Requirement
The final research report must be submitted in a Word document with 12-point Times New Roman font, single spacing, and 1-inch page margins, and should be within 15 pages (excluding cover page, executive summary, appendixes, references). The report should be named using the following format: CourseSectionNumber_ProjectTitle_Report
The report should have a structure similar to the following:
I. Cover Page (Course Section Number, Project Title, and Members)
II. Executive Summary (300-500 words) 0.5 (Zhengfei)
III. Current Business Situation 3页 2人 (lillian)
IV. Firm’s Objectives 0.5页 (Zhengfei)
V. Marketing Strategy and Implementation 6页 3人 （Han, zhanji，qinsi)
VI. Analysis and Evaluation of the Marketing Strategy 1.5页 1人 （yujie）
VII. Future 1.5页 1人
VIII. Appendix
In Section II, you should provide a concise summary of your project, highlighting the key findings of your research.
Section III of the report should have a structure like one of the cases you studied in this course (e.g., L’Oréal, Renova); you need to describe the market, industry, competition, target firm, its products/brands, consumers, and all other aspects of the firm pertinent to formulating the marketing strategy.
In Section IV, you need to lay out the objectives of the firm—what the firm aimed to achieve through the marketing strategy.
In Section V, you should explain in detail the marketing strategy the firm decided to pursue (e.g., STP, 4P’s), how the firm made the decisions, and what were the rationales behind these decisions.
You will then explain, in Section VI, how and why the strategy is effective or ineffective (what worked and what didn’t), and, if appropriate, how and why the firm should have done it differently.
In Section VII, you should discuss what might be the future challenges and opportunities for the firm, as well as what you think the firm should do next. You can provide charts, diagrams, photos, tables, and other supplementary materials in Section VIII.
Questions:
-What should be the focus of the report? Marketing Strategy and Implementation，Analysis and Evaluation?
-what should we focus on when doing analysis?
how to define marketing strategy
which kind of action
haiyang答疑的重点：
1. 整个report各个部分之间要衔接流畅，如针对mkt stg的evaluation需要紧密结合公司的目标来看
2. recommendation部分主要是针对现状和新的reality的变化，给公司提出updated 策略
3. 报告的最小篇幅没有严格的规定，最多写15页，打分主要看报告整体的质量
4. 可以重点关注本周的小米进军premium市场的case，和我们的project相关度很高
材料参考：浩华酒店咨询
focus on high-end market
NOTES ON MARKETING STRATEGY RESEARCH PROJECT
I. Business Situation 2018年的现状
Please describe the business situation the firm faces. You can consider discussing the 5 C’s (i.e., Consumers, Competitors, Collaborators, Context, and [your] Company). Some of the potentially relevant topics you might want to consider include:
(1) Consumers: Who are the firm’s customers? Who should be the customers (but currently are not)? What are consumers’ objectives? What are they really buying? What might be their unmet, latent needs? What are consumers’ priorities? What aspects of the product/service do they value most? How are consumers changing?
老用户迁移到华住会
用户体验
华住更加理解用户需求
中高端：酒店不止是居住创所，是创造回忆的空间
(2) Competitors: Who are the firm’s competitors? Who are the potential competitors? What are their strengths and weaknesses? How are they changing? What might be their future moves?
分类：连锁和非连锁酒店/国内和海外
(3) Collaborators: Who are the firm’s collaborators? Why are they collaborating with the firm? How dependent is the firm on them? How are they changing?
雅高，accor
(4) Context: What are the important demographic and economic variables influencing the market in which the firm operates? What are the prevalent sociocultural trends that might affect the firm? How about technological advances, and political and regulatory changes?
市场环境
Covid-19
(5) Company: What are the firm’s strengths and weaknesses (particularly given the 4 C’s already discussed)? What are the current and emerging threats and opportunities?
SWOT
As we discussed in Session 1, a change in one of the C’s (e.g., changes in sociocultural norms) can sometimes result in a change in another C (e.g., consumer preference), which, in turn, might affect the next C (e.g., competitors’ behaviors), and so on. If such dynamics are pertinent to the firm you are investigating, please provide a discussion.
If pertinent, you can also consider discussing the industry in which the firm operates using the 5 Forces:
(1) Rivalry among existing competitors (2) Threat of new entrants
(3) Threat of substitute products/services (4) Bargaining power of suppliers
(5) Bargaining power of buyers
II. Firm’s Objectives
Please describe the outcome the firm aims to achieve. For example, a firm that experienced a steady decline might aim to turn around its business. An ‘underdog’ firm might aim to attain more market shares. An already-successful firm might aim to sustain its lion’s share of the market, over extended periods of time. A locally dominant firm might aim to enter a new market and attract new customers.
2017-2018年新闻，通稿，找到高端市场的目标；
维度，量化指标
meiju huajiantang
品牌形象 酒店会员数量
Please explicate the firm’s marketing strategy. Please describe how the firm segments the market. For example, is the segmentation based on demographic variables, psychographics and personality characteristics, or product/service usage behaviors, or a combination of such variables? Please identify the segment(s) the firm selected to serve, and explain why it decided to target the segment(s). Finally, please describe the positioning the firm decided to pursue—the distinctive mental image that the firm wants its target consumers to have for its product/service offering.
