CICC: The relationship between hotel supply and demand is expected to rebalance, product renewal and decline in leading positions

The Zhitong Finance App learned that CICC released a research report saying that in 2024, China's hotel industry is facing the fulfillment of “weak expectations” and an imbalance between supply and demand. Looking forward to the future, the bank estimates that the relationship between supply and demand is expected to rebalance. At the same time, it is also recommended to focus on: 1) marginal changes in the competitive landscape of the South China market and “latecomers” opening up territory; 2) increasing demand for hotel products, or bringing new opportunities in the brand landscape; 3) there is still potential for leading players to sink in the market, and it is necessary to select cities and models.

CICC's main views are as follows:

How to interpret the competitive landscape of the South China market

Some latecomers are seizing market share on the margins. With core brands, they have strong breakthroughs in South China. It is recommended to continue to monitor the progress of penetration and market share growth.

How has the demand for hotel product renewal changed in 24 years vs. 23

1) Under the influence of the industry's supply cycle, the share of hotels in operation or refurbished for 6-10 years by the end of the year 24 has increased compared to the end of 23, but there is differentiation among the groups. In line with this trend, the bank determined that the number of hotels in stock that need to be renovated in the next 1-2 years may grow rapidly. After the product ages, franchisees have four optional paths (upgrade the original brand; invest more to upgrade to a leading high-quality brand/lower investment to upgrade to a soft brand/maintain the status quo), and the competitive landscape between brands is also likely to change. 2) By dividing regions, grades and brands, the aging pressure of economical and light management products is relatively greater.

Let's discuss the “ways and techniques” of penetrating the sinking market

1) Focus on the competitive pattern of the sinking market. Leading brands at all levels lead the growth rate in the sinking market, and use proven high-quality brands to penetrate the sinking market or as a common path. 2) Looking ahead, there is still some room for improvement in the business district coverage and average number of hotels in the business district of most brands in the leading group. The bank sees a more viable model of sinking currently or searching for suitable properties and replicating proven mature models in order to select sinking cities that can generate more remote demand; in the long run, various hotel groups may need to create a lightweight model with smaller rooms and more suitable for the sinking market.

risk

RevPAR's recovery fell short of expectations due to weak consumption or increased supply; the scale expansion fell short of expectations.