Huaju Jiqi believes that the history of a budget hotel from the beginning to the present, nearly 15 years, is not rigid, static, it is time to change and innovate.
After a decade of crazy staking in China's budget hotels, the drawbacks have gradually become prominent. The backlog between the budget hotel group and the franchisees has been ignited by the slowdown in economic growth and the fierce market competition environment. As the leading brand in the chain hotel industry, China Life is currently the only hotel group that adheres to the Nasdaq. The "ghosts and hatreds" between them and the franchisees have attracted much attention.
On June 7, Huazhuo announced the "Notice on the Adjustment of China Connected Hotel Group's Related Franchise Fees"; the notice showed that China Lodging Group will waive the financial supervision consulting fees of franchisees and adjust the profit distribution of membership card sales. Proportion and cancellation of the assessment, while the lower than a certain RevPAR line of the store to carry out phased fee reduction support. In addition, the adjustment plan for the store manager's expenses and the stored-value card settlement will be expedited.
On June 28th, Ji Qi, Chairman of China Living Hotel Group, exclusively published the “Towards Business Book†through Global Travel News. Ji Qi deeply reflected on the development history of China's budget hotels and the existing problems in the current situation. The detailed solution also explores where the future of budget hotels is and how they will continue to survive.
Ji Qi, Chairman of China Living Hotel Group
Ji Qi believes that the history of a budget hotel from the beginning to the present, nearly 15 years, is not rigid, static, it is time to change and innovate.
The following is the full text of the "To the franchisees" by Ji Qi, the chairman of China Lodging Group:
China Budget Hotel Review
In 2002, China's hotel industry was in a state of polarization. Either a high-star, luxury hotel based on foreign brands, mainly in first-tier cities, with good location, beautiful architecture, complete services and facilities, but the price is very high, and ordinary people cannot afford it. In the first, second and third tier cities, there are so-called “star-rated hotels†that are classified into star-rated systems. The service is good, but the prices are equally high, and SMEs are often discouraged.
Then there are a variety of small hotels similar to the guest house, which are cheap, but the sanitary conditions are very poor and the service is uneven.
Thanks to all the opportunities, we started to pay attention to budget hotels. At that time, there were Jinjiang Star and Xinya Star. After carefully studying the hotel system at the time, especially the Jinjiang Star system, we started the journey of China's economy hotel industry.
In the business model, the introduction of venture capital, the introduction of entrepreneurs and team equity, option incentives, and listing as a phased goal to complete the exit needs of investors and entrepreneurial teams.
In the design of the model, modern chain and management tools such as limited services, real-priced sales, membership systems, central reservations, balanced scorecards, and autonomous PMS are all in full.
At the beginning, it was mainly based on direct sales. After several years, it began to join the development. However, in view of the fact that most of the franchisees did not have enough experience in managing hotels, we implemented management joining, rather than the popular licensing model in Europe and America.
The layout at the beginning was mainly in cities such as Shanghai and Beijing, followed by the Yangtze River Delta.
All kinds of coincidences, Zheng Nanyan's 7 days, my founding home, Hanting, formed three economical hotel groups based on Ctrip. In order to seize the market, in order to win the love of the capital market, all of us have adopted private equity financing and listing as a phased goal. After the initial operation, we started to join the expansion; from the first and second tier cities, gradually to the third and fourth lines. Urban expansion; gradually expanding from the developed coastal areas to the central and western regions. The three companies are also listed on the US market, becoming an emerging force in the rise of China's hotel industry.
The original Jinjiang Star merged with Xinya Star, ibis is also actively developing in China, and GreenTree Inn and Super 8 share some markets in a licensed way. Some local brands have gradually declined and are gradually marginalized.
The pure franchise model of GreenTree Inn and Super 8 is mainly distributed in the low-line market; Jinjiang Star and ibis are of high cost and good quality, but the development speed is slow and the market share is very low. It should be said that the economy hotel development cannot be fully enjoyed. Bonus.
Every stage, every period, there is always a business model suitable for the rhythm of that era, too slow to do, too Low, not too fast, too fast, too high, of course not appropriate. It should be said that the three Ctrip-based companies have driven the development of the entire Chinese hotel industry, injecting an open and innovative atmosphere for the conservative and experienced traditional hotel industry.