If pertinent, you can also consider applying the ERRC framework (Eliminate, Reduce, Raise, & Create) we discussed in the session on Blue Ocean Strategy to illustrate how the firm’s strategy differs from their competitors.
After laying out the strategy, you should describe its implementation in detail. Perhaps, you can explain the implementation using the classic 4 P’s (i.e., Product, Place, Promotion, and Price). Some of the potentially relevant topics you might want to consider include:
(1) Product: What kind of attributes does the product/service offer? How about design/aesthetics and quality? How is product packaged? Does the firm provide a variety of products/services?
(2) Place: Which distribution channels are used? How much coverage do the channels provide? How about shipping and transportation (if pertinent)?
(3) Promotion: How does the firm advertise and brand the product/service? How does it leverage traditional (e.g., TV) and new communication platforms (e.g., social media)? What are the promotional activities in stores / on ecommerce sites (if pertinent)?
(4) Price: What is the price for the product/service? How do the prices differ if a variety of products/services are offered? Is there a financing option for the offerings (if pertinent)?
If pertinent, you can consider contrasting the 4 P’s of your firm with those of a key competitor (or key competitors).
STP zhouhan
ERRC qinsi
4P(+competitors) zhanji
IV. Analysis and Evaluation of the Strategy
Please conduct a thorough analysis of the primary and/or secondary data you collected, and provide an objective discussion regarding the extent to which the firm’s strategy was successful. Please explain what worked and what did not, and the reasons underlying those achievements and/or failures.
V. Future
Please discuss the future challenges and opportunities for the firm. For instance, if on-going changes of the 5 C’s can impact the firm substantially, should the firm change its strategy? If so, how? Furthermore, if your analysis in Section IV suggests that the firm’s current marketing strategy is inadequate, what is the new marketing strategy your team would recommend? How should the firm segment, target, and position its product/service? How should the firm alter its 4 P’s to implement the new marketing strategy?
II. Executive Summary
III. Current Business Situation
Consumers
There are three criteria that we applied to analyze our consumers. Firstly, for the purpose of travel, we may divide the consumers into two segments: business travelers and leisure travelers. Business and leisure travelers have distinct differences among needs and travel patterns. For business travelers, location is key. Constant and stable high-speed internet connection is requested as well as basic amenities and business facilities. On the other hand, leisure travelers devote particular attention to entertainment and recreation facilities. Secondly, we can also divide consumers more subtly according to their attributes per se, from whether they are rational and price-conscious travelers or value- and quality-conscious travelers. The former group of consumers are price-sensitive and are drawn to hotel packages while the more affluent latter group want more than a place to stay but a meaningful experience. Last but not the least, it is worth noting to separate H Rewards members (Huazhu Hotels membership and reward program) from ordinary consumers for the research purpose of our study(over two-thirds of Huazhu’s room nights were sold to H Rewards members). Many individuals or corporate consumers may have a preferred hotel that grants special rates, ensures standard comfort, and keeps costs under control.
Competitors
As a multi-brand hotel group, Huazhu mainly competes with other hotel groups as well as different independent hotels, including Chinese hotel groups like BTG Homeinns, Jinjiang, and Atour Lifestyle Holdings, as well as international hotel groups such as Marriott, Intercontinental, Hilton, and OYO. Huazhu Group together with Jin Jiang International Holdings Co.and BTG Hotels, the three China hotel giants have taken more than half of the overall market share. Specifically speaking, the competition is primarily based on location, room rates, brand recognition, quality of accommodations, geographic coverage, service quality, range of services, guest amenities, and convenience of the central reservation system. Moreover, Huazhu confronts competition from other lodging options such as service apartments and Airbnb. Existing competitors and new entrants may offer more competitive rates, better services, or superior facilities, which could attract customers away from Huazhu. Competitors may also negotiate better terms for potential franchised hotels or offer better terms to Huazhu’s existing franchised hotel owners, thereby hampering Huazhu’s expansion pace. Even if the hotel peers do not outcompete Huazhu, any increasing supply of hospitality assets in the urban areas where Huazhu now operate could negatively affect their operational and financial results. Moreover, people have developed many indoor leisure activities during quarantine, which could substitute traveling and dispel their travel desires, resulting in a decrease in Huazhu’s occupancy rates and average daily room rates.
In regards to future competition situations, some competitors even took similar strategic activities, which may pose threats to Huazhu’s future development. Homeinns Hotel Group formed a strategic joint venture with Hyatt to create UrCove, a hotel brand that is positioned to compete in the currently underserved upper-midscale segment, providing them with a seamless and premium travel experience. Atour, the largest upper midscale hotel chain in China[1], has a distinct brand portfolio of lifestyle brands, which have been quite welcomed among consumers in recent years. The “A-Card” loyalty program of Atour, built to enhance engagement and personalized experience for guests, has a strong customer stickiness similar to the H Rewards members of Huazhu.
