Case study: Competing in China

The story

Fairmont operates hotels and resorts around the world, including the Savoy in London and the Plaza in New York. The company has three hotels in China, including the purpose-built Yangcheng Lake Hotel in Kunshan, near Shanghai. This is a well-known resort district, very popular with Shanghainese.

The challenge

Fairmont faces stiff competition not just from other international chains but from domestic brands. Fairmont is the only international hotel operating at Yangcheng Lake; the other 19 luxury hotels at the resort are Chinese.

Chinese people no longer see being foreign as a hallmark of good quality, and domestic brands deliver service up to international standards. This forced Fairmont to find ways of making its own brand distinctive.

The strategy

Fairmont needed to show Chinese customers that its brand could be trusted. To do this, it focused on food, which plays a major role
in Chinese culture. Fresh, clean, safe vegetables are highly prized and command premium prices in markets, shops and restaurants.

Fairmont arrived in China at a time when public concerns over food safety were beginning to mount. Groundwater pollution and the excessive use of chemical pesticides and fertilisers had led to many cases of food poisoning.

More recently, there have been attempts by government to tackle the problems of pollution and food contamination.

The execution

Working in partnership with the property owner, the Kunshan city government, the Fairmont hotel at Yangcheng Lake has established its own farm, which supplies 70 per cent of the facility’s vegetable requirements. It is planned that by 2013 the figure will reach 100 per cent.

More broadly, the farm has become an important part of the Fairmont brand in several ways. First, the fact that food is guaranteed to be fresh and clean is itself a major draw for the hotel’s upmarket Shanghai customers.

Second, customers are encouraged to tour the farm and see how the produce is grown. In the process they learn not only about farming but also about the culture of the Kunshan region.

Guests can also select their own food for meals. In one hotel package, customers choose their vegetables and then watch as the chef invents a dish using them.

In addition, guests are given small boxes of fresh produce to take home with them when they depart.

Fairmont has also begun selling its own branded vegetables from the farm within the Kunshan region, and plans to sell into the Shanghai market once distribution problems can be resolved. This effort broadens the visibility of the brand and reinforces Fairmont’s commitment to fresh, clean food.

The farm also supplies the Fairmont Peace Hotel in Shanghai, increasing brand awareness still further.

The next stage of the plan is to clean up some of the canals in Kunshan, which at the moment are heavily polluted, and restock them with fish. This would enable Fairmont to source fresh, safe, local fish in the same manner as its fruit and vegetables. The Kunshan government is once again very much in favour of this project because it would clean up pollution, provide jobs and preserve local culture.

The result has been deep relationships with customers who feel that the hotel shares their own values. This has made the Fairmont Yangcheng Lake a strong commercial success. The hotel is nearly always at full occupancy.

The lessons

Competing successfully often means doing what competitors are not. Through the relatively simple process of creating its own food supply, Fairmont has gained very high brand recognition, with the potential for brand extension.

Fairmont did what other hotel chains had never thought of doing. It could be argued that hotels are in the hospitality business, not the farming business. But Fairmont has shown how thinking beyond the narrow parameters of your sector can build deep and lasting relationships with customers.
- Financial Times, 2 July 2012