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Hotel Industry Analysis for Budget Hotels

1. The concept and type of economy hotel

The basic definition of a hotel (also known as a guesthouse, hotel, inn, etc.) is a commercial establishment that provides safety and comfort, allowing users to get a short-term rest or sleeping space, that is, a place for guests to sleep and eat.

Budget hotels are characterized by comfort, convenience, and benefits, and provide limited products and services for ordinary business people and ordinary tourists (mainly focusing on the two basic functions of food and accommodation), which are different from mid-to-high-end hotels that provide comprehensive services.

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According to international standards, budget hotels are classified according to the target market, and there are the following five types: budget business hotels, extended-stay budget hotels, budget tourist hotels, motels and youth hostels.

2. Budget hotels are the main part of the hotel industry

Benefiting directly from the rapid development of the economy and the improvement of people's living standards, the scale of the hotel industry continued to grow before the epidemic. According to statistics from the Global Hotel Association, in 2019, the five-year compound growth rate of global hotel rooms was 7.7%. In 2020, due to the impact of the epidemic, the hotel industry experienced difficulties in operating, and the total number of guest rooms declined.

From the beginning of the 21st century to around 2015, the economy hotels represented by the world have experienced a golden growth period. At present, budget hotels occupy an important position in the global hotel market, and the number of hotels and the size of rooms far exceed those of other types of hotels. According to statistics from the Global Hotel Association, in recent years, the number of budget hotel rooms has accounted for more than 60% of the total number of hotel rooms in the hotel industry. 61.5% of the total, still accounting for the bulk of the hotel industry.

3. The chain level of economy hotels needs to be improved

Judging from the overall chain rate of the global hotel industry, the chain rate of the global economy hotel industry is still at a relatively low level in recent years. In 2020, the global economy hotel chain rate is 43.7%.

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4. The chain rate of economy hotels is expected to be close to 60% in 2026

Judging from the industry situation in the past five years, the chain rate of the global economy hotel industry has shown an upward trend in recent years. Looking ahead, there are two main reasons:

(1) After experiencing extensive growth, economy hotels have now entered the stage of reshuffle due to serious homogenization and excess supply. Reducing costs and increasing efficiency, improving operational capabilities and improving service quality have become the keys for budget hotels to stand out. As chain hotel brands have a stronger ability to control and operate service quality and service standards, the willingness of individual hotels to accept chain integration will become stronger and stronger.

(2) The new crown epidemic has objectively promoted the chain integration process of the economy hotel industry. The chain economy hotel brand has brand recognition, its customer source is relatively stable, and its ability to withstand pressure under adversity is strong, which is also one of the motivations for the integration of economy hotel chains.

In the industry reshuffle stage, the advantages of leading companies will become more and more obvious. It is expected that with the further expansion of leading hotel chain companies and further industry integration in the future, the chain rate of economy hotels will usher in a relatively rapid increase. The forward-looking forecast predicts that by 2026, the chain rate of the economy hotel industry will be close to 60%.

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