In addition to being recognized by investors and the capital market, it has also won the love and love of the vast number of consumers. In addition to the high-end hotels and guest houses, there is a choice of chain brands that are both affordable and reliable. Several scales have rapidly expanded to thousands of stores, distributed in hundreds of cities, covering most prefecture-level cities, many idle properties have found ways to use efficiently, and many dilapidated old hotels have revived and solved hundreds of thousands. The employment of grassroots workers has reached the order of several billion yuan in taxation, and thousands of franchisees have found their own business and invested a better life through investment chain hotels.
Negative list
However, with the expansion of the scale, the increase of speed, the extension of the region, and the emergence of some problems in the development of budget hotels. The most influential are the "towel door", the small card, the "and the door", the "joining door" and so on.
The towel door refers to an unannounced visit by a reporter. The room attendants of some hotel chains use a towel to wipe the toilet and wipe the cup. Once reported, public opinion is in vain.
The small card is a small yellow card in the door, usually a bar, a heterosexual massage or a door-to-door service. In order to control small cards, to do ladders, block the door, and add security, the hotel has little effect, and because of the conflict, it hurts the hotel staff.
"He and Tuen Mun" is the cause of concern to the people of the whole country. Even the CCTV reported that the female guests were beaten in Beijing and Beijing. It is actually related to the small cards that sell pornography. The government cares, public opinion supervision, public security attaches importance, and the small card will converge a lot.
The "joining door" was mainly dissatisfied with the group protests against the brand companies by the franchisees. The first was 7 days, then the home, and the Chinese livelihood was not spared.
After more than a decade of development, the economic chain has many problems. I also prepared a special article to sort out the current ills and possible solutions. However, isn't the brand hotel chain as undone as some franchisees say? Is it by relying on deception and exploiting franchisees to fatten themselves? ... Obviously, I can't agree with these one-sided views and accusations.
As one of the pioneers of this industry, I am the chairman of one of the representative hotels of China's budget hotels. I still want to talk about some of my own views in order to argue black and white.
Because I am a stakeholder, some opinions may be biased, please correct me.
Original cause
There are several reasons why this happens:
First, the national macroeconomic slowdown has affected many industries.
While fighting corruption against irrational consumption, it has also reduced many official consumption; changing the growth model has caused many bubble-type and resource-based industries, such as real estate, usury, coal mines, and oil, to fall sharply; supply-side reforms actually It is a process of going to stock, and many excess capacity is not sold and there is no growth.
The Chinese economy needs such adjustment and rectification too! The stimuli and the bubble will only delay the problem, making the accumulated problems and risks more and more serious. The high-level holding the determination and attitude of the strong man to break the wrist and cure the bones to complete this big economic adjustment, we should also hold The same psychological preparation.
The economic slowdown, the sharp drop in investment, and the de-capacity have directly affected the hotel business, especially in the 3rd, 4th and 5th tier cities. These cities have a small population, a single industrial structure, and the macroeconomic impact is particularly distinctive in these “shallow†cities.
Second, the supply of homogenization has surged.
Since the three major economic chain brands are listed in the United States, everyone is indeed more than speed, specific scale, specific coverage, performance, and stock price. So everyone chasing me, and they have opened stores in the 1 2, 3, 5 line city. At the beginning, each of the basics was still a direct-operated store. After the franchise was released, the enthusiasm for joining was very high. Many investors have seen the good return on investment of our budget hotels and have joined the business of starting a budget hotel.
Although the three have great differences in quality, management and performance, they all belong to the category of budget hotels. In addition, other brands are also desperately catching up, including GreenTree Inn, Super Eight, City Convenience, and Shangkeyou. Even the conservative Jinjiang Star has accelerated the pace of development and sprinted to Qiandian.
