Managing Kempinki's Future In China

Michael Henssler is president China for Kempinski, as well as being the managing director of Key International Hotels Management Company — Kempinski's joint venture in China with the Beijing Tourism Group.

What is the greatest characteristic of the Kempinski brand?
There are a number of differences:
We are European and we are very, very old. We are the oldest hotel management company, we have existed since 1897 — 113 years old.

We are hoteliers. We are not a conglomerate with a construction company, an oil company where one of the branches is hotels. We do hotels only, you can see it on our logo.

We focus on luxury hotels we don't have one-star, two-star, three-star, four-star hotels, we only do five star. We are 113 years old so we must be doing something right. Our growth strategy is based on this history of luxury. We limit our growth saying "We will have the number of hotels in our portfolio as the company is years old." Our philosophy is luxury is limited.

We are going to permanently improve our product. If a branch doesn't come up to our standard then we will take our name down.

All our hotels are unique. We don't have two that look alike. When you go to a Kempenski you can really tell which city you are in. We want to be exciting, not just "a home away from home."

We believe in people. We are a hotel management company, we sell know-how to an investor. So we need to have very very good people and we can say by now almost all our managers have an MBA. Our people stay with us and we grow them, we give them an education because we believe that besides skills education is important. People stay because they see how much value they add to the company and how much it adds to them: and that's how you grow.

What is luxury? If you look at the American market luxury is standardization. For example look at McDonalds, very standardized – perfect. You go in, no positive surprise and no negative surprise. If you look at the Ritz Carlton and the Four Seasons it's the same. Very standardized at the highest level and they're doing a fantastic job.

What is your view of Chinese hospitality market?
China is a very very very important market. As a domestic market, as an inbound market, and, in the future, as an outbound market.

What percentage of Kempinski's Guests come from the Chinese market?
Ten years ago our clientele was about 95% overseas guests and 5% local guests. Today it is about 60% international guests and 40% domestic. In second tier cities it is 90% to 95% domestic market and 5% international market. We see that the business is balancing out. The number of domestic guests in Beijing and Shanghai is increasing and the number of international guests in second tier cities is increasing. Over time I expect to see a minimum 50/50 in the big cities and 30/70 in the secondary cities.

Compared to other hotel management groups, Kempinski doesn't expand a lot, what are your thoughts of Kempinski's expansion strategy in China?
We have determined that we will have a nicely balanced portfolio. We are going to have up to about thirty hotels in China. We have nine open and 12 under construction so we can look at some new projects. Some projects will fall out because the contract closes so there will always be the opportunity to get new projects in China. However we are not just going to go everywhere and not just take what is offered to us. We want to ensure that the projects we take on are always going to improve the quality of our portfolio.

How does Kempinski choose the cities where it opens hotels in China?
You look at the city, not as it is today but as it will be in five or ten years time. We don't go into a market for a few years, we go for the long term so you need to look at the growth potential of the city. Let me give you an example from another region. Ten or 15 years ago in the Middle East we went to Adjman, a small Emirate, and everybody wondered why. And we said it's because we are pioneers and we go into markets and we make markets: as we do in many African destinations. As a result of our success in Adjman we are one of the most prominent operators in the Middle East. It is the same here, we were one of the first with the Kempinski Lufthansa Center Beijing. This is exactly what we are going to do in secondary cities.

The 12 hotels that are being built are distributed in second and third tier cities, what is your view of the opportunities of these cities?
On an international scale these cities are very large with 10 to 12 million people living there. and they are very important commercial metropolis. Look at Chengdu, Wushi, Nanjing, you call them second tier cities: all of them are bigger than Switzerland. They have a great future, are very important for aglobal markets and are very important for outbound markets. Again we are pioneering, we are making markets.

What new challenges do you think Kempinski face in the Chinese market? What are the urgent operational issues that need to be addressed?
The challenge in the Chinese market is to manage the growth. It is easy to loose sight of long term plans and be influenced by short term decisions, making the quick buck. And with our history and tradition we don't want to do this.

We are doubling the size of our company and the biggest challenge is people. We need to ensure that we have the right people and we can still say in four years that all our managers have an MBA.

Since you joined Kempinski, what has Kempinski given you, and have you given to Kempinski?
What Kempinski has given me was a lot of opportunities: Education, a lot of support, much excitement, and a huge amount of fun. And what I have given to Kempinski is I hope: good business, good projects, some good people that we brought into the group, and I also hope excitement and fun.

Kempinski is a very entrepreneurial company. You can get quick decisions and you can do your job. It's my employer of choice.

What measures will Kempinski hotels take in terms of low-carbon and environmental protection in the China market?
The new hotels we build are all built to LEED certification standards. From the beginning of the design process we look at energy consumption and carbon emissions. We look at the smallest details: What light bulbs do we use? How do we treat garbage? What washing machines and what detergents to use. We are already well in advance of the current standards set by the Chinese government.

Environmental protection is something that is deeply embedded in our European and German roots. Our children still need to be on this planet and be happy and this is very important to us. We are one of the leading companies and one of the leading brands.

Which Chinese cities have you visited? What is your first and deepest impression of the hotel experience in China?
China is so vast it has a lot to offer. Kunming, the best place for all round spring; Shanghai, the best place for entertainment; Beijing, the best quality of life for you and your family, it's the safest place in all of China; then there is Chengdu, the best food and natural places; and Hainan with its beaches and climate.

There is so much to discover and see, it's never going to be boring. Already I have visited around 20 cities.

China Hospitality News has set up an online platform focusing on the hotel buyers, offering topics such as booker opinion, MICE case studies, what are your suggestions and opinions in this area?
I think this is a very important tool. I think the idea is very good. Such platforms should be objective and measurable. You should standardize and set benchmarks. Separate facts from personal opinions. Give hotels the opportunities to respond.