Budget hotels planning to grow overseas units

Leading budget hotel company Hangzhou Zhuyou Hotel Management Co Ltd is stepping up its globalization pace to grab the opportunity from China's outbound travel boom, CEO Zhu Hui told China Daily.

"As outbound travel becomes more popular, we are speeding up moves to go abroad with Chinese tourists," said Zhu.

The company, which operates under the Pod Inn and Zhotels brands, has just opened a new Pod Inn in Los Angeles, becoming the first Chinese budget hotel chain in the United States market. It offers accommodations at a price between $80 and $90 per night.

Payment can be made through Alipay, China's largest e-payment company.

Zhu said other opportunities in the United States, particularly Los Angeles, are being explored, citing the good business environment in the country and the interesting cultural differences.

The number of Chinese outbound travelers will total 114 million by the end of 2014, a 16 percent increase year-on-year, according to the latest report from the China Tourism Academy.

China has become the world's largest outbound tourism market, and Chinese outbound travelers are expected to spend $140 billion in 2014, an 18 percent year-on-year rise.

The report also said China's post-1980s generation has become the driving force of outbound travel, and mid-priced hotels are the most popular.

Shi Yangqing, chief operating officer of Hangzhou Zhuyou Hotel Management, said they are targeting customers between the ages of 18 and 35 who grew up with the Internet.

"So we are perfecting our customers' user experiences by means of the Internet," said Shi.

The company has carried out many marketing activities and services by cooperating with Internet companies Tencent Holdings Ltd and Alibaba Group Holding Ltd, as well as online travel agencies.

According to Zhu, Hangzhou Zhuyou Hotel Management has developed about 280 Pod Inn hotels at home and abroad and the number will reach more than 400 by the end of 2014.

The company has also developed five mid-tier Zhotels and the number will reach 10 by the end of this year.

The huge outbound tourism market is also attracting other Chinese budget hotel chains.

Shanghai-based Jinjiang International Holding Co, which operates Jinjiang Inn budget hotels, has already entered markets in the Philippines, South Korea, Indonesia and France.

Vice-President of Jinjiang Wang Jie said the company is also working on a plan to acquire 1,000 hotels in Europe.

The increasing number of Chinese outbound travelers produces a demand for hotels they are familiar with, say analysts.

"The overseas market will be a new profit growth point for Chinese budget chain hotels," said Luo Juan, an analyst at Qianzhan Industry Research Institute, a consulting firm based in Shenzhen, Guangdong province.

A survey by the institute shows that 50 percent of Chinese independent travelers choose budget chain hotels when they travel overseas.

Chinese budget hotels need to enter the global market if they want to develop further, Luo said.

Liu Simin, guest researcher at the tourism research center of the Chinese Academy of Social Sciences, said the overseas market can help budget chain hotels enlarge their network and source of income "as competition in the domestic market becomes stiffer and profit margins decline".

The budget chain hotel industry in China has developed quickly since 2005, with their number reaching 12,727 by the end of 2013, representing a 25.89 percent year-on-year growth, according to Shanghai Inntie Hotel Management Consultant Co Ltd.