These homogeneous and similar hotels are opened in first-tier cities such as Shanghai and Beijing. Due to the large scale of the city, the large population, and the comprehensive industrial structure, the performance is basically good. However, these first-tier cities have high rents and difficult property acquisitions, but it is not easy to open stores, so everyone is easy to find the 2, 3, and 4 cities in the city to open stores. When there were only one or two chain brands in the beginning, everyone's business was good. RevPAR can do 170, 180, and low is about 150. If the rent is around, the return is quite good. However, when there are more than a dozen chain brands in this county or prefecture-level city, the diversion will be more powerful, and everyone's business will decline. Whether it is the same brand or a different brand, the role of the diversion is basically the same. If the economic situation is good, it will not be tight; under the "supply side reform", it will undoubtedly worsen. Among the various economic chain hotel brands, many of the 3rd and 4th tier cities have RevPAR below 100; although the proportion of stores like Chinatown is lower than other brands, it cannot be ignored.
Third, the product is seriously damaged and the quality is degraded.
Due to the low cost of budget hotels, the materials are generally graded, and most of them are renovation projects. Standardization and consistency are difficult. The addition of franchisees has made the difference in construction management and material procurement. At the time of rapid development, many budget hotels were rushed to the ground and were shoddy. Although the brand companies have acceptance criteria, they can't be seen when they are newly renovated. However, after a period of operation, various quality problems emerge one after another. Moreover, budget hotels rely mainly on high occupancy rates to raise their income levels. The frequency of use of guests is high. If maintenance and repairs are not carried out in time, the quality of products will drop very quickly.
In those shops with bad business, the franchisees have insufficient motivation and ability to invest in maintenance costs, making these stores often the most problematic product quality problems. Various problems such as broken homes, water seepage in the bathroom, mold, blackening of the cloth, and noise frequently occur.
Ten years ago, everyone focused on price/performance and was sensitive to price. In recent years, with the development of material life, the trend of consumption upgrading is very obvious, and customers pay more attention to product quality than price sensitivity. These dilapidated products can't be accepted even in the era of cost-effectiveness in the past, not to mention the current era of ruthlessness!
Fourth, high-speed development, talents can not keep up.
At the beginning of this business model, I have recognized the challenge of talent issues. The first hotel training college in the industry to train management talents for chain stores. It should be said that this measure has helped solve the problem of the manager of many hotel chains. At the same time, we have been promoting the practice of reducing the qualifications of hotel general managers. Try to reduce the management complexity at the hotel level, such as front-end automation, marketing membership, and catering simplification. This will enable a large number of senior staff, after a period of storefront practice and training, coupled with intensive training of the store manager class, can basically be qualified as a store hotel manager.
But good design and aspirations are not necessarily unified with reality. The development of ultra-high speed is not only the training of the store manager, but also the recruitment and training of the basic staff. In recent years, labor costs have risen rapidly. The most important thing is that the recognition of labor intensity and management style after 80 and 90 is very different from that after 70 and 60. It is not easy to recruit, train, and retain. Hotel room attendants have long been absent, and the front desk attendant turnover rate remains high. This situation has caused the hotel's service quality to drop a lot, whether it is room hygiene or front desk service efficiency, often unsatisfactory. Under such circumstances, Huatuo's innovative initiatives such as zero-second check-out and self-check-in are trying to alleviate these difficulties.
Among them, the most important is the store manager. Most of Huasheng’s store grows up from the grassroots level, understands the store, and is familiar with corporate values, but dealing with complex and complex business issues may not be sophisticated, such as government public relations, revenue management, thorny employees, and fortress stores. Very few store managers will also violate the values ​​of China Living, and even violate the law, eat and hold buckles, arrogant, bully employees, bully franchisees. Just like taking a towel to wipe a toilet is just the same for a few employees, such a store is also very few. We have misunderstood and misconducted mistakes. We found one case, handled one case, and established a blacklist system internally. There is no room for tolerance and ambiguity about values. Different minds, no difference. If we break the law, we will never tolerate it and transfer it to the judicial process.
solution
How to solve various problems in budget hotels?
First, strengthen communication
Some franchisees adopt positive communication methods, make comments, make suggestions, and find ways together. What impressed me the most is that there is a franchisee in Hangzhou, which is clear and reasonable, and each one has a proposal! However, there are still many franchisees who report that there is a problem and do not know how to communicate; after talking with the franchise department, it is sinking into the sea, or delaying shoving.
In the past few years, the progress of the franchisees has been less. The time for our executives to actively communicate with the franchisees is too small. Even some of our departments and personnel are contaminated with bureaucratic habits.
