Chinese Hotel CEOs Gear Up for New Normal, Expect Rebound by Mid-Q2
Senior executives from Plateno Group’s Xana Hotelle, 7Days Inn and Vienna Hotel Co. believe that they have weathered the COVID-19 storm with apt financial planning, and by responding with compassion.
The fear of stepping out, losing out on work, running out of food and other essentials…people all over the world continue to live in trauma as they try to fight the coronavirus lockdown. The travel industry is in disarray, too.
The travel industry and the world at large in a way are looking at China for the rebound.
Simply because China is indicating that things are slowly returning to normal. In essence, it means no new domestically transmitted cases of COVID-19 over the past few days.
It is worth assessing – how the leaders are trying to stage a comeback?
David Chang, President, Shanghai HQ Vienna Hotel Co. Ltd described the coronavirus crisis as a Black Swan event that has impacted the entire world. But he is positive, and along with his team, attempting to stage a comeback.
“We are expecting that the domestic tourism will regain its peak in May,” said Chang.
Chang shared that the nation has managed to control the spread of the virus within mainland China currently. Chang mentioned that people have slowly started getting back to work, and this has helped the hospitality industry. “Also, with the policies to boost economy being released by the government, the business travel market will also see a turnaround.”
“Based on one full year, we are confident to make up (for) the loss caused by COVID-19 in the second half of the year,” Chang told ChinaTravelNews.com.
Vienna Hotels Group, along with Plateno Group, 7 Days Group, Radisson and Louvre Hotels among the others, are all a part of Chinese hospitality group Jin Jiang International. The group has been leading the Chinese hotel expansion charge at a global level, with a series of acquisitions over the past few years. “Since Jin Jiang is now operating hotel business around the world, we can easily introduce overseas guest-traffic to domestic stores under the international brands. Global business map and worldwide member resource should be one of the advantages of Jinjiang International,” said Chang.
Other senior executives from the hotel industry in China are also hopeful of rising from the bleak situation.
“The COVID-19 epidemic has exerted serious influence on the operation of all the hotels in China, including 7Days Inn. But we never lost confidence,” said Perry Zhang, CEO, 7Days Inn. He added that 7Days Inn has shown a “very strong anti-risk ability with the support of Plateno Group, Jin Jiang Group and the government”.
“The coronavirus gives us the opportunity to show our strength and extend our leadership. You cannot isolate anyone. We are one team and in this together to fight against the COVID-19 outbreak,” said Jane Sun CEO of Trip.com.Group.
“We believe this (negative impact of COVID-19) situation will end soon,” said 7Days Inn’s Zhang.
“The situation in China has been under control, and China’s economic situation and consumption power will certainly be restored. China had similar experience in the past years, too, but the affected hotel industry experienced a retaliatory growth after the epidemic. 7Days Inn is optimizing the hotel conditions and strengthening the training to welcome more tourists from all over the world with better image and service in the future,” concluded Zhang.
He underlined that with 15 years of development history, 7Days Inn is among the largest hotel brands in China with more than 2200 hotels across the country. “Since 2019, 7Days Inn has been upgrading and optimizing all hotels gradually. Besides, in order to achieve growth, we are focusing on integration of independent hotels in China, planning to reach the target of 5,000 hotels in 2021.” He also expects support from the government to stimulate tourism consumption.
Chang expects the competition between the industry leaders to be even fiercer now. “The influence of brands, the refining of management and digital transformation are (going to be) key factors to survive the crisis and to win over the competitors.” He added, “The crisis caused a sudden stop to China’s tourism industry and hospitality industry in particular. For this industry, reassuring environment, soothing experience and intimate service could be the essence to revitalize the market,” said Chang.
He also added that the organization is looking at refining its data capabilities for multiple benefits. For instance, facilitate access to their data across multiple systems and data sources to empower the front-end staff. Also, to improve operational efficiency at the property level.
Shallen Lu, Founder and CEO, Xana Hotelle, a brand owned by Plateno Group, emphasized that the group will not change their development plan despite the epidemic. “We will still be striving for the first tier of national mid-scale hotel guest room and business ranking. We will also target being the top three hotel brands in terms of service score,” said Lu.
In response to the tough business environment, Huazhu Group worked on cost and cash flow mitigation initiatives.
Ji Qi, CEO, Huazhu, during the company’s Q4 earnings call, mentioned that the team is focused on proactive sales effort, accelerated hotel expansion, digitalization and organization restructuring going forward.
