M&A Analysis and Research Report on Economical Hotel Industry of China

Abstract:

1. The current development about hotel chains in economical level

With the economic growth and minimizing gap to world economy, economic hotel has a major role to play. It proves mature in development and standardized hotels are facing boundless commercial opportunities.

As of the end of 2005 there have 50 economical hotel chains showcasing a modern example in Chinese hotel industry and more than 600 hotels have been working so far. However, the life among the top 10 is short at 4 years at average level. The investors that have background in hotel industry shares around 50 % while direct operation is the major way of business expansion. Among 70 % of direct outlets, there has no sign of brand M&A.

The golden opportunity is given to hotel group as this sector is in development in economical level. The domestic hotel group such as Shanghai Jin Jiang Group, Xinya Group and Beijing Tourism Group have embarked a plan to boost economical hotel chains with popular social images tailoring to the growth at new level. This move has been drawing a steady stream of positive remark from the community and market which makes it swimming in profit. In terms of economical hotels, the domestic hotel group enjoys privileges over the foreign ones factoring good opportunity for economic growth as nation.

There is a common-ground between foreign hotel investors and hotel managers that to invest in top grade hotel is not good option but in economical one where the business opportunity lies. Holiday Group, Accor and Marriott among others, have a cut-clear goal in economic hotel industry. For instance, Marriott has been asking consultant firms for help. As a foregone conclusion in future hotel industry, economical hotel is a hot spot for the growth in this sector which is envisioning a higher expectation than upscale one. Furthermore, a number of franchises such as DAYS INN as famous foreign commercial total chains and YHAChina have moved into Chinese market as technically as possible with licenses which charms economical sector and stirs up integration. The economic total industry is large in demand and looks into booking center from customer basis in industry chain. Having received licenses, many foreign firms have identified the opportunity of economical hotel in Chinese market.

From the rich experience home and broad, chain and franchise is an appropriate parameter for hotels in economical level to play. Small in scale and limited budget makes the chain and franchise as the foundation for brand, customer and managerial technique among hotels while holds down cost thanks to the fact that there was no rich experience at candy by their own. Having said that, Shanghai Jin Jiang Group, Xinya Group and Beijing Tourism Group have adopted this philosophy as boosting economical hotel through investing and leasing in that area. In addition to this direct group management in chains at economical level, open-ended ones has emerged. This could be prototype for hotels in this kind to grow in China which is preponderant in foreign countries. In this respect, domestic hotel group is accustomed to handle novel ideas in traditional way. It tends to be lack awareness of harnessing the synergy from the market and interdependence as to optimize the market through transforming business mode.

As to stand on the profitable position in market, the economical hotel groups at home and broad have doubled their efforts to stake out territory. When economical hotels remains at early stage, the speed of development and expansion are relevant. The individualized aspect among brands is blurred. The exceptional virtues and strong points are the lifeline in ferocious competition. We have sorted out number of characters of status quo in current hotel chains of China .

1. There is room for market to grow

According to the 2006 Heresiarch on Economical Hotel in China , as of 2005, more than 600 economical hotels were in place. Compared to 60,000 hotels in U.S.A. , the number from American Hotel and Lodging Association, China has more opportunity ahead. From customer perspective,

2. The strong drive-up in market

The capital market show great interest in chipping money into hotel chain and economical chains has shot a spotlight in past two years.

On Oct. 26, the Homeinn was listed in the NASDAQ stock market. Dec. 14, 7Day Inn Group as the biggest economical hotel built a alliance with Warburg Pincus while in the share A, there involved host of economical hotels equities such as Jin Jiang Inn, Xinyu Inn, Huatian Hotel and Beijing Shanshui Hotel. The gathering momentum in their number indicates more concerns being drawn from investors.

3. The exceptional virtues of licensing

The image-building campaign in economical hotel chains has been amazing over the course of the past two years. The average growth rate for economical hotel to be opened among the top 10 is 74%. Their way of management is direct operation. Through it along with cooperation the market proves no sign of stopping during 2006. The best example is the 7 Days Inn Group has 6 outlets by the end of 2005 and 17 at the end of Oct, 2006. It is expected to exceed 22 as 2006 passing away. Su8 Hotel has put 6 outlets in place during September. At present, there are 96 hotels among 54 cities or going to be up and run. More than 70% of economical hotels are under direct operation, which is the only pathway to grow and lay the ground work for licensing in the next stage. By looking into the feedbacks from market, we found a big push forward to alliance.