The rise of OTA (online travel agency) like Trip.com has been cannibalizing the business of these hotel giants. For example, the penetration rate of Trip.com in hotel accommodation is as high as 32.8%. To avoid direct price competition and save their costs in commission fees from these third parties, big companies like Huazhu and Jin Jiang all started using their own apps like Huazhuhui.
Collaborators
Huazhu continues to establish partnerships to pave the way for high-end transformation. In early 2016, Huazhu completed all strategic alliance transactions with Accor. Under the arrangement, Huazhu is now Accor’s exclusive master-franchisee operating and developing in Mainland China, Mongolia, and Taiwan for the economy and midscale segments. Besides, Huazhu has become a minority shareholder in Accor’s upscale hotels business in China (10%) and will support the future development of Accor’s luxury hotels(including Sofitel, Pullman, MGallery, and The Sebel) in China.
Furthermore, Huazhu has collaborated with service agencies and airlines, etc. to better meet consumer needs in more stages and cover the full spectrum of market segments. They collaborate with renowned information security companies regarding 24/7 system monitoring and emergency response to further strengthen data security. By collaborating with renowned consulting companies, they aim to strengthen the infrastructure of information technologies and systems and to ensure compliance with data protection laws and regulations.
Context
The lodging businesses are subject to multiple conditions, ranging from economic conditions, national/regional/local competitions, weather and seasonal conditions, costs and expenses, and relevant government regulations. These conditions in China, Europe, and other countries and regions where Huazhu operate all have a major impact on Huazhu’s performances. As part of the tourism industry, Huazhu is highly sensitive to business and personal discretionary spending levels. In the past few years, China’s economic boom has promoted the continuous development of the hotel industry, and consumer demand for mid-to-high-end hotels has continued to increase. In the future, slowdowns of the Chinese economy could erode consumer confidence which could result in changes to consumer travel plans and budgets, and hurt lodging-related products and services. Seasonality of the nature of the business, as well as regional events, has an unignorable impact on the revenue as well. Summer is high-time for business whereas in the first quarter when events like Spring Festivals take place, we may witness lower sales.
The closure of hotels and lower occupancy rate during the COVID-19 period has adversely affected and may continue to adversely affect the lodging industry’s financial and operating performance, particularly to those hotels groups like Huazhu. Even if large-scale “retaliatory” travel has rejuvenated the hotel industry as a whole in the first half of this year, with the volatility of the epidemic, it is difficult for us to look at the future situation of the hotel market optimistically. In the long run, the business travels will gradually stabilize as opposed to leisure travels, which are more unpredictable provided that it is dependent upon income status and the overall state of the economy.
The trend in the lodging market is a high investment in the development of technology applications on the infrastructures and user services. For example, embedding Internet of Things (“IoT”) technology to a centralized procurement system (CPS) enables hotels to efficiently manage operating costs and allows all hotels across the network to make bulk purchases of hotel supplies at the same time. The upgraded digital system has greatly enhanced user experience as well, such as self-check-in/out kiosks, smart robots and AI assistant, etc.
Company
This concluding sector of Huazhu’s business overview follows the structure of Strengths, Weaknesses, Opportunities and Threats (SWOT) model. Recent years witnessed an ambitious growth of the hotel giant towards the top tier of the industry, yet brought new challenges it had never faced when Huazhu gained its entry to a subdivision in which it looked forward to winning.
The rich brand portfolio ranging from economy category to upscale luxury is the bedrock of Huazhu’s success and what the company has been proud of. With the intention of seizing market share and higher marginal profit in the high-end hotel market, Huazhu’s initial action was taken as early as 2013, since when they have been accumulating experience in operation, brand awareness among the public, and loyal customers sticking to their own app and brands. However, such heavy heritage is not always in favor of Huazhu’s brand-image lifting. For Huazhu as a hotel group, it is difficult to convert people’s instant and common association with Hanting (Huazhu’s most famous economy brand) to higher-tier names such as Joya and Blossom House. Consequently, the persuasion is tougher to make consumers pay a premium for Huazhu’s luxury brands than those better-known competitors already running in this course for decades. The existing intense competition in the market is the biggest threat for Huazhu. To strive in the future, Huazhu’s opportunities lie in the development of immature markets where competitors’ chain hotels haven’t taken up most share, where Huazhu should arrive in a younger image with smarter service.
IV. Firm’s Objectives
Huazhu Group at the moment had completed the first step to break out of the highly competitive hotel industry, where it was the leader in terms of market share and user stickiness. For future Huazhu, to gain more even market share and more advantages in competition, the new fortress they needed to conquer is the middle and high end of the market. To achieve this much more difficult objective, Huazhu should to work in two directions. On one hand, Huazhu would continue its expansion in both the Chinese and overseas market to enrich their brand portfolio and make their brand image more premium. On the other hand, unlike traditional hotel companies, Huazhu would continue to build on its long experience in the technology sector, empowering the hotels it has been running with cutting-edge AI technology, which for Huazhu was a differentiated way of closing the gap with rivals.
