The budget hotels of China want to get more of the growing travel market and are pushing forward as quickly as possible. Incomes have risen and now more and more of the locals want to travel. In response, hotel owners have been keen to open more units.
Leading the way on expansion is Jinjiang Inn, a subsidiary of the Shanghai-based Jin Jiang Travel. By number of units this is the biggest hotel group in China and it plans to increase its total units from 118 at the end of last year to 180 by the end of this. That is some expansion.
Home Inn, which is currently the nation’s second largest group, also wants to get bigger. It says it wants to grow its number of outlets to 200 by the end of the year at which point it will become the biggest, by numbers, hotel group in China.
China’s first budget hotels, Jinjiang Inns, opened their doors in 1997 but the market did not really take off until 2004 with the arrival of a slew of new brands, including Hotel Home, Seven Days Inn, City Inn and Joy Inn.
According to the recently released 2006 China Budget Hotel Report by the China Hotel Association (CHA), at the end of last year there were close to 100 budget brands in the country and more than 1,000 hotels. Both figures were up 100% on 2005. That is amazing growth.
So is the area saturated?
The report suggests that it is far from it. It suggests that the budget hotel sector is still has a long way to go as it accounts for just 30% of the total hospitality market, which is dominated by international brands. Of the country’s current 1,000 hotels, some 40% of them are in East China, 19% in North China.
Dai Bin, director of the academic research office at Beijing International Studies University, said: ‘The growth momentum will continue for at least three years.’ Seems likely.
Budget hotels offer good returns on investment, as they are relatively cheap to set up and the payback period is much shorter than for larger operations. One authority said the average budget hotel costs about RMB7.3 million to set up and generally becomes profitable within three to five years. With saturation a long way off and returns like this you can expect many more budget hotels in the next five years.
Source: China Daily