In addition, based on the annul report of licensing in 2006 committed by China Chain Franchise Association, the economical hotel share 1% among spectrum of franchised operation. The number provided by America Franchise Association shows that the economical hotels share more than 4% in franchised economy. These figures and potentials paint a rosy picture for such kind of hotels at economical level in cooperation.

2. The problem faced by China 's economical hotel chain and dynamics beyond M&A in this sector

M&A as an activity ruled by commodity economy is common in property reshuffle which is manifesting in acquisition and take over. In the ongoing storm of M&A, number of traditional hotels at low level will be taken over. The striving force lies in many respects:

A. Fast expansion towards scale economy. Scale effect is the most powerful tool for companies navigating through chain operation while M&A is the key to M&A. It's always a proverbial problem for chain brand to stake their territory as soon as possible in booming market. Over 80% of M&A is dealt through direct investment on a global basis. Since China being the member of WTO, the companies have been forced into the market. The economical hotels should pay enough attention to the threat from hotel multinationals. It's save to say that M&A bears two responsibilities for Chinese companies in reform. The difference to other industries is that M&A in hotel industry is to deliver solution for stamping out competition occurred at low level. Having said that, M&A is the first option to be taken.

B. To establish hotel chain group through M&A. conglomerate is good at harnessing synergies from available resources as to build up scale economy, needed capital and financing support on one hand while target resources to make company bigger and stronger. Though China has been calling for conglomerate in hotel industry and some having been there for a while, their influence proved limited especially in upscale hotel. Moreover, foreign investors and hotel management companies remained dominant players. The economic hotels were trusted by professional hotel groups home and broad for management. The brands under the umbrella of famous hotel management group will take lion share in the market.

C. M&A triggered by purpose for more profitable position with lower budget. M&A is way to make company stronger and bring down cost through collective procurement and booking as to boost renting rate. We believe that China 's hotel can make itself stronger by using its capital advantage as to move into scale economy.

3. Tendency analysis in M&A of economical hotel chain in China

^The economical hotel chain in commercial model is developing fast and casting a trend in this sector. M&A is inevitable with industry tend to be centralized.

The direction for China hotel industry characterized in its scale, image and professional technique. The dominant players remain to be famous hotel brand both in upscale and economical one on international hotel market while swim in profit from their outlets among regions. The hotel density of top 5 American in 2002 was 56% while Jin Jiang Group, a guru in China 's hotel market, shared 2% of market with 29,000 rooms available. It exhibits a tendency to trimming down cost and stirring competition through expansion in scale and network building. The following M&A trends in China 's economical hotel chain are made upon us analysis.

First, take-over by foreign venture capital has been moving into accelerated phase. China 's economical hotel is a target from host of investors whose confidence will be built up with Home Inn being listed on the market. The foreign capital is expected to seek more investment opportunity in China . Therefore, the economical hotels in China are facing threat from hotel multinationals.

Second, it's a trend for economical hotel industry gearing up in expansion and M&A through their brands. For economical hotels, scale is groundwork upon which management is growing and brand is over tangible assets. Only if company bases are firmed under number of famous names, the economical hotel industry is growing mature. From over-all domestic market point of view, the major brand acquisition among companies is absent within market so far. We believe that the direct operation is way to grow while franchises or brand M&A hinge on regional development in the near future and take-over in chain brand is foregone conclusion.

Third, super hotel chain at national level by inter-regional M&A. The hotel in among regions in China is lack of over-all pattern. Conglomerate in economical hotel based on realization of industry chain. In this model, chain layout, customer basis and well-controlled standard will be three golden roles for chain industry.

Fourth, nurturing advanced economical hotel by bring capital in through seeking finance on stock market and pushing for expansion with M&A. In current property management among economical hotels, 80% of management right is achieved in way of leasing which holds down cost and shortens construction circle. At present, Jin Jiang will list on stock market in Hong Kong followed Home Inn which was listed in NASDAQ. With these two cases successfully hammered out, there exits a possibility to make market share larger through take-over within other brands. On the other hand, a large chunk of room for expansion is left with 70% of direct operating driven by franchised business. Having said that, the trend of M&A in way of finance-seeking is proving justified.

