture:

Under the joint venture, Hyatt and BTG Homeinns will create and launch a new hospitality brand positioned to compete in the currently underserved upper-midscale segment. In a bid to better serve the unique needs of Chinese consumers, the new and entirely homegrown hotel brand will be built specifically to meet Chinese travelers’ preferences and growing expectations for a seamless, comfortable and convenient travel experience.

BTG Homeinns’ CEO had the following to say:

“There is a definite opportunity for us to make a mark in the growing upper-midscale segment. The combination of Hyatt’s expertise in premium hospitality with our local insight and vast network will ensure our collaboration will create opportunities and benefits for Chinese travelers as well as the overall hospitality industry.”

Meanwhile Hyatt’s President of Greater China had the following to say:

“With 70 iconic hotels and a pipeline of more than 100 properties in Greater China, Hyatt is committed to a long-term strategy of purposeful growth in the region. This collaboration is expected to provide Hyatt with deep China insights, build brand awareness and grow loyalty with a new set of travelers.”

The plan is that the joint venture will unveil hotels under the new brand across major cities like Beijing, Guangzhou, Shanghai, and Shenzhen, in the next five years. The new brand will be managed independently.

We don’t yet know the full implications of this for World of Hyatt. The hotels won’t be branded as a Hyatts. My initial instinct is that they’ll nonetheless participate in World of Hyatt, but maybe that’s not the case, given that Homeinns likely has more brand recognition in China than Hyatt does, and also given that they seem to be building on the Homeinns brand more than the Hyatt brand.

Then again, historically Hyatt’s biggest issue has been that they’ve had a smaller global footprint than their competitors, though they’ve been countering that through some unique partnerships, and it seems to me like this could be one of those.

It is interesting to me that Homeinns has already been expanding in the midscale market, but now is partnering with Hyatt in the upper-midscale market.

I’ll be curious to see how this plays out.

What do you make of the new Hyatt & Homeinns joint venture?

Comments

  1. Hyatt has also been expanding its Hyatt Place and Hyatt House brands in China. It’s more aggressive in that segment than any of its competitors, perhaps trying to take the lead in the segment. This JV fits that strategy.

  2. HomeInns (RuJia in Chinese) is positioned very far away from where Hyatt brand is. The level of those hotels is such that foreigners may not even be admitted. Another visionary experiment from brand builders / destroyers …

  3. @SK, you are right rujia is very low-scale, however now it is owned by BTH, who also owns Jinlun which is one of the first hotel chain to serve international visitors and mostly 4-stars hotels.

  4. It is easier to “grow” new brands by going out and doing deals with existing chains. However, that almost invariably leads to large compromises, especially in joint ventures, because each side has a ‘vision’ that it wishes to realize or features that it may wish to preserve. It is the main reason why Hilton’s CEO prefers to grow brands ‘organically”, i.e., almost from scratch.

    @lu – At least based on Q1 2019 promo that excluded no Hampton in China, and on a quick search of award availability at Hilton properties in Beijing and Shanghai, it would seem that Hampton in China now fully participates in Hilton Honors.

  5. @DCS @Lu exactly…there were reports that the Hampton Inns in Mainland have joined the Hilton Honors Program, so one should be able to earn and redeem points and possibly some elite benefits…I think…maybe.

  6. Home inns will become Hyatt house in China as they quality is similar. Home inns will earn Hyatt points and stays towards elite status.

  7. this is hilarious to watch. hyatt folks used to be ones who kept spinning the condescending “marriott is just a bunch of Fairfield Inns” but now has to watch their beloved “premium” firm create a JV with a hotel company that competes against the low end of Wyndham’s offerings.

  8. I don’t understand hotel “levels” in China. Looking at Hyatt Regency in China you’d think they are all Grand Hyatts. They’re all gorgeous with unique designs, sumptuous rooms, and overall a very luxurious aesthetic. Meanwhile in America, the vast majority are copy-pasted business hotels that are decent on the surface but clearly generic non-luxury hotels.

    Since it seems the Hyatt “levels” are one level higher in China (with a Regency being the equivalent of a Grand in America), are they going to create the copy-pasted business hotel I just mentioned for Homeinn?

    My best guess is that this new JV will be indistinguishable from current Chinese Hyatt Regency’s to you and me, but will be marketed as Chinese as the only difference.

  9. @Stanley- Not ‘maybe’. Award stays are now bookable at Hampton Inn in China — really dirt cheap too — which means that the brand has agreed to participate fully in HHonors, including adopting the T&C with respect to elite benefits.

  10. @Super – It is all of Asia that Hyatts are much better than in the US. I was totally shocked with how downmarket Grand Hyatts are in the US. I wish we could get Asia-quality Grand Hyatts and Hyatt Regency properties in the US market.

    My guess is that the new Mid-to-upscale chain is like Hyatt Place. The key benefit of a local partnership is access to good property sites, which can be hard to come by in China.

  11. Be wary of any JVs in China. Read a few classic business cases where this did not end well for the American company.

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