The integration of Kaiyuan Hotel and Zheng Nanyan is destined to become a textbook case regardless of success or failure.
Editor’s note: This article is from the WeChat public account “Global Travel News” (ID: Traveldaily), author: Wang Jing.
New Century Hotel finally ended its journey in the Hong Kong Stock Exchange on May 24, 2021. The founding team of Kaiyuan Group, with founder Chen Miaolin as the core, also retreated with the rapid privatization of Kaiyuan Hotel. To some extent, this is another important footnote of the transition between the old and the new era in the Chinese hotel industry.
Looking at the delisting of Kaiyuan Hotel in the current era of the development of China’s hotel industry, it is not the first nor the last, but it must be a significant one, especially Zheng Nanyan, who will focus on IT and capital operations in the future. After serving as the chairman of Kaiyuan Hotel, the integration of the two parties is destined to become a textbook case regardless of success or failure.
The delisting of Kaiyuan Hotel is worthy of collective thinking about local high-end hotels in China
Before the delisting of Kaiyuan Hotel, Jinmao Hotel also withdrew from the capital market. Outsiders analyze that the main reason for their delisting is low transaction liquidity; while the capital market is not optimistic, it is very likely that the story of high-end hotels is no longer “sexy” enough.
Take a closer look. Behind the delisting, perhaps more reflects the confusion and loss of the future positioning of the high-end full-service hotel group represented by Kaiyuan Hotel: Can the genes of high-end hotels (service and force) be? Find a second growth curve in the limited service area (scale and efficiency)?
High-end hotels will take a long time to establish a brand. Behind the brand is the feelings of the owner, the preferred land, the long product design, the service process creation, the talent training system, and so on. The high-end hotels that Kaiyuan Hotel has been imitating before, such as Shangri-La, and later including InterContinental, Hilton, etc., have accurate brand positioning. The core of the positioning is high-quality land, products and high-end people. The logic of making money is relying on government needs and Real estate development.
However, the external environment has undergone tremendous changes after the Eighth Articles of the PRC, and the younger generation of consumers has appeared. Compared with the previous generation, the motives of young consumers in this year’s consumption are very different, and their understanding of luxury hotels has changed. Even if this change is mapped to the Kaiyuan family, there is a very prominent difference: Kaiyuan Hotel, which adheres too much to the traditional model, has entered a state of disillusionment, while Kaiyuan Senbo, which embraces the trend, is reborn.
In the local high-end brands, Kaiyuan Hotel has been regarded as excellent in terms of products and operations. Most of the local high-end hotels developed in the past 40 years have been washed away by time, and no one cares about them.
Let’s think about it carefully. What’s the crux of China’s local high-end hotels this time? Is the problem high-end or full-service? Is the business model still established? Is it being biased by a capital market that only needs scale? Was it driven by limited service players such as Atour? Is there not enough patience to wait for China’s own Reits (real estate trust investment fund)?Mature?
In my opinion, the fundamental reason is that when building high-end hotels in the past few decades, investors and owners have designed too many rooms and rooms in order to cater to a sufficiently large market, for the purpose of making more money or for the logic of real estate appreciation. The large pool area, these face-like investments, and the coldness of the rough development model of real estate have gradually exposed deep-seated problems. At the same time, the supply-demand relationship of high-end hotels has changed. Whether it is an increase in supply or a decrease in demand, resulting in insufficient food in a single market, most high-end hotels naturally think of pursuing scale and multi-brand markets. This is also true. The size of China’s huge accommodation market will always be the first.
While entering a large-scale and diversified market, especially the mid-range limited service market, investors are more concerned about the investment return cycle, investment return rate, operating efficiency, such as the ratio of people to room, which is very important for high-end hotels. The challenges posed by genes and positioning are great.
The main challenge comes from pricing and revenue models.
For example, it turns out that high-end hotels are aimed at customers with a spending power of more than 1,000 yuan. When this part of the market is saturated, they consider lowering the price to 600 yuan. The needs of the 600 yuan group are very different from the 1,000 yuan group, because such guests are either younger and more fashionable, or mainly resorting to leisure and parenting, and their price sensitivity is much higher, and their needs will give the hotel products and services Bringing new challenges: more guests book hotels through OTA, they will order takeaways in the room, do not need a minibar, high-end restaurants, executive lounges, and paid premium services. However, the above-mentioned services may be needed by guests who can afford 1,000 yuan. If these two types of guests are mixed together, the hotel will inevitably be confused and entangled.
