On September 13th, Orange Crystal Hotel, the main brand of mid to high end hotels under Huazhu Group, released a new 2.5 version product.
From the perspective of the overall market environment, many large enterprises are lowering their travel reimbursement standards. This actually gives us a lot of business opportunities. We need to undertake elite business travel traffic and become a substitute for five-star hotels. "At the press conference, Cao Juan, CEO of Huazhu's high-end business group, analyzed the market prediction and demand grasp behind the upgrade of Crystal Hotel.
Interface News learned that the first 2.5 new flagship store has landed at Orange Crystal Shanghai Zhongshan Park Hotel. This hotel is directly operated by Huazhu Group and was renovated directly on version 2.0. It has been open for about three months after the renovation.
Huazhu revealed that the location of the store is very scarce and advantageous. Although it has a large capacity of 245 rooms, the occupancy rate has stabilized at over 85% within three months of reopening, and positive cash flow has been achieved since the second month.
What can we rely on to undertake the original five-star customer source?
Affected by the downturn in the real estate industry, in recent years, more and more high-end hotels that are complementary to real estate have been put on shelves or announced to close down. According to incomplete statistics from Maidian, there were 59 hotels auctioned in August this year alone, with 17 hotels selling for over 100 million yuan, but all have failed to sell so far.
Jinhui believes that the decline of "high-end" hotel types driven by real estate and the arrival of a new era in the hotel industry mean that there will be significant changes in operational efficiency, operating models, and supply quality.
The release of Orange Crystal 2.5 version is also a measure taken by Huazhu to detect industry changes. At present, Huazhu's hotels cover a full range of categories, with economy and mid-range hotels accounting for the vast majority. But to accommodate the original five-star hotel customer base, we cannot just provide simple accommodation functions.
At the press conference, Huazhu's portrait of Orange Crystal's core customer group is: elite business travelers who not only know how to work, but also how to live. From an age perspective, the post-90s and post-00s generations have become their main source of customers, who have higher levels of education, richer material conditions, and higher requirements for quality accommodation experiences.
Taking the iterated Orange Crystal 2.5 Executive Suite as an example, Interface News reporters saw on site that there were Ethiopian coffee beans placed on the living room tea table, with hand brewed coffee equipment next to it, making it easy for guests to experience the ritual of making their own hand brewed coffee.
In the washing area, the 2.5 version of Crystal Hotel uses the French brand Chanel Roti washing set, which includes ingredients such as camellia, natural pepper, bergamot, etc. The person in charge revealed that this washing and care product is also quite popular in the retail scene of Huazhu and can be used as non room fee income for franchisees.
Crystal Hotel 2.5 also introduced the concept of "pure good sleep" for the first time, focusing on high-quality sleep for guests. The Micro Drunk Executive Lounge has developed 5 specialty cocktails and 3 non-alcoholic special drinks, creating an exclusive dream drink list for travelers.
In addition, all rooms in Crystal Hotel 2.5 are equipped with silk mattress, which can sensitively sense changes in sleeping posture, support and fit the spine; The four piece bedding set is made of Xinjiang cotton mixed with 100% long velvet and ordinary velvet, woven with 60 count and 300 yarn density satin craftsmanship, which is equivalent to making one bed from the raw materials of two ordinary four piece bedding sets.
Cao Juan said that Orange Crystal wants to be a substitute for a five-star hotel, but it won't feel worse than the original five-star hotel when entering the room.
The cost of a single room in version 2.5 has been reduced by 5000 yuan
Interface News learned that when Huazhu created Orange Crystal 2.0, they considered using whiskey to increase service content, but many customers mistakenly believed that Orange Crystal was a whiskey themed hotel during the operation process. Based on this, the development of version 2.5 focuses on breaking away from the impression of a themed hotel.
In version 2.5, Orange Crystal has made some adjustments to the spatial design, distinguishing the whiskey lounge, restaurant, bar counter, and hotel front desk reception. At the same time, design some independent spaces to give customers a greater sense of privacy.
