This generation of workers can't wait for the whole season, and the prices of hotels like Yado have dropped.

One night, the chain hotels that cut the wages of the workers finally received the "deserved punishment".

As one of the three major operating indicators of hotels, the OCC (occupancy rate) has already shown a warning sign. The industry experts' notes for January mentioned that this year's occupancy rate is not very optimistic, and it is expected to increase by only 1-2 percentage points compared to last year.

The RevPAR (revenue per available room) of each hotel has collectively shown a slowdown in growth as early as 2023Q4. This year, the brakes continue to be applied, and Huazhu's 2023 annual report conference call revealed that RevPAR is expected to grow by a low single-digit percentage in 2024Q1, and the full-year forecast for 2024 is expected to remain flat or slightly increase.

Brands such as Atour and Jinjiang have also maintained a cautious outlook on their performance in 2024.

The storm is coming, and logically speaking, chain hotels should lower their noble heads, but the reality is quite the opposite. They not only have not "repented," but are brewing a new round of price increases.

The expert minutes for January and February repeatedly mentioned that this year's room prices will continue to rise, with an expected increase of 5%-10%.

When asked about "the trend of consumer downgrading and the hotel industry's counter-trend price increase," Huazhu confidently stated: consumer upgrading is a long-term trend, and people please themselves through consuming products.

In terms of specific actions, it can be seen that the expansion plans for various hotels in 2024 still focus on the mid-to-high-end market.

It's another price hike, another upgrade to the mid-to-high-end market. It seems that chain hotels are not concerned about whether consumers can afford it, nor are they paying attention to the warnings of OCC and RevPAR.

Who gave them the courage to continue raising prices?

Lowering prices may not save the occupancy rate, so it's better to stick to the price.

On the streets of small and medium-sized cities, the hotel version of "Ghost Town" is spreading rapidly: entire buildings are being contracted by various hotels, and the exterior walls are covered with densely packed billboards.

Upon careful observation, it can be noticed that most of the names on the wall are budget chain hotels such as Hanting and 7 Days, as well as unknown standalone hotels.

The competition on the supply side of budget hotels is evident. It is precisely this market situation that makes the hotel industry particularly vigilant about price competition. Even industry experts stated last year that a 10% price reduction may only result in a 2% increase in traffic.

So why does this situation occur?

This is directly related to the nature of the industry. After a hotel goes out of business, its fixed/proprietary assets such as rooms and linens do not disappear but continue to circulate in the market.

Taking second-hand linens as an example, hotel owners who have not survived the epidemic have slashed the price of brand-new single satin bed sheets to 9.9 yuan per sheet, and there are countless promotions such as "half price, floor price for five-star hotel quality linens."

This characteristic, Buffett once commented: Airlines are a terrible business. Even if an airline goes bankrupt, the planes, pilots, flight attendants, and terminals still exist in the world, and the related production materials have not disappeared. They are just changing shareholders by exiting the market.

Therefore, even for hotels that have exited the market, as long as the property and bedding are rebranded and labeled with a new sign, they can reopen for business. Once popular franchised hotels like OYO, H Hotels, and Huazhu are all the same.

And the cost is quite low. According to Junyi Hotel's experience: the renovation cost for a 30-40 room hotel is only tens of thousands, and the construction period can be compressed to within two to three months.

Even the "three giants" of chain hotels (Jinjiang, Huazhu, and Shangri-La) are even more exaggerated, as a mere thirty to fifty thousand can make a room look brand new.

The data shows that in the first half of 2020, about 879 hotels completed rebranding to join hotel chains, with over 70% of them joining the three major hotel groups.

Zheng Nanyan, the founder of 7 Days Inn, once said, "It's not that we want to expand, it's the market pushing us forward. These hotels will always open, it's just a matter of whose brand they will carry."

It is evident that economy hotels are constantly in a state of "changing hands," and the industry's consolidation to a certain extent is "pseudo-consolidation."

On the contrary, once signs of recovery appear, in addition to the "rebranded" hotels joining the competition, there is also a large influx of new supply.

Taking homestays as an example, data shows that there were 200,000 homestays nationwide in 2019, and by mid-2023, this number had grown to over 300,000. In other words, one-third of the current homestays were newly opened in 2023.

This means that from the perspective of major hotel chains, economy chain hotels always face "over-saturated competition" and cannot obtain excess profits.

Instead of lowering prices to revive flagging occupancy rates, it's better to hold prices firm, at least to maintain the dignity of the brand and earn higher profits per room.

This is reflected in the operational data, as it can be seen that under the brand of chain hotels, the occupancy rate of mid- to high-end hotels has recovered and has always been ahead of economy hotels.

Moreover, the historical pattern of the hotel industry is the same.

Looking back at the recovery wave after the 2008 financial crisis and the consumption upgrade wave in 2018, the occupancy rate always decreases after each peak.

However, the average daily rate (ADR) of each room, based on price rigidity, does not drop at the same time, and the inflection point often appears 3-4 quarters later. Hotels can take advantage of this window of opportunity, pressuring suppliers for lower prices while charging higher prices to guests, making the profit statement look attractive.

For example, after the industry occupancy rate declined in 2018, Huazhu and Shangri-La relied on raising prices to achieve a peak in operating profit margins.

The current hotel industry is obviously in this stage. Until the last moment, chain hotels will not reduce prices recklessly and ruin their own rice bowls.

Moreover, from a long-term perspective, chain hotels also have reasons to raise prices.

The players who hold the power are not satisfied with their current high status.

Whether you like it or not, it is very difficult to avoid the three giants of chain hotels when traveling within China.

