Will China Welcome a Mid-Range Hotel?

(page 2 of 2)

The result is in marked contrast to the small, dingy rooms at many of the country's budget chains. Each room comes with a bevy of extras, including wireless and broadband and liquid-crystal display TVs. In the smaller ones, designers located the bathroom sinks and closets between the front doors and bedrooms, creating a more cloistered, private sleeping environment. Designers also laid out certain rooms so they could be used as daytime offices for business travelers. Rates range from $100 to $180 for the high-end suites, compared with about $50 to $100 for bare-bones budget accommodations elsewhere.

But like many brands trying to break into a new market, Hotel Jen's success is uncertain. Kuok says since the hotel's opening on Mar. 1, occupancy slightly lags that of the same property before the rebranding. He says that's "to be expected for a new brand entering the market."

Copycats May Cut Into Market

Consultant Patrick Ford expects the company to do well. "The Kerry Group knows the market extremely well," he says. "They'll be known as a Chinese company, which could be a big advantage in front of the Chinese middle class."

Still, the hotelier could face some difficulties. It will have to target two distinct groups of potential customers, pitching lower prices to those who currently stay in luxury hotels while trying to entice budget customers with Hotel Jen's upscale amenities and design. And a global economic slowdown could contribute to a slowdown in travel to the country, though the Chinese business scene doesn't show signs of that.

The biggest challenge may be from copycats. In the U.S., design-savvy boutique hotels have been so successful that they now face competition from industry sub-brands such as Starwood Hotels & Resorts' (HOT) new Aloft hotels and InterContinental Hotels Group's (IHG) Hotel Indigo. More established Chinese hospitality brands may do the same, cutting into Hotel Jen's market.

At the moment though, Hotel Jen has few direct competitors, and it is opening at a time of unprecedented growth in travel to and within China. The latest official data available show that, in 2006, 1.39 billion domestic trips by Chinese tourists generated $85 billion, an increase of 17% from 2005. Even a small fraction of that could mean millions of dollars of potential business for the new chain.

Click to view a slide show of Hotel Jen images.

Vella is a writer for BusinessWeek.com in New York.