Overseas expansion of China's budget hotels
Following in the footsteps of Chinese companies that go overseas to acquire high-end tourism assets, China's budget hotel chains have begun their overseas expansion journey, with the main purpose of serving the country's increasing number of outbound tourists.
Anbang Group (Anbang) is one of the investors making headlines in the travel industry. The company bought the Waldorf Astoria in New York for $1.95 billion in 2014. Now, it is the turn of low-cost hotel groups to go abroad.
The "7 Days Inn" (7 Days Inn), which has approximately 2500 hotels in China, is the main brand in China's economic tourism industry. As the domestic market slows down, the brand opened hotels in Linz and Salzburg in Austria last year. At the same time, the 95-room "7 Days Premium Hotel" will open in Vienna From this hotel you can easily go to "Schönbrunn Palace" (Schönbrunn Palace). In the next 12 months, "7 Days Premium Hotels" in Berlin, Munich, Leipzig and Venice will also open one after another.
Another budget hotel chain, GreenTree Inns, has opened hotels in the United States, Thailand and Vietnam since 2015, while its rival Huazhu Group formed an alliance with the French company Accor last year. Seek international expansion.
Tomasz Janczak, Plateno's European business distribution director, said: "Our brand was initially unknown in Europe." 7 Days Hotel is part of Platinum. He added that when Chinese tourists “see a brand they are familiar with in the country, they will of course choose this hotel to stay”.
After acquiring a majority stake in Platinum and French economy hotel chain Louvre Hotels, Shanghai Jin Jiang International Hotels became the fifth largest hotel chain in the world last year. Jin Jiang International is a Chinese state-owned company listed in Hong Kong.
In the ten years ending in 2014, the number of budget hotels in China has soared from less than 500 to more than 16,000. But since 2011, the profitability of budget hotels has declined. With reports that the market has been surplus, 7 Days Hotels will no longer open new stores in first-tier cities. Kiki Yang, a partner of Bain in Hong Kong, said: “The era of explosive growth is over” and brands are “seeking precautions”.
However, during the same period, China's outbound tourism business has developed greatly, reaching about 40 million outbound tourists last year. Platinum operates hotels in Thailand and Malaysia-Thailand is the most popular tourist destination for Chinese tourists. Jin Jiang International has two budget hotels in the Philippines and plans to open a dozen more.
Mitch Presnick, founder of Super 8 China, said: “It is generally felt that it is time for the Chinese hotel industry to go global.” The company is the only major foreign group in China's budget hotel market.
Macy Marvel, an analyst at the research group Mintel, said that with the increase in outbound travel, it is wise for China's budget hotels to expand overseas. But she added: “Asian tourist destinations are more suitable for the expansion of Chinese budget hotels because they attract more Chinese outbound tourists.”
At present, China's budget hotel chains adopt the method of "asset-light operation" overseas. "We use some of the experience gained in China," said Roland Paar, vice president of Plateno Europe. "We don't own these hotels, but we run them ourselves."
In terms of online reservations, Chinese hotels have been leading the way. Platinum said that 75% of its customers use its internal reservation system. People can easily book a 7-day hotel in Europe on a Chinese website and pay through the social networking software WeChat, which claims to have 700 million Chinese users. Pal said that by contrast, "most hotels in Europe don't know WeChat."
The company plans to acquire existing hotels in Eastern European countries such as the Czech Republic, which are receiving an increasing number of Chinese tourists. Pal said: "Our approach is much more flexible, and Western brands are more conservative."
However, he emphasized that its European hotels aim to provide an "economic and premium" experience, and the standards are higher than those in China-in domestic budget hotels, instant noodles and disposable slippers are standard.
Parr said: “Western companies always have problems in attracting Chinese customers. In the past, we thought that putting porridge on the dining car and slippers in the room would do.” He added: “Now many Chinese tourists want Hearty breakfast."
Compared with the development of domestic star-rated hotels alone, the development of budget hotels in China tends to be large-scale, and now some people call it oligopoly. It is undeniable that nowadays, several large budget hotel brands occupy most of the market share. Some of them rely on foreign investment, some are financing through listing, some are accelerating domestic deployment, and some are beginning to expand overseas markets and develop The momentum is quite rapid. On the one hand, it proves that the demand for economy hotels is increasing. On the other hand, it means that the brand development of economy hotels is gradually becoming mature.
The author believes that exporting brand management to overseas is the only way to expand the influence of local economy hotels in the future. If conditions permit and the time is ripe, exporting the brand is not only for profit considerations, but also to establish a national brand image and essentially improve services. The way to improve the quality of the industry.
It is true that at present, the timing may not be ripe. It is manifested in several aspects. First, the standardization system of budget hotels is not yet complete. Some big brands have indeed adopted unified management standards and configurations, but in fact they are in the process of operation. , There is still a certain gap between directly-operated stores and franchised stores; second, brand recognition needs to be further improved. Although some budget hotel members are growing, how to improve member loyalty and recognition still needs to be further explored.