Specialization key to success

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By Han Tianyang (China Daily)
Updated: 2009-09-29 13:44

It will take more than the global economic downturn and the spread of H1N1 flu to undermine the long-term goals of Beijing Tourism Group (BTG), one of China's leading integrated travel and destination marketing companies, according to its president Liu Yi.

Liu admitted that the prevailing economic environment has ushered in tough times for the tourism industry, but maintained that the group is still very much on course to realize an ambitious five-year plan that will see it double its total assets, operating income and net profits by 2013.

Liu is undeterred by the fact that BTG's operational income from hotel management, its core business, has dropped dramatically as a result of the international financial crisis. According to Liu, in the first half of this year, BTG's hotel interests earned 1.642 billion yuan, a drop of 20.79 percent year-on-year.

Taking a broader perspective, however, BTG's overall performance remained stable. Over the first half year, the group maintained a turnover of some 10.13 billion yuan, a drop of only 6.19 percent compared with the same period last year.

So how did BTG, a company in one of the most vulnerable business sectors, manage to weather the effects of the ailing economy?

Liu said: "It's all down to our industrial chain and the structure of our business. We are capable of withstanding difficult periods and maintaining sustainable development."

According to BTG's own figures, with the exception of its hotel and travel agency concerns, the majority of its business portfolio either remained steady or continued to grow. Its transport interests, in the coach and taxi sectors, maintained their market share and continued to trade at 2008 levels whilst its shopping, restaurant and destination marketing concerns actually enjoyed growth in real terms.

BTG's robust financial performance can, in part, be attributed to a number of acquisitions the group made back in 2004. At that point four SOE's - the Beijing New Yansha Group, the Quanjude Group, the Antique City Group and the Beijing Donglaishun Group - were all merged into BTG.

Following the completion of the deals, BTG embarked on a wide-ranging rationalization of its new assets and restructured the acquired companies into six specialist divisions in a bid to build its overall market share and to ensure it benefited from economies of scale.

The results of BTG's internal restructuring have proved to be hugely beneficial. Despite a number of adverse trading factors in the last 12 months, including icy weather conditions, the Sichuan earthquake and the global economic crisis, BTG still secured a turnover of 22.2 billion yuan. This saw the company achieve 21.53 percent year-on-year growth, with a net profit of 1.26 billion yuan - a 25.88 percent increase on its 1998 figures.

Pressed on the reason for the company's continuing success, Duan Qiang, BTG's chairman, said: "It's all about increased scale and market specialization.

"It's not always easy for SOEs to compete with private enterprises or foreign businesses within the tourism sector, especially as there is such a low barrier to entry. However, our 11-year development strategy has provided something of an answer to this problem.

"On the one hand, a State-owned enterprise needs to grow rapidly through strategic acquisitions and mergers, which can boost both the company's funding and its critical mass. On the other hand, it should focus on establishing itself as a brand. If an SOE can achieve both, it is well-positioned to survive in even the most competitive marketplaces."

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