Ascott finds room for growth in China venture

Mr Lim Ming Yan (left), CapitaLand president and group CEO, and Tujia co-founder Melissa Yang looking on as Mr Lee, Ascott CEO (seated left) and Mr Luo, Tujia CEO, signed their joint venture yesterday.
Mr Lim Ming Yan (left), CapitaLand president and group CEO, and Tujia co-founder Melissa Yang looking on as Mr Lee, Ascott CEO (seated left) and Mr Luo, Tujia CEO, signed their joint venture yesterday.PHOTO: CAPITALAND

Link-up with Tujia offers business travellers lower-price accommodation across 25 cities

Business travellers seeking accommodation in China have a new brand to check out: Tujia Somerset.

It is part of a joint venture between Ascott, the world’s largest service residence business, and Tujia, Asia’s largest holiday home rental platform touted as China’s Airbnb.

The brand was launched in Shanghai yesterday, with over 400 units already available at two locations and up to a total of 2,000 units targeted by this year.

Those in operation since January are the 76-unit Tujia Somerset Baiyue Dalian and the 355-unit Tujia Somerset Xinhui Shenyang, both in north-eastern Liaoning province.

Two more will open later this year, in Hainan’s Haikou city and coastal Jiangsu’s Wuxi city. Others – in Tianjin and Jiangsu’s Nanjing city – will open next year.

In all, the six properties will add 1,005 units to Ascott’s China portfolio, which stands at 15,000 units in 85 properties across 25 cities.

As part of the joint venture formed last August with an initial capital of US$40 million (S$54 million), Ascott will lend its expertise in managing the units, which will include newly sourced properties and Tujia’s serviced apartments deemed suitable for conversion.

Tujia co-founder and chief executive officer Luo Jun believes the joint venture will help the company compete with Airbnb, a US-based online home rental service, though he stressed that Tujia does not care how others define it.

“We focus on building up our strengths, which is not just in our online platforms,” said Mr Luo, citing Tujia’s offline services in operating apartments for owners and franchising to third-party operators.

“Poor offline services will limit future growth, so our tie-up with Ascott is aimed at setting new standards in this business.”

Tujia, which is valued at over US$1 billion and lists more than 430,000 units across 290 destinations in China as well as 1,025 overseas locations on its website, is seen as China’s biggest challenger to Airbnb, which announced its China expansion plans last August.

Tujia Somerset will be targeted at business travellers with a lower budget, Mr Kevin Goh, Ascott’s managing director for North Asia, said at the launch. He sees strong demand potential among China’s 100 million-strong middle class.

Also, China recorded over four billion domestic tourist visits and 120 million outbound visits last year.

We believe there is huge potential in the lower-end market of 300 to 500 yuan (S$63-S$105) nightly room rates, and that Tujia Somerset can meet the need,” he added.

Ascott CEO Lee Chee Koon said Chinese travellers increasingly prefer serviced apartments over hotels. He cited how 30-40 per cent of its clientele in China are locals, up from 1-2 per cent in the early 2000s.

Ascott, which is wholly owned by CapitaLand, has seen annual increases of 30-40 per cent in the number of Chinese among its one million-plus customers globally.
 

A version of this article appeared in the print edition of The Straits Times on March 19, 2016, with the headline 'Ascott finds room for growth in China venture'. Print Edition | Subscribe