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Economy hotels : Zoom on emerging markets

Chine :

-* Leaders : Ibis, Super 8 -* Outsiders : Holiday Inn Express -* Domestic players : JinJiang Inns, Home Inn, Motel 168 Because of limited domestic demand, few African countries are interested in developing the economy hotel segment. Two countries are an exception to this trend nonetheless: Morocco with 14 Ibis that will be joined by 10 others by 2010, and South Africa, where 24 hotelF1 have opened as the result of a JV with the local group Southern Sun. This partner is building its own offer little by little. Also closely tied to InterContinental for midscale and upscale brands, Southern Sun took over Garden Court hotels and is moving most of the Express by Holiday Inn hotels under the new budget brand: StayEasy by Southern Sun. The British group has nonetheless found solid support in ISO Leisure and is preparing to open several Express by Holiday Inn hotels by 2010, the year of the next FiFA World Cup.The strong growth of domestic tourism and China’s economy combine with the explosion of domestic transportation to produce vast perspectives for economy hotel specialists. The worldwide leaders were right on target. Wyndham with Super 8 and Accor with Ibis got a head start on the competition, starting with InterContinental and Holiday Inn Express which is opening up to franchising to rejoin the lead pack.The Chinese groups JinJiang Inns, Home Inns and Motel 168, meanwhile, have taken an active position, controlling nearly half of an economy supply consisting of 1698 hotels at the end of 2007 versus 166 in 2004. But they are far from being the only ones to have made a foray into this appealing market. A government study counts 100 different economy brands for a multitude of regional players. In the province of Hebei, Guoda Group is attempting to impose the brand Yijia365. The Lingnan group, based in Guangzhou, is trying to expand its brand Garden Inn*.More ambitious, Hanting Hotel receives support from investors to grow its offer of Hanting Inns and its budget brand Hanting Express Inn*. The group founded by Ji Qi, which lies at the origin of Home Inns, is not alone in the race. Merrill Lynch and Deutsche Bank have injected 60 million euros in the future of 7 Days Inn*. These two players are targeting 200 hotels in the short term. And the list of candidates including Swiss Belhotel continues to grow. To find a place in the sun, some don’t hesitate to adopt extreme strategies. Star Cruises decided to slash prices in order to establish its brand My Inn, offering hotels at 99 RMB, or 10 euros a room, versus average prices of more than 200 RMB.The result: it is likely to become increasingly difficult to find good locations. And this supersonic development will not be innocuous with regard to the price of real estate and results. The previously ultra-rapid – 2 years at most – profitability of the investment should gradually return to normal. Another phenomenon: China has entered a phase of concentration with the takeover of Top Star Hotels by Home Inns. The latter, which made no attempt to skimp on spending in digging its hole, wound up digging its grave. While perspectives remain astonishing, those lacking the stamina beware...* Any resemblance with a well-known brand is, of course, fortuitous...Inde : -* Leader : Comfort Inn -* Outsiders : Ibis, Premier Inn, Easy Hotel -* Acteurs locaux : Ginger, Hometel,Kamfotel While India, under-equipped in terms of hotels, watched the rapid development of upscale hotels, a veritable economy segment began to develop. With the rise of a middle class and businessmen who are cautious about spending, the time is right for global groups to introduce their brands at a destination where low-quality independent hotels are the standard. Choice, in association with the Gupta Group, is well-positioned with 10 Comfort Inns at present, a presence that the joint venture Choice Hotels India is preparing to double while looking for opportunities for Sleep Inn.Accor with Ibis is of course on the list of suitors for the title of number-one international brand in India. The French group partnered with the local group InterGlobe and the first Ibis will open this month. 13 others are in the pipeline. In a joint venture with Emaar, Accor will also invest 300 million dollars to establish its hard budget brand F1 in major cities. 100 properties are expected in the mid-term. The Dubai investor is not stopping there and supports the development of 80 Premier Inns in an agreement for another 300 million dollars. Isthitmar, another investor from the Middle East, banks on the international potential of the EasyHotel concept. 