The second issue is cost, because the essence of high-end hotels is not to pursue the return on investment cycle, GOP rate, or cost. This is destined to be a heavy asset investment in high-end hotels, which is a burden in the eyes of capital.
With retreat as progress, Kaiyuan Hotel boldly try
Obviously, Kaiyuan Hotel has realized the problem and has been seeking changes since it went public. In recent years, despite the slow expansion rate and the lack of profitability, it is still remarkable in terms of brand launch and product innovation. The most typical one is Kaiyuan Senbo, even though Kaiyuan Senbo is not in a listed company.
There have been many interpretations about the delisting of New Century Hotel and Zheng Nanyan’s entry in the future. Earlier, Jin Wenjie, chairman of New Century Hotel, also communicated with the media that Kaiyuan Hotel’s delisting was an active choice, and it was an early idea for Zheng Nanyan to join New Century Hotel.
I prefer to think of Kaiyuan Hotel’s delisting as “retreat to advance”, and this is the founding team of Kaiyuan, which is mainly the endogenous and spontaneous change of the Chen family led by Mr. Chen Miaolin. Attempt can also be described as “bold”.
Starting from the reform of Xiaoshan Hotel, Kaiyuan Hotel has been up and down for more than 30 years. It was founded by one hand and put Kaiyuan Hotel in crisis several times.Although Mr. Chen Miaolin, who has turned the tide, retired to the second line a few years earlier, he still had an absolute influence on Kaiyuan Hotel. For a long time, the only external investor of Kaiyuan Hotel was Carlyle Capital.
Mr. Chen Miaolin is now more than 70 years old. He previously handed over the chairmanship of Kaiyuan Hotel to Jin Wenjie. Now it seems that he is going to hand over to Zheng Nanyan again. There will be many speculations in the outside world.
A closer look at Kaiyuan Hotel’s business is actually divided into two parts: property holdings and asset-light assets. In the 2020 financial report of New Century Hotel, New Century Hotel operates 40 hotels and manages 271 hotels; hotel operating income is approximately 1.4 billion yuan, and hotel management income is approximately 190 million yuan.
The essence of Kaiyuan Hotel Management Company is an asset-light company, without a penny of fixed assets. No matter how the asset-light hotel management company develops in the future, Kaiyuan Group still has tens of billions of fixed assets on hand. For Kaiyuan Hotel, this is actually a safety line of defense and the confidence of Kaiyuan Hotel to “retreat as advance”.
So, how to attack after Kaiyuan Hotel delists? This mainly depends on where Zheng Nanyan’s resources are used.
Previously reported by Global Travel News that Zheng Nanyan will formally serve as chairman and president of Kaiyuan Hotel after May 24, directly in charge of important functions such as mid-range hotels and members, IT and brands, and related organizational structures and reporting relationships will also be carried out. Adjustments to facilitate Zheng Nanyan’s focus on core businesses such as strategic development.
Let’s split the above report into two parts:
First, Zheng Nanyan has experience in the consumption upgrade track, from 7 days to Platinum, and he continues to be optimistic about consumption upgrade, high-end is the development trend, especially lifestyle limited service hotels will be more and more popular Favored by owners and investors, it can be seen from the promotion of lifestyle hotels by international brands such as Marriott, Hilton, and InterContinental in recent years;
Second, Zheng Nanyan came from a non-traditional hotelier. He comes from the IT industry and participated in the development of Ctrip. His understanding and practice of IT development-driven, digitalization and offline chain development are the current shortcomings of the old Kaiyuan people. For a group that develops as mature as Kaiyuan Hotel, it is no longer the long board of the barrel that determines growth, but the key to life and death lies in the short board.
However, when Zheng Nanyan entered the New Century Hotel, there were challenges. How can two groups with different resources, different genes, different experiences, different cultures, and different values achieve the same big goal?Under the premise of (pursuing scale and rapid development), breaking down the barriers, making a hole of strength, thoroughly integrating together to produce new culture and kinetic energy, and creating a new hot wheel, this is the most concerned by the outside world, including me.
A person who drinks oolong tea, how to manage a group of people who drink Longjing tea? Wait and see.