Ma Yingyao makes dreams, Shangmei runs wildly with wisdom

Source | Industrial Technology

In the hotel chain market, Shangmei Shuzhi’s business story is the most exciting.

With the aura of "King of Small Towns", Sunmei Shuzhi, under the leadership of founder Ma Yingyao, has been expanding in lower-tier markets for more than ten years by relying on economy hotels such as Thank Inn Chain Hotels, and has transformed small and medium-sized enterprises in the third, fourth and fifth tiers. The city is in the pocket. From scratch, Shangmei Shuzhi already has 6,000 hotels, and in 2021 it will become the fifth hotel group in China and the first in the sinking market.

Nowadays, the expansion strategy of low-tier and low-end configurations is weak and the expansion anxiety is overwhelming. Shangmei Digital Intelligence has begun to shift its strategic focus from low-tier cities to first- and second-tier cities, and at the same time, its product strategy has shifted from low-end to mid-tier cities. High end tilt. During the period of strategic adjustment, Sunmei Digital is coerced by capital and must always tell a growth story for capital.

When it comes to storytelling, Ma Yingyao, who often competes with capital, is definitely a master. Two years ago, he mentioned in the article "The Password of Growth or the Password of Capital?" "Capital is very picky. It wants to see growth, and it is unconventional rapid growth; it needs to see the future, preferably An unimaginable future. ”

For the hotel industry, there are many participants and a sufficient supply of standardized and non-standardized services. Growth is not easy. But this is not a problem at all in Ma Yingyao's view. He believes that Shangmei has basically found the password for rapid growth and found a methodology to grow 3,000-5,000 hotels a year while ensuring quality.

The fact is that when the code for growth was found, Ma Yingyao’s plan of 10,000 stores five years ago did not come true, and Shangmei Life (the predecessor of Shangmei Digital Intelligence) had to give investors a step down. Then, in order to build momentum for growth, Ma Yingyao successively created dreams for Shangmei Digital, including intelligent transformation, franchise model innovation, mid-to-high-end breakthrough, etc.

Judging from the business changes of Shangmei Digital Intelligence, it is becoming more and more like the prototype of the business story that capital is optimistic about. Ma Yingyao, who has a tendency to have a big mouth, frequently stands in front of the stage to endorse the growth potential of Shangmei Digital Intelligence . After the five-year plan of 10,000 stores went bankrupt, Ma Yingyao quickly shouted the slogan of 30,000 stores by 2030. But at present, the number of Shangmei Digital Hotels has not exceeded 10,000.

Just when Shangmei Shuzhi is seeking growth, it is difficult to maintain its stock. Leading hotel brands and OTA platforms are invariably vying for space in the hotel branding and chaining market. The industry has entered a stock game, and the cost-effective advantage of Shangmei is insignificant.

The fierce battle in the sinking market is not over yet. In order to get rid of the shackles of low prices and achieve price-for-volume, Shangmei Data Intelligence stands in the arena with a defensive posture, sprinting towards the high-end to increase premiums, and targeting young groups We have made many attempts, cooperated with IPs such as Tencent e-sports to build theme hotels, and incubated service brands such as coffee, baking, and bookstores.

However, the gene of affordability runs deep in its bones, and it is labeled as mid-to-low-end in consumers’ perception. Shangmei Shuzhi’s dominance in the high-end market is not strong, and it is difficult to convince high-net-worth people to pay, and there is a sense of crisis. As uncertainty grows simultaneously, the story of the ship turning around will take time to test.

Ma Yingyao also disagreed with this. He compares BYD and Anta to Shangmei Digital Intelligence, and firmly believes that Shangmei Digital Intelligence, which focuses on cost-effectiveness and low price, can also make its name by relying on cost-effectiveness like BYD and Anta, and eventually lead the world.

Ma Yingyao, who is accustomed to making lists of plans, has formulated two big plans for Shangmei Digital Intelligence this year. One is to expand globally and look for opportunities in Africa; the other is to seek a listing and catch up with other established companies. The largest listed hotel group. According to reports, Ma Yingyao said when talking about going overseas, "Private enterprises like Shangmei can only go to Africa, do some hard work, and export some Chinese culture to the African people."

Overlay of worries and concerns. , Shangmei Shuzhi is still in a dream.