6 hotels are planned in the next five years.But, like in China, international players must face emerging local competition. The group Kamat with its Kamfotels is trying to multiply the number of hotels it has on India’s major axes while respecting the essentials: a good bed, a kitchen and clean toilets. Present in the upscale and master franchiser of Carlson, the group Sarovar has also launched into the adventure with its own “no frills” brand Hometel. The mid-term goal: 35 hotels versus 2 at present. Indian Hotels, the mother company of Taj, is a pioneer with its Ginger Hotels (ex-IndiOne) launched in 2004. With 11 units, Indian Hotels plans to expand its Smart Basics concept (see p.48) throughout the entire country. A single element could slow the growth of this affordable offer: the very high price of real estate in addition to rising building costs – a room costs 20,000 euros on average in addition to the land – with respect to relatively low room rates, particularly in the super economy segment.Moyen Orient : -* Leader : Express by Holiday Inn, Ibis -* Outsiders : Premier Inn, EasyHotel -* Acteurs locaux : Ecos Hotel Favorable terrain for the luxury hotel segment, the Middle East seems ready to develop a less costly hotel inventory. The midscale is beginning to gain momentum and the economy segment is following close behind. In its tourism development plan, Dubai plans to gradually open up to mass tourism and low cost flights. The need for this type of hotel should make itself felt rapidly as projects such as Dubailand rise out of the ground. Aware of the challenges, local investors are partnering with the leaders of the worldwide hotel industry to accelerate the growth of the supply. Ishraq actively supports Express by Holiday Inn. The first – a 244-room high capacity hotel costing 30 million dollars – rose out of the ground in Dubai Internet City at the end of 2007. The real estate developer will invest over 400 million euros to erect twenty other properties throughout the Gulf countries. At the same time, InterContinental partnered with Sirja Capital to construct 10 Express by Holiday Inns through franchises in Saudi Arabia.Twenty or so Ibis hotels are also expected to open in the region by 2011, Dubai and Kuwait already have their own. In a more distant future, Accor is considering introducing its hard budget brands F1 and Etap Hotel. These two leaders are not alone of course. At a time when British clientele is developing on the Persian Gulf, Premier Inn took advantage of the .ux from the Emirates to open its hotel in the Dubai Investment Park. Two other properties are expected. The English brand that has also just established itself in Abu Dhabi has a goal of 5,000 rooms in the emirates. Another brand from the United Kingdom, Easy Hotel is actively supported by Istithmar.While local investors are carefully watching this type of hotel business, Middle Eastern hoteliers are expressing relative inter-est. Only Rotana has gotten involved in the midscale range with the brand Centro. But more recently, Coral International, a group that is in the hands of the Emir of Sharjah Faisal Al Qassimi and the Noblet family, announced the launch of Ecos Hotels. Both economical and ecological, these minimalist, trendy, technological properties have a vocation to cover not only the Middle East region but also to reach out to the entire planet with units of 100 to 200 rooms.Amérique latine et du Sud : -* Leader : Comfort Inn, Ibis -* Outsiders : Hampton Inn, Super 8 -* Acteurs locaux : One Hotels American brands logically moved into Canada by creating a network with Super 8, Hampton Inn and Comfort as footholds. Today they are crossing the Rio Grande with about ten properties each for Hampton Inn and Comfort. Ibis is also present with 4 hotels. Yet, with its dynamic economy, Mexico remains relatively untouched in terms of low-cost hotels. The Mexican group Posadas is decided not to miss out on this opportunity and has just launched its One Hotels concept. Five hotels have been built and the benchmark of 50 newly constructed properties has been set for the 5 years to come. Brazil, another major emerging country in the zone, has not yet generated any similar vocation locally. Ibis, hotelF1 and Comfort Inn may relax for the time being.Asie du Sud Est et Pacifique : -* Leader : Comfort, Ibis, hotelF1 -* Outsiders : All Seasons -* Acteurs locaux : Tune Hotels, HotelSO Comfort Inn, Ibis and hotelF1 have long dominated the segment in Australia. These Accor brands are also well established in Indonesia and Thailand. They should soon be rejoined by All Seasons whose network, could rapidly reach thirty hotels in its region of origin. Here too, new actors are appearing (see p.50). Following the Easy Hotel model, Tune Hotels is riding the wave of the development of low-cost airlines and plans to accompany its development in Asia. In New Zealand, Hotel So is part of the very British tendency for trendy economyAfrique : -* Leader : Ibis, hotelF1 -* Outsiders : Express by Holiday Inn -* Acteurs locaux : StayEasy by Southern Sun Because of limited domestic demand, few African countries are interested in developing the economy hotel segment. Two countries are an exception to this trend nonetheless: Morocco with 14 Ibis that will be joined by 10 others by 2010, and South Africa, where 24 hotelF1 have opened as the result of a JV with the local group Southern Sun. This partner is building its own offer little by little. Also closely tied to InterContinental for midscale and upscale brands, Southern Sun took over Garden Court hotels and is moving most of the Express by Holiday Inn hotels under the new budget brand: StayEasy by Southern Sun. The British group has nonetheless found solid support in ISO Leisure and is preparing to open several Express by Holiday Inn hotels by 2010, the year of the next FiFA World Cup.

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