Development Report of China’s Lodging Industry 2018 Released in Shanghai_China Tourism Academy
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Development Report of China’s Lodging Industry 2018 Released in Shanghai

2018-11-27 9:02:51       Size:[L  M  S]

On September 14, Dr. Yang Honghao, Deputy Director of Institute of Tourism Industry and Enterprise Development, China Tourism Academy (CTA), issued a special report on China's Lodging Industry: High-speed Growth to High-quality Development on behalf of the research group at the 2018 annual meeting of China's cultural tourism industry held in Shanghai Marriott Hotel Parkview, and shared the main contents of Development Report of China’s Lodging Industry 2018.

According to the Development Report of China’s Lodging Industry 2018, the high-speed growth of China's lodging industry has ended and the high-quality development has begun. The report is divided into five sections.

Development mode: high-speed to high-quality

In terms of the industry scale, the high growth speed slowed down. The number of lodges increased in 2016. However, the growth of investment began to slow down since 2014. In terms of the industry profitability, the lodging only gained low profit as the tourism. The profit margin of tourism and lodging industry barely exceeds 5% and 3% respectively. In terms of brand influence, the brand influence of China's hotel industry has not been improved simultaneously although two hotel groups in China ranked among top 10 in the world in 2012 and further rose in the rank in 2017. In terms of the quality of lodging industry, we still have to take a large step. Quality related issues occurs every year, such as substandard air quality, bedsheets and towels with excessive pH, food poisoning, fire, data leakage and so on. In addition, in terms of industry structure, we saw insufficient and unbalanced development. Specifically, there is certain contradiction between the consumers' ever-growing and diversified needs for lodging experience and service quality and insufficient development & irrational structure of lodging industry. The industry distribution is also unbalanced among regions. All these issues drove the change of development mode to turn into high-quality development.

Driving force of development: factor-driven to innovation-driven

While changing from high-speed development to high-quality development, the driving force of industry development shifts from factor to innovation. The development quality herein includes efficiency, benefit, quality, etc. We should give play to the role of land, capital, human resources, science and technology, creativity and other factors, and constantly improve the total factor productivity of the lodging industry for high-quality development. In the future, land and capital, the traditional factors, will remain important, with the focuses changed. The lodging facilities are functional spaces originally attached to the land. With high-quality land resources getting less and less, we have to make optimum use of existing ones in the future. During high-speed growth, a large amount of investment promotes rapid growth of hotel scale, but the investment benefit remains low. The current return rate of the lodging industry (2% - 3%) is far from offsetting the cost, so the development mode is unsustainable. We should pay attention to asset management of current hotels and lodging industry for better returns rather than building new hotels and lodges in the future.

Human resources, technology and cultural creativity are the innovative factors driving high-quality development of the lodging industry. In terms of human resources, we should pay attention to the role of entrepreneurs, especially private entrepreneurs, which may create a better environment for development in the future. We should create new jobs, such as hotel asset management, brand asset management, and so on, so as to maximize hotel value from operation management and asset management. In terms of technical factors, the application of artificial intelligence, virtual reality/augmented reality, Internet of Things, big data, modular building technology and healthcare technology can cultivate new business model, improve industrial efficiency and experience. According the Report, the application of sleep techniques and block chain in the lodging industry may build a new economy system of tourism. In terms of the cultural creativity, the future economy will rely on story-telling, and the cultural creativity and IP are highly important to industry forms such as boutique hotels, theme hotels, boutique homestay, etc.

Development direction: industrial upgrade driven by consumption upgrade 

We should study the change and upgrading direction of consumption, and drive lodging industry upgrade by consumption upgrade. Low-end and high-end consumption always coexist in tourism, forming a dual structure. However, the consumption of tourism is constantly upgrading in general. Similarly, the consumption of lodging industry is upgrading in general with structural differentiation. The middle-end hotels, boutique hotels, theme hotels, designer hotels and boutique lodges account for increasing proportion significantly. According to the ratchet effect of consumption, people's consumption habits are irreversible, at least in the short term. Thus, the so-called consumption downgrading is unlikely in lodging industry currently. For example, homestay is very popular in recent years, showing the diversification and individualization of tourists' consumption. For rural and low-income tourists, the economic hotels also mean a kind of consumption upgrade, because they used to stay in small guest houses and even basements. Consumption upgrade is shown in diversified forms. There are two key factors driving consumption upgrade, renewal of consumption concept and change of consuming subject. If we divide consumption upgrade into three levels, the lowest level consists of cognitive upgrade and concept upgrade. Therefore, we should pay more attention to and affect the users' mind and concept in product design and business upgrading in the future. In terms of consumption concept, people are paying more attention to quality and individualization. In terms of consuming subject, we should pay attention to the middle class. The millennial generation has become the consuming subject due to strong consumption. The millennial generation has tendency in consumption because they are in shortage of resources to be consumed. They show more trust in local, original and niche brands. Therefore, they prefer more distinctive products of lodging industry rather than more expensive ones.

