The Challenge of International Budget Hotel in China Market - Dissertation Example

Most of the time, travelers are left with no choice but to check-in in these places due to China’s growing popularity as a tourist destination as well as other traveling activities caused by the boom in the country’s economy. This problem posed opportunities to international hoteliers and domestic operators who saw profits in putting up a wave of low-cost and clean hotels as a response to the high demand for affordable yet quality accommodation. Travelers stay at zhaodaisuo mainly because they are inexpensive.

What the international hoteliers are offering is the more hygienic alternative at the same price (Lau 2006).There are strong signals in these developments that the economy hotels in the country are moving towards replacing all of its zhaodaisuo. Jinjiang Inns was considered as China’s first budget hotel which started opening its doors in the year 1997. However, it was not until 2004 that the market actually took off. It came with the arrival with other new names including Seven Days Inn, City Inn, Hotel Home, and Joy Inn.

Budget hotels comparatively require lower investment to set up and the payback period is shorter than those with larger operations. This factor makes the budget hotel yield good returns on investment. The standard cost of setting up a budget hotel is approximately 7.3 million CNY. This generally becomes profitable in three to five years' time (Qingfen 2007).Budget hotels, which usually charge at around Rmb134 to Rmb202 per room a night, are gaining popularity among business travelers. Among those firms which require their junior managers to stay at budget hotels instead are computer company Lenovo and consumer electronics group TCL.

In 2005, budget hotels in China were enjoying an average occupancy rate of 85% to 96%. This is significantly higher than the 50% enjoyed by thousands of zhaodaisuo or in China's many one and two-star hotels. The budget hotel sector was profitable. For example, a budget hotel, Home Inns was founded in 2002.