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Huazhu expects continued growth into 2016

03/18/2016| 10:06:50 AM|

After a strong year of expansion in 2015, Huazhu (China Lodging Group) CEO Min Zhang discussed the company’s plan to continue its trajectory through 2016.

For Huazhu Hotels Group (China Lodging Group), 2015 was a year of strong growth, according to company officials in Thursday’s fourth quarter and year-end earnings call.

Huazhu CEO Min Zhang said during the call the company began in 2005 with one brand, HanTing, and now has 12 brands ranging from economy to upscale.

“We built one of the most profitable and insightful hotel networks with 2,763 hotels, 278,843 rooms in operation, covering 352 cities as of the end of 2015,” she said, according to a recording of the webcast.

By the end of 2015, the company had 21 leased hotels and 656 manachised and franchised hotels contracted or under construction.

Continued growth

The company projects a gross opening of 750 to 800 hotels this year, Zhang said, while at the same time closing more than 80 to 100 hotels for not meeting new brand quality standards.

Zhang said she foresees consolidation in China to continue with her company as the main consolidator in the market. From 2009 to 2014, the company grew eightfold in its market share in the economy segment, she said.

“We expect our market share to continue to increase drastically,” she said.

A majority of the company’s hotels are conversions from existing properties, Zhang said. Approximately 63% of its newly opened hotels converted from other hotels, and Zhang said she believes the trend will continue as independent hotels look to brands for system support to handle economic and competitive situations.

A senior financial officer of the company said the company closed on its strategic alliance transaction with AccorHotels in January 2016. As a result, the company has exclusive master franchisee rights for Mercure, Ibis and Ibis Styles as well as co-development rights for Grand Mercure and Novotel from Midland China, Taiwan, Egypt and Mongolia. AccorHotels will contribute approximately 91 hotels to add to the China Lodging Group network, he said.

“We also have a non-controlling 29.3% stake in a joint venture with AccorHotels’ luxury and upscale brands in the region,” he said. “The financial impact started in January 2016.”

Brand refresh

As part of the company’s strategic refocus for the year, Zhang said there will be a project to strengthen and differentiate the flagship brand, HanTing.

“Our customers seek for higher quality for their accommodation,” she said. “Our focus is to deliver products that generate value for money. They experience and maintain our status as one of China’s most innovative hotel groups.”

Increasing travel

Domestic travel expenditures from 2007 to 2014 grew annually by 21%, Zhang said. Consumption upgrade stimulates more demand for travel, she said. There’s also an increasing adoption of the annual leave system.

“We see good progress of adoption in the past six years after regulatory support of the annual leave system,” she said. “Nevertheless, a recent survey shows us only 41% of the respondents took all of their entitled leave. Increased adoption is expected.”

As incomes have increased, the lifestyle change brought about improved short-distance leisure trips, Zhang said. There are a number of theme parks under construction, including Shanghai Disney, which should contribute to new travel demand, Zhang added.

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