Room for improvement?

Competition in the Tianjin Hotel Industry

By Annie Ly

One need only take a glance at some of the most iconic looking buildings in Tianjin to know that the hotel industry is part of the lifeblood of the city. From the distinctive cubic exterior of The St Regis Hotel to the elegantly historic The Astor Hotel, A Luxury Collection Hotel - Tianjin is not short of high end five star hotels and there are more cropping up on the horizon. As the city anticipates the opening of its first ever Four Seasons Hotel later this year, isn't the high end hotels market already oversaturated without the need for more new hotel developments?

Perhaps what makes the state of hotel industry in Tianjin even more intriguing is the ever reducing room rates as a result of increasing competition. When service offerings and quality is currently at par with other major Chinese cities, how sustainable is the state of industry and what more can be done to draw positives from the competitive environment? We discuss whether there is room for improvement.

The potential seen in Tianjin for business growth and success is huge. Its continuing reputation as one of the country's leading industrial hubs will no doubt ensure a constant flow of international business travellers, both long and short stay, for a long time to come. Government investment into initiatives such as the Pilot Free Trade Zone (FTZ) or Jing-Jin-Ji further demonstrate the belief of the government in Tianjin's potential. There is no doubt that all high end hotels in Tianjin are poised and ready to welcome higher vacancy rates which will come with the business allure of these initiatives.

The good news is that competition between hotels drives innovation and inventiveness of individual offerings. As one of the biggest winners of revenue in hotels is food and beverage, offerings are constantly being refreshed to provide guests with imaginative choices that pay keen attention to the cultural eating habits of Chinese locals as well as to western tastes of business travellers. Guests are clearly winners in this sense but it is not enough to combat the potentially disastrous effect of accelerated competition.

Changing models of leadership

Perhaps one of the most prominent changes within Tianjin's hotel industry is the makeup of management. Each luxury hotel is led by a seasoned hotelier with a decade's worth of experience in the hospitality business. By no means is this detriment to the industry but it does call for disruption and experiment to shake up the status quo. Could the recent model adopted by Starwood Hotels & Resorts to appoint just one manager to take lead on three of Tianjin's most iconic hotels mark a shift in how the hotel industry is run?

The benefits, in theory, are clear, namely less expense lost on the salaries of three separate leaders. More continuity in management and direction, as well as quicker decision making to up the pace of change is also expected. As a relatively new leadership concept, only time will tell whether such shifts in leadership models will pay off and give the hotel industry in the city a lease of new life to come out winning. What is clear is that competition in the hotel industry has driven change in models of leadership, a change which has the potential to stabilise the price drops.

Segmentation

It is a given that keenly understanding your customer market and catering to their every need is the key to make it in the hospitality industry. Further segmentation and research data is required to understand the changing types of customers and what they are looking for when it comes to travel. When service quality is delivered at the utmost standard, it is vital that high end hotels position themselves correctly to differentiate themselves in an oversaturated market.

If recent trends are anything to go by, going 'green' is high on the priority list for business travellers. Business surveys of foreign companies based in Tianjin have highlighted on multiple occasions concerns over air quality and smog. Such aspects become even more concerning when executives move their families to the city for project based work. The combination of proximity to Beijing and industrial production in the municipality make poor air quality almost inescapable, despite local government's best efforts to put in place measures to reduce haze.

Hotels may look to the example set by the recently opened Shanghai Tower J-Hotel which not only boasts of being based in one of the tallest skyscrapers in the world but also claims to be the most green. Achieving the top LEED rating, sustainability and the green factor certainly sets this establishment apart from other major hotel brands in China's largest cities.

The industry must also avoid turning a blind eye to domestic travel trends. Reported to have spent in excess of $104.5 billion in 2015, outbound tourism shows no sign of slowing down. To tap into the increasing pool of Chinese tourists spending money visiting other Asia Pacific destinations, five star hotels in Tianjin need to crack the millennial market and appeal to their more aesthetic driven indulgences. Attitude towards travel has experienced a boom in recent years with many more people living comfortable middle class lifestyles and seeking travel experiences. There is no doubt that the onslaught of technology and the prolific use of social media has been a catalyst of this change.

Impact of Technology

The Swiss-army-knife of Chinese social media, WeChat, now allows users to carry out a range of practical functions all in one app. Mobile payments, sociability and instantaneous response have become part of the everyday norm. As a result, it is now possible through streamlined services for guests to engage directly with brands, receive recommendations from friends and pay for their travel experience in one smooth journey.

Focus on customer journeys is the key to keeping service simple, quick and effective for the new age market. Further, attracting them through one key channel can allow for better data collection and understanding rather than the cross-amalgamation of differing channels which will sometimes give conflicting information making it difficult to draw true trends from customer behaviour. It is only with true data that effective segmentation can take place to base marketing strategies on to reach niche markets.

Is it a city issue?

Such trends as discussed above can be applied to the hotels' market in general for top cities in China, which bodes the question - what is it that really makes Tianjin such a special case? Could it be that the city itself lacks in drawing tourists? Efforts by the Tianjin government have indeed taken place in recent years to make Tianjin more attractive for travellers but there appears to be a disconnect or lack of cohesive strategy to solve the issue. Collaboration with local government to boost tourism and attraction to the city is just another solution that could lift competition into the next phase.

Potential in Tianjin still remains and as these formative years of further investment and improvement pass by, the city needs to consolidate its identity. Indeed, it will always have the title of one of the most important industrial hubs in the country but such a reputation lacks the necessary draw to attract new life. It is only when Tianjin finds a new voice that the industry can react and innovate further to turn competition on its head and bring travellers from all walks of life to appreciate what the city has to offer. The future of the industry still looks bright, but there is certainly room left for improvement.

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