Deutsche Hospitality’s Chinese parent slows development

by | 14 Sep 2022 | Pipeline

Pictured: Rendering of Jaz in the City Dubai.

H World Group (Huazhu), the China-based parent company of Deutsche Hospitality since 2019, has slightly reduced its global hotel pipeline over the last quarter.

The group has curtailed its development by 2%, with its forthcoming hotel amount standing at 2,236 as at 30 June 2022, compared to a previous total of 2,271 on 31 March.

Pipeline analysis

The current pipeline includes 2,199 hotels from the legacy-Huazhu business, down 1% from the previous quarter’s 2,226. The legacy Deutsche Hospitality (DH) segment now has 37 properties under development, a 27% cut from Q1’s 45 hotels.

Overall, 1,225 of the pipeline at the moment is midscale or upscale sites, a 5% increase from the previous quarter’s 1,289 hotels. These include the 198-room IntercityHotel Heidelberg, MBD Zephyr Bengaluru in India and the 253-key Jaz in the City Dubai.

Moving more local

Reflecting the group’s changing priorities, Jin Hui, CEO of H World commented: “Although covid has been affecting our business from time to time over the last two-and-a-half years, our long-term strategy remains intact.

“In order to further increase our hotel coverage and penetration rate in China, we need to move our organisation and management closer to the local market. Therefore, in the second quarter, we established six regional headquarters and shifted from brand-based to regional-based organisational structure for our economy and midscale brands.

“By doing so, we believe we can become even closer to our local customers, franchisees, and employees, and create more value for all of them in a more efficient, agile, and precise manner. Moreover, localised management and operational capabilities would achieve better regional synergy and result in higher operational efficiency.

“Different from the approach we adopted for the economy and midscale segments, we are keeping our brand-based organisational structure unchanged for our upper-midscale and upscale brands due to the importance of differentiated brand positioning and a unique customer experience for each of our upper-midscale and upscale brands.”

European reflections

Hui said of the Deutsche Hospitality division: “Against the background of surging inflation in Europe and the resulting substantial increase in costs as well as uncertainties about the future development of covid and energy supplies, a comprehensive cash flow improvement program remains critical.

“Therefore, DH’s near-term focus will remain on efficiency improvements, renegotiation of further lease waivers, and personnel cost optimisation.”

Recent openings

During the second quarter of 2022, H World’s legacy-Huazhu business opened 269 hotels, including five leased (or leased-and-operated) hotels and 264 manachised (or franchised-and-managed) hotels and franchised hotels, and closed a total of 86 hotels, including 12 leased hotels and 74 manachised and franchised hotels.

In the same quarter, the legacy-DH business opened five hotels, including two leased hotels and three manachised and franchised hotels.

The reasons for hotel closures mainly included non-compliance with brand standards, operating losses, and property-related issues. In Q2 2022, H World temporarily closed seven hotels for brand upgrade and business model change purposes. Plus, as of 30 June 30, 645 hotels were requisitioned by governmental authorities.

Operational totals

At the end of the second quarter, H World’s worldwide hotel network in operation totalled 8,176 hotels and 773,898 rooms, including 125 hotels from DH. 3,192 of the total (39%) are midscale or upscale properties.

In terms of room numbers, the global total at the end of the quarter was 748,942, comprising 91,171 leased and owned keys and 657,771 manachised and franchised rooms.

Originating in China, H World Group now operates in 17 countries. Brands include Hi Inn, Elan Hotel, HanTing Hotel, JI Hotel, Starway Hotel, Orange Hotel, Crystal Orange Hotel, Manxin Hotel, Madison Hotel, Joya Hotel, Blossom House, Ni Hao Hotel, CitiGO Hotel, Steigenberger Hotels & Resorts, Maxx, Jaz in the City, IntercityHotel, Zleep Hotels, Steigenberger Icon and Song Hotels. In addition, H World also has the rights as master franchisee in the pan-China region for Mercure, Ibis and Ibis Styles, and co-development rights for Grand Mercure and Novotel.

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The unique and varied Deutsche Hospitality portfolio includes the Steigenberger Hotels & Resorts, Jaz in the City and IntercityHotels brands. Deutsche Hospitality was acquired by Chinese hotel operator and franchisor Huazhu Group in 2019.