Budget hotel chains are scrambling to expand their franchises in China by bringing smaller properties into the fold, as they jostle for position in the growing market. The latest franchisers are H Hotel, a newly established hotelier backed by local chain giant Huazhu Group, and India-based budget hotel network OYO, which Huazhu had also invested in previously for a tiny stake (less than 5%).
According to a Nikkei report, the industry is shifting toward consolidation. Data from 2017 showed that hotel chains account for only 3.2 million rooms, or 19% of total rooms available in China. This is considerably lower than the 70% in the U.S. and 40% in Europe.
Both Oyo and H Hotel have already expanded rapidly in China. OYO's strategy of quickly growing its chain contrasts with H Hotel's method of carefully selecting hotels, by, for example, setting certain levels of sales as a condition for consideration as franchisee. As the competition heats up, these chains' ability to win over small hotels will determine their fortunes in the red-hot Chinese market.