At present, business activities become increasingly frequent in big and medium-sized cities across China, and travel consumption is emerging, offering favorable external environment for the inception and growth of budget hotels.

In China, high-grade star-rating market are dominated by foreign hotel groups, while domestic brands have very good development opportunities in the fields of low and medium-grade star-rated hotels and budget hotels, which take up more than 90% in the total.

Since the birth of the first budget hotel brand in real sense in China in 1997, three camps have taken shape. The first camp is consisted of nationwide budget hotels brands, such as Home Inn and Jinjiang Inn. The second camp is made up of regional brands, such as Motel168 in Shanghai, 7 Days Inn in Guangzhou, and Jins Inn in Nanjing. The third camp is formed by international hotel management groups, such as Accor Ibis of France and Super8 of the US. Home Inn plans to open 200 hotels by 2008, and get listed successfully. Jinjiang Inn intends to develop 200 chain stores in the next 3-5 years, and eventually open 1,000 hotels around China, and then the company will work on its global layout by making breakthrough in the Southeast Asia first. Accor aims to open 50 Ibis hotels in Chengdu, Qingdao, and Shanghai within the next five years; Super8 plans to sign agreements of intent on the franchising of 68 stores by the end of 2006.

Currently, budget hotels are also facing grim challenges from the market.

With regard to the external environment, budget hotels, on the one hand, are confronting with the test of cost model; on the other hand, they are encountering the test of market regulation. The biggest challenge for budget hotels is cost control. At present, as the real estate market heats up, the price of commercial property is continuously rising in big and medium-sized cities across China, and the rent of commercial property is one of the most important parts of the budget hotels' cost.

At the same time, budget hotels also come under huge pressure generated by inconstant energy cost. In the respect of market regulation, budget hotels should do what is right and truly refrain from engaging in business beyond "boarding" needs. Currently, some budget hotels provide KTV and sauna services, which break away from the original notion of "budget hotel". To enterprises that entered the field of budget hotels earlier and take leading advantages, grasping the opportunity to set industry standard will be an enormous impetus to their development.

As for the internal environment, budget hotels will face challenges from human resources, standardized services, and management system. Most hotel managers cultivated in China are "tailor-made" for big hotels. There are even few textbooks for professional management of small and medium-sized hotels. Budget hotels have robust demand for qualified human resources, and yet the supply is relatively limited. Thus, they have to cultivate human resources for budget hotels anew.

Standardized service poses a huge challenge for many budget hotels. Only when service is standardized, can the quality of service be unified. In addition, it is a challenge for management system. For example, the difficulty of requirement on managing a hotel with 1,000 beds and 300 employees differs from that on managing 10 hotels with 1,000 beds and 300 employees. Apparently, the latter requires a good management system. The method of managing several to a dozen hotels is different from managing a dozen to tens hotels. 

So far, foreign budget hotel brands have not swarmed into China yet, but they certainly will, and will definitely impact on China's budget hotel market. In the future, the domestic budget hotel market may undergo reshuffling, and interests may be reallocated.

In the future, budget hotels will present the following three trends in China:

The first trend is branding. To budget hotels, scale is the foundation of management, and brand is above tangible assets. Only when there are a large number of enterprise colonies under several noted brands, may we say that budget hotels have evolved into a relatively mature business form.

Secondly, trend of chain operation will become increasingly notable. Hotels in many provinces and municipalities across China are basically regional instead of nationwide deployment. To achieve group operation, budget hotels must turn into chain stores. In the future chain operation, chain layout, chain customer source system, and standardization are three most important factors supporting chain operation.

Thirdly, the requirements of standardization on budget hotels become increasingly high. To chain enterprises, overall quality control and quality management is a formidable challenge. How to make all chain hotels run under the same standard is a big science. Without good standardization, it is very difficult to guarantee the quality of hotels, and the enterprise's brand and reputation will be severely affected, which determine how far the enterprise can go.

Editor: Yan