Cases
Hotel Investigation Report
(confidential information has been changed to protect privacy)
Background information collated:
Founded in 2005, Hotel Y is a budget hotel chain that is aggressively expanding across China . The company caters to young professionals and entrepreneurs who travel on limited budgets. Furthermore, Hotel Y currently has over 30 hotels in cities such as Guangzhou , Beijing , Shenzhen, Chengdu , Changsha , Nanjing , and Shanghai , a Guangzhou Administration for Industry and Commerce source said.
Due to Hotel Y's focus on business travelers or individuals with a lower budget, the company tends to only supply the basic necessities and no extra services that are more common of four or five star hotels. For example, the windows are smaller compared to other hotels as their belief is that their guests are not tourists who care too much about the view or that it limits the noise from outside giving people more peace and quiet. Furthermore, there are no drawers in the room. Because there are no drawers, it takes less time for the cleaners to clean and they are able to hire fewer cleaners, according to a Shanghai hospitality investment analyst.
Because the cost of the rooms are relatively cheap (about RMB 150 – 200 per night depending on location), the company is a bit shielded when the economy experiences a downturn. For example, if the economy declines, more people will stay in budget hotels. On the other hand, when the economy experiences an upswing, more people will stay at more expensive hotels. That said, China has a large income distribution problem and there is a very large market for budget hotels, a Shanghai hospitality investment analyst said.
Furthermore, as Hotel Y mainly supplies the basics, it is relatively cheaper to build than much larger and grander establishments. This allows the company to quickly recoup their investment and make a profit. It also allows the company to expand relatively faster and become better established, as reported by the same Shanghai hospitality investment analyst.
Going forward, Hotel Y wants to expand and open more facilities across China . The company wants to become more well-established and known through its expansion. For example, there are many budget hotels in China . However, only a few are well- known and have established a satisfactory level of credibility. The budget hotel industry is still relatively new, has lots of potential, and up for grabs. Thus, XYZ Hotel is constantly looking for investors to help fund its expansion, a Shanghai hospitality investment analyst said.
J Wang is a large investor of Hotel Y. He is not involved in the day-to-day management of the company. He made his money previously elsewhere (SEE TRACK RECORD) and tends to invest rather than actively manage a business, as reported by a Guangzhou journalist.
Alan Chan is responsible for the management of the various chains. Chan travels to the Hotel's many branches and makes sure that everything is running smoothly. Chan then reports to Josh Smith to help determine if changes need to be made and how to further improve the hotel's services. Chan is also very objective and strong in cost management.
Eric Wong is responsible for the company's marketing. He is a strong promoter and very hands-on. He is a professional, passionate, and a go-getter. The company is seen as marketing itself well so Wong has done a solid job thus far.
Keane Lee is a professional and strong in his responsibilities. Lee is a technocrat, quite trustworthy and able to manage and develop relationships well, according to a Beijing travel industry analyst.
Reputation:
Although Hotel Chain Y is a relatively new company and still in its development phase, the company has thus far performed well. The company also has a lot of repeat and loyal customers which indicates the company is doing a solid job. Overall, Hotel Y has a decent reputation because it is run well and seen as having a lot of potential, as indicated by reports from a Beijing hotel industry analyst.
Hotel Y's executive team members are well regarded as they are known as a group of smart, capable people who seem to know what they're doing. They are young and dynamic. Furthermore, they are also able to work well together. All of them are professionals who are very committed to the development of the company.
Track Record:
Born in 1960, J Wang's initial source of wealth was from Good Food Company which produces and has a large market share in various beverages and yogurt. He was the owner of Good Food and became one of the richest men in China through Good Food. He made an investment of 60 million Yuan into Hotel Y.
In his mid 30s, Josh Smith was most recently the marketing director of China's southern region for BBB Company – an online travel agency. He experienced early success in his career by producing hotel management software at his company; IT Computer Company. After selling ownership in IT Computer, he joined BBB in 2000 where sales increased tremendously while he was there. As he is quite ambitious and was able to notice the trends in the hotel industry from his position at BBB, he decided to set up Hotel Y, a Guangzhou Administration for Industry and Commerce source said.
Jeremy Law, Jamie Ho, Alan Chan, and Eric Wong were part of Josh Smith's original management team, a Guangzhou journalist said.
Jeremy Law is a long time close associate of Josh Smith's, reports a source in the Guangzhou Administration for Industry and Commerce.
Negative, Dubious:
Not aware of XYZ Hotel or any of the individuals being involved in any negative or dubious episodes, a Beijing hotel industry analyst said.
Risk:
A possible risk for XYZ Hotel is that the company may expand too rapidly. For example, the company's main objective is to expand. However, it may lose sight and not recoup the necessary revenue before further expanding. It may take some time before the company makes a profit and the company will have to be responsible and keep their ambitions in check, a Shanghai hospitality investment analyst said.
Another possible risk for XYZ Hotel is that the company may have a lack of management experience. Because members of the management team do not have a strong background in hotel management, it may be very difficult for them to effectively manage XYZ Hotels many branches in the future. For example, the company may not have the managerial experience to deal with increased competition and the large scale of hotels it plans to manage, a Shanghai hospitality investment analyst said.