Thank you for subscribing.

Please check your email to confirm.

Unsubscribe success..

You already subscribed and confirmed.

Please check your email.

You already subscribed.

Please check your email to confirm.

Does Atour Group Have the Keys to Hotel Success?
Does Atour Group Have the Keys to Hotel Success?
Atour Hotels exterior. PHOTO: Credit to Atour Group
Associated Company
Atour Atour

According to South China Morning Post, conclusions of a new report indicate Chinese travellers are not only impacting regional and global economies but also the domestic tourism market.

In 2016, “domestic visitor arrivals grew 11% year on year (YOY), accounting for over 97% of total visitor arrivals,” according to Knight Frank Research. International visitors also increased but “by a modest 3.8% YoY, reaching 138 million.” 59.27 million were overnight visitors, an 4.2% YOY.

However, China’s tourism industry has been gradually declining since 1Q 2017, according to 199it. In 2019, Reuters reported “China’s 2018 tourism revenue growth” was the “slowest in a decade as economy cools.” As such, what does this mean for China’s hotel industry?

Founded in 2013, Atour Hotel (亚朵酒店) is a Chinese-owned hotel serving the middle-income market. The company completed three funding rounds which raised USD 135 million. Their latest was a Series C round from 2016. They promote a “fourth space lifestyle” concept, bringing joy and comfort to those “on the road.”

Currently, Atour operates in all cities across China. However, in tier three and four cities, they mainly operate in central business districts. Atour has three main competitive advantages that help them stand out from the hotel industry: growth opportunities of mid-scale hotels and cross-sector cooperation.

Mid-Scale Hotel Growth Opportunities

According to Seeking Alpha, upscale hotel oversupply would likely persist in the future. “China has been a very difficult market to try to expand in,” John Kidd, President of HNA Hospitality Group, said to Nikkei Asian Review.

Oversupply was one of the main obstacles for growth he mentioned. James Chappell, Global Business Director at Horwath HTL, also mentioned oversupply as an obstacle that “caused issues over the last couple of years.” However, demand is also “catching up and performance indicates a robust market.”

According to Knight Frank Research, China’s first-tier cities such as Beijing, Shanghai, and Guangzhou saw high increases in upscale hotels over the past decade. Other cities such as Taiwan, Macau, and Hong Kong also saw significant increases. On the other hand, hotel performance fluctuated between cities. Out of all the cities mentioned, Beijing saw the biggest decrease. Taipei, Macau, and Guangzhou saw simultaneous performance growth with increases in upscale hotels.

The respective economic indicators are reported below for a better picture of each city’s economic outlook.

As luxury hotel oversupply persists, hotel operators are turning to China’s domestic mid-end hotel segment. In China, three- and four-star hotels are considered mid-scale.

According to the Journal of Resources and Ecology, the number of four-star hotels has been steadily increasing. While the number of three-star hotels has been fluctuating, its numbers drastically outrank the others. China’s five-star hotel room inventory increased by 75%; mid-scale rooms increased by 33%; one-and two-star hotel rooms declined the most at 74% and 51% respectively.

Atour was ranked consecutively for two years for the greatest number of rooms and number of hotels with over 30,000 rooms and over 250 hotels on China’s 2019 High-end brand. On Feb 24, 2019, Atour opened its 300th store. In less than six years, Atour now operates in more than 150 cities.

In 2015, mid-scale hotel revenues in China reached USD 36.3 billion, a compounded annual growth rate of 12.5% from 2012 to 2016. This trend is also expected to continue with significant growth from tier two and three cities.

As China’s middle class is expected to double its consumption spending to nearly 50% in 2030 from 38% in 2014, mid-scale hotels may be the primary growth driver going forward in the midst of excess upscale hotel supply.

Cross-Sector Cooperation

As China’s hotel sector targets the young middle-class generation, it’s looking to innovate ways to lure current and prospective travellers. Atour Hotels strategically utilized cross-sector cooperation to increase its competitive advantage. On Dec 3, 2018, the hotel launched its 10th IP themed hotel in Shenzhen

According to 199it, accommodation quality is in high demand. Additionally, the “cross-border” concept is becoming a trump card to attract profit. ZHAO Huanzhen, a senior expert in the hotel industry, remarked that “cross-border cooperation is one method to strengthen a hotel’s competitive advantage. He emphasizes that the hotel is similar to a “consumer terminal” which allows businesses from different sectors to extend.

In the past, Atour Hotels has partnered with NetEase Yeation, Zhihu, Shanghai Joint Publishing, and Tencent Cloud.

