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Hotels: Competition drives greater innovation

Brands focus on expansion and experience


Despite intense competition from both local and multinational brands, the hotels category continued to rise steadily in value, expanding 13 percent after recent annual increases of 8 percent and 11 percent. One hotel brand dropped from the ranking, or the value rise would have been greater.


The two remaining brands, Home Inn and Hanting, rose 46 percent and 50 percent, respectively. Both brands primarily serve the budget market with a consistent standard of comfort and service at an affordable price, for both leisure and business travelers.


Home Inn operated slightly more locations, 2,385, but both brands have grown quickly and enjoy above average brand awareness in the budget hotel sector. Hanting has expanded somewhat more aggressively, ending 2017 with 78 percent more locations that it had only four years earlier. And the brand has remodeled many of its locations and introduced a redesigned logo.


These leading Chinese hotel brands are expanding aggressively while facing increasing pressure from multinationals. Until recently, the Chinese market was more neatly bifurcated. The multinationals focused mostly the middle- and upper-end hotel market in major cities, and the Chinese brands rapidly opened budget locations throughout China.


Today, the global brands are expanding their footprint throughout China, in the middle and budget segments of the market. At the same time, government discouragement of extravagance has impacted high-end accommodations; business travel has slowed; and sharing economy options, like Airbnb, have added competition.


The middle and budget Chinese brand hotels, which had grown business through rapid expansion, are shifting attention to enhancing their existing locations with improved guest services. These initiatives correspond with the premiumization trend that crosses many categories. Some Chinese brands are adding more personalized services. Others are collaborating with decorator brands that furnish the hotel rooms. In some instances, the hotel guest can scan a code and purchase an item.


In another response to heightened competition, some budget hotels began repurposing their existing room inventory as office space. Home Inn planned a joint venture with UrWork, a shared office space provider, to launch office space locations. To trial the idea, the brands plan to begin with 50 hotel renovations in six cities: Beijing, Shanghai, Wuhan, Xi’an, Chengdu, and Qingdao.