In China, Hotel Operators Pursue Middle Class

　　China"s growing middle class is buying new cars and heading off on the country"s freshly built highways. And those travelers want clean, affordable places to sleep.

　　Two U.S. hotel giants are hoping to fill that need, launching midpriced brands in China for the first time to capture part of the fast-growing domestic travel market.

　　Hyatt Hotels Corp. said Wednesday that it plans to introduce two Hyatt Place hotels and one Hyatt House hotel in the suburbs of Shanghai. The first two of the new Hyatt properties are set to open in 2014.

　　Carlson, which owns the Radisson hotel chain, said it plans to unveil its midlevel Park Inn brand in China, although the company didn"t say when the new hotels would open.

　　Carlson Chief Executive Hubert Joly said the hotel industry in China is at a stage similar to the postwar period in the U.S., when roadside motels of uneven quality were the only choices for travelers. "It"s like the U.S. in the 1950s, when the freeways opened," he said. "You had this infrastructure that was built and you needed these hotels for the boom in domestic demand."

　　International hotel operators have been expanding quickly in China, focusing mainly on high-end offerings in big cities frequented by foreign business travelers.

　　Hyatt said Wednesday that its affiliates plan to add eight full-service hotels in China, including three under the Grand Hyatt brand and five under the Hyatt Regency label. Those high-end properties give Hyatt a total of 32 properties under development in the country, the company said.But now as the Chinese middle class becomes more affluent, operators have shifted their strategy to accommodate them with outlets that will appeal to traveling salesmen and families.

　　"The proportion of intra-China travel is growing," Hyatt CEO Mark Hoplamazian said in an interview in Hong Kong. "These [new brands] will appeal to young professionals and business travelers who don"t need a full-service luxury hotel."

　　Hyatt and Carlson won"t be the first in the midmarket space. Wyndham Hotel Group, part of Wyndham Worldwide Corp., already has 34 hotels in China under the Howard Johnson banner, while InterContinental Hotels Group PLC has 84 hotels under its Holiday Inn and Holiday Inn Express brands.

　　Mr. Joly said Carlson is "opening up its balance sheet," committing $50 million to $100 million to an expected $1 billion fund that the company hopes to raise for the construction and ownership of hotels in China.

　　Paola Orneli, head of hospitality at property agency Cushman & Wakefield, said midmarket hotels have been slow to develop in China, where the industry has been dominated by either luxury developments or budget hotels. "It"ll be an enormous market," Ms. Orneli said. "Travelers will want a three-star offering that is good and consistent. There aren"t many right now."

　　She added that midpriced developments might appeal to Chinese real-estate developers because they are cheaper to build than luxury hotels, typically enabling them to turn a profit more quickly. According to Cushman, a midrange hotel room costs $131,000-$160,000 to build, about half the cost of a luxury room.

　　But not all operators believe in the midmarket approach, At Accor, its mainland Novotel hotels haven"t done as well as its higher-end Sofitel and Pullman brands or its lower-priced Ibis brand. "We haven"t seen the growth in the midmarket area," said Michael Issenberg , chairman of Accor"s Asia Pacific division.