China's economy hotel brands are set for a rapid expansion this year with huge business potential, but a related issue is the urgent need to ensure order in the market between rivals, industry watchers said Sunday.
The Nasdaq-listed Home Inns & Hotels Management Inc announced Friday that it planned to open a record 260 to 280 new hotels in 2011, of which 100 to 110 will be leased-and-operated hotels, and 160 to 170 will be franchised-and-managed units, according to an announcement on its website.
Home Inn is the largest economy hotel in China.
The target is to take the total number of Home Inns' hotels to 1,100 this year.
"Throughout the recovery from the recent economic slowdown, we have rebuilt a strong development team and implemented effective development strategies," David Sun, CEO of Home Inns commented on its website. "We believe Home Inns, is well positioned to invest in the future and achieve sustainable long-term growth."
Another Nasdaq-listed domestic company, China Lodging Group Limited, announced January 4 that it planned to operate and manage more than 1,000 hotels in 100 cities by 2013. The 7 Days Group Holdings, listed on the New York Stock Exchange, has already opened more than 500 budget hotels in China. It plans to open at least 240 stores more this year, China Business News reported.
An industry watcher said that due to the huge market potential, Chinese economy hotel brands expanded much faster than some foreign budget hotel brands including Super 8, which is affiliated to Wyndham Hotel Group.
"The demand for budget hotels in China is very large, and there is room for further growth," Zhao Huanyan, chief consultant of SAO Hotel Solution Consulting, told the Global Times Sunday. "Each operator tries to occupy as much market share as possible," Zhao said.
According to a report filed with CIC industry research center, more than 80 percent of businessmen from small- and medium-sized companies and officials of public functionaries choose budget hotels during their business trips.
However, serious competition has also given rise to practices such as price wars in the hotel market, said Zhao. He cited a typical instance: "Two brands, in their competition to rent a property to manage their own brand hotels, were directly responsible for the rental rate soaring from 0.7 yuan ($0.11) per square meter per day to 2 yuan ($0.30)."
"Such a trend will put too much pressure on the hotels," said Zhao.
"The solution is for the hotels to set up an association among themselves to coordi-nate market demand and rates in a healthy manner," Zhao added.
