June 2014 Report on the Development of Mid-range Hotel Brands in China’s Hospitality Industry

(1) Essence International Securities released a research report, incorporating related studies from Bloomberg analysts, predicting that Huazhu Hotels Group’s net profit will achieve a compound annual growth rate of 27.3% from 2013 to 2015E, with dynamic price-to-earnings ratios of 37.0 and 29.4 for 2014E and 2015E respectively, and gave a “Buy” rating for its U.S. stocks.

(2) Fuyi plans to add 4 new directly operated stores and 36 franchised hotels in the second half of this year, and is striving to take the leading position among mid-range chain hotels on the Chinese mainland. In addition to accelerating expansion, Fuyi has also readjusted its corporate organizational structure to control operating costs—reducing the previous four major regional headquarters to just two: North China and East China. [Details]

(3) Recently, Jinjiang International Hotels Group’s listed company, Jinjiang Shares, held an extraordinary general meeting of shareholders to propose a non-public issuance of A-shares to strategic investor Hony Capital and controlling shareholder Jinjiang Hotels, aiming to raise no more than RMB 3,035,257,160. Through this issuance, the company plans to accelerate the development of its high-end limited-service hotel brand “Jinjiang Metropolo” and other types of hotels. By the end of 2017, the number of limited-service hotels under the company will double compared to the end of 2013, reaching 2,000, while maintaining the current ratio of directly operated to franchised properties.

II. Analysis of Mid-range Hotel Brand Influence in June

2. Brand Analysis

Novotel is a globally renowned business hotel brand and one of the three well-known hotel brands under France’s AccorHotels Group. This brand is located in major cities and tourist destinations worldwide, providing international-standard accommodation and services for individual business travelers, business groups, and leisure guests, ensuring a value-for-money experience.

Initially positioned as a business hotel brand, Novotel sets very high standards for location selection to meet the needs of business travelers, requiring that locations meet three criteria—convenient transportation, time-saving, and punctuality—thereby creating an internationally synchronized network for both business and leisure guests. As the brand evolved, Novotel has also sought to break new ground in positioning by expanding into leisure destinations such as Bali and Phuket, including beach resorts and leisure golf courses. With its expansive sports facilities and entertainment options, carefully curated dining choices, and well-equipped children's activity centers, Novotel has become an ideal choice for couples, families, and tour groups seeking vacation stays.

As a leading name among mid-range hotel brands, Novotel has consistently ranked at or near the top of the Meadin Brand Power Rankings, reflecting its prestigious reputation in China and attracting many celebrities.For example, the Grand Hyatt Taipei Novotel attracted Zhang Zhijun, the highest-level Chinese mainland official to visit Taiwan at the time in charge of Taiwan affairs. This hotel, the first Novotel property in Taiwan, is located at Taiwan’s busiest Taoyuan International Airport, just a five-minute drive from the airport and only forty minutes from Taipei, demonstrating Novotel’s consistently high standards in site selection. Additionally, the hotel offers a “Family Benefit” allowing one child under sixteen to stay free in a room with parents. Thoughtful amenities include a dedicated children’s play area, a 24-hour Western restaurant, international buffet dining, and on-site facilities such as an indoor heated pool, jacuzzi, steam room, and a 24-hour fitness center that help guests relax and unwind. Convenient transport, refined facilities, and attentive service make Taipei Grand Hyatt Novotel a prime example of Novotel as an ideal global holiday destination.