Business Model Battle Of Middle And High End Hotels

On July 8, the first upgraded orange crystal hotel (hereinafter referred to as "new crystal") under "Huazhu era" opened in Shanghai.

Four years ago, after Huazhu acquired 100% equity of orange hotel group with a price of more than 3.6 billion yuan, Ji Qi, chairman of the board of directors, appointed Cao Juan to manage orange crystal, a medium and high-end hotel brand that caused great waves in the domestic hotel market at that time.

As one of the top ten employees of Huazhu group, Cao Juan traveled south and North with Ji Qi in his early years, opening up four regions for Hanting brand, including Beijing, southwest, northwest and South China. This past entrepreneurial experience has given her experience in managing budget hotels. Cao Juan became the CEO of orange family business department of Huazhu group, realizing the transformation of hotel brand management from economic type to medium and high-end.

Taking over the orange crystal, Cao Juan has a completely different idea of hotel management. Especially for an orange crystal brand which had deep design feelings and numerous fans, the "new crystal" under its control must fight back some old powder's doubts.

The logic of pursuing design and paying attention to feelings is still pursued by many hotel groups in the era of hotel competition in which quality elements are constantly highlighted. But in the final analysis, the hotel project is an investment, it serves not only the guests, but also the investors, which is a test of business model.

At the "2021 Design Shanghai Forum" held in June this year, Ji Qi admitted that in his eyes, Huazhu has always been taking benign business model and design empowerment as the dual engine. In an interview with the 21st century economic reporter, Cao Juan also said that the original business model of orange crystal is not suitable for rapid development, and the orange crystal in Huazhu era can achieve both quality and scale.

Objectively speaking, the emergence of "new crystal" is just a choice for many hotels to invest in "intermediate opportunities". On the supply side, it is an indisputable fact that there are many competitors.

"Intermediate business opportunity" of hotel investment

From 2006 to 2014, there was an "economic boom" in China's hotel industry. During this period, there have been many mergers and acquisitions in the field of budget hotels - home has successively acquired seven Dou Xing and Motai 168, 7-day chain has won Huatian star, and Hanting has reorganized its mid-range brand Xingcheng. At the same time, economic hotel leaders rushed to the capital market, such as home, Hanting, 7 days chain of American shares listed, Jinjiang Star returned to a shares.

The listing tide of budget hotels has attracted the hot money of investment, which has laid a foundation for the current situation that the economic supply of the whole domestic hotel industry accounts for more than 60%. According to the statistical data released by China Hotel Association, as of January 1, 2021, the number of economic (two-star and below) guest rooms in China is about 9.424 million, accounting for 61%; The total number of medium (three-star) and high-end (four-star) rooms was 4.824 million, accounting for 32%; The number of luxury (five-star) rooms was 1.078 million, accounting for 7%.

However, such a pyramid structure of supply has shifted in recent years. Since 2015, under the catalysis of capital merger and acquisition, the domestic medium and high-end hotel market has entered a period of group and chain integration.

"Referring to the hotel market in developed countries in Europe and America, there is a stable positive correlation between income structure and hotel structure." A hotel industry analyst told the 21st century economic reporter that under the general trend of consumption upgrading, domestic medium and high-end hotels are ushering in structural opportunities.

In the view of the industry, such a structural opportunity is almost inevitable. On the one hand, the growth momentum of the domestic hotel market is switching from incremental to stock, and medium and high-end hotels are recognized by the market with high-quality service and cost performance; On the other hand, the sinking market war ignited, high-quality middle and high-end brands have become the main force of hotel group expansion in the process of growing middle class in low-level cities.

It is worth mentioning that the outbreak of the epidemic in 2020 has impacted on the operation of the global hotel industry, but it has increased the speed of clearing up the supply side. During the epidemic period, the operation of small and medium-sized single hotels was under pressure, the Matthew effect of the industry was strengthened, and the chain rate and concentration rate were accelerated.

The forecast model of Dongxing securities shows that in the steady state, China's hotel industry structure will transition from 1:3:6 to 1:4:5, and the proportion of medium and high-end hotels will continue to expand and stabilize at about 44%. According to this calculation, under the accelerated layout of the leading enterprises and the market expansion, the high-speed growth period of the medium and high-end market will be at least 3-8 years, and the number of guest rooms will reach 8.81-11.01 million, which still has 76% to 120% growth space compared with the current situation.

