Retrieve the "stolen" profits. Chain hotels issue an "impossible mission" to franchisees | Kejin · Culture and Tourism

Author | Wang Hanyu

Editor | Zheng Huaizhou

In the recent two months, after Huazhu Group required that the proportion of OTA bookings for its hotels to be controlled below 30%, the occupancy rate of the hotel where Peng Xin works has significantly declined.

Currently, Peng Xin is responsible for developing local members at a Ji Hotel in an eastern coastal city. He told 36Kr with emotion that the hotel business is becoming increasingly difficult, "We've been hit hard this year". Under such market conditions, reducing the OTA proportion of the hotel is undoubtedly making things worse.

To a certain extent, Peng Xin's "misery" reflects the common predicament of the hotel industry at this stage. On the one hand, since the hotel investment transaction market reached a new high in popularity last year, the industry's investment enthusiasm has been high, contributing to more and even excessive store increments this year. On the other hand, the profit level of the hotel industry has obviously declined. By the third quarter of this year, the net profit of most industry leaders has decreased significantly compared to the same period last year.

In contrast, the performance of OTA platforms such as Ctrip and Tongcheng continues to grow.

Part of the profit is "taken away" by the middlemen, so the hotel group has to require each store to control the OTA proportion. But in the eyes of franchisees, compared with the huge drainage value of OTA, paying a 10%-15% commission for each order is actually a "cost-effective" choice.

Own Member Proportion of 85%? "An Impossible Task"

According to Peng Xin, the commission rate that the OTA platform currently charges for each order of his hotel is about 10%-15%. "For example, Ctrip is 12%-15%, Meituan is 10%-12%, and Fliggy is about 10%." However, as long as it can bring in guests and the hotel can be fully occupied, paying this commission is "not expensive".

But this relatively balanced state was broken in September this year.

Peng Xin mentioned that around May and June before this year's summer vacation, Ji Qi, the chairman of Huazhu Group, went to summer tourist cities such as Yantai with a group of senior executives to conduct research on Huazhu Group's hotels. During the trip, it was found that the orders from OTA platforms for individual stores exceeded 50%.

Peng Xin said that in retrospect, perhaps this research has increased the sense of crisis among the management of Huazhu Group. The logic is obvious. The management fees that the franchise stores should have paid to Huazhu Group have been taken away by OTA in the form of commissions.

In August, Huazhu Group's semi-annual report was released, further strengthening the above crisis. Huazhu Group achieved a total operating income of 11.426 billion yuan, an increase of 14.15% year-on-year, while the net profit attributable to the parent company decreased by 13.92% to 1.726 billion yuan.

Subsequently, in September, Ji Qi released "Cultivating the Foundation and Discussing the Importance of Members" within Huazhu Group, mentioning phenomena such as stores relying on OTA to supplement guests and store managers giving concessions to OTA to ensure the occupancy rate, and proposed that in the future, it is hoped that the proportion of Huazhu Group's own members in its hotels can reach 85%.

Peng Xin admitted that for a store like his own with an average geographical location and business district, it is an "impossible task" to reduce the orders from other channels such as OTA to 15%.

But by around October this year, the OTA proportion of the Ji Hotel where he works needs to be controlled within 30%, which has become a mandatory indicator of Huazhu Group. And he believes that the group is likely to gradually reduce this indicator to 20% and 15% in the future.

The effect of the hotel brand's strong measures is immediate. In that month, the hotel where Peng Xin works met the above requirements. At the same time, the vacancy rate of the hotel has also significantly increased. He mentioned that to reduce the OTA proportion, the hotel simply needs to increase the booking price on the OTA platform to ensure that the booking price of its own member system is the lowest and attract guests to join the membership.

"But now there are too many chain hotels. If our price is high, guests have many other choices. They can stay at Super 8 or Home Inn. In the end, it is only the franchisees who will be 'hurt'."

However, he also mentioned that the decline in the occupancy rate of his hotel in the past two months is only an intuitive feeling based on his work status and communication with colleagues, and he has not yet seen the exact OCC data of the store.

At the same time, regarding whether the requirement that the OTA proportion of relevant hotels of Huazhu Group should not exceed 30% is a mandatory regulation, and whether the matters mentioned in the article published by Ji Qi within the group are accurate, 36Kr has made further verification with Huazhu Group, but no response has been received as of the time of publication. However, Interface News previously reported on this internal article, and the matters mentioned are basically consistent with the information Peng Xin disclosed to 36Kr.

Whether the above information is accurate or not, the performance of the hotel industry's profit and OTA profit being inversely related has been reflected in the financial reports of major groups.

Previously, data from Sinolink Securities showed that in the first and second quarters of this year, the RevPAR of the hotel industry decreased by 9% and 12% year-on-year, respectively, and the ADR decreased by 3% and 8% year-on-year, respectively. Industry leaders such as Huazhu Group, Jinjiang Hotel, BTG Homeinns Hotel Group, and Atour Group have all experienced varying degrees of decline.

Data Source: Hotel Group Financial Reports Charting: 36Kr

By the third quarter, the profit performance of hotel groups has still not improved. The RevPAR and ADR of Huazhu Group, Jinjiang Hotel, BTG Homeinns Hotel Group, and Atour Group continue to show negative growth. The RevPAR decreased by 7.91%, 8.38%, 7.8%, and 10.5% year-on-year, respectively, and the ADR decreased by 7.1%, 10.49%, 5.5%, and 8% year-on-year, respectively. At the same time, the year-on-year changes in the net profit attributable to the parent company of the first three groups were -4.79%, -43.08%, and -9.54%, respectively, and the cumulative year-on-year changes in the net profit attributable to the parent company in the first three quarters were -10.26%, 12.13%, and 5.63%, respectively.

