China’s marrying types are a boon to the consumption market but they’re more than a nice little prospect for Marco Polo Hotels.
When they exchange vows and drink to wedded bliss, the celebratory spoils are good as gold in these times of state-mandated frugality in the mainland.
Marco Polo Hotels Management Ltd., the operator of the eponymous hotel chain owned by The Wharf (Holdings) Ltd. (00004.HK), is increasingly looking to wedding receptions to make up for loss of income amid Beijing’s curbs on banquets and extravagance.
China’s catering sector, especially high-end dining, has been reeling from the frugality campaign. Sales at larger restaurants fell 1.8 percent last year from the previous year, compared with a 12.9 percent gain in 2012, according to the National Bureau of Statistics.
“To be honest, this initiative, which has been in place for over a year, has affected everybody. And particularly in the catering business, the big banquets are pretty much gone,” Marco Polo Hotels president Eric Waldburger told the Hong Kong Economic Journal’s EJ Insight. “People just don’t show up anymore or don’t go through these lavish functions.”
But “when you have that many people in a country, there are always ways and means to catch up to plug the hole,” he said. “What’s very strong in China is that a high percentage of your catering business is from weddings.”
Waldburger said some of the company’s new projects in the mainland will have more halls for wedding receptions, which account for more than 50 percent of its banquet revenue. Marco Polo Hotels has unveiled eight new projects across China through 2017, including one in Changzhou and another in Chengdu scheduled for launch this year.
Since rising to power in late 2012, Chinese President Xi Jinping has ordered officials to cut down on receptions, overseas trips and vehicle purchases. The restrictions are coupled with a high-profile fight against corruption which Xi said threatens the Communist Party’s six-decade rule. Demand for luxury items such as Moutai liquor and Longjing tea have slumped.
“Hopefully, it will smooth itself out eventually, and gradually, all these biggies will come back. But so far I don’t think we’ve seen any indication of that,” said Waldburger, a 40-year veteran in the hospitality industry.
Despite Beijing’s austerity drive, Marco Polo Hotels stands by China’s growth story. It will open three hotels in Tianjin, Guiyang and Wuxi in 2015, two in Chongqing and Changsha in 2016 and one in Suzhou in 2017.
“People still spend money. The disposable income in China has gone up. People are more affluent and there’s a very solid middle class, ” Waldburger said. According to official figures, disposable income for Chinese urban residents tripled to 24,565 yuan in 2012 from 7,703 yuan in 2002.
The company’s portfolio boasts seven properties in the mainland and three in Hong Kong, including its flagship Marco Polo Hongkong Hotel in Tsim Sha Tsui. It also manages three hotels in Thailand and the Philippines.
“We’re also looking at other cities like Seoul, Tokyo and Indonesia,” Waldburger said. “Our focus is on the capital cities first, but we have to find the right partners.”
In the first half last year, the hotel operator’s revenue grew 6 percent to HK$689 million from a year ago. Operating profit fell 11 percent to HK$170 million on reduced business travel spending as well as renovation and pre-opening expenses, according to a stock exchange filing.
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