ChinaTravelNews, Nicole Sy - BrandZ, one of the world’s top brand valuation firms, has released its list of Top 100 Most Valuable Chinese Brands 2015. Their definitive brand valuation methodology combines “extensive and on-going consumer research with rigorous financial analysis.”
Part of a three-part special series, ChinaTravelNews takes a look at the Travel industry brands that made the list. Part 2 takes a look at hotels, with three making the list. Home Inn ranks the highest at 66, followed by Hanting at 78, and Jinjiang Inn at 94. The three companies constitute China’s leading hotel chain groups, and dominate the mid-economy priced hotel market.
The hotel category stayed completely flat in terms of brand value growth with zero percent growth, year on year, at $998 million. “Although hampered by slower economic growth and reduced government business travel spending, the hotel category continued to expand and competitors broadened their offerings to gain share across market segments from budget to luxury,” BrandZ reports.
China’s growing middle class and leisure travelers also offset the fall in official government travel, lured by loyalty programs and facilitated by the ease of booking online.
Home Inns & Hotels Management, Inc. leads the pack with its brand value worth $464 million, up 10 percent from last year’s valuation, helped by its aggressive expansion strategies. The leader of the economy hotel segment, Home Inn added hotels in 2014 at a rate of one per day, according to the report.
With five brands under its belt, Yitel, Homeinn Plus, Home Inn, Motel and Fairyland, and growing loyalty program adjacent to that, the company targets variations of segments in the market, and underscores brand consistency. Home Inn is owned by the same rotating group of CEOs as online travel agency, Ctrip, and maintains its style of direct management involvement, mostly through franchise ownership, as the source of its consistent product and services quality. ChinaTravelNews reported by the end of Q4 2014, 65 percent of Home Inn hotels were franchises, up 60 percent year-on-year.
The hotel’s focus on digital platforms also contributed to its strong performance despite a soft economy— more than 2.6 million users downloaded the Home Inn mobile app as of the end of 2014. Reservations via the mobile app accounted for 21% of total bookings in the fourth quarter, and an additional 3% of total room bookings were from messaging platform, WeChat.
“Our marketing strategy and methods have totally shifted from traditional to digital in 2014 and have made a successful step to better service our loyalty members,” a Home Inn spokesperson wrote in an email. They also have a loyalty program for all their hotel brands and other participating hotels called Home Alliance.
Hanting comes in at the 78th most valuable Chinese brand, worth $348 million. It also ranks the 10th highest in terms of brand growth of all 100 brands on the 2015 BrandZ report, rising a whopping 45 percent in value from last year’s list. Under parent company, China Lodging Group, Ltd., Hanting is primarily an economy hotel targeting business travelers and price-sensitive tourists. Perhaps further proof that the industry is consolidating, Hanting is included in the same rotating cast of CEOs as Home Inn. Ctrip, as the biggest company of the roster, is an investor in both Home Inn and Hanting.
Hanting’s parent group has another two budget brands, elan and Hi Inn, and four mid-high level hotels: Ji Hotel, Starway Hotel, Joya Hotel and Manxin Hotels and Resorts. At the end of 2014, the hotel group also inked a long-term partnership with international hotel brand, Accor.
Growth from Hanting comes from its massive online and loyalty program expansion. According to the report, 90 percent of its reservations came from its more than 20 million loyalty program members. About 40 percent of China Lodging Group’s bookings also come from digital channels, CEO Jenny Zhang shares in a ChinaTravelNews January interview. “We already offer guests an option to select a room via our website and mobile app,” she says. “One can see the floor, the room, and then choose a room accordingly. Their ID can be scanned once they reach the property, and they are all set for the room. Even check-out can be done in advance.”
“Big data enables us to dig out consumers' potential needs by integrating and analyzing their online behavior and offline consuming habits,” writes a Hanting spokesperson in an email. That means they can “update our products more efficiently and deliver messages to consumers more occasion-based.”
At 94th on the rankings, Jinjiang Inn’s brand is worth $186 million, and grew an impressive 32 percent from last year’s valuation. The only State Owned Enterprise (SOE) of the group, it similarly focused on the digitization of its brand, a key trend in the industry.
“The amount of reservations in 2014 greatly increased with year-on-year growth of 160 percent,” writes Jinjiang COO Kevin Li in an email. The company further launched an English-language app and pursued direct email marketing.
