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Global Management Forum 2019

Red Planet Hotels avoids China entry to focus on Japan

Budget chain's CEO says repeat visitors make Japanese market a good bet

Red Planet Hotels CEO Timothy Hansing shares his high hopes for Japan's tourism market. (Photo by Kotaro Igarashi)

TOKYO -- Red Planet Hotels depends heavily on Chinese globe-trotters to keep its rooms full, but the Bangkok-headquartered budget chain has no plans to actually enter China's vast market, its chief executive said in an interview.

Instead, CEO Timothy Hansing told the Nikkei Asian Review, Red Planet sees more potential in a country that is already its second-largest revenue source -- Japan. Only the Philippines, where the company has the most properties, generates more sales.

China's "incumbent hotels are very dominant," Hansing explained, adding that his company is focused on the Chinese outbound market. Chinese travelers comprise the majority of Red Planet customers in Thailand and Japan.

In particular, Hansing expressed excitement about Japan's unprecedented growth in tourist arrivals. The Japanese government is on track to reach its goal of 40 million arrivals in 2020, and 60 million by 2030, after hitting 31 million last year.

To serve the influx of demand, Red Planet now has 1,000 rooms across Japan, with 351 more in Kyoto and Hiroshima scheduled for completion next year.

"Here's the interesting bit: 19 million of [last year's arrivals] were repeat visitors," Hansing said, describing major cities like Tokyo, Osaka, and Kyoto as gateways that lure travelers to come back. Similarly, Hansing said major sporting events like the Rugby World Cup and next summer's Olympic Games in Tokyo should not be viewed as a tourism peak, but as an introduction to Japan.

"To achieve a sustainable tourism strategy, you need repeat visitors," he added. "A one-hit wonder is not a sustainable tourism plan."

In Asia's tourism market -- the world's fastest growing -- catering to budget travelers appears to be a smart plan.

Following the model of low-cost airlines such as America's JetBlue, Europe's EasyJet, and Malaysia's AirAsia -- whose sister company, Tune Hotels, was previously a partner -- Red Planet has shunned pricey services that not all travelers want or need.

That does not mean compromising on everything. At home, the CEO said he sleeps in the same kind of bed guests will find in the company's 31 properties across Asia. Aside from five-star mattresses, he also bragged about the company's mobile app, which allows customers to book stays, hail cabs, access concierge services and find local discounts.

"It's not just about logistics, but providing this level of service for $35 a night," said Hansing, who was visiting Tokyo for the Nikkei Global Management Forum.

Budget travelers, of course, also have the option of using vacation rental services like Airbnb, which is looking to make a comeback in Japan after a regulatory crackdown on home-sharing last year. But unlike most of the hotel industry threatened by Airbnb, Hansing credits Airbnb for bringing tourists to Asia.

"I don't look at Airbnb as a threat. They're not directly competing with me," he said. Airbnb guests typically have longer stays than Red Planet guests, who average one to two nights. "You couldn't have had this growth in demand without Airbnb because there were not enough hotels to stay at."

Red Planet's rapid growth in scale and reputation since its founding in 2010 has allowed it to pursue a different business model in Japan, which Hansing says generates "super profits" for the company. Red Planet is building a hotel in Hiroshima that it will sell to AXA and then lease and operate.

"We're being paid to build our own hotels," Hansing said. "The profits we made from the sale can be put back into more properties."

Although a similar strategy of immediately pursuing scale haunted the office-sharing startup WeWork, Hansing said that every Red Planet hotel is profitable, and that the company will pursue an IPO as soon as it forms an exit plan for its shareholders, including Goldman Sachs. Red Planet subsidiaries in Japan and Indonesia are listed in Tokyo and Jakarta.

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