On the 2017 Huazhu World Conference, Huazhu Group for the first time stated its intention to become a global hotel group (Tao, 2017). To realize this ambitious intention, the foundation for Huazhu in the coming years was keeping its pace in expansion as well as its profitability. Apart from this basic requirement, Huazhu would focus on quality. To improve the overall quality of Huazhu’s hotel services, an obvious and necessary approach was to put more weight of Huazhu’s business on higher end of the market. In China, Huazhu would continue to expand its brand portfolio by establishing new brands and making more acquisitions. Overseas, Huazhu intended to invest more on mid-tier and high end hotels to practice its strategy of globalization.
On the following year’s World Conference, Huazhu specified their approach to future growth: use technologic, AI in particular, to empower Huazhu’s development in both scale and efficiency. For the past years, Huazhu’s implementation of technology focused on how to bring the hotel business online, reducing operation costs and providing better user experience. In the future, with the development of AI, Huazhu hoped to provide personalized services with less human and material resources. As a service provider, Huazhu understood that some services cannot be replaced by cold technology, therefore, Huazhu summarized the future objective in a phrase, “Man-machine integration”.
V. Marketing Strategy and Implementation
STP Analysis
The development of Huazhu Group Limited has grown rapidly in over a decade. It has more than 20 hotel brands now, and develops from an economic chain to multiple brand hotels, covering almost all segments in the market (Huazhu, 2021). Based on the analysis of STP, we found that Huazhu Group Limited definitely has a deep understanding of consumer insight and a sophisticated system to explore consumers’ demands.
Segmentation（中高端人群细分）
Specifically, Huazhu Group Limited mainly develops four scales of hotels to segment its targeting consumers, including economy, midscale, upper midscale, and upscale hotels.
This brand segmentation is a combination of several variables, including demographic, income, geography, and personal characteristics. Also, hotels in each scale have exclusive features to attract customers by adding extra value and incentives, like local culture.
First of all, according to geography, upscale and upper midscale hotel brands are focusing on tier 1 and tier 2 cities, where people who care about the quality of life and have a relatively high income are living in. Respectively, economy and midscale hotel brands are mainly located in tier 3 and 4 cities.
Furthermore, among those brands, they consider business districts to identify specific segmentation. For example, IntercityHotel becomes a symbol of transportation, while Grand Mercure and Joya Hotel are concentrated in the center of the city.
In addition, the personal characteristic is regarded as an inevitable factor as well because of its exclusivity. It’s a personal characteristic that causes diverse requirements, which make the market provide corresponding services to fulfill different requirements. To be specific, the youth are a group who are easily attracted by innovation, artificial intelligence, and networking because they are more inclusive to accept the new format of things and meet new friends. Setting up the various themes, like Hello Kitty, Marvel, One Piece, and movie scenes, is a way to attract their attention. For business travelers, their trips are more related to doing business. What they want is efficiency and comfort to release their pressure from heavy work. Hence, they tend to pursue a high comprehensive demand of hotels, involving convenience of location, identity shown by brand image, quality of fitments, and comfortable living environment. Besides, people living outside with their family have the purpose of cultivating kinship and relaxing from daily trivial things. Family trips especially with children emphasize safety, healthy food, entertainment, room size, and equipped hardware facilities. They intend to enjoy and feel a life-enriching experience without rush hour.
As the segmentation of Huazhu Group Limited is as thorough as possible, it’s instrumental to understand and analyze consumers’ requirements, providing excellent services and environments.
Targeting （商务客）
Huazhu Group Limited’s targeting is expanding and developing the strength of its middle to upper-scale hotel brands. Launching Joya Hotel, an upscale brand in 2013, Huazhu Group Limited enlarged its portfolio with international midscale to upscale brands to further enter the upscale market by a strategic alliance with Accor in 2014 and acquisition of Deutsche Hospitality in January 2020 (Huazhu, 2021).
Based on this ambition, Huazhu Group Limited primarily focuses on millennials (age from 25 to 40) and generation Z (age from 9 to 24) who have the ability of consumption and requirement of aesthetic. Also, millennials and Generation Z are the highest spenders as travelers. Millennials take an average of 35 days of vacation each year, while generation Z takes 29 days each year. Furthermore, 35% of millennials are willing to stay in upscale and luxury hotels. 81% of generation Z consider budget as a factor to make a decision (Travel Statistics). Therefore, midscale to upper scale hotels will become their first choice to think about when they have a travel plan. Living in a high-quality hotel with a limited budget tempts consumers to choose.
Positioning （图）
For millennials and Generation Z, they are the groups that have an intention to value a brand through high national identity and culture. Huazhu Group Limited positioned itself as a smart, warm, and affectionate travel companion. In order to enhance the brand’s recognition and customer loyalty, Huazhu Group Limited also builds and differentiates the brand image of each of its hotel products (Huazhu, 2021).
For instance, Songpin hotel is designed as a place where consumers can discover the interest of art life and appreciate the beauty of art in life. From the perspective of China’s elegant and luxurious lifestyle hotel, Songpin hotel conveys an elegant life attitude with the ultimate creative art and luxurious and comfortable service, helping travelers perceive the environment by their sensitive senses and close to nature. Huazhu Group Limited combines local culture and brilliant design to provide a special and consistent living environment to consumers.