Sinking crisis

Just as Shangmei Digital is trying to advance from low-tier cities to first- and second-tier cities, major hotel groups have also formed groups to penetrate into the sinking market and go straight to Shangmei Digital. business hinterland.

Before the outbreak of the COVID-19 epidemic, the domestic tourism and hotel industries were developing rapidly. Leading hotel groups such as Jinjiang, Huazhu, and Beijing Tourism Group expanded rapidly through asset-light models and renovations. During this period, a large number of economical chains emerged Among the hotel groups, Shangmei Digital Intelligence, which started in the sinking market, is one of the leaders.

In the early days of its establishment, Shangmei Shuzhi’s strategy of “surrounding cities from rural areas” showed results. In 2010, its first Thank Inn Express Hotel was born, focusing on “third- and fourth-tier cities, 40-60 rooms, small and "Beautiful" brand positioning, five years later, the number of Thank Inn Chain Hotel stores exceeded 1,000, becoming one of the few brands in the industry to reach the scale of 1,000 stores in five years.

After many rounds of competition, Shangmei Shuzhi has achieved greater achievements in scale. In the 2021 "Top 225 Global Hotel Groups" rankings, it ranks in the top 12 in terms of number of guest rooms and top 10 in number of stores. famous, second only to domestic local brands such as Jinjiang, Huazhu, BTG and Green.

Due to its high market share in the sinking market, Shangmei Digital Intelligence is also known as the "King of the sinking market". After more than 10 years of development, Shangmei Digital Intelligence now has 29 brands, with stores covering more than 324 cities and 1,686 districts and counties, with 100% coverage in third- and fourth-tier cities and 90% coverage in fifth-tier cities.

Although it has many honors, Shangmei Digital Intelligence has constant internal and external worries. The scale is expanding too fast, making it difficult to balance service quality and user reputation; during the golden period of budget hotels, the popularity of the third- and fourth-tier sinking markets that Shangmei Shuzhi is proud of has increased, and domestic and foreign hotel giants regard it as investing "real money" a battleground.

More than half of Huazhu’s newly signed hotels in the third quarter of last year came from the sinking market. Jinjiang Hotels (China)’s 7 Days Inn accounted for more than 50.3% of its operating stores in the sinking market, and 64 of its newly signed hotels were in the Super League. % comes from the sinking market, and Shangmei Digital Intelligence faces the attacks of giants.

In order to improve profitability, Shangmei Digital Intelligence has gradually upgraded its economic products and tried to raise barriers through intelligent upgrades and increased consumption scenarios. Last year, Shangmei Digital upgraded its budget hotel brand ThankYou, launched ThankYou U6, changed the brand's main color to the national style cinnabar red, built a small town cultural wall, equipped with super bedding and intelligent guest control. It is understood that Thankyou U6 can realize a single-room investment of 45,000-50,000 yuan and a house price of 150-180 yuan.

In December 2021, Shangmei Digital Intelligence received strategic investment from Hanxing Venture Capital Co., Ltd., an affiliated company of Xiaomi, and will deploy intelligent hardware products in sinking hotels to achieve "intelligent and high-end upgrades." For low-end hotel consumers, general intelligent functions, including smart door locks, smart curtains, and smart speakers, are not really needed, but more like gimmicks that are larger than reality. They pay more attention to the affordability of economic chain hotels. For Price changes after intelligent transformation are more sensitive.

In addition to intelligent transformation, Suncity also changes its expansion model to enhance brand penetration and influence in order to achieve breakthroughs in hotel scale. In September 2021, Shangmei Digital released the "New Interlocking, Light Brand" plan to share chain development experience and system capabilities with investors, and proposed to jointly invest and *** with investors Take risks and enjoy profits.

Industry insiders said that the idea of ??changing the franchise model is beautiful but realistic. The penetration rate of hotels in third- and fourth-tier cities is easily saturated, and there are many alternatives for consumers to choose from. Newly opened hotels still have a long way to go in terms of revenue. "It's just a matter of using a new model to attract more people into the game and increasing the volume, so that it can be recognized by capital."

Regarding the goal of opening a store in Shangmei Shuzhi, Ma Yingyao often dreamed up dreams and slapped him in the face.

In December 2016, Shangmei Life Group announced the completion of 140 million yuan in Series B financing. At that time, it also proposed a strategic plan of “10,000 stores in five years”, aiming to become the largest limited-service hotel in China. group. However, five years later, the Wandian plan fell through.

