Introduction: During the three years of the epidemic, Huazhu's mid-range hotels have expanded the most ferociously.
01 The best of times
With strong winds and waves ahead, small and medium-sized hotels can only rely on their own strength to tide over the difficulties. And the giants are often the biggest winners.
Data shows that in 2019, the chain rate of China's hotel industry was 26%, and this figure will become 39% in 2022. At the same time, the total number of hotel outlets in China was 27 in 2020 and 2021, respectively90,000 and 2520,000, 83% and 75% respectively in 2019.
Behind the cold numbers, countless small and medium-sized hotels were forced to clear and failed to survive the long winter.
However, the leading hotel can use the financing power of the capital market to take the opportunity to "pick up the corpse" and expand the acquisition.
For example, Huazhu Group (HTHTo/1179.HK), which happened to be a secondary listing in Hong Kong in September 2020, when the epidemic had just been initially controlled, raised a net amount of 59$2.5 billion, of which approximately 40% was used for capital expenditure and expenditure.
Huazhu's cash flow position before the epidemic was not bad. At the end of 2019, Huazhu's cash and cash equivalents balance was as high as 1399.9 billion yuan. The good cash flow situation ensures that the company has sufficient working capital to maintain normal operation, and also makes the capital market more confident in the logic of the hotel.
What's more, a large number of small and medium-sized brands have been cleared in the past three years of the epidemic, and the hotel industry can recover quickly after the epidemic. The giants who copied the "big bottom" did not suffer for too long.
After the liquidation and reorganization, the pricing power of China's hotel market is controlled by giants, which is also the reason why everyone often complains about the high cost of hotels. In the core area of Shanghai, damp, dark and windowless hotels can be priced at more than 500 yuan a night, and many core cities even have hotels below 1,000 yuan a night during the New Year's Eve.
A monthly salary of 20,000 yuan may not be able to afford bread, but the rigid need of "experiential" consumption - travel must be in a hotel. Coupled with the "retaliatory" resumption of business travel activities in the first half of 2023, hotel giants have also made a lot of money in this wave.
For the full year of 2023, the comprehensive ADR (average daily room rate) of Huazhu China's hotels will be 299 yuan, an increase of 345%。Of these, the occupancy rate was 811%, although it is 33 percentage points, but the RevPAR (average rentable room revenue) was 242 yuan, an increase of 22 from 20194%。
In the first three quarters of last year, Huazhu Group achieved revenue of 1629.8 billion, significantly exceeding the 112 in 20191.2 billion; Achieved a net profit of 338.8 billion, nearly double the number in 2019.
Although the occupancy rate has not returned to pre-epidemic levels, the profitability of hotels has improved significantly thanks to the clearing of the industry and the control of pricing power by the leading companies.
02 Reverse upgrade
Before the start of the epidemic, Huazhu had already started the road of M&A expansion. The growth process of Huazhu has also changed China's hotel industry.
In the 80s of the last century, Chinese hotels ushered in a period of development. After the reform and opening up, China's economy is thriving, but due to the lack of supply, the rapidly expanding economy hotels have well met people's increasing travel needs.
Since then, the market has gone from undersupply to oversupply, Chinese consumers have become more affluent, and budget hotels have said goodbye to the period of rapid expansion. Instead, the proportion of mid-range hotels continues to increase, and consumer demand has gradually shifted from "having a room" to pursuing quality and experience.
In 2013, Ji Qi, the founder of Huazhu Group, said that if there is anything big in China's hotel industry in the next decade, it will happen in mid-range hotels. Mid-range hotels have the advantages of cost-effective properties that high-star hotels do not have, and at the same time have the advantages of product quality and brand identity that are superior to those of economic hotels, which can meet consumers' dual needs for high quality and high cost performance.
Against this backdrop, Hua lived in 2017 to 36500 million acquired the entire equity of Orange Crystal, and paid 4600 million acquired 712% stake, in 2019 for 700 million euros to acquire the entire equity of Deutsche Hotel, opening the road to international development.
The trend of mid-range hotels replacing budget hotels has clearly accelerated during the pandemic.