The solution to the problem is to strengthen communication and ensure the smooth flow of channels. This time, some franchisees proposed to form a business association committee (referred to as the industry committee), which should be one of the effective ways to strengthen communication. At the level of China, from the CEO to the regional total, from development to stores, from the franchise to the operations department, we must establish a daily routine communication mechanism to serve the franchisees.
This time, I met with the CEO of China Life, Zhang Min, the 10 most difficult franchisees. Every year, I also invite excellent franchisees to Europe, plus the annual franchisee conference - China World Congress. This kind of communication and communication guarantees my participation and attention to some of the most important affiliations. Managers at all levels of Huaju should also establish a similar communication system to ensure that they can hear the most vivid and authentic voices on the front line.
Second, reasonable distribution
For the already signed stores, even if they are not reasonable, they must share the same, and expect to gradually digest a large amount of homogenized stocks.
In fact, there are great regional differences in the development of China's economy. Many emerging cities, tourist cities, new development zones, and industrial zones all require economic chain entry. Of course, the choice of location and the control of the volume of these areas is very important, but it is better than opening a shop in a low-water city with a shallow water.
In first-tier cities, such as Shanghai, Beijing, Shenzhen, etc., it is not a question of how many stores are, but whether they can open a hotel. The high rents and competitive formats make the replacement cost of first-line leases high. However, emerging areas such as Shanghai's Disneyland and Beijing's Tongzhou still have a lot of potential.
According to our existing big data, we can give the whole year's store planning and layout suggestions (note that it is “recommendationâ€, not a guarantee of return on investment, we will not bear the responsibility for unsuccessful investment), we can Sharing information to regional franchisees also allows them to target and reduce the probability of blind shop opening. For franchise requests that are not in our plan, we can only decline.
We also hope that our peers will return to rational development, such as 7 days and home. Therefore, the supply of budget hotels will gradually slow down and become rational in the next few years.
Third, guarantee quality
In the rapid development of the past few years, both hardware quality and service quality have declined to varying degrees. Now it is time to make up the class!
In terms of services, limited services will be the mainstream of the future, and still rely on automation and IT technology to reduce labor and reduce job requirements. However, limited services are not without services, and are not inferior services. All services provided, whether manual or automated, should be considerate, intimate, meticulous and professional, with love to serve.
For newly opened hotels, the hardware is not closed, can not pass! In order to reduce the loss of the owners, we must make persistent efforts in procurement, on-site supervision and other aspects, and strive for excellence. Do communication first and help. Hardware standards can only be hard, not soft, otherwise, the damage is the entire brand, the loss is everyone's interest.
For the old stores, strengthen quality inspection, establish internal quality rating, and introduce user evaluation system. Stores that cannot operate according to standards must be rectified without compromises and accommodations. And to establish an exit mechanism, for stores that do not meet the brand standards, there is no rectification within the time limit, and the brand is withdrawn according to the rules.
These requirements are requirements for all stores, whether it is direct or affiliated, and the quality is treated equally!
The so-called "supply-side reform" is to eliminate backward production capacity, which is unable to keep up with the inferior inventory demanded by customers. In our chain, we have to eliminate the low-quality stores.
For long-term rentals, it is recommended to upgrade to a Hanting 2 or a full-time mid-range brand. These new designs are more popular with consumers and the returns are good!
Fourth, strengthen talent training and training
When expansion is no longer the first driving force, you can encourage the craftsmanship of “shopping for the home†and “single store maximization†throughout the chain. All salaries and rewards can also be relied on in this direction. The store manager’s salary and bonuses are returned to the store, and they are paid in real time and no longer go through the headquarters.
The cultivation of the manager, despite the short-term training of the Huazhu College, the improvement of the values ​​and the comprehensive nature of the individual depends on the daily accumulation and penetration. Therefore, the store managers at the grassroots level are mainly promoted and dispatched by the China Living System. At least they must learn and adapt after a period of time in the China Living System. Values ​​are the most fundamental, and if they are right, others are easier.
We can't rely too much on the complex management capabilities of the grassroots store managers. The technology can solve them. It's best not to rely on people, such as pricing, revenue management, various analysis reports, budget tracking, cost analysis, etc. We need to use the cloud of China Living System. Big data helps the store manager to make decisions and manage. This will enable thousands of ordinary employees to have the ability to manage their own stores.