It was also shared that 93.5% of Huazhu’s hotels are in operation, up from the level 50% days ago. As per the guidance provided: Huazhu “expects net revenues to decline 15% to 20% year-over-year or 45% to 50% if excluding the addition of Deutsche Hospitality” and expects the gross opening of 1,600-1,800 hotels this year. In 2020, Huazhu is expected to close 350-450 hotels, including planned closure of 300-350 hotels and special closure of 50-100 hotels impacted by COVID-19.
Ted Zhang, CEO, DerbySoft , in an update on the company’s blog in the last week of March, shared that in Shanghai, things are slowly returning to normal. “Life is coming back to the streets, and our offices are once again filled with employees who had been working from home. We are not nearly through the crisis, but we are beginning to see a slight rebound in search and bookings for the China market, which we hope bodes well for the rest of the world in the coming months,” he wrote.
Vienna Hotel’s Chang said, “It’s true that the confidence in the tourism industry has been negatively affected to a large extent during the widespread of COVID-19 in China. But now, as recovery is underway, travel is set to become a buzzword again. Great efforts are being made to boost the tourism industry, e.g. the campaign featuring pre-sale coupons that can be used for future consumption.”
Trip.com Group’s Jane acknowledged that the short-term consequence will be significant. At the same time, travelers are keen on domestic travel going by early indications.
She said, “Challenge has been on filling the travel deficit found between inbound and outbound travel. Governments recognize this importance and have teamed up for continuous promotions. There needs to be great policy to support domestic travel as well as other services in place such as English signs, passages for foreign guests to catch trains, easier ticket collection etc.”
As for the outbound travel segment, Xana’s Lu said, “I do not worry about the outbound travel since Chinese people have strong desire for it. And I do believe that after the worldwide epidemic (settles down), the size of overseas travel (segment) will rocket. What (got) impacted the most is domestic tourism. Lots of people are constrained as the epidemic developed and even the business trips were curtailed. What we are going to do is to stimulate personal travel, and now we are launching versatile hotel products and service, for example, IP hotels, to meet more individual needs.”
Plans in place
Established hotel brands believe that they acted with sincerity and compassion, and they expect that travelers are going to respond to the recovery in a positive way.
Chang mentioned that no one from Vienna Hotel gets affected and the team is in full power to prepare for the recovery of business, with initiatives including training and digitalization.
“Most importantly, we should guarantee the health, job and deserved incoming to our beloved staff. Second, online training is also underway to empower them and digitalization is being integrated to enhance work efficiency as well. For the investors, we are offering financial support totaling 3.5 billion RMB, management fees deduction and multiple promotion measures,” said Chang.
“Inspired by the COVID-19 epidemic crisis, we will once again strengthen the anti-risk ability with the investors, such as develop reasonable policies and strategies to help the investors survive from the downturn; introduce new technologies, strengthen training, improve the efficiency of the hygiene system to protect the health and safety of employees,” mentioned Zhang.
Organizations expectedly have embraced the work from home (WFH) approach.
Trip.com Group’s Jane said, “From the very beginning, we have initiated WFH (work from home) across the Group. We acknowledge and ensure their well-being. We provide free masks and stick to daily temperature checks to ensure a safe working environment. Staff members can apply their working flexibility, time or place. It depends on different job positions, departments or individual personal conditions. To show our appreciation for their work during this outbreak, we provide bonus incentives, extra work allowance, related entertainment activities, vacation benefits.”
Robust financial planning
As for how hotel groups managed to overcome the precarious situation, Lu referred to the significance of cash flow.
“The COVID-19 crisis keeps me holding a belief that, as always, all stakeholders in hospitality industry should remain anti-fragile,” said Lu. Highlighting the key points, Lu shared:
• First of all, always maintain a healthy cash flow no matter what growth stage the company is experiencing.
• Then to cope with any emergent issue stay alert with daily risk management.
• Last but not least, a franchise business should forge a strong relationship with all franchisees and estate owners’ base on effective communication to reach mutual benefits and understandings.
Aid from the government
The Civil Aviation Administration of China (CAAC) said it will provide subsidies to Chinese airlines. So what sort of support is needed from the authorities to get back on track?
Chang said the government is expected to come up with policies in areas like tax-deduction, loans/ borrowings, consumption coupons, extended holidays, re-opening of tourist attractions, more exhibitions and museums.
For the industry, Lu expects “more low-entry loan schemes” that can be offered to the group’s hotel owners. “And we also hope the local government can speed up the process of hotel operation permit,” said Lu.