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This article comes from WeChat public account:Jinlv.com, author: Chen Jie, original title: "This year's first batch of hotel owners who lost money have begun to secretly change their brands to survive", head picture from: Huxiu (photographed by Xiaoyu)

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“Many hotel chains that have only been open for a year have begun to secretly change their brands.”

Jinlvjun’s friend Mr. A is a senior practitioner in hotel brand franchising. Recently, a large number of new hotels that will open in 2023, especially economy chain or mid-to-high-end hotel owners under the leading hotel groups, have been eager to ask him to help change the brands of their own hotels.

Jinlvjun was quite surprised by this.

The hotel industry has always been known for its long investment payback period. Generally, the lease period of a hotel property starts at 10 years, and the investment payback period for investing in any hotel brand is at least 2-5 years. In other words, a two-year loss for a new hotel was originally within the psychological expectations of hotel owners. How come so many hotel owners suddenly go against their norm and seek other solutions by such a decisive means as changing brands?

"Isn't it because I'm losing money like crazy?"

Mr. A explained to Mr. Jinlv that the end of the epidemic and the wave of retaliatory tourism consumption in the first half of 2023 made the hotel industry earn a lot of money from top to bottom. The huge amount of money stimulated a large number of new players to flock in, resulting in explosive growth on the hotel supply side.

In just one year, the number of domestic hotels increased from 279,000 at the end of 2022 to 323,000 at the end of 2023, basically recovering to the same level as the same period in 2019, becoming the first segment of the tourism industry to return to pre-epidemic levels.

How exaggerated is the increase in new hotel supply?

If you randomly pick a hotel in the core area of ​​any larger city in China, you will find that with this hotel as the center, at least three to five new hotels have opened within 3 to 5 kilometers since last year, and most of them are brands under the leading hotel groups.

The new supply of hotels has increased significantly, but the growth of new demand for hotels is very weak.

As the wave of retaliatory tourism consumption recedes and the public's pessimistic outlook for the future economy, consumer demand has been visibly declining rapidly since the beginning of this year. The impact of this on the hotel industry has been low occupancy rates and plummeting room prices.

In the first two quarters of this year, the overall room rates in the domestic hotel industry fell by 3% and 8% year-on-year, and the revenue per available room fell by 9% and 12% year-on-year, and the entire hotel industry was in mourning.

This resulted in a large number of new hotels that entered the market at a high point reaching their peak as soon as they debuted, and their occupancy rates plummeted to an appalling level since their opening, which not only broke the hotel owners' defenses, but also caused them to lose a huge amount of money.

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Jinlvjun wonders, since hotels value long-term benefits, why don't new hotels sacrifice room prices to maintain occupancy rates? Although it is also a loss-making business, at least it can maintain cash flow. At the same time, if they make more efforts in online and offline traffic channels to stabilize occupancy rates, they can always hold on for a while, and there is no need to rush to change the brand?

Ideas are beautiful, but reality is cruel.

In fact, what really overwhelmed these new hotel owners was not the sluggish economic environment and weak market demand, but the leading hotel groups of the hotel brands they joined.

The performance of new hotels opened in the past two years, especially franchised hotels under the leading hotel groups, has been sluggish. A large part of the reason is the "strict requirements" of the franchised brands on all aspects of hotel operations, which is directly reflected in the hotel's pricing strategy and traffic strategy.

Leading hotel groups often require that the prices of all hotels joining the brand must remain above a certain benchmark red line. In this way, the brand can stick to a certain price range and ensure the stability of the brand tone and overall pricing system to the greatest extent from a macro perspective.

While this practice maximizes the profits of the leading hotel groups, it inevitably causes a large number of franchised hotels to bear huge losses. Even for franchised hotels of the same brand, the "28 phenomenon" still exists. In principle, this price control behavior of the leading hotel groups ensures that the franchised hotels with the strongest operating capabilities can ensure higher occupancy rates with higher room prices, but for those franchised hotels of the same brand that are originally weak, especially the new franchised hotels, they are very passive. They can neither beat the surrounding hotels of the same brand nor compete with other brands in the surrounding industry. They suffer from both sides and survive in the cracks.

In addition, in order to ensure the sufficient and competitive traffic of their own membership system, the leading hotel groups will also force franchise hotels to rely on their own membership system as the main source of online traffic, and to control OTA and other online and offline traffic to a certain proportion. Not long ago, a leading hotel group explicitly stipulated that the proportion of traffic from OTAs for franchise hotels must not exceed 15%.

It would be fine if the hotel group's own membership system traffic could fully meet the franchise hotels' needs, but the problem is that since last year, franchise hotels have received less and less traffic from their own membership system, and the order volume has shrunk sharply. In this case, the hotel group still insists that franchise hotels should not access new external online and offline traffic, which has caused strong resistance from franchise hotel owners.