“Hotels need to embrace Internet thinking, pay attention to and make use of data, make data drive the hotel operation and management, and improve service based on the analysis of current data,” says Li. “Mobile Internet technology will be fully applied to all aspects of the hotel industry to change hotel’s service mode, reduce labor costs and greatly improve clients’ experience.”
It also invested plenty to expand domestically and internationally, with the full acquisition of City Inns, which has a foothold on southern China, and France’s Louvre Group, Europe’s then-second largest hotel group for $1.45 billion. “France was identified as a top destination for Chinese travelers in our survey, so we immediately thought of the Louvre Group, which we worked with before,” says Jinjiang CEO Zhenggang Lu in a ChinaTravelNews interview. “Our key consideration is brand development potential and we hope to introduce more brands to both groups in the future”
All the three hotel groups also scored highly in terms of brand contribution marketing. Brand contribution measures the brand’s impact, without other factors coming into play like price, according to the report. A special feature of BrandZ, it also measures the future earning potential of the brand.
Both Home Inn and Hanting made the top 20 in brand contribution with Jinjiang Inn close behind.
“The best way to gain long-term trust is with a simple brand message, supported by clear and consistent in-store messaging,” says Michael Smollan, CEO of international retail solutions company, Smollan, China. “We have seen how this brand consistency in all media and in-store gives consumers a sense of stability and therefore fosters trust in both the product and the brand.”
Digitization is also a key trend in the industry. For many brands today, not only in China, it is also a matter of survival. “Brands need to be aware where the conversations that are happening,” says Luo Xiaoting, Senior Vice-President of Hill+Knowlton Strategies, China. If all the chatter is online, “the trick is how to interrupt consumers’ virtual lives to deliver value and connect them with something tangible all before they click away,” she says.
But there is pushback from hotels on some segments of digitalization. In September 2014, the three hotel groups joined forces to demand online travel agencies (OTAs) to cease their attractive cash-rebate programs due to whittling margins. China’s top OTAs relented, but eventually agreed.
All three brands climbed from their positions in 2014’s Top 100 Most Valuable Chinese Brands. Home Inn rose just one rank from its position at 67th last year, while Hanting jumped the highest, leaping 6 ranks from 84th. Jinjiang Inn climbed two spots from 96 to 94 to continue its slow but steady ascent.
One hotel that failed to make the list this year but was present last year is Huatian Hotels, previously ranked as China’s 89th most valuable brand. The luxury brand was badly hit by the Chinese government’s move to curb graft and public spending. ChinaTravelNews reported “the budget cuts for official conferences led to a 30-40% drop in revenue from conferences and dining, affecting the financial results of the entire hotel industry.”
“The overall logging industry has suffering a hard period and we are not seeing immediate signs of a market rebound at the moment,” the Home Inn spokesperson adds. “But the stable growing of travel and lodging industry with evolving customers needs encourage us with the potential for additional new product and service launched to capture emerging market opportunities.”
Hanting’s spokesperson concurs. “The challenge is how to keep keen insight into consumers' ever-changing needs and provide high-quality service during our fast expansion,” he writes. “It is a must for us to achieve the goal effectively and efficiently.”
China’s hotel industry is brimming of opportunity especially in the mid-budget sector, and similarly, competition. “Mid-scale hotel is the future of hospitality industry,” according to Jinjiang’s Li. “More and more people get high salaries now, and they are not satisfied with the economy hotel. Those people pursue better quality and better taste.”
Home Inn also looks to drive its mid-level hotels. “The success of our multi-branded platform has given us the confidence to devote more resources to the mid-scale hotel segment by further accelerating Yitel development and rolling out our new brand, Homeinn Plus,” Home Inn writes.
Hotels will have to differentiate their brands to fully win over the Chinese consumer. With their high levels of brand awareness and brand contribution, Home Inn, Hanting and Jinjiang Inn already have a head start, but will have to ceaselessly deliver consistent product and service quality to stay ahead of the competition.
Stay tuned for Part 3 of the series, where ChinaTravelNews looks at travel agency brands that made the list.
Also check out China brands special Part 1: Airlines - Premiumization and trust and Part 3: Hotels,- Digitalization and quality consistency , ChinaTravelNews’ three-part series of China’s most valuable brands in the industry.