When Frits van Paasschen boarded a flight to China with his executive team to spend five weeks immersed in the country’s business culture, the Starwood Hotels chief was quick to point out he wasn’t just trying to drum up publicity.
Starwood is one of the largest hotel companies in the world, with some 300,000 rooms across more than 1,000 properties operating under banners such as W, Westin and Four Points Sheraton.
Eighty per cent of the New York-based company’s growth is expected to take place outside North America in the next decade. It plans to open a hotel every two weeks in China, on average, for the next few years.
Already, China is the company’s second biggest market, behind the United States, with more than 70 hotels (Canada is third largest). And like many hotel and commercial real estate executives, Mr. van Paasschen wanted to better understand what is becoming an integral market.
“I couldn’t spend five weeks on a publicity stunt,” he said on his way back to New York. “This is a big time investment, with the objective of better understanding a market that is increasingly important to our future.”
Before the executives had even returned to New York they issued the first of several anticipated changes: a new program geared toward accommodating Chinese tourists and business travellers at 19 hotels around the world. They will offer in-room teakettles and slippers, and translation services will be available in-house.
“Just as our hotels in China have historically catered to American and European travellers, with familiar amenities from home, now our hotels globally will provide the same services to Chinese travellers,” he said.
But that’s not all Mr. van Paasschen is taking home from the Far East. Here’s what he learned on his trip:
What was the biggest surprise?
What has struck me the most is the rate at which the economy continues to develop. Being here has afforded me the opportunity to look outside the major cities and see the changes that are taking place. It’s the second- and third-tier cities that are amazing – the cost of real estate and living in the larger cities has affected growth elsewhere. While there may be some talk of overbuilding right now, it would seem there is such a continued growth in demand that extra supply will easily be used up. Today’s overcapacity is tomorrow’s supply.
So there’s a market opportunity for foreign hotel operators?
Absolutely. Look at a city like Shenzhen – it has essentially been built in the last 25 years. We came in a number of years ago and [looked at a more luxurious brand] opening there for us. We’ve been saying for some time that you need to be in these markets to see how big they can become. The other notable change is a broader range of what people consider luxury – the Chinese have traditionally had a more traditional view of luxury, but that is changing.
What have you learned in China that you couldn’t have learned in the U.S?
Many decisions you take in business are not just a function of analysis and available information. By spending time with our teams in China, seeing the developments first hand and observing travellers, we all feel better able to talk about what we’re doing, and we can make decisions that are based on judgment. I could have read a book about the developments talking place here, but it’s not the same.
In China, relationships are extremely important. They see this as our commitment to the market. That’s an important signal, and it’s not lost on most people that we’ll soon have 30,000 associates working in our hotels in China. As we double our footprint over the next three years, that number will increase proportionately.
Any advice for other business leaders?
We’ve really seen the value of having Chinese senior executives running the business in China. It may seem quite obvious, but it is important to hire local managers in any market – particularly China, because the cultural differences are so great.
What cultural differences have you noticed?
There’s the language barrier. That may seem trivial, as in Europe and North America you can follow the thought process even if you don’t speak the language. In China, there is a different manner. Relationships are key, and in initial meetings, you speak far less about business. The communication is more subtle, and you need to talk to people afterward who are culturally and linguistically knowledgeable in order to reflect on what the reaction actually was.
It’s difficult – I’ve shown up to some meetings in a suit, only to have everyone arrive in T-shirts, and I’ve worn a T-shirt into a meeting full of suits. One thing I’ve had a good laugh about is the way Chinese is translated into English. It’s a cautionary reminder that my attempt to say things may seem equally comical the other way around. You need to recognize that some things will look silly, but as long as you’re doing it in a way that is jovial and familiar, it’s not that uncomfortable.
This article has been edited for length and clarity.