Home Inn is currently the largest budget hotel brand in China. Starway, as the first and largest mid-range hotel group in China, has opened up another blue ocean by setting its development direction in the currently chaotic mid-range hotel market that lacks strong brands.
Although both Home Inn and Starway are two major hotel brands derived from Ctrip, they operate on completely different trajectories.
Home Inn is currently the largest budget hotel brand in China. Starway, as the first and largest mid-range hotel group in China, has opened up another blue ocean by setting its development direction in the currently chaotic mid-range hotel market that lacks strong brands.
As of November 2009, Starway has completed its initial national layout, owning 60 high-quality hotels in 22 cities, with 15 branches in a certain city and 13 branches in another city. Liu Jiajun, the executive general manager of Starway Hotel Group, said that it is expected to have 150 high-quality mid-range hotels by the end of next year.
Compared to budget hotels that overly emphasize cost compression and purely do "subtraction," leading to "simplistic" services and hardware, Starway does more "addition" in its services. It targets business travelers and leisure travelers who pursue a higher quality of life, thus paying great attention to the location, room size, facilities, and decoration of the hotels. Even the toiletries are specifically developed and registered as a brand, reaching the standard of high-end hotels.
"Doing 'addition'—we are not a budget hotel."
"Simple facilities, cramped rooms, plain decoration, limited service..." Although budget hotels can provide relatively high-cost-performance accommodation services, in order to control costs, a large number of service contents are cut, making the software and hardware seem "shabby"—for example, hair dryers are not provided in hotel rooms; guests need to go to the lobby to obtain them... These cannot meet the needs of business travelers and leisure travelers who pursue a higher quality of life.
"Although we and Home Inn are both chain hotel brands, we are not budget hotels; we are positioned as mid-range comfortable hotel brands," said Liu Jiajun, the executive general manager of Starway Hotels. For business travelers and leisure travelers who pursue a higher quality of life, budget hotels cannot well satisfy their demands, thus creating a larger market gap. Liu Jiajun believes that Starway effectively fills this gap, thereby being welcomed and recognized by consumers.
As the only national mid-range hotel brand in the current market, Starway Hotel's requirements for software and hardware are significantly higher than those of budget hotels. Whether it's the hotel's location, room size, guestroom facilities, or decoration, all are greatly superior to budget hotels. The toiletries are specially developed and registered as a brand, reaching the standard of high-end hotels.
For instance, the actual area of Starway guestrooms averages about 21 square meters, some even exceeding 30 square meters, which is 17% more than general budget hotels, equivalent to having an extra bathroom space, making living more spacious and comfortable. The configuration of public areas also starts from customer experience, with imported European premium scents used in the lobby to help relieve stress and improve mood, generally found only in top luxury hotels. Another example is that all hotel corridors are carpeted to reduce luggage dragging noise, creating a quiet resting environment.
Liu Jiajun stated that Starway's "addition" often targets the weak points of budget hotels. For example, the toiletries of budget hotels are often relatively simple, with over half of customers choosing to bring their own toiletries, especially female guests where over 70% bring their own toiletries. Starway has created its own STARESCENTIAL bathing brand, providing customers with safe, high-quality, and comfortable toiletries. During the R&D period, Starway and professional R&D institutions conducted repeated tests and selections on more than ten factors such as raw materials, ratios, and fragrances, ensuring that the quality comprehensively surpasses home-use brands.
Liu Jiajun also admitted that doing "addition" indeed increases operational costs to a certain extent, but the cost paid significantly improves customer satisfaction upon check-in, providing guests with "comfort within a reasonable budget" rather than simple facilities and limited services. Currently, the average per-night stay fee of Starway is about 50 yuan higher than budget hotels, which aligns with Starway's market positioning.
Starway Cultivates the "Virgin Land" of Mid-Range Hotels
Liu Jiajun, the executive general manager of Starway Hotels, revealed that after completing the national layout, Starway has locked onto East China, North China, and the Pearl River Delta as the next development focus, planning to increase the development and distribution efforts in these regions, aiming to add another hundred hotels within a year. It is expected that by the end of next year, Starway plans to have 150 hotels. Liu Jiajun emphasized that mid-range hotels are currently still a "virgin land," with enormous development space for quality hotel brands.
It is understood that there are currently 20-30 main brands of high-end hotels domestically, such as InterContinental, Holiday Inn, and Shangri-La, with more than 500 hotels; budget hotels covering the lower end include Home Inn, 7 Days Inn, Jinjiang Inns, etc. Compared to the increasingly clear budget hotel market and the high-end hotel market dominated by foreign capital, the domestic mid-range hotel market overall remains in chaos, mostly consisting of individual hotels, lacking influential and scaled brands. The rapid development and strong integration of Starway will greatly change the landscape of the mid-range hotel market.
Currently, traditional mid-range hotels—three-star or three-star standard hotels—number around 10,000 (in comparison, the number of budget hotels does not exceed 3,000), and most are individual hotels. Due to the lack of strong brands and marketing capabilities, they have been severely squeezed in survival space between high-end hotels and budget hotel groups, resulting in a significant drop in occupancy rates. Most individual mid-range hotels survive at the break-even point, or even incur serious losses.
Experts believe that business travelers actually have a very large demand for mid-range hotels. The budget of these guests generally falls between 250-400 yuan, which is precisely the market space lacking strong brands and distributed among numerous individual three-star hotels. Due to the competitive disadvantage of individual hotels lacking strong brands, they cannot compete with chain hotels, leading some consumers to develop a tendency towards low consumption, shifting towards staying at budget hotels. He also indicated that although budget hotels have a strong momentum, their simple services far fail to meet the needs of business people and leisure people pursuing quality.
The emergence of mid-range chain hotel brands like Starway provides consumers with a choice of high-cost-performance and more comfortable branded mid-range hotels between expensive high-end hotels and rudimentary budget hotels. It is understood that the current occupancy rate of Starway Hotels generally exceeds 80%, far higher than the around 50% occupancy rate of individual mid-range hotels, reversing the predicament of individual mid-range hotels under the impact of budget hotels.