Shangri-La in China Essay Example

Chinese compatriots comprising the majority. However, in 2003, this trend suffered a slight decline due to the SARS epidemic outbreak that hit the area. In China, there are two types of hotels available: high-end luxury hotels with four and five-star ratings and budget-friendly local accommodations. Chart 2 depicts a steady growth in the number of star-rated hotels available.

The promising statistics suggest that China has great potential in the hotel industry. Chart 1, sourced from the National Bureau of Statistics in 2007, displays the number of visitors from 2001 to 2006. Chart 2, also from the National Bureau of Statistics in 2007, shows the number of star-rated hotels from 2001 to 2005. As China's open door policy allowed for an increase in international business travel, it became apparent that there was a lack of luxury accommodations suited for these travelers. Recognizing this need in the market, Kuok entered the hotel industry in China. In addition to the growing business travel market, Kuok was also attracted to China's vast population, cultural heritage sites, tourist destinations, and warm reception of international tourists due to Asian culture. The stable political climate was also a contributing factor to Kuok's decision as he believed it would encourage tourism activity.

In 1984, Shangri-la opened its first hotel in Hangzhou – marking the entrance of the first international hotel management chain and the first five-star hotel into China. The hotel was a replacement for Hangzhou Fan Dian (????) and is jointly owned by Shangri-la (45%) and Zhejiang Tourism Group (????????), formerly known as Zhejiang Provincial Tourist Bureau (??????). Shangri-la adopted the "integration of hotel management and ownership" concept as their first mode of entering

the Chinese market. (Funding Universe, 2008)

In 1985, Kuok collaborated with the State Economic and Trade Commission to initiate his first investment in China, which was the Beijing World Trade Centre. This endeavor amounted to a value of 3.8 billion USD and included an establishment that featured offices, shopping complexes, hotels, and luxurious service apartments. Both Traders Hotel and China World Hotel, which are two of the Shangri-la hotels, were incorporated into the complex. These hotels were opened in 1989 and 1990, respectively, and Shangri-la held a 50% ownership in each. This project has established itself as a prominent landmark in Beijing CBD. Additionally, Kuok opened his second Shangri-la hotel in Beijing in 1986 (Li, 1995).

In 1995, Kuok noticed a lack of high-end commercial office space in Beijing and decided to invest in another property - Kerry Centre. The project was a collaboration between Kuok's property investment arm, Hong Kong's Kerry Group, and Beijing's Beiao Company. One of the highlights of this project was that it included Shangri-la's second hotel in Beijing. As a result, Shangri-la now has a total of four hotels in Beijing with 2443 rooms, making it one of the largest international hotel chains in the city (Shangri-la Asia Ltd, 2007). Since then, Shangri-la has expanded rapidly and doubled its number of hotels during the 1990s, achieving an aggressive expansion rate of about one hotel per year.

The "binary plan" strategy, consisting of hotel ownership and hotel management, has been adopted by the group as they expand into the Chinese market. Shangri-la fully owns about half of its hotels in China, while the rest are operated through joint ventures where Shangri-la provides

expertise in hotel management. Shangri-la has three expansion phases, with the first phase focusing on China's international cities through joint ventures and total ownership. The hotels may appear as single buildings or as part of integrated office and shopping complexes.

Shangri-la has categorized Beijing and Shanghai as international cities, each with four or more hotels owned or managed by the group. These cities are significant entry points into China and favored by global tourists. The next step for the company is to launch the Shangri-la brand in provincial capitals, which usually serve as hubs for domestic business and leisure travelers. Surprisingly, Shangri-la frequently operates as the sole five-star hotel in these locations, providing an ideal opportunity for establishing its high-end image and renowned Asian hospitality in mainland China.

Shangri-la Asia Ltd is currently in the third phase of their expansion, which involves introducing their popular brand hotel into secondary cities. This strategy is focused on opening hotels in smaller cities. The company currently operates two major brands in China: Shangri-la and Traders. Shangri-la hotels are luxurious five-star properties that cater to leisure and premium business travelers, often for top-level executives of multinational corporations. The hotels feature exquisitely decorated lobbies, fine Asian hospitality, and beautifully landscaped Chinese gardens that are key selling points. Traders, their four-star brand, is primarily targeted at business travelers.