In addition, Huazhu Group Limited established a member community called the H Rewards loyalty program. It stands for a member who has a right to enjoy privilege under all Huazhu Group Limited’s hotel brands. It has a membership point mechanism to stimulate and incent consumers as brand loyal users. As consumers frequently live in hotels belonging to Huazhu Group Limited, then they are more likely to have the right to live in midscale to the upper-scale hotel with the cheapest price compared with the market price. It’s an efficient strategy to help Huazhu Group Limited expand their consumption volume of midscale and upscale hotels.
ERRC Analysis
By creating its innovative high-end brand portfolio, raising digital consumer services and operations of corporate, reducing the number of managers and service staff, and eliminating high-cost and low-utilization facilities, Huazhu has taken a stride to differentiate itself in the high-end hotel market.
Create
First, Huazhu has created a unique portfolio of high-end hotel brands, covering different market segments and diverse consumer demands. In recent years, China’s economy has grown at a rapid pace and the standard of living of Chinese people has risen significantly. In 2020, China’s per capita disposable income reached 32,189 yuan (citation 1). This figure has more than doubled compared to the figure in 2010. After the majority of the Chinese urban population has met the basic needs for food and clothing, people have begun to focus on improving the quality of life. As the overall strength of China becomes stronger, more and more Chinese people have a strong sense of national pride. The trend makes a variety of national products promoting Chinese-style design become popular. In addition, the new generation of Chinese consumers are beginning to have more diversified and personalized needs.
However, in the current mid- to high-end hotel industry, hotel styles are mostly standardized and most hotel designs follow the Western notion of luxury. Huazhu Group identified this unmet demand and have established or acquired a series of high-end hotel brands with their own distinctive features in addition to the existing standard high-end hotel brands. As mentioned in the product section of the previous 4p analysis, Huazhu’s premium line brands include its own brand Joya, acquired brand Blossom House, and its cooperative brand Mercure with Accor, etc. Their innovative positioning includes oriental refined living, utopia in the city, oriental French, etc. Whereas, other competitors are still pursuing the imitation of international high-end hotels.
Raise
Ji Qi, the founder of Huazhou Group, was also the founder of Ctrip, China’s largest online travel agency, which makes him very Internet-minded. Although the hotel industry belongs to the traditional industry, Ji Qi led the entire team to digitize consumer services and business management to the maximum extent. These initiatives have dramatically improved consumer loyalty, user experience, and operational efficiency.
With the development of mobile internet, Huazhu established its own mobile application Huazhu Club. The main function of this application is to set up an online membership reward system. As mentioned in the promotion section in 4p analysis above, Huazhu Club uses a series of strategies to attract consumers to become members of Huazhu Club. Instead of asking consumers to download the application and signing up for the membership while checking in, Huazhu used more effective methods such as exchanging free additional services for signing up. In addition to increasing the number of new members, the company also pays great attention to the retention of members by offering reward activities online and offline. As a result, Huazhu has created a highly sticky online membership system. Compared to other competitors, Huazhu has the highest number of members in the industry.
Moreover, using mobile Internet and cutting-edge technology, Huazhu has improved the user experience throughout the consumption process. Users can select and book the hotel based on their preferences, including city, time, location, price, star rating, etc., on the Huazhu Club application. After arrival, users can use the self-check-in machine to obtain a room card through automatic authentication such as face recognition, without having to deal with a real person. When checking out, consumers can return the card through the machine. Huazhu officially promotes it as “30 seconds check-in and 0 seconds check-out”. For corporate employees who stay in hotels on business trips, Huazhu provides an online invoicing system and employees can obtain electronic invoices online through the Huazhu Club application. Besides, Huazhu is also entering into alliances with enterprises, and employees staying at Huazhu hotels for business trips can log into Huazhu Club through their corporate accounts to enable the hotel to deduct funds directly from their company accounts, while eliminating the reimbursement process.
Huazhu also optimizes the user’s in-stay experience through Internet of Things. Once arriving at the room, users can use the Huazhu Club application to connect to WIFI with one click, which solves the pain point of not being able to find the WIFI password. For devices in the room, including door locks, switches, curtains, air conditioners and TVs, users can remotely control them with their cell phones. Huazhu Club also provides online reservation for laundry, charger and other item borrowing, luggage delivery, online reservation for cleaning and other services. Recently, Huazhu has also developed the robot “Hua Shopkeeper”, which is responsible for delivering goods to guest rooms. It can save the labor cost and also improve efficiency.
In terms of enterprise operation management, Huazhu has established a comprehensive technology infrastructure. It has built a digitalized middle office to centrally manage its business, which includes customer relationship management system, central reservation system, etc,.
Reduce
4P Analysis
In view of this strategy, Huazhu has made a series of actions. From the hotel product development, channels, publicity, and pricing. The middle and high-end market is a brand-new market for Huazhu, which faces different consumer groups and serves different objects. As new customers have different consumption habits and demands, Huazhu has implemented its own strategy according to their characteristics.
Product
To enter the middle and high-end market, Huazhu needs to provide better accommodation products. Unlike budget accommodation products, which only emphasize sleep quality and room hygiene, high-end accommodation products have more product standards. High-grade hotels need to have more design sense of facade, wider lobby space, larger guest rooms, more sound health and recreation facilities, more restaurants, and more quality services and so on. In accordance with this requirement, Huazhu uses new hotel brands to create middle-to-high-end and high-end hotel products.