In January 2020, at the "Brand Reconstruction Breaking the Winter | 2020 Sinking Market Vitality Conference" held by Shangmei Life Group, Ma Yingyao talked about Shangmei Life's goals for the next 10 years, and made a high-profile claim to have 50,000 stores worldwide plan.

The confidence of these 50,000 stores comes from the sinking market. Ma Yingyao envisioned 5 stores in a county and 10 stores in a district. Ten years later, there would be 50,000 stores around the world, making it one of the top five hotels in the world.

One year later, Ma Yingyao once again called out a new goal. He hopes that in the next ten years, we will work with industry partners to open 30,000 stores, create 10,000 wealthy families, cultivate 200 profitable startups, and incubate 100 "interlocking" brands through a two-pronged approach to new interlocking and light brands.

Today, 30,000 stores have been opened in 10 years and are used as slogans in the Shangmei Digital Intelligence office building.

In Ma Yingyao's view, although Shangmei Shuzhi called out a seemingly earth-shattering goal, he believed it could be achieved.

What to achieve? Ma Yingyao's answer is new interlocking and brand creation. Shangmei Digital opens up its membership, management, technology and supply chain capabilities to empower the establishment and operation of cooperative brands, and the cooperative brands then pay fees to Shangmei Digital. Ma Yingyao predicts that the number of brands cooperating with Shangmei will reach 50 in 2023, and the number of cooperative brands will reach more than 100 by 2030. Each brand will open 20 hotels per year, and the number target of 30,000 hotels can be achieved.

It must be said that Ma Yingyao really understands the logic of capital and the business stories that capital wants to hear.

High-end is blocked

Shangmei Digital Intelligence has extended its tentacles to high-tier cities and deployed mid-to-high-end brands. On the one hand, it will distract Shangmei Digital Intelligence’s energy and struggle to cope with the sinking market. competition. On the other hand, the mid-to-high end is an area that Shangmei Shuzhi is not good at. For the sake of multi-brand strategy, the growth of store scale and the improvement of unit price per customer, the risks of rushing into the mid-to-high end cannot be ignored.

Since the emergence of the COVID-19 epidemic in 2020, the tourism industry chain has been impacted. The hotel industry has fallen into oversupply and continuous liquidation. Chain brands such as BTG Homeinns, Hanting, and 7 Days, which occupy major market shares, are still There is room for maneuver, but the room rates of other low-end economy hotels are limited, and costs are rising rapidly, seriously eating up the net profits of chain hotels and squeezing profit margins. This problem is particularly prominent in the large and fragmented sinking market, and cost reduction Efficiency becomes the main theme.

In order to achieve breakthroughs in the sinking market, Shangmei Shuzhi sought growth from mid-to-high-end hotel brands and split it into seven companies through de-grouping. The original four major business divisions were upgraded to independent companies to create a centralized Accor-Movenpick, Liuxiang Business, Whales Hotel, and Thank Inn Chain Hotel are a collection of brand matrix, providing consumers with low-end, mid-end and high-end hotel brands.

In the context of consumption upgrading, young people have increased demand for mid-to-high-end hotel product quality, service capabilities, and personalized and experiential consumption. Shangmei Shuzhi’s traditional economic hotel products cannot meet the growing new consumer demand. Demand has entered a round of "knockout", and mid- to high-end hotels have become another blue ocean market for accommodation.

The seemingly glamorous mid- to high-end hotels have entered the stage of "fighting between gods". In addition to Shangmei Shuzhi, leading hotel chains such as Home Inn, Huazhu, and Jinjiang, emerging chain brands such as Atour, and OTA platforms such as Ctrip, Meituan, and Tongcheng have already set their sights on mid- to high-end hotels, and have increased their focus on urban tourism clusters, cities In the business district, they are trying their best to please the “rich and picky” Generation Z.

There are two main mid-to-high-end routes for Shangmei Digital. One is to focus on the high-end hotel sinking market, and the other is to directly go to first and second cities to seize the mid-to-high-end market. In 2022, Shangmei Shuzhi will promote the development of mid-to-high-end hotel brands as a strategic plan. In addition to its own mid-to-high-end brands such as Lanou Series and Thank You, it will also cooperate with international high-end hotel brands to open up the high-end market.

