[photopress:hotels_hime_inns_1.JPG,full,alignright]Early this year Home Inns, a leader economy hotels in China, announced it had 26 chain hotels for RMB340 million from Shanghai Top Star. So far, it is the biggest example of merger and acquisition within China’s sector of economy hotels.
Economy chain hotels are in an era of brand integration in which purchases, mergers and acquisitions wiill become the rule rather than the exception.
As shown in the 2007 Annual Report on China’s Economic Hotel Industry, which was issued by the ministry of Commerce and the China Hotel Association, by the end of 2006, there were nearly 100 economic hotel chain brands in the market for China’s lodging industry and over 1,000 hotels with over 100,000 rooms had been set up.
In the coming few years, the result of competition is likely to be that a large number of minor brands will be merged and acquired by several major brands like Home Inns, Holiday Inn, Star of Jinjiang Group, and Super 8.
As shown in the report, the occupancy rate for economic hotels in China has fallen by nearly 7 percentage points from the annual average of 89% in 2005 to the annual average of 82.4% in 2006.
In the meantime, the average guest room price decreased from RMB328 in 2005 to RMB209.
On the other hand, the property management costs for economic hotels increased by 40% in 2007 in comparison with those in 2006.
These are the problems. Consolidation of brands is possibly the solution.
Source: China Economic Net