In response to previous feedback from homeowners and the market, Orange Crystal 2.5 version has also optimized and upgraded bedside tables, control panels, mini bars, and tea tables. Due to the fact that the proportion of female customers for Orange Crystal has reached 45%, the 2.5 version has also increased the usage space for dressing rooms and cloakrooms.
Despite multiple upgrades and iterations, the cost of a single room in version 2.5 is lower than that in version 2.0, with a reduction of approximately 5000 yuan per room. The reason why the cost can be "lowered" is closely related to the mature procurement system and supply chain system behind the group.
Taking mattresses as an example, the person in charge of Huazhu introduced during a visit with Interface News reporters that the mattress used in the bedroom is the Zhumeng series mattress jointly created by Huazhu and mattress head brand Silian. This mattress is priced at about 5000 yuan on JD.com, but Huazhu franchisees purchase it on the platform for only over 1000 yuan.
The bottled drinking water provided by the guest room tea table is Ba Ma Huoquan mineral water, from the longevity town of Guangxi. The person in charge said that this mineral water is priced at 15 yuan per bottle on the high-speed rail, but the franchisee's purchase price on the Huazhu platform is also very low.
In the past, the cost of a single room in Orange Crystal 2.0 version was about 155000 to 156000 yuan, but now the 2.5 version can reach around 150000 yuan.
Run economies of scale in the mid to high end market
In 2017, Huazhu Group fully acquired 100% equity of Orange Crystal Hotel Group for RMB 3.65 billion, and acquired its subsidiaries Orange Hotel, Orange Crystal Hotel, and Orange Hotel · Selection.
At the time of the acquisition, Orange Hotel had only 100 stores under a single brand. Currently, the number of stores has reached over 700, and with the addition of over 200 Orange Crystal Hotels, the total number of stores has reached 1000. That means we have multiplied it tenfold in 7 years, "Cao Juan said.
However, in terms of the overall scale of Huazhu Group, the proportion of mid to high end hotels is still relatively low. According to financial report data, as of the end of the second quarter of this year, Huazhu China's economy and mid-range brands accounted for 92%, 82%, and 89% of their hotels currently in operation, waiting to open, and newly opened, respectively.
Currently, major hotel groups are betting on the mid to high end hotel market. According to the "2024 Top 10 Domestic Mid to High end Hotel Brand Franchise Guide" by Maidian Research Institute, the domestic mid to high end hotel market will begin to rebound in 2023, with 75774 newly opened rooms, recovering to 83.46% of 2019. The number of newly opened high-end hotel brand rooms in the first half of 2024 is 39006, accounting for more than half of last year's total, and is expected to continue to grow this year.
In order to catch up, Huazhu put forward the strategic slogan of "fighting in the high-end market" at the end of last year and the beginning of this year, considering the high-end market as the next growth curve for Huazhu Group.
To compete in the mid to high end market and achieve acceleration, it is crucial to improve market share and form economies of scale.
Cao Juan told Interface News that when Huazhu Group first bought Orange Crystal Hotel Group, the crystal hotel brand adopted a "one store, one design" approach, but this would affect the speed of brand development. But today, Orange Crystal has achieved relative standardization, which is not equivalent to complete standardization. Relative standardization is a product that maintains efficiency while constantly iterating and updating.
Cao Juan stated that the Orange Crystal 2.5 version is currently quite popular, and the number of signed contracts has doubled since the product was released. From the investment return rate of Orange Crystal 2.5 version, franchisees can recoup their investment in 4-5 years.
But currently, most of the crystal hotels that have opened are located in the core commercial areas of first, second, and third tier cities. In addition, the group also has requirements for site selection. Only with customers can we make money, and we will first enter places that ensure franchisees make money.
Regarding the expansion pace of Orange Crystal in the future, Jinhui revealed at the press conference that as of August 2024, the number of Crystal Hotel stores has reached 220, covering 68 cities across the country. It is expected that the number of openings this year will reach 300, and by the end of next year, 500 crystal hotels will be welcomed, half of which will be upgraded versions 2.5.