Gabriel Escarrer Jaume, CEO, Melia Hotels International, was in Paris this month to visit its new property, Melia Paris La Defense. His future priorities include expanding the brand’s horizons in emerging markets.
When did you start to have an interest in the Chinese market?
Six years ago we realized that we didn't have the brand awareness necessary to enter the Chinese market and that we needed to sign a partnership with a strong local group. We first signed a marketing agreement with Jing Jiang and a year later a development agreement with Greenland, a major real estate company. Thanks to the later agreement we will increase significantly our presence on the market. We started with the Melia Jinan in Shandong and we just signed a second property in Tianjin, because the owner is very satisfied with the performances.
Could the acquisition of Louvre Hotels Group by Jing Jiang International change your relations?
I don't see why as we always sign agreements for the long term, even though I can understand that they may give some priorities to the Louvre Hotels' brands. But the Chinese feeder market is so big that it should not affect our marketing alliance.
Do they expect in return that you open the doors of the European market for their clients?
In a selection of our hotels in the main capital cities in Europe, we have designed a tailor-made package for the Chinese travelers, called Ni Hao (Hello in Mandarin) with a dedicated floor, special amenities and F&B propositions adjusted to their needs. We also signed a strategic alliance with Ctrip, the largest OTA in China to welcome the high income Chinese travelers in our properties.
Would you also help to establish their brands?
It's true that we convert a former Tryp hotel in Francfort into a Green Land Hotel, but we do not have yet another opportunity in our radar.
Do you sense a balance relation with the strong Chinese conglomerates or do you fear a demonstration of strength at some point?
So far, I really feel that they need our expertise as much as we need their introduction to the Chinese market. I believe in sincere exchange without being afraid of passing to much of our expertise. Thanks to my father Gabriel Escarrer, we have the experience of sixty years of relations with intermediaries and joint-ventures and we know the rules of the game.
You mentioned that the emerging countries will be a priority for your future developments, do you feel that your portfolio is not yet correctly balanced?
We don't want to get away from the traditional Spanish and Latin-American markets, where we already have the leadership, but we felt the need for diversifying the portfolio in the recent years. We actually focus on South-East Asia, Middle-East and Latin America where we can grow further, both on the resorts' side and the urban properties. There is also a major advantage when we discuss with developers which are family-controlled for most of them. The fact that our family is still in command, even though we are a listed company, adds a dimension of confidence. They know that we will take care of the properties as they are family assets.
What are you looking for, a few flagships or a local network?
With single properties you cannot obtain the synergy that we need in terms of human resources and distribution. So, whenever we target a market, such as Indonesia where we have 12 properties in operation or in the pipeline, or Vietnam with two more developments, the objective is to reach the proper critical mass, and a balance between resorts and city hotels.
Would you be interested in development in Africa, following the major hotel groups?
We need to prioritize our involvement and to follow our guidelines, being strategic, sustainable and profitable. So far these criteria apply to Europe, the Middle-East, Asia-Pacific and Latin America. Africa is not on the top list.
How do you see your presence in the United States?
There, the market conditions are different. We cannot expect to compete with the local players. My objective is to be present with large properties in 5 to 6 gateway cities, such as New York, Miami, Los Angeles, San Francisco, Boston, and Chicago. But definitely not in the secondary cities.
Incidentally, how do you appreciate the new relations between the US and Cuba?
As you can imagine, I look very much forward to it. We will celebrate this year our 25th anniversary of presence in Cuba with 27 properties. We are about to open our largest hotel worldwide. With a market share of 39% of all international tourism in the island I expect a big growth with many more American travelling and lesser restrictions. It is a fabulous destination in terms of architecture, food, music, culture, history, not only leisure.
Did you manage to overcome the crisis in your native market, Spain?
On the resorts' side, we are now above the results of our latest best year of performance, 2007. But in the city markets, we still have some way to go. We are still missing between 20% and 25% of our activities compared to the peak year 2007. We have done a good job in big cities like Madrid and Barcelona, in attracting international clients, but in secondary cities, the domestic market is predominant and not yet sufficient. Since last autumn, we see the consumption level growing and the RevPAR following.
Did you reorganized your domestic portfolio to obtain these results?
Absolutely, as a member of the hospitality industry I am really concerned by the growing competition from new players, such as AirBnB, and the best reaction is to get away from the perception of commodity brands, selling just rooms. As a group, we are going upscale. The other reason is that on the economy segment you need critical mass and volumes, only achievable through franchising. This is not our expertise, we prefer to keep the management of our hotels to guarantee the persistence of the client's experience.
So what could happen with the Tryp brand?
We sold it to Wyndham but we still manage the properties in Europe. Together, we shall keep making this Brand competitive and appealing.
Do you rather concentrate on the higher end of your portfolio such as Innside, Melia and ME by Melia?
Innside came in our portfolio through an acquisition in Germany. I call it a decaf contemporary lifestyle brand, with a good element of design and a focus on food and beverage. Besides Germany, we already have three in operation in Spain and we will open the first one in the UK in Manchester. The brand is very popular and we have already 36 projects in the pipeline.
F&B was not very popular among hoteliers, because of poor profitability, it is changing?
It has never been the case for Melia as we are born with a first resort property in Mallorca and we had to entertain our guests at least for a week, being imaginative in terms of F&B and leisure activities. F&B is part of our legacy and profitability in our DNA. Now we extrapolate these expertises in all of our property worldwide. There is a good example with The Place that we developed in the ME by Melia London, now in the new Melia Hotel in Paris. Flexibility is essential in terms of propositions, hours of service, such as for the breakfast until late in the morning.
How do you expect to develop ME by Melia to keep up the spirit of the brand?
It is a very successful concept but only applicable to trendy destinations, whether they are gateway cities or resorts, such as Ibiza, Marbella, Bali, Cancun, Mykonos, Rio de Janeiro. We are just about to open the latest one in Milano, next to the Principe de Savoia and still looking for an opportunity in Paris. Thirty properties around the world, split between resorts and city centers, is a good figure to me.
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