The services and management at this establishment are comparable to those at Shangri-la, but with a greater emphasis on practicality rather than luxury to accommodate the needs of businessmen. The rooms are smaller and less expensive than those at Shangri-la. This establishment has two subsidiary brands: Kerry Centre, which caters to young businessmen, and Shangri-la Resort,

which primarily serves travelers seeking island and beach vacations. The establishment's decision to establish three different brandings is likely aimed at targeting diverse market segments.

Shangri-la, as a service industry-based organization, prioritizes enhancing its value-added hotel services that feature fine Asian hospitality. The company aims to provide services that make customers feel that their experience is worth more than what they actually pay. The company's operation strategy is based on the core value of "Pride without arrogance". This strategy encourages employees to take pride in their internal achievements but remain humble about external accomplishments (Shangri-la Hotels ; Resorts, 2008).

Shangri-la values its employees as a crucial asset, believing that true success does not necessitate excessive publicity. The management team understands that competent, happy, and loyal employees can provide the best services to satisfy customer needs. By delivering exceptional service, customers may consider returning to Shangri-la, thus creating a pool of loyal customers for the corporation.

Maintaining a competitive advantage over rivals is vital in the service industry, especially for companies like Shangri-la. To achieve their goal of satisfying customers every time, Shangri-la Hotels ; Resorts (2008) has implemented policies to retain their employees. These policies include training courses that cover pre-employment and on-the-job training. By providing training, employees gain a clear understanding of their career paths, which fosters loyalty and retains talented staff. The Shangri-la Academy in Beijing is evidence of the hotel group's commitment to providing excellent training programs for its employees.

Shangri-la offers a competitive salary package to attract talented employees and promote healthy internal competition based on performance. For example, employees at Shangri-la Pudong hotel receive a year end bonus of 4.5

months. The company also has a budget of RMB 200 million for employee gatherings and provides in-house facilities to create a sense of belongingness among staff (Li, 2008).

Moreover, the company grants certain decision-making authority to its employees within their specific work areas. This contrasts with Chinese cultural norms, in which managers and supervisors make all decisions and technicians simply follow orders. The rationale behind empowering employees to make decisions is to enhance operational efficiency, as those who are experts in their daily tasks can make rapid and informed choices. Additionally, the majority of employees are recruited locally

Shangri-la's success in China can be attributed to their belief in the abilities of the locals and their provision of customized services that are familiar to domestic customers. This is significant because the management team predicted a strong and encouraging growth in China's domestic tourism (Ren, 2004). Shangri-la's visionary founder, Kuok, was instrumental in their successful debut in China. Having established relationships with prominent figures such as Tun Abdul Razak, Tun Hussien Onn, and Lee Kuan Yew during his education at Raffles School in Singapore, Kuok was able to rapidly build his empire in Malaysia and Singapore and accumulate capital for future investments in China.

Kuok leveraged his strong relationship with the Malaysian Government to establish his sugar supply company, Perlis Plantation Ltd. Thanks to this strategic move, he was able to thrive and build an impressive sugar empire that controls 10% of the world's supply. With this achievement, Kuok earned the moniker "Sugar King" and also generated capital for his future investment endeavors in China. Despite some negative perceptions about guanxi, Kuok views it as a form of

friendship. As an overseas Chinese, he values the importance of these relationships in building and expanding his business empire through future partnerships. In Chinese culture, friendship is often seen as an opportunity, a tenet that Kuok fully embraces.

Through his knowledge of guanxi, Shangri-la's founder established strong relationships with prominent figures such as Lee Kah-Sing from Cheung Kong and Larry Yung Chi Kin from CITIC Pacific. This, along with the recruitment of experienced professionals like David Hayden and Robert Hutchinson from Westin, contributed to Shangri-la's success in entering and expanding into China. Furthermore, during its period of rapid expansion, Shangri-la chose to construct hotels in less recognized cities. (Li, 1995; Funding Universe, 2008).

