December 9 –China Lodging trounced rival hotel chain Home Inns in the battle for three prime Merrylin Hotels' properties still in its stable after its sale of Motel 168. China Lodging acquired long-term leasing of the properties and is committing RMB100 million to renovate the three Merrylin hotels for rebranding under its mid-range JI Hotel brand.
Competition between the hotel group giants
The Merrylin Hotels' properties are located in the Pudong district and Wuzhong Road Shanghai.
“Merrylin Hotels invested in Motel 168 many years ago. When the hotel group put it up for sale, three major economy hotel groups contested for it. In the end, Home Inns beat China Lodging and Jinjiang Inns for it. But Merrylin Hotels still had three prime hotels each with around 300 rooms available,” an informed source said.
Home Inns admitted that they had been in contact with Merrylin Hotels over the Wuzhong Road properties but it declined to comment on the competition with China Lodging.
China Lodging vice president Jinhui Cai said they had originally planned to acquire these three properties but the cost of these centrally located properties were too high to deliver viable return on investment. Instead they decided to sign a 15-20 year long-term lease for the properties and will spend RMB100 million refurbishing them. The properties will be re-launched under its mid-range brand JI Hotels in Q2 of 2015.
Mid-range hotels gain popularity
The RevPAR of economy hotels has been shrinking due to rising costs and increasingly fierce competition extending the break-even period from three years to five years. The high-end hotel market has also been hard hit by the government’s anti-corruption measures such as the eight-clause provision. “Since last year a large number of high-end hotels have seen business results plummeting 50%," according to hotel consultancy Huamei Consulting's chief knowledge officer Huanyuan Zhao. He added that the high-end and economy hotel markets will gradually cool down under these conditions, prompting both sectors to explore the hitherto overlooked mid-range market in search of profits.
China Lodging's founder Qi Ji said the company is putting more emphasis on developing mid-range properties as many companies are tightening their travel expense budgets making mid-range hotels the main choice for business travelers.
Besides China Lodging, Jinjiang Inns has launched its mid-range brand Metropolo. Plateno Group, which owns the 7Days Inn economy hotels, has launched its own mid-range brands as well as partnered with Hilton Hotels Group to introduce the Hampton hotel brand to China. Many industry observers see the mid-range hotel market as the new battleground similar to the hard contested economy hotel sector of the past few years.(Translation by David)