What? For the sake of the brand's reputation, the franchisees who invested real money will starve to death!

Mr. A has inspected many new hotels under leading hotel groups that opened last year and were not performing well. If we look at it purely from the perspective of actual store operations, the occupancy rate of this new hotel can often increase significantly if the pricing strategy is made a little more flexible and the online and offline traffic sources are more in line with the actual store situation.

However, this last bit of hope was considered an unacceptable backstab by the leading hotel groups, causing a group of newly joined hotel owners to lose their last confidence in the brand.

This is the fundamental reason why many new hotel owners are seeking to rebrand this year.

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In this conflict between the leading hotel groups and the newly joined hotel owners, there is no absolute right or wrong, but both sides have their own interests. The reason why this conflict is particularly prominent this year is thatThis is mainly because of the "misalignment phenomenon" between the leading hotel groups and the owners of newly joined hotels.

In the past two years, a clear development trend has emerged among the major hotel groups, that is, their hotel brands are becoming increasingly mid- to high-end. Even the most basic economy chain brands are constantly iterating and evolving. The threshold for joining, represented by the cost of a single room, is getting higher and higher. Many new hotel owners have found that an ordinary economy chain hotel often starts with an investment of tens of millions of yuan.

There was a saying in the hotel industry that when investing in an economy hotel chain under a leading hotel group, hotel owners should not worry about whether they can make money or not, but should regard it as a financial management behavior. In other words, hotel investment has unknowingly put more stringent requirements on the investor group and investment returns. This is no longer a business that ordinary people can touch, but a financial management game for a group of rich people.

However, a group of new hotel owners who have entered the market in the past two years are completely motivated by making money. Their profiles are as follows:

They are short of their own funds and have to rely on loans or partnerships to raise funds for hotel investment. They rely on online traffic channels such as OTAs and brand membership systems, but their actual operations lack the professional operation capabilities of OTAs, and they have a lack of incremental brand memberships and have lost the ability to expand offline private traffic sources. They have extremely high requirements for the investment return cycle and hope to maintain a certain degree of autonomy in hotel operations.

Although this group of new hotel owners highly identify with branded hotel chains, they find it increasingly difficult to reach the threshold for joining the leading hotel groups. Even if they try their best to successfully join, conflicts and discomfort arise in all aspects, which is the "misalignment phenomenon."

This is very similar to the e-commerce industry back then.

whenJD.comWhen Tmall began to target the middle-class groups within the Fifth Ring Road as its core customer group, both the platform policy and traffic strategy were more inclined towards powerful large brands and large merchants. Small brands and small merchants were invisibly eliminated by the platform. This is a "brand spillover effect."

However, from another perspective, it is these small brands and small businesses that were eliminated by the "brand spillover effect" of large platforms that accidentally hit the outlet of mass consumption stratification and eventually became the new kings in the e-commerce field.Pinduoduo。

The "brand spillover effect" in the current hotel industry is becoming increasingly obvious. These hotel owners who have been eliminated by the leading hotel groups have, on the contrary, resonated with the general public after the current consumption downgrade because of their extreme pursuit of high cost-effectiveness. This will be a huge new opportunity for the hotel industry.

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Most of the 2024 summer vacation has passed, and the overall performance of the domestic hotel industry has not shown any substantial improvement.

Mr. A predicts that there will be a significant peak in hotel brand replacements as early as after this year's National Day holiday. From the second half of next year to the first half of the year after, there may be the largest wave of hotel brand replacements in the past five years.

This potential trend will accelerate the "brand spillover effect" of leading hotel groups. At the same time, with the increasing brand chain rate and penetration rate in the sinking market in the domestic hotel industry, it will jointly create a new and large group of hotel owners, and then give birth to a new supply of hotels with the pursuit of "high cost performance" as the core concept to meet the public's urgent demand for high-quality hotels in the context of consumption downgrade.

As new supply and demand relationships are established in the hotel industry, more hotel brands that are targeting the "brand spillover effect" will also follow suit, and the intensity of competition in this track cannot be underestimated.

Leading hotel groups have already realized this change.

Mr. A analyzed to Jinlvjun that this year, major hotel groups have launched franchise brands with lower per-room costs. One of the purposes is to lower the increasingly high franchise threshold in disguise, thereby attracting more high-quality hotel owners to join.

The leading hotel groups continue to compromise with OTAs. Although they emphasize the dominance of their own membership systems on the surface, they privately turn a blind eye to their franchised hotels expanding more OTA traffic.

After all, if the franchised hotels cannot be well-fed, the backlash from the franchised hotel owners will be very fierce, which has long been confirmed in the previous game between the two sides.

A new major change has quietly begun in the hotel industry. Let us wait and see who will be the winner in the future.