Starting out at the top

Foreign companies in China typically position their brands higher than back home. Does the strategy work?

When Harry Tan bought the Asia-Pacific management rights for Days Inn in 2003, the US-based hotel chain was hardly known in China, save for a token budget hotel that had limited occupancy and a 2.5-star rating.

Nine years later, the hotel chain is bursting at the seams in China with more than 100 properties in various cities and regions, 30 of them opening in 2011, and still more in the works.

Operating under various names like Days Inn, Days Hotel or Days Hotel and Suites, and providing a wide range of amenities, the chain is no longer synonymous with budget hotels, but rather represents higher-end comfort.

Tan said the makeover was necessary to succeed in China as the changing economic conditions had brought about a sea change in the perceptions of Chinese consumers.

"When people move up the economic ladder, they often aspire for high-value products and services. For Chinese people, foreign brands were always the symbols of high-end luxury and quality," Tan said.

Realizing that the challenge before him was formidable, Tan decided that the chain needed a major re-branding in China, one that would propel it into the upper echelons with ratings of four stars and above, unlike the three-star budget hotel rating it had in the United States.

Like Days Inn, other global brands have also encountered similar problems in China. Though the market challenges were varied, the underlying motive was always the need to cater to the Chinese consumer with products with higher value and better brand positioning.

Such opportunities abound in many sectors like hotels, food and beverages, textiles, and automobiles.

Though positioned as a street-corner cafe in the US and Europe, Starbucks is perceived as a high-end meeting place in China. Similarly, the mass market and affordable furniture provider from Sweden, Ikea, is considered a fashion icon in China.

Levis, the affordable jeans brand from the US, is a status symbol among Chinese youngsters. The list of products that enjoy higher social status in China is endless.

Moving up

"It is normal to position a Western brand a little bit higher in China, as 'foreign’ stands for good quality in people’s stereotype," said Tan, chairman and chief executive of Days Inn China.

"The higher positioning gives us more flexibility in the hotel industry. When the economy is good, those who usually stay in three-star hotels will reward themselves by moving up. But if the market goes down, five-star people will also come to us."