ChinaTravelNews – The “CEO Chat” event on May 13 in the 2015 China Hotel Marketing Conference in Shanghai, jointly organized by TravelDaily China and PhocusWright, was undoubtedly the most dynamic dialogue in China’s hotel industry this year.
The four major CEOs in China’s hotel industry – Huazhu Hotels’s Qi Ji, Jin Jiang Hotels’s Xiaoqiang Zhang, Plateno Group’s Alex Zheng and HKCTS’s Wu Sun – squared off in a rare and candid discussion and the result was a veritable goldmine of knowledge.
Below are some excerpts from the exchange:
On the recent fracas between hotels and OTAs over pricing
Host: Are you concerned with recent activities in the industry? There has been plenty of actions from OTAs…
Huazhu Hotels CEO Qi Ji: I’m upbeat myself. You know Ctrip just made a mistake (with the disruption) and we helped them correct it. Any OTA that lists a lower price than that on our official website will get cut off. But the sooner they correct the situation the sooner we’ll reinstate them. We resumed supply to Ctrip the same day (after they corrected prices) but we still haven’t done that for Qunar yet.
Jin Jiang Hotels CEO Xiaoqiang Zhang: Although we’ve improved our official website in the last few years, it is obvious we still rely on OTAs. We really have a love-hate relationship with OTAs. I totally agree with Mr. Ji’s way of handling the incidents such as those we had prior to the last May Day holiday. It makes complete sense to me!
About Ctrip and Qunar’s rumored merger
Huazhu Hotels CEO Qi Ji: Huazhu Hotels and Accor’s partnership was a very important move for us. In fact even more partnerships are needed in the OTA and hotel industries. If all OTAs merged into one company, they would be unshakable. Of course we hope for orderly competition, but in the case that things go wrong we’d rather deal with a unified competitor. Unified leadership would be better for everybody regardless if Alibaba or Ctrip took the reins, as there would be less disruption and better negotiations with a single company.
The same goes for hotel groups. If growth slows, our share price will drop. So how do we solve this dilemma? Well, Mr. Zheng and Mr. Sun, why don’t we three get together and have a talk with Ctrip? We can offer Ctrip a choice of adhering to our demands or getting cut off altogether. Our groups also have multiple groups of shareholders including Americans, Israelis, Africans and Chinese, so we can’t say they are only our companies but rather multi-faceted groups.
I think we’re much more united with more M&As in the hotel industry (than OTAs) and so no single company tries to beat out rivals with low prices and cash-back schemes. That's why(Ctrip’s CEO) James Liang’s proposition to strips bare prices is impossible in our situation. What would we strip anyway?
How does the economy affect the hotel industry?
Jin Jiang Hotels CEO Xiaoqiang Zhang: Our consumer price index has risen by one point now while our producer price index has fallen four points to a 20-year low. But at same time the bullish stock market these days just proves that sometimes there is a counter-intuitive economic effect in certain markets. I think the economic downturn of the last two years will have a huge effect on the hotel industry.
In my opinion, even when the economy isn’t good, a lot of people will still choose to eat out and also choose leisure travel. So while supply is increasing in the hotel market, demand is also increasing.
Commenting on their first quarter results
Huazhu Hotels CEO Qi Ji: All our hotel brands had the most miserable performance this first quarter and we have been recording Q1 losses for the last couple of years. In market terms, there are usually losses taken in the first quarter so we’re quite used to that. Although we haven’t gotten the results in for our first quarter, I’m sure we did better than Homeinns, but only just.
What about Airbnb?
Plateno Hotels Alex Zheng: I tried it before and I definitely won’t be using it again. But it’s not bad at all, in fact it does a good job of targeting specific customers and it will likely have a certain effect on the industry. When it comes down to it, there will be proponents and opponents of Airbnb, as with any service.
Jin Jiang Hotels CEO Xiaoqiang Zhang: I think Airbnb won’t be able to make a strong challenge against the traditional hotel industry. In fact they will have to take on their own risks. I see Airbnb’s risks in the areas of false information, safety and policy as limiting them. As such, I’m not optimistic about C2C rental services and consider B2C rentals like Tujia more of a threat to hotels if they get ahold of heavy assets.
Getting the basics right
Huazhu Hotels CEO Qi Ji: The very basic rule of thumbs for any hotel is making a great product with excellent service while keeping costs low and always reselling at a lower rate. If a hotel follows these core rules it will retain customers regardless of the brand. So there’s really no use in constantly going on about high growth, international branding, domestic branding and so forth. (Translation by David)
(Report by Xianhao Zeng)