In the decade leading up to 2014, the number of budget hotels in China went from 500 to more than 16,000. Budget hotel operators in China are now looking for expansion opportunities outside of China and are following the Chinese tourist's favourite locations in doing so.
Hotel operators all over the world face the same challenge, when they are looking to emerge from their crowded home market, to move into new markets. But there are challenges in doing so.
Hotel operators favour operating agreement models to holding the property asset.
There are many considerations for businesses entering into new markets that need to be addressed beforehand:
- local laws restricting foreign investment and foreign businesses operating in the country
- HR laws
- corporate structure for the operating company
- tax efficient ways to repatriate income
- consumer law and promotions
- health & safety
- liquor licensing
- brand protection
It is important for hotel businesses to seek local law and tax advice and identify red flags in a market (and prepare for them) ahead of time.
Following in the footsteps of the Chinese companies that bought high-end tourism assets abroad, China’s budget hotel chains are beginning their own overseas push to serve the country’s swelling numbers of international travellers.