In July last year, Chaumet became the exclusive strategic partner of Accor and M?venpick, a high-end brand under the Accor Group, in China and was responsible for the development, preparation, operation and management of the Accor and M?venpick brand in the Chinese market. Accor and Movenpick's first store is planned to be located in Qingdao, and it plans to open more than 400 Accor and Movenpick smart technology hotels in the future, focusing on expanding the tourism market in second- and third-tier cities.

Compared with its competitors, Shangmei Digital Intelligence, which lacks high-end genes, has doubts about its product power, vitality and market competitiveness in the high-end market. Jinjiang Group, backed by Shanghai's state-owned assets, has relatively strong financing capabilities; it has a rich matrix of brands such as Vienna International, Jinjiang Inn, and 7 Days Series; Huazhu has a comprehensive layout from economical to high-end, with strong brand stickiness; Junting is deeply involved in the mid- to high-end products in the Yangtze River Delta region Hotels; Atour has launched multiple cross-border IPs such as Atour Basketball Hotel and Atour NetEase Cloud Music Hotel.

Regarding cooperation with international mature high-end brands, Ma Yingyao bluntly said that it is conducive to strengthening Shangmei’s high-end genes. He said that to build a high-end hotel, you need to accumulate long-term experience, whether in product design, construction, or service management, and Shangmei hopes to draw on the experience of mature brands.

Although he started out as a budget hotel, Ma Yingyao is also confident in developing luxury hotels. His methodology is to use the empowerment of technology to provide a 300% experience beyond the basics at three or five points that consumers are more interested in, and to precisely control costs in places that consumers cannot see, but the consumer’s sense of touch is Flawless.

However, the external environment is not as ideal as Ma Yingyao thought. The competition among mid-to-high-end hotel brands has become more intense, and first- and second-tier cities are becoming saturated. Statistics from the Median Research Institute show that among first-tier cities, there are more than 700 mid- to high-end hotels in Beijing and Shanghai, and more than 400 in Shenzhen and Guangzhou. The first two mainly rely on existing stocks, while the latter two still have room for new additions; in tourism In hot cities, the number of mid-to-high-end hotels is 787 in Chengdu, 684 in Hangzhou, 242 in Sanya, and 196 in Xiamen. The overall number is still astonishing, and some regions have become saturated with vacation products.

In addition to the confusion surrounding the high-end route, Shangmei Digital’s asset-light expansion route has also been criticized. Last year, Shangmei Digital Intelligence carried out a brand upgrade, from a single hotel brand to a hotel brand + industry intelligent platform company. This means that Shangmei Digital Intelligence has maximized its imagination in model expansion and created * The concept attracts capital into the game.

Although the story is beautiful, the implementation effect is questionable. The vision of Shangmei Digital Intelligence described by Ma Yingyao is to help more than 100 to 200,000 small hotels in the sinking market that are living at the break-even point, so that they can become well-branded and operate more efficiently, so that everyone can operate in any town. You can stay in good hotels.

Judging from the results of expansion, Shangmei Digital Intelligence faces many obstacles. Among them, standardization in sinking markets is more difficult and is the most difficult hurdle to overcome. Shangmei Shuzhi hopes to earn service fees through the franchise policy, which is also regarded by the market as suspected of harvesting the sinking market.

At the same time that Shangmei Digital Intelligence was expanding, Shangmei Digital Intelligence was in court with its partners, and cases related to franchise contract disputes occurred frequently. Shangmei Shuzhi is mostly the plaintiff, but some franchisees opened their businesses without passing the opening acceptance of Shangmei Shuzhi, which constitutes a fundamental breach of contract. In addition to assuming liability for breach of contract as stipulated in the contract, Shangmei Shuzhi also has the right to collect trademark licensing fees. Taken together, the liquidated damages in some cases are as high as 300,000, and the rules are mainly determined by Shangmei.

As of the end of 2021, there are more than 5,800 hotels owned by Shangmei Shuzhi, and 3,979 stores have been opened. To achieve the goal of 30,000 stores, nearly 3,000 new stores will be added every year. This year Ma Yingyao called out "800 new hotels will be opened in 2023."

Judging from the current growth rate, it is obviously far away from the target, but Ma Yingyao explained that the future growth of Shangmei's hotel scale will definitely not be linear growth, but exponential growth.

You always shout too much about your goals. Are you really not afraid of falling?