According to Funding Universe (2008), many secondary cities in China had populations of over five million and functioned as industrial growth areas. Additionally, China's positive economic climate encouraged domestic trading, creating a demand for luxury hotels in these secondary cities. Unfortunately, these cities often lacked such facilities, making Shangri-la the first and only luxury hotel in the area (Li, 1995). This allowed Shangri-la to "monopolize" the luxury hotel market in these areas through the principle of supply and demand.

The company's ability to understand China's economic developments and plan for the long term is demonstrated by their branding strategy. Launching Traders hotel as a second brand allows them to target executives seeking practicality. While Traders provides similar services to Shangri-la, it acts as a bridge between four and five-star hotels. This creates an opportunity for the hotel group to introduce their luxury Shangri-la brand into the market. The company's ability to diversify its operations and target different market segments is matched by their ability to

establish the standard for luxury hotels in China (Funding Universe, 2008).

Shangri-la gained its reputation among locals in secondary cities by offering luxury hotel properties, which is crucial for future expansion in both domestic and international markets. The success of the Shangri-la group in China can be attributed to its ability to understand the market and implement a visionary long-term plan. Robert Kuok’s cultural understanding and guanxi helped Shangri-la surpass its rivals such as Intercontinental Hotel Group and Marriotts Group, making it the largest luxury hotel management chain in Asia. The company's good staffing policy and branding strategy have allowed them to build a unique brand that emphasizes Asian hospitality, garnering numerous awards from international travel organizations.

The culture of power release in China has resulted in a new development in their human resources strategy. However, ever since China joined the WTO, the market has become increasingly more accessible. This has led to an oversupply of hotel rooms in certain cities like Beijing and Shanghai, due to the entrance of big international hotel chains including Hilton and Four Seasons Hotel (Clarke ; Chen, 2007). As a result, Shangri-la must take this matter seriously as their market share is diminishing with the influx of new players. To combat this issue, it is suggested that Shangri-la expands their network beyond the East Asian market and into major cities in Europe and America.

This strategy aims to attract Chinese tourists who frequent the destinations mentioned by leveraging Shangri-la's reputation and the travelers' familiarity with the brand. As a result, Shangri-la will establish itself as a significant global player in the leisure market worldwide. Reference: Clarke, A., ; Chen, W.

(2007) In

London, Butterworth-Heinemann published International Hospitality Management: Concepts and Cases. In 2008, Funding Universe provided information on the company history of Shangri-la Asia Ltd.

Li, R. S. (1995). "ShangriLa-Asia-Ltd-Company-History." Retrieved September 01, 2008, from Funding Universe: http://www.fundinguniverse.com/company-histories/ShangriLa-Asia-Ltd-Company-History.html

The reference is as follows: ????? -????. The book was published by Guangzhou Publishing House under the name ????? . The author is Li, Y. and the date of publication is March 20, 2008. The book includes information about ????????????.

The National Bureau of Statistics can be found at http://travel.sohu.com/20080320/n255813896.shtml and was accessed on September 01, 2008 via Sohu Travel.

(2007). China Statistical Yearbook 2007. Beijing: National Bureau of Statistics. (2004).

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The National Bureau of Statistics published the China Statistical Yearbook in 2007, following its previous release in 2004, and it can be referenced from Beijing.

The citation for C. W. Ren's book titled "????? :??????????????? (???????? —?????? )" can be found on pages 66-67 of the publication by Tsinghua University (???????), located in Beijing.

The 2007 Annual Report of Shangri-la Asia Ltd. was published in Hong Kong by the company itself.

Retrieve information on Shangri-la Culture from Shangri-la Hotels & Resorts website on September 01, 2008 (Shangri-la Hotels & Resorts, 2008).

Discover the mission overview of Shangri-la by visiting their corporate website at shangri-la.com/en/corporate/aboutus/mission/overview