Jin Jiang Looks for Room at the Global Lodge 锦江集团寻求跻身国际高端酒店之列

By newsdoug on March 6, 2012

Jin Jiang looks for room at the global inn with JV I’ve been watching with interest these last few weeks as Jin Jiang (HKEx: 2006), one of China’s oldest and best known non-budget hotel brands, has been partnering with a US firm in a bid to compete with big international operators, making it a potentially interesting investment bet over the longer term if it can succeed. Of course, such success is far from assured, as Jin Jiang, despite its long history in China, still has much to learn to compete with the likes of Marriott (NYSE: MAR) and Hilton, both of which have far more experience and, equally important, reputations for operating top-notch hotels. But a couple of recent franchising deals look interesting enough to merit a mention here as a potential sign of big new developments for Jin Jiang. In the latest of those announcements, Interstate China, a joint venture hotel management company between Jin Jiang and US firm Thayer Lodging, has announced it will take over operation of the JC Mandarin hotel in Shanghai, one of the city’s oldest 5-star hotels whose image has faded somewhat in recent years as many of the bigger brands have opened newer and better-run properties. (English announcement) Announcement of the deal comes just weeks after Interstate also announced it will also manage a Shanghai-based DoubleTree, one of Hilton’s brands. The venture will also manage the J Hotel when it opens in Shannghai Tower, which will become China’s newest skyscraper with its scheduled opening in 2014. With the latest additions, the joint venture now manages eight hotels in China, and clearly it has much bigger plans for the market. I’ve visited a number of Jin Jiang hotels during my years in China and, while it’s clearly one of the better managed domestic brands, it still lags well behind the big international names in terms of quality and overall guest experience. That said, I like the joint venture and franchising approach that Jin Jiang is taking to try and build itself into a world-class player. The pairing with Thayer has obvious advantages of bringing in an experienced global player, while the franchising approach will allow Jin Jiang to avoid many of the costs associated with building a new brand. I suspect Jin Jiang’s ultimate goal is to create its own new brand after it has sufficient experience, which it could then develop not only in China but also export to other countries. Of course, the big question is whether Interstate China will be able to earn a reputation as an operator of top-end hotels, which it will soon have a chance to prove if it can improve the JC Mandarin and operate well-received hotels in its other properties. Given the problems that often occur with such Sino-foreign joint ventures, I would give this one just a 50-50 chance of success. But if it does succeed, Jin Jiang could indeed become an interesting investment alternative for those who like the mid- to high-end China hotel story.

Bottom line: Jin Jiang’s aggressive new push into higher-end hotels through a US joint venture has a 50-50 chance of success, potentially helping it to compete with the big international brands.

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