7 Days Discovers Joys of Management 7天酒店发现管理乐趣
It’s been hard for me to differentiate between China’s top 3 US-listed hotel companies due to their similar focus, but I have to admit I’m intrigued by a new announcement from one of the three, 7 Days (NYSE: SVN), about its latest strategic decision to focus on the management business. In fact, 7 Days’ announcement shouldn’t come as a huge surprise to any industry people, as it’s largely following a trend that happened in the west a couple of decades ago and paved the way for the rise of global hotel giants like Marriott (NYSE: MAR), InterContinental (London: IHG) and Accor (Paris: AC). What all the foreign companies discovered was that it was much more profitable to simply manage hotels for other property owners rather than own the actual properties, as such a business model required much less capital investment and thus was much easier to expand. In addition, the model also offered much better profit margins than the traditional model of owning properties, allowing the big western names to not only expand more rapidly but also boost their margins in the process. Now 7 Days is very publicly telling the world that it intends to also focus on this business model that emphasizes management over ownership, as it seeks to differentiate itself from US-listed rivals Home Inns (Nasdaq: HMIN) and China Lodging (Nasdaq: HTHT), as well as Hong Kong listed rival Jin Jiang (HKEx: 2006). (company announcement) 7 Days is already moving in that direction, with a hotel portfolio that currently includes about 60 percent managed properties while the remainder are properties that it directly leases. By comparison, Home Inns and China Lodging both have a 50-50 split between hotels that they manage for other property owners and ones that they lease directly and operate for themselves. From an investor perspective, I like not only the fact that 7 Days is trying to differentiate itself from its rivals, but also that it is choosing a business model with a proven track record outside China to try to improve its position. The biggest risk is that branding becomes the biggest issue for any company that pursues this model, since the company is no longer a hotel owner but instead just a manager of hotels for other owners. Thus, if its brand isn’t popular or suffers from image problems, many hotel owners looking for a company to manage their properties could easily choose a rival hotel manager with a better reputation. In that sense, I do get the sense that 7 Days probably enjoys less brand recognition in China than Home Inns, Jin Jiang, or even China Lodging, whose major brand is the Hanting chain. Still, it does enjoy a relatively solid reputation, and should work hard to boost that image if it wants to succeed in its new focus on hotel management. If it can do that, it could easily grow much more quickly than its rivals and pass industry leader Home Inns to become China’s biggest hotel operator, boosting its profit margins in the process.
Bottom line: 7 Days’ decision to focus on the hotel management business and downplay ownership looks like a smart move that could quickly boost its growth and profitability.
Related postings 相关文章:
◙ China Lodging Adds Brand With Starway 汉庭旗下新增星程品牌
◙ Hotels: Room for Consolidation 经济型酒店行业或加速整合
◙ Jin Jiang Looks for Room at the Global Lodge 锦江集团寻求跻身国际高端酒店之列