Huazhu made great efforts to launch a variety of middle to high and high-end hotel brands. It created a new brand Joya in 2013. Then it acquired the brand Orange Crystal in 2017 and Blossom House in 2018. In 2019, it took over DH Hotel Management Group, which has high end brand Steigenberger, Jaz and middle end brand Intercity. Even more, with the collaboration with Accor in 2014 and Sunac ( a one of largest real estate developer in China) in 2020, Huazhu has the right to operate and manage the Accor’s brand (Mercure, Grand Mercure and Novotel) and Sunac’s (Manve Hill, Manve Glamor and so on). It also launched luxury brand Song hotel, Le Banshan hotel in 2021(Huazhu,2021).
Among these, representative brands include Its own brand Joya, its acquired brand Blossom House, and its cooperative brand Mercure with Accor. These brands have different features to cater to different preferences and different types of accommodation needs.
Joya hotel is characterized by neo-Chinese aesthetics which is widely used in the lobby and guest room design (Exhibit 1). The guest room equipped with costly desk and chair from Shangxia(上下), which is a luxury Chinese furniture brand. At the same time, Huazhu hired Chinese local designer Zhou Guangming as the chief designer of the Joya. Joya hotel also has stricter requirements on site selection. It only opens in central business areas of core cities, such as Lujiazui in Shanghai and Qianjiang New Town CBD in Hangzhou. The central location means convenient transportation and commuting. The Hotel Joya is positioned as a business hotel to meet the needs of business travel. Blossom house, another resort brand, is more diverse in its design, incorporating regional culture (Exhibit 2). Some Blossom House hotels are even built inside scenic areas, with children’s entertainment areas and pet-friendly features to appeal to high-end vacationers. The brands that cooperated with Accor have different product features. Mercure, as the most valuable mid-to-high-end hotel brand (refer), focuses on French elegance and romance. The design of lobbies and guestrooms highlights purple elements (Exhibit 3). At the same time, Accor has its own brand standards for Mercure, which makes Mercure become a standardized mid-to-high-end hotel brand.
Place
Hotel product is a special kind of goods, it emphasizes consumption in the store to complete. Therefore, huazhu’s distribution includes the selection of hotel locations, including cities and business districts.
In the distribution of hotels, China’s high-end hotels are mainly distributed in the first and second tier of economically developed cities in the business circle. Among them, Joya brand is the strictest site selection, only opening in the core of the first-level city. Blossom House hotels are within two-hour commutes of large cities, often near well-known attractions. The Mercure brand has a less restrictive distribution, with more than 70 stores in China.
Huazhu sells hotel products through multiple channels. First, Huazhu has its own sales official website and APP. This is the direct sales channel of Huazhu. The main distribution method of Huazhu is for members to book rooms directly through huazhu’s own sales platform. Huazhu has been trying to establish its H reward membership system, Huazhu Club, which allows members to book rooms using huazhu’s official website or APP. In 2020, the number of huazhu members exceeded 150 million. Second, Online Travel Agencies (OTAs). With the rapid development of e-commerce, OTAs have replaced travel agencies as the main way for people to book airline tickets and hotels. OTAs is an important distribution channel for Huazhu and an important source of customers. Ctrip is the largest OTA platform in China, and some hotels in China have more than 50 percent of their customers. Third, book directly by phone. Some older customers or corporate group customers will call the front desk or hotel sales to book a room. For the hotel that undertakes many conference needs, this channel also contributes a larger proportion. Fourth, Accor’s direct channel. Former Accor members can still book Accor brand hotels managed by Huazhu through Accor’s channel. Therefore, Accor’s direct channel is also an important source of Accor brand hotels. Fifth, wholesalers are the link between hotels and consumers or travel agencies, which can bring guests to hotels. This channel accounts for a small part of Chinese tourists. Finally, global distribution system, a small number of foreign tourists may use this channel to book hotel rooms.
Generally speaking, 40 percent of guests of high-end hotels of Huazhu come from direct channels of Huazhu or Accor, 35 percent from OTAs and 20 percent from hotel sales representatives. The remaining 5 percent comes from other sources. The mix of customers varies from hotel to hotel, and basically the more high-end the hotel, the greater the proportion of OTAs and hotel sales representatives.
Promotion
Because hotel products are special compared with other products, Huazhu mainly promotes hotel brands and products through tweets (Exhibit 4).. For each opening of a high-end hotel, Huazhu will publish relevant tweets on its wechat official account to promote the hotel. At the same time, packages of popular hotels in Huazhu will be recommended on the app. Instead of promoting its products on traditional media, Huazhu uses social media to promote its high-end brand hotels in consideration of the consumption habits of young people in the new era. For example, Huazhu will hire some Internet celebrities and KOLs to test stay at the hotel, experience the afternoon tea, and let them express their opinions. Through this way to improve brand awareness, attract fans to try.