Taking Huazhu as an example, the total number of hotels has increased from 5,618 in 2019 to 9,394 in 2023, of which mid-range hotels have grown the fastest, from 2,133 to 4,247, accounting for 3797% to 4521%；The growth rate of budget hotels has slowed down significantly, with the number of hotels increasing from 3,485 in 2019 to 4,984 in 2023, accounting for 6203% to 5306%。
In terms of the number of rooms, the total number of rooms in Huazhu increased from 65 in 2020220,000 units increased to 91 in 2023240,000 rooms, of which the mid-range rooms grew faster, from 2910,000 units grew to 47810,000 rooms, accounting for 4458% to 5204%；The number of budget rooms grew relatively slowly, from 36140,000 units grew to 40770,000 rooms, accounting for 5542% dropped to 4468%。
Of course, peers have chosen a similar style of play.
Jin Jiang Hotel, which is also in the hotel industry, has undergone a wave of upgrades. In 2015, Jin Jiang acquired Louvre, and in 2016, it acquired an 80% stake in Vienna. Radisson Blu acquired in 2018; In 2020, Jin Jiang and Hilton renewed their agreement to continue to grow Hampton by Hilton. From 2019 to 2023, the number of mid-range hotels and the proportion of mid-range rooms in Jin Jiang have increased to 5757% and 6612%。
However, in the past three years of the epidemic, Huazhu's mid-range hotel expansion has been the most ferocious.
03 The mid-range is king
Why did Huazhu choose to expand into mid-range hotels? In today's more cost-effective world, why aren't low-end hotels more popular with hotel leaders?
The answer is that the occupancy rate of the two is almost the same as the shrinking scale of existing demand. However, the sensitivity of the mid-range hotel customer group is lower than that of the low-end hotel, which makes it more achievable for the former to stabilize or even increase the price. After all, many mid-range hotel customers belong to B-end customers, and business trips are just needed.
In terms of occupancy rate, the occupancy rate of Huazhu Economy Hotel was 82 last year5%, and the occupancy rate of mid-range hotels is 814%, the difference between the two is not large.
However, in terms of the average daily room rate that can confirm the market demand, mid-range hotels are significantly better than budget hotels. Last year, the average daily room rate of Huazhu economy hotels was 180 yuan, while the average daily room rate of mid-range hotels reached 304 yuan.
Multiplying the average daily rate by the occupancy rate gives the average rentable room revenue, which is 129 yuan for Huazhu economy hotels and 198 yuan for the mid-range.
Exquisite decoration style and creating a comfortable living scene can bring attractiveness to occupancy, but this requires investment at the level of fixed assets.
How to give people a "value-for-money" experience, so as to better achieve premium and repurchase, is also an "asset-light" metaphysics - it may be more respectful of human service details, material furnishings, or even a book, a bouquet of flowers, and a set of tea sets in the room.
And it all depends on the hotel's operational capabilities.
Huazhu launched the whole season of 5The 0 version pays more attention to the construction of artistic conception from the lines, and achieves the effect of "inexpensive and inexpensive, and the atmosphere is in place".
For example, the lobby image welcomes guests and sets the tone.
Oriental aesthetic symbols, represented by pavilions, wisteria flowers and Taihu stones, are in harmony with Chinese minimalist furniture, but are only reflected on the background wall of the tea table.
Toiletries are also a large package that the hotel's "wool party" can't get, saving costs.
In general, budget hotels have lower profit margins, around 8% to 15%, and mid-range hotels have profit margins between 15% and 25%. If calculated according to the profit margin of 11% for economy hotels and 20% for mid-range hotels, it means that Huazhu makes a net profit of 14 for every day of rental of economy hotels19 yuan, while every day you rent out a mid-range hotel earns 396 yuan, the latter is 2 of the former8 times, which is why Huazhu has always wanted to increase the proportion of mid-range hotels.
In addition, there is another advantage of vigorously developing mid-range hotels, which is that it can attract more franchisees through brand effect. As of the end of last year, 4,017 of the 4,295 mid-range hotels were franchisees, which shows the brand influence of Huazhu's mid-range hotels.
From this point of view, the essence of the expansion of Huazhu mid-range hotels is to spend small money, do big things, and use limited costs to win higher returns. Between the sizes of the stock competition, a world has been vacated.
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