Photos: Cendant Hotel Group
Super 8 in China
The US economy hotel chain offers China travelers a new lodging option
by Paula M. Miller
Cendant Hotel Group recently opened its first Super 8 in China. Previously only located in the United States and Canada, Super 8—the world's largest franchise economy lodging chain by number of hotels—is now targeting Chinese domestic tourists. Will the budget chain capture the nation's rapidly growing middle-class market?
First links in a chain
Cendant Hotel Group (parent company not only of Super 8 but also of the AmeriHost Inn, Days Inn, Howard Johnson, Knights Inn, Ramada, Travelodge, and Wingate Inn hotel chains) is not new to China. The first Ramada hotel in China opened in 1993. Howard Johnson and Days Inn chains entered China next—opening in 1998 and 1999, respectively. Cendant Hotel Group's master franchisees in China plan to develop roughly 14 Days Inn, 15 Ramada, and 21 Howard Johnson hotels in the next 18 months.
Super 8 opened its first China hotel in Beijing in June 2004. The chain has since expanded to five other locations and plans to expand to 38 major cities in China by mid-2006. The chain aims to start in first-tier cities such as Beijing, Chongqing, Guangzhou, and Shanghai and second-tier cities such as Dalian, Liaoning; Chengdu, Sichuan; Hangzhou, Zhejiang; Harbin, Heilongjiang; and Xiamen, Fujian. The chain then plans to expand to smaller cities and major highway locations.
Customer base
Reas Kondraschow, senior vice president and managing director of Cendant Hotel Group International, noted in a recent interview that Cendant is now able to offer travelers lodging at all price levels in China. Howard Johnson hotels are in the top tier, with a 5-star rating in China, and are generally frequented by senior executives. Ramada properties range from 3.5 to 5 stars and, depending on whether the hotel is a Ramada Plaza or Ramada Hotel, house senior or mid-level executives. Mid-level executives also often stay at Days Inn hotels, which range from 3 to 3.5 stars. Super 8 hotels range from 2.5 to 3 stars. Super 8 expects most of its guests to be Chinese business travelers, group tours, and budget travelers, and in the short run, that most Super 8 guests will be Chinese. The chain also expects budget travelers from Australia, Japan, and South Korea, as well as backpackers from many countries.
Mitchell A. Presnick, president and chief executive officer of Super 8 Hotels (China) Co. Ltd., elaborated: "Super 8's target customers are Chinese middle-class business and leisure travelers who appreciate good value and international levels of quality and service. Currently, most Super 8 customers arrive by plane or train. However, we expect more and more car travelers in the future, consistent with China's high growth rates in road networks and car sales. Super 8 customers in China tend to be at least 50 percent business travelers, in contrast to in the United States, where two-thirds of Super 8 customers are leisure travelers."
A master franchise operation
Cendant picked China as Super 8's third country of expansion because it found an investor/developer that fit all of its master franchisee criteria. Kondraschow explained, "We selected Tian Rui Hotel Corp., based in Hong Kong, to be our master franchisee partner because it matched Cendant's requirements for capital and marketplace knowledge." Tian Rui Hotel Corp., in which Presnick is an investor, is the master license holder of Super 8 Hotels in mainland China, Hong Kong, and Macao. "Presnick was involved in the development of several major American brands in the PRC and wanted to expand the Super 8 brand to China because the nation needs quality economy hotels and because more Chinese are traveling by car and seeking value accommodations." (Super 8s are traditionally motels.) He added, "Also, as many people know, the number 8 is considered lucky in China. For all these reasons, Super 8 seemed like a good fit."
Super 8 customers in China tend to be at least 50 percent business travelers, in contrast to in the United States, where two-thirds of Super 8 customers are leisure travelers.
Under the master franchisee agreement, Tian Rui acts as franchisor in China and will develop the brand and franchise system there. (In contrast, Super 8 Motels, Inc., a subsidiary of Cendant Hotel Group, handles its own franchises in the United States and Canada.) Meanwhile, US franchisor Super 8 Motels, Inc. provides its trademarks and international sales and reservation services. Kondraschow explained, "It's an ideal relationship—Tian Rui brings the local knowledge and Super 8 brings the international trademark. . . . Cendant was one of the first hotel companies to set up in China on a franchise basis; Ramada was its earliest brand. Most competing hotels went into China as manager agreements. But in the hotel industry, franchising is a viable alternative." (Franchises have existed in China for more than a decade, but in the early years frequently suffered from legal ambiguity and quality control problems. Now, with several years of experience in China and clearer laws, franchising is a more attractive business model.)
Adapting an established model
Super 8's goal is for all Super 8 franchises to maintain the same high international standards, whether in China or North America. But hotel layout and design may vary by location—for example, in room size or parking lot space. According to Kondraschow, Cendant encourages master franchisees to reproduce the US product, but also to tailor the hotels a bit to suit each region's language and characteristics. In China, hotels can be more elaborate than in the United States—not only because Super 8s are slightly more upscale in China than they are in the United States but because materials are cheaper in China. However, the brand owner must be sure a hotel does not become so upscale that it breaks out of its planned market tier. "Super 8s in China will not become 3- or 4-star hotels, but we can enhance their product quality," said Kondraschow.
Marketing will also take a slightly different tack in China. Super 8 will emphasize that it is a new company in China that provides a new product for a market segment that did not exist before. And it will place Chinese-language advertisements in the local markets via billboards, newspapers, and travel agencies.
"Super" challenges in China?
According to Presnick, Super 8 has not experienced major marketing or World Trade Organization-related hurdles in China, but other issues have arisen. For example, the chain must focus on implementing detailed operating processes to ensure service consistency. Presnick said, "Although we already provide detailed standards for operation and hotel conversion, our hotel owners have asked us to provide more common-look features in our design plans than we originally anticipated. There have been many requests for a standardized 'Super 8 Model.' Some franchisees have asked us to insist on certain Super 8 hotel-style features and other hardware similarities. In addition to the hardware and safety requirements, which are fairly stringent, and the branding requirements and 'Superline' board [which details contact information for Super 8 hotels across the country], we have now added a 'Super 8 Picture Wall' to the design requirements for all Super 8s in China." The wall includes photos of important moments in the brand's history, such as "Super 8 Day on August 8, 1988."
But what about Super 8's competition? The economy hotel sector is just getting started, according to Presnick. Super 8 was among the first foreign economy hotel chains to enter the China market, he explains, but there have since been several other entrants, including Green Tree Inn, a foreign-funded chain (founded by American Pacific Homes, Inc.). Local Chinese-owned economy hotel chains include Home Inn, Motel 168, and Jinjiang Inn. Presnick added, "We have worked to capture the benefits of first-mover advantage, which has in turn helped to create a good degree of visibility for the brand. During the first eight months of operation, the market has responded well to our value proposition."
With their modest price and Western standards, today's urban Super 8s are doing well in China. Someday, will fatigued Chinese travelers on long road trips scout out Super 8 motels off stretches of highway? Only time will tell.
Paula M. Miller is assistant editor of the CBR.
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