Accor’s Jo&Joe Plans Chinese Growth With More Than 1,000 Hotels Across China

Main Photo: The funk bedroom style from Jo&Joe

Date: May 2022

Name: Jo&Joe – Ennismore

Location: Across China

Number of Keys: 1,000 hotels! – Keys: TBA

Partner: Chinese group Country Garden

Brand: Ennismore’s Jo&Joe

Ennismore, Accor’s lifestyle division, has signed a partnership agreement that could see more than 1,000 Jo&Joe branded hotels pop up across China.  

The move could take the lifestyle brand to a scale not yet seen for anything in the segment.  

It is the latest in a series of such deals with Chinese group Country Garden, all promising to help deliver international hotel brands into the market.  

Accor and Country Garden say they have worked together previously for several years, “on hotel projects involving premium hospitality brands”. And, with 500 hotels across Greater China, Accor has also used partnership agreements to drive growth, notably with Huazhu, which is delivering Ibis and Mercure hotels across the country.  

Country Garden, and its two-year-old hotel subsidiary Funyard, already have extensive connections with international hotel brands, effectively giving it several options when considering a hotel development.  

In mid-2020, Country Garden and Hilton signed a strategic partnership under which Country Garden would deliver up to 1,000 Home2 Suites properties across China. At the time, the pair were already collaborating on a half dozen hotels which Country Garden was developing.  

“We know from our success with several existing properties that Country Garden is one of the strongest players in the Chinese property market,” said Alan Watts, Hilton’s president, Asia Pacific. “We are thrilled to continue working with them to introduce a new Hilton brand to China and realise our shared vision to build more than 1,000 Home2 Suites together.” 

As of April 2022, Funyard reported it had signed 150 contracts to develop Home2 Suites sites across the country, with nine listed as trading and a further nine listed as coming soon on the Hilton’s booking website.  

Also in 2020, Country Garden signed a partnership with serviced apartment specialist Oakwood, to launch a new localised brand, Oakwood Beluxs, across China. The pair have targeted 100 properties by 2030. Oakwood had previously expanded its eponymous brand in the country, and currently has eleven sites across China.  

In early 2021, Funyard agreed a strategic partnership with Minor International, aiming to grow its Anantara, Avani, Oaks, Elewana, Tivoli and NH brands across mainland China. No number targets were mentioned as the deal was signed.  

Ji Hongjun, president of Funyard Hotels & Resorts, commented: “The pandemic is further accelerating the process of the Chinese economy shifting toward the domestic market. This means new opportunities in domestic tourism and hospitality. We and Minor Hotels are both convinced that China’s resort market is full of potential.” 

Reporting in January 2022, Funyard stated: “In just over a year since its establishment, it has managed and prepared about 260 hotels and more than 55,000 guest rooms, covering seven major regions including South China, Central China, East China, and Southwest China. 

Hilton’s arrangement with Country Garden is a second successful partnership in China. In 2014, the group signed a deal with Chinese partner Plateno, to grow the Hampton brand across the country.  

That agreement survived Plateno being merged into the larger Jin Jiang group. By 2020 the pair celebrated the signing of 500 projects, and extended the management license agreement to 2034. The pair set fresh goals of signing more than 1,000 properties and opening at least 400 hotels in China by 2024, and today have 250 Hamptons listed as open.  

Country Garden has been established 30 years, and is a Hong Kong listed company with a substantial residential development business in China as its leading division. In the year to 2021, it delivered sales of RMB558bn, having built out more than 66m sq metres of floorspace. Net gearing stood at 45% at the end of 2021. 

Wyndham, meanwhile, continues to build on its position as China’s largest international hotel franchisor. It has more than 1,500 hotels across the country trading under 11 of its 20 brands, and finished 2021 with 153,800 rooms in Greater China.  

HA Perspective [by Chris Bown]: It is the breathtaking scale and pace of development that never ceases to amaze. But, by and large, partnerships with local Chinese developers look to be delivering for the international brand groups.  

Country Garden/Funyard looks to be a good partner, already delivering for Hilton at a pace that should give others confidence that it can get developments under way. The group appears to have created its Funyard hotels division as a sensible diversification away from residential real estate.  

But will Funyard have the resources to keep delivering hotels? That exposure to the Chinese residential market is the biggest worry for the future. Country Garden appears in the top three of Chinese real estate developers alongside Evergrande, which in recent months has hit the headlines for all the wrong reasons. Evergrande defaulted on debts last year, in a failure that has had knock-on effects for its peers, including their ability to tap international dollar-denominated debt markets.  

Concerns over Country Garden’s debt levels and residential market exposure led ratings agency Fitch to downgrade the company to negative, in early April 2022, noting “decreasing contracted sales and sales collection since 3Q21, as well as a declining profit margin of the sector. Country Garden has been able to access the capital market, but the difficult funding access and operating environment for Chinese property developers adds to uncertainties. The company’s leverage is higher than that of most investment-grade peers.”  

Hilton, Accor and Minor will all be hoping Country Garden can shake off its woes and keep building hotels.  

Additional comment [by Andrew Sangster]: This story builds on the one we had last week that painted a gloomy picture of the long-term prospects in China. I say gloomy only in that the previous outlook had been so bullish: now it is much more moderated. 

There are two issues with growth in China: whether it will happen to the extent envisaged and whether it will be profitable. 

Even when I was more bullish on China prospects, I had doubts about the incredible numbers being talked about. But these have been largely confounded. The openings have, pretty much, happened. 

Typically, these master development deals create a flurry of interest for both the brand and the developer – which suits both parties – but then quietly fail to deliver on promises. But the fanfare does its job by helping to secure debt and land opportunities, even if rarely to the extent that the bullish projections can be met. Except, it seems, in China. Will it be so again? I’m not so sure. 

As we write in the story above, property developers in the PRC are facing an existential crisis. Evergrande is just part of the story and there are many chapters to come in the property meltdown. 

There is much scepticism about official statistics on the scale of the problem with independent economists typically paint a much gloomier picture. The unofficial sources suggest that property development and related industries account for as much as 30% of Chinese economic output and this is likely to contract to represent 15%. In most Western developed economies the property sector is more like 10% of GDP. 

Optimists will point out that the Chinese Communist Party is seeking to boost domestic demand, moving away from mostly export-driven growth. This will certainly boost hotel demand within China. 

Whether the CCP succeeds in shifting its growth model from exports to domestic demand is questionable. Most likely there will be a significant growth slowdown with the current 5% or less a year growth being the new normal, rather than the 10% plus enjoyed in the past few decades. 

Coupled with the weaker growth outlook there is now the huge change in geopolitics that makes autocratic regimes like that in the PRC much less attractive to Western interests. There is a decoupling underway, and it would be a brave individual that claimed they know how far this will go. China looks unlikely to start sharing Western values anytime soon. 

China will remain a significant market for hotels but not quite yet at the level of North America or Europe, particularly for non-Chinese brands. The Western global major hotel brand companies need to start reframing their growth ambitions with more of a European lens. Europe is an already established market, albeit one where they have struggled to make as much headway in. 

Price: Mega-Bucks!

THPT Comment: As our friends from Hotel Analyst state these numbers sound crazy! Clearly some progress has been made by Country Garden/Funyard to date, but another 1,000 Jo&Joe’s does sound like a bridge too far! Let’s wait and see….

First Seen: Hotel Analyst

CLICK HERE TO CONTACT US