Advantage is far from a match of the trend. The enterprises of lodging industry must strive to study the change of consumption trends and develop products that meet the needs of consumers. Otherwise, the previous advantages may turn into a burden of development. In terms of product development in lodging industry, the refinement and craftsmanship spirit are required to realize constant reconstruction and iteration. In terms of industry structure, we should upgrade it from low-end to middle and high-end. In terms of brand cultivation, we should consolidate the middle and low-end brands, and attach importance to middle and high-end ones. In addition, we should upgrade the industry chain and reconstruct the value chain, constantly promote the growth of enterprises in the lodging industry, and cultivate unicorn company and invisible champion.

Disruptive innovation: break through the borders and pay attention to fringe fields

The high-quality development and upgrading of lodging industry depend more on the innovation mode from 1 to N, but disruptive innovation is also very important. We can emphasize both breaking through the borders and paying attention to fringe fields. We should focus on the core fields. Specialized development is the only way leading to industry development. However, a lot of innovations are driven by internal factors rather than external factors, specifically, breaking through the borders and integrative development. There are many cases of cross-border innovation. For example, IKEA and MUJI stepped into the hotel industry. In the future, driverless cars may rewrite our understanding of lodging forms. Innovation occurs often in fringe fields of lodging industry, such as Airbnb and Tujia. Airbnb has grown into the world's largest lodging group in a short time. Specifically, the long tail of lodging industry composed of homestays and apartments are relatively fringe fields. However, the long tail has strong power, and it will immediately generate disruptive effects once integrating with network technology.

Industrial policy: theoretical to pragmatic

We should renew the concept. Some people may think lodging industry is very theoretical. In fact, the lodging industry provides actual services for consumers, meets the needs of consumers for a better life, and creates social values. It is necessary to formulate relevant laws and regulations to constantly overcome the institutional factors that restrict the industry development, such as the grey zone of the industry. It has been eight years since the last edition of Standards for Star Hotels was issued, and it is urgent to introduce new standards. The policies related with land use, supporting, financing, subsidies, incentives, etc for homestay and other industry forms should be implemented. The concept integrating culture and tourism should also be implemented in the development of industry products such as boutique hotels/homestay, theme hotels and so on. We should build a reasonable industry system and constantly upgrade the industry chain. We should promote consumption and industrial upgrading from both supply and demand sides. On the one hand, we should increase wealth effect and enhance consumption from the demand side. On the other hand, we should give play to the advancement effect of the supply side, namely, promoting the advancement effect and supply-side reform of lodging industry by technology.

With the Blue Book of China’s Tourism Economy as the core, the "1+8+X" symbolic achievement system of think tank from CTA is composed of special reports on inbound tourism, outbound tourism, domestic tourism, leisure, travel service industry, lodging industry, scenic and tourism groups, as well as special studies on summer tourism and popularity of tourism destination.

1. China’s Tourism Performance Review & Forecast (2017-2018) (Blue Book of China’s Tourism Economy No.10) (Released)

2. Annual Report of China Outbound Tourism Development 2018 (Released)

3. Annual Report of China Inbound Tourism Development 2018 (Released)

4. Annual Report of China Domestic Tourism Development 2018 (Released)

5. Annual Report of China Leisure Development 2017-2018 (Released)

6. China Tourism Scenic Development Report 2018 (To be Released)

7. China Travel Service Industry Development Report 2018 (To be Released)

8. Development Report of China’s Lodging Industry 2018 (Released)

9. Annual Report of China Tourism Groups Development 2018 (released every December)

The above reports can be purchased from Amazon, Dangdang or publishing houses.

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