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China Travel

Consumer Series II: Budget Hotels

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I was on the train from Shanghai to Lan’xi today. The train station was crowded, reminding me of my college days: at one time I was so afraid of stuck in the train during winter break, I told my mom I would stay in the campus.

I saw lots of leisure travellers on the train, some are “stand room only”. Hangzhou and Jinghua are two popular places for leisure travellers. I talked to a family from Tianjin: they took the train to Jinghua. They regret not taking the plane now because the train is so crowded. The difference between air ticket and train ticket is about 1000 Yuan. I heard the airlines lowered some tickets this time due to the launch of the “bullet train” on April 18.

Five star hotels are not that lucky, although they lowered their prices dramatically, some just 200-300 Yuan above the rate of budget hotels, they may not get the occupancy rate in normal days: because their customers are mainly business travellers. The reason is very like the “train and airplane example” above: people are mostly budget conscious in China.

With emerging middle class, more cosumer spending, travelling is a sweet spot in this trend. But not all companies are equally profiting from this: some are better positioned than the others. I believe budget hotels are uniquely positioned on this one: Jinjiang Inns (2006.HK) and Home Inns (HMIN) are top 2 players at this time.  

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