Huazhu and Sunac team up to ride tourism wave

Hotel management group Huazhu and major property developer Sunac founded a joint venture on Monday, aiming to open 100 high-end hotels across China over the next five years despite the pandemic.

The new company, Yongle Huazhu, will operate the upscale hotel brands of the two groups in China. They include the Steigenberger brand that Huazhu acquired from German luxury hotel group Deutsche Hospitality in 2019.

Huazhu will hold a 50 percent share of the joint-venture, while Sunac and its partner will hold the other half.

"We started from an economy hotel chain, but we aim to expand in all the market segments," said Ji Qi, founder and chairman of Huazhu. The company was founded 16 years ago through a well-known economy hotel chain, Hanting Inns.

In recent years, Huazhu has been making inroads with the midscale and luxury segments of the hospitality market.

It partnered with Europe's largest hotel group, Accor, in 2014 to franchise its mid-to-upscale brands, including Grand Mercure and Novotel in China. It then bought 4.5 percent of shares of Accor in 2018.

"The founding of the joint-venture is a concrete step in our march into the high-end market and it will be a milestone in the development of China's hotel industry," Ji said.

In 2018, Sunac established Sunac Culture and Tourism Group. It has since been developing around 40 resorts and "culture and tourism cities and towns" across the country. These include 49 theme parks and 150 upscale hotels.

Lu Peng, president of Sunac Culture and Tourism Group, said: "There will be a lot of potential for the joint venture with the resources and strength of the two groups."

Any benefits of membership and loyalty programs of the two groups will be merged, he said.

Dai Xueying, chair member with hotel consulting firm Horwath HTL, said the COVID-19 pandemic has boosted China's domestic tourism and leisure market. Its study shows that in 2020, high-quality domestic resorts in provinces such as Hainan and Yunnan outperformed the previous year.

Xia Nong, CEO of Yongle Huazhu, said he is not worried about people returning to outbound tourism after the pandemic.

"The pandemic has changed the travel preferences and tastes of the Chinese. They have discovered interesting and once-overlooked travel destinations inside the country," said Xia.

Before joining Huazhu, Xia worked in international hotel management groups－such as Hyatt and Starwood－during their expansion in China.

"Whether the momentum of the domestic tourism trend continues after the pandemic, it will be up to the quality and experience we provide in the future," he said.