In the selection of the store manager, we must respect the opinions of the franchisees and also play a supervisory role. However, for the evaluation of the manager's performance, it is necessary to use a unified standard. It is not possible to have one opinion or one opinion. For some franchisees to propose a pure franchise, in the current situation, I think it is better to suspend. After the quality is over, let's revisit it.
The main responsibility of the store manager is to lead the team of the store, serve the guests, and maintain good communication with the franchisees. At the same time, complete the income and cost budget, and maintain products, services and brand standards.
Fifth, like-minded, shared in the same boat
This time, the Chinese franchisees put forward some appeals and gave suggestions and opinions. Most of them were very rational and constructive, but some people were very irrational, pulling banners, blocking companies, and even abusing and rumoring brands and individuals. It has greatly hurt the Chinese-speaking brand, hurting the good intentions of the Chinese residents, and hurting themselves and other franchisees. We don't care about it, we also tolerate these excessive behaviors, but if we want to work together for a long time, we still have to be like-minded.
In the early days of my founding in China, I said a word: a group of like-minded friends happy to achieve a great cause. Like-mindedness is fundamental, and then you can be friends, you can be happy, you can be great! In the same way, Huazhu only chooses like-minded partners. We don't want to waste precious resources on people and things that should not be wasted. Like-mindedness is the only criterion for choice. Those who do not agree with the values ​​of China, do not agree with the Chinese brand, do not agree with the spirit of the contract, or please withdraw early. At this meeting with some franchisees, I also gave a one-month time limit for the reduction of the liability for breach of contract (the difficulty shop can be exempt from the penalty for breach of contract).
In our country, including the whole world, the spirit of the contract is the foundation and the foundation. If we do not recognize this point, we believe that it is fundamentally inconsistent with our values. Therefore, from the beginning to the present, we have always followed the spirit of the contract and implemented it according to the agreed contract. If you don't approve the contract, you can negotiate, you can negotiate, of course you can not sign, no one is forced, tempted or intimidated. If you say that you want to leave the contract aside, even say that our contract is a "overlord clause." Huazhu is unacceptable and cannot be tolerated.
When the macro economy declines, some site selection mistakes, high rents, usury loans, crowdfunding (including family and friends to join the money partnership), urban planning changes (or expected planning is not realized), hardware is dilapidated, low-level cities with less developed migrant populations, etc. The store is indeed worse, although we implemented it a few years ago: predicting loss franchisees do not accept joining, even if the other party must join, we signed a loss agreement. However, under the current situation, we must further tighten the review mechanism. We are no longer accommodating for the site selection that is not optimistic for internal review. Even so, we don't think we can predict the changes in the local economy and competition in the next five years, 10 years, and 15 years, and the impact these changes will have on hotel revenue. We don't have the ability, and we don't have enough information to help franchisees make these judgments. Therefore, for these problems, we have no obligation, no responsibility, and bear the risk of their investment mistakes. If the word "game" is used to describe the relationship between the current franchisee and us, it is really inappropriate. There is a contract first, what is the game? When the ship sails on the sea and encounters the wind and waves, only by working together can we turn the tide into danger and there is no other way.
However, for those who are the most suffering, we can still treat with love and compassion. These include the reduction of part of the cost, the addition of outstanding talents to the fortress, hardware improvements. However, this is not a general policy, not a violation of the contract, but an understanding and adherence to the "good" in the Chinese values. This is what I said - to help each other.
future
Where is the future of budget hotels? Can you continue to survive? Is it possible to maintain steady growth? Can you still have investment value?
These problems are not only the concerns of the majority of franchisees, but also the problems we must think about and torture ourselves.
There have been several years of thinking about this issue. In the past few years, rents have risen, and various costs, including labor, have risen, while the same store RevPAR has not risen. That is to say, the corresponding return on investment is falling, and if it falls to a certain extent, it will not reach the standard of general investment, and it will become a low-growth or non-growth industry.
It has been a long time since the media and various experts have smashed the economy hotel, but the major brands are growing and the situation is not as bad as they predicted.
