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Rapid Expansion of Budget Hotels
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On the back of positive predictions about the continued growth of the Chinese tourist market, the country has become increasingly interesting to budget hotel brands from home and abroad who’ve accelerated their plans for expansion in the country in recent years.


On August 22, Shanghai-based Jinjiang Inn, one of main domestic budget hotel players, disclosed that its first overseas hotel would probably be in St. Petersburg, Russia with progress on the deal expected next year. If their plans go ahead as scheduled, it’ll be the first for a Chinese budget hotel group to venture into overseas markets.


In recent years many domestic budget hotel brands like Jinjiang Inn, Home Inn and Motel168 have expanded rapidly. The competition between the two big players Jinjiang and Home is regarded as being fierce.  


Jinjiang Inn is a subsidiary of local hotel giant, the Jinjiang Group. It now has 139 outlets, according to information released by them on August 26. Their rapid expansion is much quicker than their strategy announcement two years ago. Then they discussed plans to open 200 hotels in 3 to 5 years.


Another domestic budget brand, Home Inn, disclosed this month that it has 150-plus hotels in total with a presence in over 40 Chinese cities. Founded in June 2002, Home Inn owns the largest number of hotels among domestic budget hotel brands. 


Home Inn is being jointly developed by and the Capital Tourism Group. is China's biggest online travel agency. Home Inn says it plans to have a total of 180 hotels by the end of this year.


The two brands are both said to have plans to take the IPO route to access funding for their expansion plans, an industry insider observed. Home Inn is seeking to go public through NASDAQ while Jinjiang Inn is expected to take the Hong Kong route.


Motel 168 has also expanded its network and now has 39 hotels. But domestic brands are not the only players in the field keen to grow. The Chinese market is also attracting the attention of foreign hotel groups.


On August 29, the Super 8 franchise, the budget brand of the US-based Cendant Hotel Group, arrived in Xiamen, a coastal city in south China’s Fujian Province. Their Xiamen hotel is their 42nd in China. At present they’ve established a network of hotels in 24 Chinese cities.


Another international hotel giant, Accor, currently operates four Ibis budget hotels in China. They plan to increase their network to 50 by the end of 2008 with an investment of US$250 million, said Brian Deeson, Accor's CEO (Greater China) in June.


But as more budget hotels expand, risks are also emerging. At the Fuzimiao (Confucius Temple) , a wonderfully scenic area in east China’s Nanjing City, 50 budget hotels have gone into operation from last year alone.  


Competition between these hotels also exists in some secondary cities. In Zhenzhou, capital of central China’s Henan Province, two dozen budget hotels have opened in the last 15 months. Some hotel operators have complained that income can’t offset the increased running expenses after becoming part of a hotel chain brand. 


( by Wang Zhiyong, August 10, 2006)

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