SHANGHAI—China Lodging Group’s founder and newly appointed CEO said Wednesday that he’s not satisfied with the growth of the Shanghai-based economy chain’s Seasons Hotels and Hi Inns brands.
The last few years have seen disappointing expansion of those brands, said Qi Ji, whose comments were translated by chief financial officer Min “Jenny” Zhang during a conference call Wednesday morning China Standard Time. Ji on Tuesday was appointed CEO by China Lodging Group’s board of directors. He replaces Tuo “Matthew” Zhang, who will transition to non-executive board member and vice chairman of the board by 29 February.
Ji founded China Lodging Group in 2005 and served as the CEO until 2009. Over the past two years he acted as the executive chairman.
To remedy the company’s stagnate growth of its two smaller brands, the company will pursue an aggressive, multi-brand strategy during 2012 that will see the addition of 25 to 30 Seasons hotels and 10 to 15 Hi Inns. As of 30 September, there were 20 Season properties and 26 Hi Inns in operation.
China Lodging Group also has 534 HanTing Express properties in operation, with plans to add 240 to 250 more during 2012.
The two smaller brands will have dedicated operational teams, while the supporting platforms and infrastructure will be shared with HanTing Express to achieve economies of scale, Ji said.
“We mainly need to further upgrade the product,” he said of the Seasons brand, which is China Lodging Group’s highest priced economy product at RMB250 to RMB400 (US$40 to US$63) per night.
There is not enough differentiation between Seasons and HanTing Express, and he said he wants to set up a “more clear image” for Seasons. A redesign/revisiting of the brand will garner a slightly higher price per room.
The group’s efforts surrounding the Hi Inn brand, which garners an average room rate of RMB70 to RMB150 (US$11 to US$24) will focus on driving profitability.
“We need to further polish the model to understand better and summarize our experience to have a more accurate positioning with what kind of locations, room size, product design are the best fit for this segment,” Ji said.
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“Depending on how well those two smaller brands perform in 2012, that’s going to impact how many of those we’re going to open in 2013 and beyond,” he said.
The shuffling of roles between Ji and Zhang is China Lodging’s second major change in senior management since October 2011, when the company announced the resignation of Chang Su, COO, who left for personal reasons.
When asked by an analyst whether the company was looking to expand its management team, Ji said: “We will consider to add new members to the senior management team at a proper timing.”
Efficient leadership is among China Lodging’s top priorities, Ji said throughout the call. In addition to sharing infrastructure between HanTing and the two smaller brands, the newly appointed CEO also said the group must learn to operate amid aggressive expansion.
“The biggest challenge is buying into the organizational capability,” he said. “Given our very fast expansion speed, it requires a lot form the management team … Currently not only us but (other Chinese economy hotel companies) Home Inns and 7 Days (Group Holdings) are all adding 200 to 300 hotels a year.”
He did not rule out adding bodies at the management level via internal promotion or external hires, but said no moves are on the immediate horizon.
Leased versus managed
“We don’t expect to have any significant change to our current business strategy,” Ji said after being asked if the company had plans to shift its mix of leased versus managed properties.
Of the total 580 hotels in its portfolio, 314 properties are leased-and-operated while 266 are franchised-and-managed.
China Lodging Group is seeing strong demand from franchisees, Ji added.
As of 30 September, the company had a pipeline of 233 hotels under development, including 88 leased-and-operated hotels and 145 franchised-and-managed hotels.