COVID-19 like a "Black Swan" in 2020 had a huge effect on the global hotel industry. In China, relevant reports issued by China Hotel Association showed that accommodation enterprises such as the domestic hotel and the home stay lost more than 67 billion yuan of their turnovers in the first two months this year. Thanks to strict prevention and control system and efficient scheduling capacity, domestic prevention and control of COVID-19 has entered a normalization stage. The industrial development is recovering stably.
As one of "bellwethers" in the hotel industry, Huazhu takes the lead in blowing the trumpet of renewal. On May 25, the opening ceremony of Huazhu's "Industrial Revival Plan" was held in Xi'an. The "Reassurance 360 White Paper" issued by Huazhu at the opening ceremony was the first COVID-19 prevention and control standard of the hotel industry in China. Senior executives such as Ji Qi, the founder, chairman and CEO of Huazhu, and Jin Hui, the president and CEO of Huazhu Group, and others as well as experts in the industry presented at the ceremony. They, based on the above topic, communicated deeply and shared their opinions.
Although the battle against the pandemic is difficult, the core competence is the key.
There is no doubt that the hotel industry, as an industry depending on people's travel and accommodation needs, has suffered a lot from the pandemic. However, enterprises at different levels vary greatly in their visions and ambitions toward how to review the "value" of this pandemic reasonably.
In contrast to the pessimistic attitude pervaded in the industry, Ji Qi thinks this pandemic is like a "touchstone" for enterprises. When leaders of enterprises are worried about it, they must reflect and look back on their previous strategies constantly as well as think about what kind of effect this event will have on their enterprises. Based on Huazhu's own anti-pressure capacity and the domestic prevention and control of COVID-19, Ji Qi concluded that "even though the country and the city were locked down, we still can survive it. As a leading enterprise, (in the wake of the pandemic) we may be better than before. "
The reason why Ji Qi expected so positively is that Huazhu Group and its team presents the following four keywords during this pandemic: value, executive force, influence of brand, system construction.
Ji Qi said COVID-19 allowed him to see what he had never seen before. It was the humanity. "I hold a relatively superficial evaluation toward the humanity before, but this pandemic enables me to evaluate it at a higher level."
Ji Qi, the Founder, Chairman and CEO of Huazhu Group
Jin Hui also said the value of Huazhu was not just limited to a slogan. In consideration of the complicated situation at the frontline, Huazhu solved all problems during the hard time of the pandemic on the basis of the following principles: guest first, care employees, help the alliance business out of the pandemic, and improve the communication efficiency by means of the technology.
In fact, Huazhu had committed itself to advancing its technology empowerment in and out of its platform prior to the outbreak of COVID-19. At 2019 Huazhu World Conference, Ji Qi put forward "Huazhu business operating system" for the first time. The system has two levels including the software and the hardware with its hardware platform serving the offline hotels. 12 modules such as members, the supply chain, IT and AI, the cloud service, the brand, market, finance, investment consulting, quality control, products, training and income management constitute the software system to solve all problems arising from the early stage of the alliance, the construction and operation period and the stable period.
In accordance with Ji Qi's judgment at that time, when Internet becomes an infrastructure of all industries, the innovations in technology and other fields will become new energy supply. The new technology will promote the industrial transformation and upgrading of the whole country. Obviously, the technology empowerment efficiency will be improved further after this pandemic.
In the wake of the shuffle, the industry will recover reasonably.
Under the impact of the pandemic, how many enterprises didn't pull it through? What's the judgment of the industry toward the development prospect of the hotel industry?
As far as Ji Qi is concerned, the four kinds of hotels such as the special home stay, chains only hanging out their shingles, office buildings driven by non-market factors and the flatulent and extravagant hurried comer may not be able to survive this winter. Correspondingly, "when some pests are frozen to death, the crop will be better in the next year."
With regard to the possible challenges of the industry, Ji Qi gives his predictions from three aspects:
Firstly, with the great change of China's economy, the decline of the manufacturing industry resulted from the combination of de-structured inventory and the trade war will be serious bad news for hotels' business. Secondly, the rise of video conferences during COVID-19 has changed normal offline scenario need. It is a visible impact on the business travel accommodation market with high frequency and quality. Finally, it comes to the international guests. In consideration of global pandemic spread tendency and domestic pandemic prevention and control capacity, Ji Qi thinks that there will be a few international guests before the vaccine comes into service.