In fact, since 2020, China's high-end hotel investment has ushered in a peak.

In the golden age of China's real estate in the past few years, hotels, as property supporting facilities, play a role in enhancing the brand value of the development land and driving the sales of commercial office buildings or residential buildings. High star hotel projects almost ignore profits as a foil to commercial real estate projects. In recent years, with the domestic real estate industry generally facing financial pressure, the hotel projects in the hands of real estate developers need to return to the nature of commercial investment.

At the same time, with the deepening of urbanization in recent years, a large number of property resources that have not realized commercial value have been released, which provides new opportunities for hotel investment. It is worth noting that even for the middle and high-end hotel market, there are still some problems, such as low degree of chain operation and low efficiency of asset operation. According to the industry statistics, among the more than 300000 medium and high-end hotels in China's hotel market, the degree of chain operation is less than 14%.

Therefore, driven by both sides of supply and demand, medium and high-end hotel products have entered the peak of investment. According to the aforementioned analysts, the investment in medium and high-end hotels has become an investment with both safety and quality, and "intermediate business opportunities" have emerged.

However, the medium and high-end hotels are also divided into vacation type and business travel type. Facing different demand groups, they determine the different business models of hotels.

Business experience of medium and high end hotels

Many people like to compare the "new crystal" with the original product. Cao Juan also emphasizes the difference of "huazhuhua" orange crystal.

Cao Juan told the 21st century economic reporter that "new crystal" hopes to expand and rapidly develop the brand on the basis of refining its original reputation“ Its original business model is not suitable for rapid expansion. "

Wu Hai, who founded orange crystal, is an experienced Hotel entrepreneur. However, looking back on the orange crystal in the Wu Hai era, the scale development of this hotel is always much slower than that of the competitors. When the scale of the hotels established by the entrepreneurial partners in the same period was more than 100, he had only a few; When there are thousands of others, he still has dozens; When others go to overseas capital markets to ring the bell, he is still thinking about how to design new products.

Wu Hai, a "hindsight and hindsight", finally launched the trusteeship franchise mode in 2015, introducing orange crystal into the road of high-speed expansion, but the time has been delayed“ We think the previous orange crystal has a distinct personality, but we want to be a product of the public and business travel. " Cao Juan told reporters of the 21st century economic report.

However, new crystal is not the only brand focusing on business travel. Similarly, Huazhu is not the only hotel group to seize the share of business travel.

Since 2020, the domestic hotel giants have been constantly "upgrading".

On August 4 last year, Puyin, a medium and high-end business hotel brand of first travel home inn group, landed in Shanghai; On August 6, Shanghai Aegean haiyaduo s Hotel announced its official opening and continued to build IP concept; Jinjiang Hotel Group's Vienna upgrade version 5.0, trying to speed up the replication of innovation modules. However, the business model of some hotel groups is also questioned. For example, Yaduo's business model of building online red hotel with IP also fell into the mood, which made it look a little "powerless" in terms of expansion speed.

With the same medium and high-end positioning, how can "new crystal" attract investment after tearing off the original "Design Hotel" label?

Cao Juan told the 21st century economic report that the cost of a single room of "new crystal" dropped from 200000 yuan to 160000 yuan, and instead of continuing the original design method of one store for one orange crystal hotel, it has developed several standard versions suitable for different property conditions and consumer markets. In addition, "new crystal" also continues the modular transformation mode of several other hotel brands of Huazhu, and the project period of the hotel is reduced to 5-6 months.

Cao Juan stressed that the performance price ratio of "new crystal" can be reflected not only in investment and cost, but also in pricing. "The room price is between 600 and 1200 yuan, hoping to achieve" five-star experience, four-star price, three-star cost. "

In Cao Juan's description, "new crystal" seems to have the advantages of business model to compete with other competitors. However, it can not be ignored that the new round of capital intervention indicates that the competition of middle and high-end hotel brands is bound to be cruel in the future.

According to the prospectus disclosed by Yaduo, which is listed in the U.S., Hillhead said it would subscribe at the IPO price and intend to subscribe for the $120 million ads of Yaduo group.

In recent years, Dongcheng hotel group, which continues to make efforts in the medium and high-end market, has recently launched IPO listing guidance.

In this context, Cao Juan told the 21st century economic reporter a number - in the next three years, "new crystal" will open 400 stores, "according to the current signing speed and current state, (this goal) should be no problem."

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