Contents:


Chapter 1  Research Overview
Section 1   Background of the research
Section 2   Contents of the research
Section 3   Method over the research
Section 4   Team for the research
Section 5   Conclusion for research


Chapter 2  The status quo of economical hotel chain industry on world stage between 2008and 2009
Section 1  The chain development and its charater in economical hotel on world stage
Section 2  The demand and trend analysis over ecnomical hotel on world stage
Section 3  The competition among economical hotel on world stage
Section 4  The centricity of competition among hotel chain at world stage
Section 5  The regional competition among hotel chain industry at world stage
1. Europe
2. North America
3. Oceania
4. Asia


Chapter 3  The status quo of economical hotel in China
Section 1  The status quo of economical hotel in China
1.  The status quo of economical hotel in China between 2008 and 2009
2.  The opportunity in this sector between 2008 and 2009
3.  The development model in this sector between 2008 and 2009
Section 2  The status quo of competition among hotels in China 
1.  The regional structure of hotel chain industry between 2008 and 2009
2.  The centricity analysis of hotel chain between 2008 and 2009
3.  The demand and prospect between 2008 and 2009


Chapter 4  The Status Quo of Regional Development and Competition of Economical Hotel in China
Section 1  North-eastern region 
1.  The demand for regional economical hotel chain between 2007 and 2010
2.  The development and industrial pattern in regional economical hotel chain
3.  The regional competition and major player 
4.  The M&A trend and feasibility in regional economical hotel chain
Section 2   Northern region
1.  The demand for regional economical hotel chain between 2007 and 2010
2.  The development and industrial pattern in regional economical hotel chain
3.  The regional competition and major player
4.  The M&A trend and feasibility in regional economical hotel chain
Section 3   Eastern region 
1.  The demand for regional economical hotel chain between 2007 and 2010
2.  The development and industrial pattern in regional economical hotel chain
3.  The regional competition and major player
4.  The M&A trend and feasibility in regional economical hotel chain
Section 4  Central region 
1.  The demand for regional economical hotel chain between 2007 and 2010
2.  The development and industrial pattern in regional economical hotel chain
3.  The regional competition and major player
4.  The M&A trend and feasibility in regional economical hotel chain
Section 5  Southern region 
1.  The demand for regional economical hotel chain between 2007 and 2010
2.  The development and industrial pattern in regional economical hotel chain
3.  The regional competition and major player
4.  The M&A trend and feasibility in regional economical hotel chain
Section 6  Western region
1.  The demand for regional economical hotel chain between 2007 and 2010
2.  The development and industrial pattern in regional economical hotel chain
3.  The regional competition and major player
4.  The M&A trend and feasibility in regional economical hotel chain

Chapter 5  The Investment Policy Environment in China¨s Economical Hotel Industry of P.R.C.
Section 1  The impact of macro-economy towards hotel chain
Section 2  The impact of industrial policy towards hotel chain

Chapter 6  The Main Factor Analysis Driving Development of Economical Hotel
Section 1  The analysis on risks on development of economical hotel
Section 2  The problem in economical hotel chain now a days

Chapter 7  The Ongoing M&A in Economical Hotel Industry
Section 1 Background analysis in M&A of China¨s economical hotel industry
Section 2 Analysis of status quo in M&A in China¨s pharmaceutical industry
Section 3 Case analysis in M&A in China¨s pharmaceutical industry
Section 4 The M&A trend analysis in pharmaceutical industry

Chapter 8  The Block of M&A in Economical Hotel of China 
Section 1 Financial difficulty
Section 2 Channel stumbling block
Section 3 Integration hurdles

Chapter 9  The Case Analysis on M&A in Foreign Economical Hotel Chain
Section 1  Dubai take over British Turism Hotel Company
1.  The background and core value of M&A
2.  The prodedure and solution for M&A 
3.  The strategic development in post-M&A era
Section 2  San Fu Hao take over Four Seasons
1.  The background and core value of M&A
2.  The prodedure and solution for M&A 
3.  The strategic development in post-M&A era
Section 3  Kai Yue purchasing AmeriSuites
1.  The background and core value of M&A
2.  The prodedure and solution for M&A 
3.  The strategic development in post-M&A era
Section 4  Xidawu purchasing Aimei
1.  The background and core value of M&A
2.  The prodedure and solution for M&A 
3.  The strategic development in post-M&A era

