Rising rents may damp rosy market
(Shanghai Daily)Updated: 2006-12-06 13:50
According to its listing plan, the group aims to raise a maximum of HK$2.42 billion (US$311 million), with more than half of the proceeds to be used to support Jinjiang Inn's expansion.
Compared with the quick expansion of the local brands, international brands lag behind as it is often more difficult for them to deal with property rental issue since they are less familiar with local environment and related policy regulations, said Mao.
"They are more likely to be overcharged by real estate agencies for instance," Mao said. Yet this does not mean international brands are doomed to fail in this sector.
Ibis, the economy hotel brand of French Accor group, has four economy hotels in China now. Ibis's slower expansion is because all its properties are owned rather than rented. So the one-time investment might be very expensive, but it is good for stable development in the long run, said Mao.
"In the east coast of China, it is better to have owned property rather than rented ones to develop the hotel business, since the rental price is so expensive and shows no sign of falling," Mao said.
"In Shanghai, rent for hotel property is about 15 to 20 yuan (US$2.53) per square meter per month, and there will be a tight supply of hotel property at convenient locations in the following years."
Although franchising takes about 40 percent of Ibis hotel management in Europe, "all our hotels will be 100 percent owned by 2010 (in China), since we take hotel quality as the first priority," said Gilles Larrive, senior vice president of Ibis Asia.
Ibis plans to add 35 new properties around 2008 and will open up to 100 outlets in the following three to four years.
Another factor the budget hotel chains have to take into account is the expected trend for mergers and acquisitions, which might also change the outlook of the economy hotel sector, industry observers said.
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