In terms of possible good opportunity, it includes two aspects: Firstly, the need for a nearby travel and holiday travel will bounce back strongly. Secondly, it comes to the compensating business travel. The business accommodation needs will bounce back quickly after several months' overstocks.
Jin Hui also shared relevant data of Huazhu to prove Ji Qi's idea. On May 19 and 20, Huazhu's occupancy rate reached 83%. Although the unit price of the guest room is not ideal compared with that in normal situation, there is still a rule for the market recovery to follow. Only when the occupancy rate recovers will it be possible for the unit price of the guest room to recover. Currently, the hardest days have been over. After the occupancy rate comes back to a stable level, the recovery of the industry will speed up again.
Jin Hui, the president of Huazhu Group and CEO of Huazhu China
There is another aspect needing to be pointed out. Due to the impact of COVID-19, a lot of newly established companies which raised rents greatly were closed down. The occupancy rate and rent of office buildings in many areas declined greatly. Therefore, it is obviously good news for hotels to rent relevant buildings at a lower rent. In Ji Qi's opinion, the withdrawal of industrial speculators due to the failure to survive the industry depression will also reduce the rental price which has increased rapidly in recent years. A healthy profit margin in the industry will also be recovered.
The sinking strategy will be implemented continuously. The great plan will be accelerated again.
With the hotel industry entering into an inventory age, sinking and integrating the inventory has become a keyword of domestic hotel industry in recent years.
Ji Qi thinks that the hotel may not be the best investment comparing with many other fields. However, it is always a good investment in terms of its threshold and stability. "There are many good investments in the market. For example, restaurants acquire its retribution faster than hotels. However, many restaurants are closed down. The e-commerce, Pinduoduo, Tik Tok and Toutiao are all good. But it is less possible for everyone to engage in it. On the other hand, the ordinary people who can afford several millions of investment can engage in hotels. When you join Huazhu, you can continue with your travel. After all, people's desires for travel will not disappear no matter how the situation is."
In fact, thanks to the huge improvement of infrastructure such as high-speed railway, highway and aviation, the new urbanization dividend brought about by them makes the business travel and recreational travel more convenient. The population mobility is not confined to the first and second-tier large and medium-sized cities. Instead, the third and fourth-tier cities are becoming the new market growth. In next four years, the high-speed railway will cover 80% cities with more than 1 million population. The highway will cover cities with more than 200,000 population. The airport will also cover cities with more than 200,000 population. 200 new airports will be built. With the consumption upgrading, more and more "small-town youngsters" need high-quality accommodation. It generates a huge market growth opportunity.
In terms of development strategy of Huazhu brand, Ji Qi said the consumption market in China belonged to a pyramid market. So does the distribution of hotels. That is to say, the foundation of the market and Huazhu lies in the economical and middle level. Meanwhile, Huazhu Group will continue to build middle and high level brands such as Crystal Orange Hotel, Manxin Hotels, VUE HOTELS & RESORTS, and Joya Hotel. It's nothing but a targeted product positioning and market survey more prudently with more selectivity.
Mentioning the important task of the next stage, Jin Hui said that Huazhu would firstly focus on the domestic market and customers, the localization and business travel needs, etc. Huazhu aims to expand the sinking market by paying much attention to it. Huazhu aims to open more than 10,000 branch hotels in 1,000 cities in next 3 to 5 years. It is based on Huazhu's judgment on the hotel industry's entering into 3.0 era soon.
In Ji Qi's opinion, 1.0 era of the hotel industry refers to the guesthouse and small hotels. 2.0 era witnesses the overseas hotel management groups competing to capture Chinese market. In contrast, 3.0 era marks the economy-hotel chain. The newly established hotel enterprises in China are developing comprehensively. "With the continuous evolution of 3.0 era, Huazhu will become one representative of them. The hotel company with the largest scale will definitely appear in China in the future. By then, a complete change will have taken place in the whole era.