Budget hotel brands change tack to meet rising demand

Chinese budget hotel groups saw satisfying growth in the first half of the year, as they continue to build higher-end hotels or upgrade existing brands to attract customers seeking premium accommodation options.

Budget hotels not only face challenges from more expensive competitors, but also from bed-and-breakfast lodgings and short-term rentals, which have a price advantage and offer more distinctive experiences.

BTG Homeinns Hotel Group, owned by Beijing Tourism Group, is upgrading its budget Homeinns hotel chain to Homeinns NEO. It also recently launched new mid-end hotel brands such as Yunik Hotel.

The group plans to have about 700 to 800 mid-end and high-end hotels in its portfolio by the end of the year. Sales revenue from those hotels is predicted to represent more than 30 percent of the group's total revenue, the company said.

In the first six months, BTG Homeinns' hotel business netted sales revenue of 410 million yuan ($59.92 million), up 36.1 percent year-on-year. Net profits reached 340 million yuan in the period, expanding 41.23 percent year-on-year, according to its earnings report.

Huazhu Hotels Group Ltd, which owns and operates more than 3,000 properties nationwide, saw mid-end and high-end hotels make up for 65 percent of its newly opened hotels nationwide in the first half this year.

It has launched flagship hotels for some of its existing brands, including Joya Hotels and Mercure Hotels. The newly built hotels are located in the core areas of major cities.

Shanghai Jin Jiang International Hotel Group Co Ltd, one of the largest listed hotel groups in China, saw the proportion of its mid-end hotels in its portfolio rise from 24.86 percent at the end of last year to 28.22 percent in June, a total of 1,985 hotels.

In the first half year, Jin Jiang achieved sales revenue of 6.94 billion yuan, up 10.34 percent year-on-year. Its net profits reached 503 million yuan, up 22.05 percent year-on-year, according to its earnings report.

"Leading Chinese hotel groups have set up diversified product systems that span from low-end to high-end. This will be an inescapable trend, and the sector is expected to speed up its integration," said Mei Xin, an analyst at Huatai Securities, according to the 21st Century Business Herald.

"The consumption upgrade trend in the country has fueled the growth of the mid-end hotel market. In the next few years, mid-end and higher-end hotels should establish distinguished brand images and strengthen customer loyalty via differentiation strategies, instead of merely satisfying the traditional and standardized demand of business travel," Mei said.