Why is that?
Any business organization must create value and provide services for a certain group of people. The population of budget hotel services is still there? Is there a fundamental change? My point is: the crowd is still there, there is no fundamental change.
The potential consumers of Chinese hotels are between 600 and 800 million, the vast majority of which are unfamiliar families and individuals. Their price is a very sensitive factor for travel. Although the middle class and the new middle class are steadily growing in recent years, consumption upgrading is also taking place, but the fact that it cannot be changed is that the vast majority of Chinese consumers are still not rich! This fact is related to the total wealth of a country and is related to a country's wealth distribution model. I don't see any fundamental change in 50 years. We are still developing countries, our country's per capita income is still very low, and our spending power is still limited.
Therefore, budget hotels have turned from white-collar, business, urban and other groups to more and larger groups, including but not limited to those who are price-sensitive, rational consumers who are looking for cost-effective, and value convenient travel. By. The mid-range layout is far less than the economic chain, and there are some upgrades in the economy like Hanting 2 and IBIS. These factors will make the audience very wide. In the future, Hanting will be a “national hotelâ€, which is a stable, reliable and economical default choice for all levels of society.
At present, the total amount of all chain brands only accounts for about 20% of similar hotels, and this ratio is about 70% in the United States, so I said that the development of budget hotels is at least compared with developed countries. 3-4 times growth potential.
As for the new format such as AirBNB, will it subvert the hotel industry? Will you live in someone else's home in the future? Sleeping in the living room of someone else's home? It sounds like a fairy tale! There will be changes and changes in this type of hotel, but for the foreseeable future, the hotel will still exist and will still be a major choice for travel, especially for serious travel.
To return on investment, it is definitely necessary to return to a normal range.
It is precisely because of the high returns of the budget hotels in the past few years and the reliability of the return on investment that attracted many franchisees to join. Some franchisees are not careful, some rents are too high, and some are due to changes in urban planning, but the main reason is the economic downturn in recent years, which has caused problems for franchisees' returns, and some even suffered losses. This will cause some people to withdraw, and other investors will be more cautious. In this way, like the laws of most market economies, this invisible market hand will adjust the speed of development, returning to rationality and returning to normal. At this time, the most rewarding and competitive brand in the market will stand out (of course, I firmly believe that it is Hanting in China!), those speculators and followers will gradually be expelled and cleaned by the market.
From the beginning to the present, the budget hotel has been nearly 15 years old, not rigid and static, and it is time for change and innovation. After the rapid expansion of budget hotels and the rapid opening of stores, brands will continue to subdivide and continue to stratify, and brand differentiation and personalization will be more distinct. Whether it is product innovation, model innovation, or quality upgrade, it is necessary to keep up with the needs of mainstream consumers.
Huazhu has completed the research and development of the Hanting II and the new version of Ibis, and I am full of expectations and confidence! As always, we continue to invest in brand marketing and technological innovation. This is a necessary investment to ensure sustainable core competitiveness in the future competition. Huazhu is actively planning to invest large sums of money to carry out the image upgrade and re-engineering of the Hanting brand, with a view to constructing a new, more distinctive and contemporary brand image and building closer emotional ties with consumers. At the same time, China Living continues to increase its investment in IT technology, such as the continuous improvement of APP, the speed of light stay, and the treasurer of China, so that consumers can enjoy the convenience brought by technology.
As Mao Zedong said: the future is bright, the road is tortuous! Economic hotels have gone through more than a decade of roads. Now it is a consolidation period. It is also taking the road of “supply-side reformâ€, eliminating inferior stocks and eliminating regional excess capacity. The future market needs high quality, low price and reliable products.
Huazhu will still regard the budget hotel as the company's strategic focus, and still maintain investment in direct stores, and still place the company's main resources in budget hotels, including but not limited to the correction of problems caused by the rapid development in the past.
The changes in the market have given us a good time for self-reflection, and also gave us the motivation and reason for rationality.
I firmly believe that the future of budget hotels is still bright! I hope that: Huazhu and the like-minded partners will go to the piece of light and work together to achieve a better life!
Editor in charge: Bi Lanfei
Yangzhou Lansun Slipper Co.,Ltd , https://www.lansunslippers.com