Chapter 10  The M&A Trend of Foreign Economical Hotel Towards China
Section 1  The development of hotel chain home and broad 
1.  Traits of investment
2.  Regional investment
3.  Market performance
4.  Investment products mix
5.  Investment trend
Section 2  Su 8 Hotel
1.  The investment flow of Su 8 into China
2.  The core competition of Su 8 
3.  The M&A trend and feasibility by Su 8
Section 3   IBIS Accor Hotel
1.  Accor Group¨s investment in China
2.  Core competitiveness of Accor Group
3. The M&A trend and feasibility bySu 8
Section 4   GreenTree Inn
1.  GreenTree Inn¨s investment in China
2.  Core competitiveness of GreenTree
3.  The M&A trend and feasibility by GreenTree
Section 5  Holiday Kuai Jie Hotel
1.  Holiday Kuai Jie Hotel¨s investment in China
2.  Core competitiveness of Holiday Kuai Jie Hotel
3.  The M&A trend and feasibility by Holiday Jie Hotel
Section 6  Ascott Group, Singapore
1.  Ascott Group¨s investment in China
2.  Core competitiveness of Ascott Group
3.  The M&A trend and feasibility by Holiday Jie Hotel

Chapter 11  The Competitiveness of Major M&A Player in Hotel Chain Industry of P.R.C.
Section 1  Home Inn
1.  Basic information of hotel
2.  Outlets pattern
3.  Strategic development and model
4.  Core competitiveness of hotel
5.  The M&A trend and feasibility of Hotel
Section 2  Chain of Jin Jiang inn
1.  Basic information of hotel
2.  Outlets pattern
3.  Strategic development and model
4.  Core competitiveness of hotel
5.  The M&A trend and feasibility of Hotel
Section 3  GDH 
1.  Basic information of hotel
2.  Outlets pattern
3.  Strategic development and model
4.  Core competitiveness of hotel
5.  The M&A trend and feasibility of Hotel
Section 4  JiaXing MoTai168 Hotel
1.  Basic information of hotel
2.  Outlets pattern
3.  Strategic development and model
4.  Core competitiveness of hotel
5.  The M&A trend and feasibility of Hotel
Section 5  Xinyuzhixing Hotel
1.  Basic information of hotel
2.  Outlets pattern
3.  Strategic development and model
4.  Core competitiveness of hotel
5.  The M&A trend and feasibility of Hotel
Section 6  Nanchang Yongsheng Xiandai Hotel
1.  Basic information of hotel
2.  Outlets pattern
3.  Strategic development and model
4.  Core competitiveness of hotel
5.  The M&A trend and feasibility of Hotel
Section 7 Days Inn
1.  Basic information of hotel
2.  Outlets pattern
3.  Strategic development and model
4.  Core competitiveness of hotel
5.  The M&A trend and feasibility of Hotel
Section 8  Zhongzhou Kuaijie Inn
1.  Basic information of hotel
2.  Outlets pattern
3.  Strategic development and model
4.  Core competitiveness of hotel
5.  The M&A trend and feasibility of Hotel
Section 9  Hanting Hotel
1.  Basic information of hotel
2.  Outlets pattern
3.  Strategic development and model
4.  Core competitiveness of hotel
5.  The M&A trend and feasibility of Hotel

Chapter 12  The M&A Possibility of China¨s Economical Hotel Chain 
Section 1  M&A in super hotels 
1.  Jin Jiang Inn
1.1  The analysis of corporate development
1.2  The bottleneck of strategic development 
1.3  The possibility of M&A
2.  Home Inn
2.1 The analysis of corporate development
2.2 The bottleneck of strategic development 
2.3 The possibility of M&A
Section 2  The possibility among medium and small hotels
1.  Xinyandu Hotel
1.1 The possibility of M&A
1.2 The value of M&A
2. Baolongju Hotel 
2.1 The possibility of M&A
2.2 The value of M&A
3. Qidouxing Hotel 
3.1 The possibility of M&A
3.2 The value of M&A

Chapter 13  The M&A Risk Analysis on Hotel Chain in China
15.1 The risk analysis on corporate integration
15.11 The risk analysis on strategic integration
15.12 The risk analysis on business
15.13 The risk analysis on systematic integration
15.14 The risk analysis on personnel integration
15.14 The risk analysis on cultural integration
15.14 The analysis on financial risks
15.3 The management risks

Chapter 14  The Recommendation on Hotel Chain in China

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