In its cooperation with NetEase Yeation, Atour had 14 guest rooms rebuilt as “Yeation rooms” where guests are allowed to purchase products via the Yeation app. This allows Yeation customers to make better purchasing decisions and allows Atour to take advantage of Yeation’s userbase to gain prospective customers.

On the other hand, Zhihu is a popular Quora-like platform in China. This cooperation led to Atour posting 314 philosophical and daily questions about life around the hotel to think about these “life issues” they may encounter in the future. It’s also a creative way to promote business values.

Atour and Shanghai Joint Publishing cooperated to build free “24-hour reading lounges,” thus building a customer base of “literature lovers with consumption power.”

Lastly, Atour Hotel has cooperated with Tencent Cloud to open its Atour S Hotel where the room’s hardware is connected to Tencent’s content ecosystem. Its guests will frequently use Xiaowei, a virtual assistant that functions similar to Siri. For example, its voice interaction function allows guests to ask about the weather and to play their favourite music.

Competitor Comparison (MUJI Hotels & FlyZoo)

MUJI Hotels and Alibaba’s future-esque hotel, FlyZoo, are two competitors that challenge Atour’s cross-sector business ventures.

MUJI is a Japanese retail company who branched into the hotel business in 2019 with operations in Beijing, Shenzhen, and Ginza. According to Archinect, the company reports their hotels are specifically “designed to reflect an anti-gorgeous, anti-cheap concept.”

As the company is involved in many business sectors such as retail, catering, and housing, it established a sound outbound logistics system. According to a Global Management Case Study on MUJI, the POS electronic system is common within the retail, catering, and hotel industry and uses sale statistics, inventory, and customer purchase behaviour to improve its operating efficiency. As MUJI’s operations are vertically integrated, the company has a better grasp of its logistics system which improves their overall supply chain. Additionally, as MUJI is an established brand, the company doesn’t have to rely on excessive marketing costs.

FlyZoo opened its doors to the public approximately at the end of 2018, according to Reuters. The most notable feature of Alibaba’s hotel is its robot management. This helps Alibaba save labour costs and eliminate the need to interact with other people. In addition to voice command technology, its rooms and elevators are equipped with facial recognition technology to enter and verify which floor its guests can access respectively.

While it saves in labour costs, it’s daunting to imagine a service sector without human interaction. Therefore, efficiently dividing tasks between AI and people will allow guests to get the best of both worlds.

According to the International Federation of Robotics, the global market for service robots is rising. The market is expected to grow between 20 percent and 25 percent from 2018 to 2020; sales during that time is also expected to grow to USD 27 billion. Alibaba isn’t the only company to make use of AI service. Hilton’s robot reception concierge, Connie, was criticized for not being able to answer guest questions and unable to understand in a noisy environment. In 2018, Henn na Hotels also announced its plan to staff eight more robots.

How Does Atour Fare?

Due to mid-scale hotel growth opportunities and its cross-sector partnerships, Atour Hotel has the potential to flourish in the Chinese market. As Atour Hotel is one of the other localized brands from Atour Group, its localization caters to different consumer groups and needs. To achieve this, Atour has partnered with notable companies in the respective sectors. However, to gain a solid competitive edge, it may be helpful to look into a “green supply chain” as efforts in eliminating waste can reduce costs.

Atour Hotels may also gain a competitive edge by expanding further into tier three and four cities as consumption power increases. Additionally, as the government continues shaping the Chinese market, they are looking to “[provide] support for major hospitality players such as land-price discounts, cash or tax incentives, and priority approval processes,” according to A.T. Kearney. Therefore, developing government relations strategy will strengthen relationships to gain a competitive edge as more mid-scale hotels start to rise.

Enterprise Information

Atour is a new lifestyle hotel brand that promotes a human, warm and fun “on the road” fourth space lifestyle.
CATEGORIES: Real estate
Last Funding Type
Series C
Number of Employees
1000-2000
Number of Funding Rounds
3
Total Funding Amount
62.00M

Enterprise Information

Atour
Atour is a new lifestyle hotel brand that promotes a human, warm and fun “on the road” fourth space lifestyle.
CATEGORIES: Real estate
Last Funding Type
Series C
Number of Employees
1000-2000
Number of Funding Rounds
3
Total Funding Amount
62.00M

Reach the Author!

Ask the author questions about the copied text

MOST READ

THE LATEST

Any Question

EqualOcean is a leading industrial tech media and investment research company that focuses on technological and industrial innovation in China.

We aim to assist Chinese entrepreneurial enterprises to break into the global market and provide overseas investors, VCs, and enterprises with a deeper understanding of China's business environment and to seize opportunities in China.

Join over 800,000 of your peers