The promotion activities mainly take place in member development. As mentioned above, Huazhu attaches great importance to its member development. So they sell memberships to new customers when they check in. Huazhu gold card members need to purchase, the price is 219RMB, equal to about $30. There are additional benefits for members staying. Such as free breakfast and afternoon tea, welcome fruit and departure gifts and so on. Members also get discounted rates when they book rooms and earn points that can be used to offset their room costs in the future.
Price
Hotel room rates change in real time, depending on weekdays, off-peak seasons, and events. In general, mid-to-high-end huazhu hotels are priced between $80 and $200. Different hotel brands have different prices. Among them, Joya, Grand Mercure, Steigenberger and Blossom House are premium positioned and priced higher, typically above $150. Mercure, Novotel and others are in the middle and high end, priced around $80- $100. At the same time, the pricing of the same hotel brand will also be affected by geographical location. Hotel prices in first-tier cities will be higher than those in second-tier cities, and those in core areas of cities will be higher than those in surrounding areas.
Huazhu offers a price discount for its members. This action is rare for hotel groups. Different levels of membership have different levels of discount. For silver the level is 8% ; for gold degree is 12% and platinum is 15%.
VI. Analysis and Evaluation of the Marketing Strategy
Responding to the outbreak
We understand that the HZ Group’s primary goal since early 2020 has been to provide the best possible response to the effects of the severe epidemic. Following the Group’s internal adjustments and the implementation of new hygiene regulations, their hotel services have recovered at a satisfactory rate, and in the second quarter of this year, the Group’s revenue for the six months to the end of June rose 49 percent year on year to RMB 5.91 billion, with a net profit of RMB 130 million, completely reversing the loss of RMB 2.68 billion in the same period last year(Huazhu Group Limited, 2021).
Huazhu Expansion without slowing down
The emergence of the new Delta variant virus has resulted in the implementation of new travel restriction policies by relevant government departments, which has had a significant impact on the entire hotel industry.
Huazhu, on the other hand, did not abandon its expansion plans as a result. Huazhu (excluding DH) opened 481 new hotels and closed 140, for a net increase of 341 hotels in the third quarter of 2021 (see Exhibit a). Huazhu (excluding DH) opened a net 243 hotels in the second quarter of this year, and the rate of store openings continues to rise. Huazhu Group had 7,466 hotels in operation as of September 30, 2021, with 722,983 rooms and 2,827 hotels under construction. In China, there are 7,345 hotels in operation, with a total of 698,668 rooms.
At this rate, the number of hotels operated by Huazhu is very likely to reach the target of 10,000 by 2022.
Decline in hotel occupancy and RevPAR while costs increase
Despite the fact that the rate of hotel expansion has not slowed, both hotel occupancy and RevPAR are on the decline. Looking at the data for the third quarter of 2021 (see Exhibit b), the occupancy rate of Huazhu’s hotels (excluding DH) decreased by 10.1 percent, while RevPAR for 2021 was $177, a 1.1 percent year-on-year decrease. Furthermore, the average daily rate of Huazhu’s hotels in the third quarter of this year exceeded the pre-epidemic levels over the same period, increasing by 2.7 percent from the same period last year. However, compared to the pre-epidemic period, occupancy and RevPAR dropped 15.8 and 17.8 percentage points, respectively, from the same period in 2019.
Hotel expansion while maintaining RevPAR performance is an inherently difficult task. Huazhu intends to run the company using Internet business principles, introducing IT and IoT to reduce operational costs. Hotel operating costs is approximately RMB 2.9 billion in the third quarter of 2021, according to the cost side of the equation. “The increase in operating costs was primarily due to higher rental costs for leased and owned upscale hotels, as well as the acquisition of CitiGO hotels, as well as higher staffing costs due to the continued expansion of our hotel network,” Huazhu explained. In the third quarter of 2021, Huazhu and subsidiaries’ hotel operating costs (excluding DH) were RMB 2.3 billion. This accounts for 76.9 percent of revenue for the quarter, up from 70.4 percent in the same quarter last year and 65.5 percent in the previous quarter. According to the results, Huazhu did not meet its goal. Instead of remaining stable, there is a downward trend.
(https://pdf.dfcfw.com/pdf/H2_AN202111241530891657_1.pdf?1637783018000.pdf)
Anchoring on “mid-to-high-end”
Entering the mid-to-high-end market has always been the primary goal of Huazhu Group. In the third quarter of 2021（see Exhibit c）, there were a total of 2,788 hotels that had not yet opened, of which 50.72% were mid-range and above, which shows the determination of HASCO to lay out the mid-range and high-end market. During the year, Huazhu has been upgrading its brands in order to maintain growth. In the mid-to-high-end hotel market, there are several brands such as Orange Crystal, Manxin, Hualetang, Xi Yue, etc. In 2021, high-end hotel brands such as Shipperge and Songpin have also been officially put into operation.
Huazhu Group’s primary goal has always been to enter the mid-to-high-end market. There were a total of 2,788 hotels that had not yet opened in the third quarter of 2021 (see Exhibit c), of which 50.72 percent were mid-range and above, demonstrating Huazhu’s determination to lay out the mid-range and high-end market. Huazhu has been upgrading its brands throughout the year in order to maintain growth. There are several brands in the mid-to-high-end hotel market, including Orange Crystal, Manxin, Hualetang, Xi Yue, and others. High-end hotel brands such as Shipperge and Songpin will also be operational in 2021.
