Huazhu Group, China’s second-largest hotel operator, eyes expansion amid consolidation that could wipe out independent firms
- Company’s shares are up 2.7 per cent on Hong Kong exchange debut
- Nasdaq-listed Huazhu Group plans to open 1,800 new hotels this year
Huazhu Group, China’s second-largest hotel group by number of rooms, said on Tuesday it expected the coronavirus pandemic to unleash the sector’s first consolidation wave in over a decade, which could wipe out a tenth of the country’s 493,000 independent hotels.
The company, whose shares opened 2.7 per cent above its offer price at HK$305 on their debut on the main board of the Hong Kong exchange, however, expected hotel chains to benefit from a rise in domestic travellers, which were expected to offset a drop in international tourism.
About 40,000 independent hotels were likely to close down because of the pandemic, which had affected their cash flow and made them unprofitable, Jin Hui, the hotel group’s president, said. Their closure would create opportunities for China’s 55,600 hotel chain groups, he added.
Huazhu Group will open up to 1,800 hotels by the end of this year, Jin said. “China will be the single biggest growth market in the global hospitality sector in the next three years. We won’t miss this opportunity by any margin,” he added.
China’s hotels sector has witnessed consolidation on two previous occasions, following the Severe acute respiratory syndrome (Sars) outbreak in 2003, and the global financial crisis in 2008. Hotel chains accounted for just a quarter of China’s 19.7 million hotel rooms last year, below the global average of 41 per cent, with the bulk made up by independent hotels. But chains are expected to grow to 35.2 per cent of 21.6 million hotel rooms by 2024, according to research firm Frost & Sullivan.
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