[photopress:Rising_prices.gif,full,alignright]The budget hotel industry is booming in China. It enjoys the market share of domestic clients who are more aware of their brands than they are of international hotels, it’s easier for them to rent properties from landlords for use as hotels and in total numbers of hotels across China, they far outrank their overseas competitors.
But the future may not always be so bright. Rising rental property prices may put pressure on the budget hotels just when they are trying to expand.
Mao Zhengrong from Everbright Securities commented on the chain Home Inn, which listed on Nasdaq in November this year, and is ranked No.2 out of China’s top 10 budget hotel chains:
‘Home Inn’s listing on Nasdaq solved its short-term capital bottleneck caused by high property rental costs. But the company needs to think more about sustainable development in the future, because once the rental period is due, it will face high rentals. This problem might occur in seven to eight years.’
‘In the east coast of China, it is better to have owned property rather than rented ones to develop the hotel business, since the rental price is so expensive and shows no sign of falling.’
Industry analysts have also suggested budget hotel chains in China may be affected by future mergers and acquistions in the hotel sector.
Source: Shanghai Daily