Although the net profit attributable to the parent company of Atour Group increased by 47.27% and 82.79% during the same period, it can be seen from its RevPAR and ADR data that it cannot remain unscathed in the overall decline of the industry. Its positive profit growth comes more from the supplement of retail business.

Data Source: Hotel Group Financial Reports Charting: 36Kr

The continuously growing performance of OTA platforms is in sharp contrast to the general decline of hotel groups.

For example, Ctrip achieved an operating income of approximately 15.9 billion yuan in the third quarter of this year, an increase of 16% year-on-year; the adjusted EBITDA was approximately 5.7 billion yuan, compared to approximately 4.6 billion yuan in the same period last year. Among them, the operating income from accommodation bookings was approximately 6.8 billion yuan, an increase of 22% year-on-year; the operating income from transportation tickets was approximately 5.7 billion yuan, an increase of 5% year-on-year.

At the same time, Tongcheng Travel achieved an income of 4.99 billion yuan in the third quarter, an increase of 51.3% year-on-year; the adjusted net profit was 910 million yuan, compared to approximately 620 million yuan in the same period last year. Among them, the transportation business income was 2.03 billion yuan, an increase of 20.6% year-on-year; the accommodation business income was 1.38 billion yuan, an increase of 22.2% year-on-year.

In addition, the number of on-site hotel and travel business orders of Meituan in the third quarter increased by more than 50% year-on-year.

This means that the accommodation business, or the commission from hotels, has made a significant contribution to the performance of OTA. This has also led to the topic of "OTA stealing hotel profits" becoming a hot topic.

The Continuously Dispersed Hotel Industry and the Highly Concentrated OTA

However, looking beyond a single perspective and analyzing more industry factors comprehensively, the current performance decline of the hotel industry is also the result of excessive market supply in the investment boom and the comparison with the high base in last year's "revenge travel".

First, according to the monitoring data of Aowei Cloud Network, in the first three quarters of this year, a total of 374,000 hotels (with 15 rooms or more) were in operation nationwide, with a room scale of 17.14 million. The scale of the existing market is huge. At the same time, 37,000 new hotels were opened, approaching 95% of the number of stores opened throughout 2023; the room scale was 1.57 million, reaching 96% of the number of rooms opened throughout 2023.

As of the first half of this year, the number of domestic hotels and the number of guest rooms have reached 109% and 103% of the same period in 2019, respectively. Meanwhile, the domestic tourist trips were 2.73 billion, and the domestic tourism revenue was 2.7 trillion yuan, which were 89% and 99% of the same period in 2019, respectively.

Secondly, observing the third-quarter business of several international hotel groups that have a relatively small dependence on OTA in China or the Asia-Pacific region, the RevPAR and ADR also mostly declined. For example, the RevPAR decline of InterContinental Hotels Group and Wyndham Hotels & Resorts exceeded 10%.

Emmanuel Ruetsch, the CEO of InterContinental Hotels Group Greater China, also mentioned: "In the first half of the year, our performance in China showed some fluctuations, partly due to the high base in the first half of 2023."

Under the influence of multiple factors, looking back at the relationship between hotel groups and OTA, it can be found that the statement "OTA steals hotel profits" is relatively one-sided. Previously, securities firms such as Zhongtai Securities and Zheshang Securities also mentioned in their research reports that OTA still has an important drainage value for hotels.

In the view of Zhou Mingqi, the founder of Jingjian Think Tank, the difficulty for domestic hotels to get rid of their dependence on OTA platforms stems from the disparity in the status of the two sides. Currently, the domestic hotel pattern is relatively dispersed, while OTA is highly concentrated and the pattern is stable, with the traffic in the hands of a few two or three platforms. This leads to the weak bargaining power of hotels when facing OTA platforms such as Ctrip.

In contrast to the transportation business, the supply of air tickets and high-speed rail tickets basically depends on the four major airlines and the railway department. "There are only a few OTA platforms, and there are only a few airlines, and most of them are state-owned." Zhou Mingqi said.

Under the comparison of the two sides, it is obvious that hotels that are mainly privately owned and have a dispersed market are more easily "controlled" by OTA.

In addition, Zhou Mingqi also mentioned that the enthusiasm for hotel investment may only increase in the future. Previously, he had a conversation with a hotel group executive, who said that at that time, many properties in the markets such as Shanghai had a low occupancy rate of up to 50%. In the future, he plans to choose more such idle properties to transform into chain hotels.

This may represent the mentality of some investors, and the store scale of the hotel industry may further expand. Therefore, Zhou Mingqi judges that in the longer term in the future, hotels will still find it difficult to get rid of their dependence on OTA.

And for front-line participants like Peng Xin, it is more difficult to seek a balance between the group brand and OTA. He told 36Kr that another chain hotel brand in his city is currently preparing to start a "price war". During the Spring Festival holiday, Peng Xin admitted that if he does not join, he is likely to be eliminated.

(At the request of the interviewee, Peng Xin in the article is a pseudonym)

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