Article
--- Teddy Zhang, President and CEO of HUBS1
The Shanghai World Expo 2010 will be one for the history books, the first ever held in a developing country. It is expected to be the largest and most highly attended Expo in the 156-year history of the World Expo. To date, 237 participants are confirmed, including 189 countries and 48 international organizations. However, statistics show, among the 70 million anticipated visitors, only 5% will be foreigners; the remaining 95% are expected to be domestic visitors. The hotel industry is preparing for a major boom in business for the event and years following. Will there be enough beds to go around? And what long term plans are being made for the hospitality industry after the event wraps up in Shanghai?
Guest profile
Zhang graduated from the School of Hotel Administration, Cornell University and holds an MBA from the Wharton School. Prior to founding HUBS1 in 2005, Teddy was Director and Managing Director for the Thayer Group, one of the largest private equity firms in the US.
Q: Hello and welcome to the Maintalk, I’m your host Amy Rutledge. Join me on this edition is Teddy Zhang, President and CEO of HUBS1, the official hotel reservation service provider for 2010 Expo Shanghai. So estimated right now there are supposed to be 70million visitors for the Expo, does it seem like a realistic figure to you?
R: Actually we are very confident about the number from several aspects. If you look at how realistic this number is going to be. First if you look at historical world Expo visitor numbers back in 1970s, Osaka Japan had 64 million visitors and then if you look at shanghai on an annually regular basis, there are hundreds of millions visitors coming to shanghai alone and five million visitors from overseas. So from those aspects, I think it is not a stretch by any means, which 70 million visitors are going to happen. And this is part of government’s initiative to ensure the successful splendid, memorable Expo.
Q: At this pint, there are 325 star-rated hotels in shanghai, plans to build another 175 by the start of the Expo. Is this something that you see as a smart move, this number of star-rated hotels?
R: For hotel industry, if you build a hotel purely for one occasion, the event like the Expo or even like the Olympics, I think that’s not a wise decision. I don’t think any hotel industry would do that. But if you look at it in the long run, the business environment in Shanghai, and particularly Shanghai is going to be a financial center and logistic center not only in China but hopefully in Asia, that’s the central government’s initiative, they just proposed those two centers in China. So business travel, leisure travel, they all grow very fast if you look at the past five to ten years. From that regard, hotels still have a lot of room, potentials to grow. Given the 70 million visitors we just mentioned, among them probably 40-50 million visitors need hotel accommodation. So, the six-month event is also helpful for hotel getting brand awareness. It may not be if you build a hotel just for the Expo, but that’s the exposure you will like to have. All the hotel companies take that as a good start.
Q: Once all the new construction is done for the Expo, we are supposed to have something along 500,000 beds in Shanghai area available for visitors for the Expo, but they are predicting on peak time, we are going to get about 800,000, where are those 300,000 extra people going to stay?
R: The organizing committee project on this regular daily basis, it’s about 400,000 visitors, and peak time is as you mentioned 800,000. So 500,000 beds are within Shanghai area, but that not really includes the service apartment, and the committee may also utilize college dorm as a temporary solution, and we even mentioned about cruise line, they can dock along the Huangpu River, which can provide thousands beds as well. The other is if you look at the surrounding area, one hour to two hours ride away, if you include one or two hour ride places like Suzhou, the north of Shanghai and Hangzhou, the south, that should be pretty sufficient. I think that adds to about 800,000 beds. But if you really look at the peak time, 800,000 visitors per day, among them, 600,000 will need accommodation. Because other visitors are domestic, and they live just one or two hours ride from Shanghai. They don’t need hotel accommodation to stay overnight.
Q: In terms of the hotels that are being built, do you think it’s a good idea because there is the potential that once the Expo is over; there is a lot of hotel rooms that could sit empty in Shanghai?
R: Yes. I think in the long run, the industry development standpoint there is still an opportunity and there is a potential growth for the travel industry, needs a lot of hotel rooms. But no investor will build hotels just for this one special occasion, so if you look at the long run, and look at the cities like Manhattan, San Francisco, Chicago, Shanghai supply is still under par compared to those cities. And given the economic growth and given the domestic emerging middle class, family travel, I still think building hotels right now is fairly reasonable investment decision. It’s also a good opportunity before the Expo that exposes your brand worldwide and nationwide through different channels.
Q: Let us talk a little bit of how many reservations for the Expo we got, it is promising already or is still early but I am sure people looking ahead.
R: Yes, you are right. Too early but we are ready to get almost like nearly 50,000 confirmed and paid deposit. There is hundreds of thousands of reservations in the pipeline. We got a lot of increase particularly from inbound and from a lot of countries. Because a lot of countries plan to build pavilion here, those bookings are already coming and domestic wise. As you know Chinese travelers pattern their lee-time in the industry, the word lee-time is pretty short. So we are looking at the end of the year or early next year for the domestic travelers starting to book but for the international we are looking at the second half of this year the bookings will pick up pretty soon.