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Fri, 11 May 2018

Ascott Accelerates Growth of Citadines Brand in China with Manachise JV

Ascott is stepping up the expansion of its Citadines brand in China through a joint venture with one of China’s leading hotel operators Huazhu Hotels Group (Huazhu) and Huazhu’s subsidiary and an apartment rental firm, CJIA Apartments Group (CJIA).

Listed on Nasdaq Stock Market since 2010, Huazhu has a market capitalisation of US$10.4 billion and the third largest market share in China’s midscale hotel segment with a total portfolio of over 380,000 hotel rooms.

 CJIA, within a short span of over two years, has expanded quickly to collaborate with over 100 property management firms with 10,000 apartments.

Studio Executive Living Room at Citadines Sukhumvit 23 Bangkok. Click to enlarge.

 With an initial registered capital of RMB 100 million (S$21 million), Ascott, Huazhu and CJIA will hold 50%, 10% and 40% respective stakes in the partnership.

 The joint venture will focus on growing Citadines in the first-tier Chinese cities of Shanghai, Beijing and Shenzhen for the initial years.

The JV has secured its first property in the Pudong district of Shanghai, which will come under the Citadines brand and enjoys easy access to the city’s financial district.

Ascott’s partnership with Huazhu and CJIA marks Ascott’s most significant and game-changing move in the asset-light manachise business to date. Manachise is a hybrid of franchise and management contract, whereby an on-site manager appointed by the joint venture will actively manage the operations of the property.

Mr Kevin Goh, Ascott’s Chief Executive Officer, said, “Huazhu is one of China’s biggest hospitality players with significant local capabilities. CJIA has scaled up rapidly in the apartment rental space with more than 90% of its revenue from long-term rentals, which complements Ascott’s strong position in the long-stay business. Ascott will be able to tap on Huazhu and CJIA’s vast expertise in operating properties through manachise, and their over 100 million-member database of domestic corporate and leisure travellers. The joint venture will fast-track Ascott’s growth in China and accelerate the boost in recurring fee income given the shorter timeframe to open a new property. The manachise business model focuses on design and product standardisation, as well as economies of scale, resulting in time and cost savings for the manachisees. Manachise will also allow our joint venture to actively manage the properties and maintain the quality of our world-renowned Citadines brand while enjoying franchise fees. Coupled with Ascott’s international marketing network and experience in managing award-winning properties worldwide, our formidable partnership with Huazhu and CJIA will give us a leading edge in the market.”

Mr Goh added, “China remains our top source market globally with the Chinese constituting almost a quarter of our customers and continues to be the fastest growing segment. With the joint venture’s target to sign 16,000 units under Citadines by 2025, this will more than triple our current Citadines portfolio in China. We will also continue to grow our other award winning brands including Ascott, Somerset, Tujia Somerset as well as the millennial-targeted, coliving brand lyf. Besides manachise, Ascott will continue to expand through investments, strategic alliances, management contracts, leases and franchises. We are confident of surpassing Ascott’s global target of 80,000 units this year, and doubling our portfolio to 160,000 units by 2023.”

Ascott has more than 110 properties with over 20,000 units across more than 30 cities in China. Of these, 30 are Citadines-branded properties with close to 5,000 units in 19 cities.

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