Recommendation
On the one hand, due to the epidemic, many independent hotels began to abandon the market, which is very favorable to the expansion plan of Huazhu Group. On the other hand, under the pressure of room occupancy rate, RevPAR and other data, the plan to continue to acquire high-end brands overseas began to be shelved, and the overseas expansion did not progress smoothly under the repeated epidemic. The epidemic has clearly hindered Huazhu’s expansion in both domestic and overseas markets, as well as in the mid-to-high-end market, and has also negatively impacted franchisees. Therefore, the current plan of the Group still needs to focus on cost cutting, infrastructure building and digital transformation. This will enable Huazhu to achieve the desired goals after the outbreak is over.
VII.Future
The global market has provided Huazhu with a number of challenges and opportunities for the future. By segmenting, targeting, and positioning its products and services through effective marketing, this hotel chain can expect to grow significantly in the future both within China and in the international sector.
The company may face two major challenges in the future. Firstly, the business-to-business (B2B) alliance with Accor, based in Paris, to facilitate multi-brand hotels is currently on a steep decline. Accor has already sold half of its stakes with Huazhu to compensate for the losses it experienced during the Covid-19 pandemic (Spearance, 2021). Secondly, as Huazhu rapidly expands to the international market, with over 250 hotels scheduled to be inaugurated in the next few years (Hamidi, 2019), the management may struggle to keep up with the fast-growing needs of the various hotels. With a carefully planned future strategy, these threats can be overcome.
Despite these threats, there are several opportunities for growing the business and its services in the long and short term. Converting to a smart hotel by using the latest automation technology can be a major opportunity for the future. Smart hotels can lead to a reduction in the need for too many service staff and result in the lowering of operational costs. Even if all services are not automated, the integration of technology to enhance the customer experience can be beneficial for Huazhu. It may be possible to integrate these smart features into the hotel own mobile applications to allow customers to customize their own experience. Simultaneously, increasing the number of high-end services offered in the hotel will appeal to the consumers seeking a luxury experience.
The recruitment of high-quality talent for senior staff roles within the hotel chain and improving the overall services of the hotels are important future goals for Huazhu to retain a competitive advantage in the premium hospitality sector. Improved services through technology can have a positive effect on brand positioning. Marketing the new intelligent services offered in the hotels can have a significant benefit for attracting customers who are seeking an advanced customer experience. This will appeal to the national and international business sector personnel who constitute the target customer segment for mid-high range hotels.
Huazhu’s expansion plans in the future should include the construction of more hotels in the high-end market range both nationally and internationally. Developing a plan for the acquisition of other upcoming hotel chains can also be a major focus in the future, which can be extremely beneficial in accelerating Huazhu’s expansion objectives. These acquisitions will, simultaneously, give Huazhu access to a wider customer base and allow for the expansion of its loyalty program. Through a well-constructed strategy, Huazhu can greatly increase its brand visibility in the acquired hotels. The product lines run by Huazhu through existing hotels should also be expanded in the future. Offering a wide range of luxury products and services, and incentivising loyal customers when accessing these, can lead to the enhancement of the hotel chain’s brand image and revenue. Executing these plans will lead to Huazhu establishing itself as a major contender in the high-end hotel market.
The recent economic effects of the lockdowns due to the Covid-19 pandemic has been felt in all sectors, including hospitality and led to significant financial losses. However, there are some opportunities that Huazhu can utilize to reduce spending, continue its expansion plans, and market to the target customer segment. One major opportunity is to capitalize on the low cost of real estate due to the economic downturn. The cost of constructing high-end hotels can be reduced by acquiring real estate for these projects at the present low prices. As travel around the world along with business activities are resuming after the pandemic, the demand for these high-end hotels is likely to steadily increase in the future. Huazhu can use the increase in demand to its advantage through effectively marketing these luxury hotels to the business sector and luxury holiday sector. Since smart hotels are likely to gain a major competitive advantage in the hospitality sector in the future, equipping Huazhu’s high-end hotels with smart features can go a long way in attracting high-profile customers. Smart features can reduce the need for too many service staff in existing hotels, thus leading to cost savings. Furthermore, the economic changes due to the pandemic have led to the integration of contactless services worldwide. This is another opportunity for Huazhu to capitalize on in the short and long term. Integrating contactless services for payments, access, ordering, etc. can improve customer experience through the increase in convenience and safety. These opportunities can help Huazhu recover and grow consistently over the next several years following the pandemic.
In conclusion, Huazhu has several opportunities and threats in the future. As Huazhu continues to expand to more worldwide locations, with effective marketing and integration of technology, the hotel chain can capture its target customer segment.
References
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Appendix
Exihibit1
Joya hotel in Hangzhou
Exhibit2
Blossom House in shanghai
Exihibit3
Mercure hotel in shanghai
Exihibit4
Huazhu official tweet
Exihibit a
Exihibit b
Exihibit c