Development of Budget Hotels
At first glance, the budget hotel sector1
looks
promising over the long term. It offers a
reliable value proposition: a clean, dependable,
inexpensive place to stay for business people and
tourists. These hotels offer better facilities than
most one to two star hotels or guesthouses in
many cities and districts where previously the
economy hotel experience could best be described
as uncomfortable –all at a similar price level.
There is also the potential to attract three-star
hotel guests, as facilities are very similar and
budget hotel prices are often better value for
money. As a result, guests are likely to trade up
to or switch to budget hotels. Because of the
world economic turmoil of 2008 –2009, there
are reports that some guests of four to five star
hotels are trading down to budget hotels in order
to cut their potential travel budgets (Exhibit 1). In
addition, the number of business travellers, the
main target group for budget hotels, is forecast to
resume growing.
Occupancy rates, at an average of 82% for 2007,
were also higher than other hotel categories.
In 2008, at the beginning of the economic
slowdown, the leading player, Home Inns & Hotel
Management, reported an average occupancy
rate of 85%, compared with 91.1% in 2007. 2
In a sign that the worst of the global slowdown
may be over for the Chinese budget hotel sector,
occupancy for Home Inns was 92.4% for the
Second Quarter of 2009, compared to 88.2% for
the same period in 2008, and to 82.6% in the
First Quarter of 2009 (Exhibit 2). 3 Budget hotel
chains feel more and more confident, the large
ones –Home Inn, Hanting, 7 Days, Greentree
Inn, and Motel 168 –have announced aggressive
expansion plans in adding over a hundred hotels
each in 2009, split between direct-operated and
franchise hotels.
The long-term industry
looks
promising over the long term. It offers a
reliable value proposition: a clean, dependable,
inexpensive place to stay for business people and
tourists. These hotels offer better facilities than
most one to two star hotels or guesthouses in
many cities and districts where previously the
economy hotel experience could best be described
as uncomfortable –all at a similar price level.
There is also the potential to attract three-star
hotel guests, as facilities are very similar and
budget hotel prices are often better value for
money. As a result, guests are likely to trade up
to or switch to budget hotels. Because of the
world economic turmoil of 2008 –2009, there
are reports that some guests of four to five star
hotels are trading down to budget hotels in order
to cut their potential travel budgets (Exhibit 1). In
addition, the number of business travellers, the
main target group for budget hotels, is forecast to
resume growing.
Occupancy rates, at an average of 82% for 2007,
were also higher than other hotel categories.
In 2008, at the beginning of the economic
slowdown, the leading player, Home Inns & Hotel
Management, reported an average occupancy
rate of 85%, compared with 91.1% in 2007. 2
In a sign that the worst of the global slowdown
may be over for the Chinese budget hotel sector,
occupancy for Home Inns was 92.4% for the
Second Quarter of 2009, compared to 88.2% for
the same period in 2008, and to 82.6% in the
First Quarter of 2009 (Exhibit 2). 3 Budget hotel
chains feel more and more confident, the large
ones –Home Inn, Hanting, 7 Days, Greentree
Inn, and Motel 168 –have announced aggressive
expansion plans in adding over a hundred hotels
each in 2009, split between direct-operated and
franchise hotels.
The long-term industry