The core areas of first-tier cities are almost occupied by mid-to-high-end hotel brands such as Jinjiang, Huazhu, and Shangri-La; even budget travelers cannot escape their control of "200 yuan on regular days, five-star prices on holidays."

This "widespread situation of a group of close-knit brothers" is the result of the business strategy choices in recent years—accelerated expansion and competition.

Data shows that from 2020 to the present, the proportion of domestic franchised and licensed hotels has increased rapidly. Specifically, the number of franchise stores for Atour has increased by 119%, Huazhu has increased by 44%, and both Shangri-La and Jinjiang have increased by 37%.

Of course, not only in China, but also in the overseas hotel industry, the situation is the same.

It can be seen that internationally renowned hotel chains such as Hilton and Marriott have a franchise and management agreement ratio of over 90%, and it is still increasing.

The reason is simply that the franchise model is more in line with the logic of capital - the business model is lighter and better (from self-financing to licensed brand business), which is conducive to quickly forming regional monopolies and controlling pricing power.

In fact, the reasons for accelerating the high-end development are not only this.

Reviewing the development history of Hilton, it will be found that since 1996, during several downturns in the US hotel industry, it has almost endured huge losses and insisted on "holding prices".

In daily operations, there is no hesitation in promoting the style, such as in the Bulgari's bathroom, using Hermès and Chopard's bathing products.

In order to maintain their reputation, there may even be some dramatic public relations management.

In October 2020, when the "Shanghai Socialites Group" luxury service went viral on social media—Gucci stockings were shared and worn in turns, 40 people collectively booked a Bulgari room, and 60 people shared a Ferrari for photos.

Bulgari, The Ritz-Carlton, and other high-end luxury brands were the first to come out to refute the "no similar situations found" and emphasized the need for "facial recognition for hotel check-ins".

Such bloody "price control" and public relations management are aimed at maintaining the "mindshare" of high-end luxury brands.

As a feedback from the consumer end, the pursuit is even stronger. Taking Hilton as an example, the membership numbers increased from 30 million in 2011 to 128 million in 2021.

Under such dual "enticements", franchisees are eager to join: Hilton's franchise and management income has remained stable at over 80% in recent years.

This further reinforces the operating choice of the hotel industry - to upscale the brand as much as possible to resist economic cycles.

The performance of several domestic giants also validates this point. It can be seen that, taking advantage of the bottoming out and vigorously promoting franchise, during the post-epidemic recovery period in 2022-2023, both Huazhu and Atour have far outperformed Jinjiang and Shangri-La in terms of both revenue and net profit rebound.

The performance differentiation comes from the disparity in the construction of high-end brands: by the end of 2023, the proportion of mid-to-high-end brands of Huazhu and Atour is both over 75%, which is higher than Jinjiang and Homeinns.

Yaduo was established with IP joint names and humanistic atmosphere to break out of the middle class taste; Huazhu also obtained the mid-to-high-end market early through its own brand, Quanjia Hotel, in 2010.

In comparison, Homeinns started developing its own mid-range brand in 2015; Jinjiang didn't enter the mid-to-high-end market until 2016 through the acquisition of Vienna Hotel.

Not only did they start from different starting lines, but in their daily operations, Huazhu and Yaduo also imitate the tone of luxury hotels.

For example, they leverage well-known external brands to provide added value—Yaduo invited Wu Xiaobo for promotion; Quanjia Hotel offers a one-stop shop for Chinese-style souvenirs such as tea bags, aromatherapy, and pineapple cakes.

In addition, InterContinental's parent-child rooms, Huazhu's deep sleep rooms, and Jinjiang's vacation brand all emphasize personalized service with the slogan "There's nothing we can't do, only things we haven't thought of."

In this way, it makes the "wealthy" who are already aiming for exclusive services and scarce resources even more satisfied.

Data shows that 78% of Huazhu's customers are members, with a repeat purchase rate of over 40%; As of the end of 2023, Atour has 63 million members, with a member repeat purchase rate of 53%.

In contrast, economy hotels mostly only provide accommodation and breakfast, leading to a high degree of homogenization.

For the target audience of such services, price is the priority, and there is usually no loyalty. It can be seen that the economy hotel chains, such as Shangri-La and Jinjiang, with a larger proportion, have lower occupancy rates and average room prices.

The price and occupancy rate also determine the speed of return. Data shows that the return period for mid- to high-end hotels in second-tier cities and above is between 3.8 and 4.5 years, while economy hotels require around 4.5 years.

A series of buffs and pulls directly affect the choices of hotel franchisees.

It can be seen that in 2023, the franchise growth of Atour and Huazhu has remained at 10% or more, while the data for Shangri-La and Jinjiang is in single digits.

It is not difficult to understand why chain hotels are so persistent in raising prices and competing for locations.

Now, the Shoulu Hotels have also completely awakened, with their senior management looking ahead to 2024, stating, "We will transition from 'growing big and fast' to 'specializing and innovating', and in the next three years, we will make up for the shortcomings in the mid-to-high-end market."

Summary

After more than a year of domestic and international travel restrictions, the Chinese people's urgency to travel has gradually turned into a casual attitude. However, the hotel prices that have exploded as a result will never return to the past.

Driven by the combined forces of "do not want, do not wish, and cannot" lower prices, as desired by the hotel players, high-priced hotels have become the new normal.

While most office workers only have holidays during the May Day and National Day, and while tens of thousands of people gather at the Tang Dynasty Night Market and queue up at Yalong Bay, they may also "return from a long holiday to poverty and eating dirt."