On Tuesday, Fliggy, the online travel arm of Alibaba Group, formed a hotel alliance that put together independent budget hotels and provided them with technology to streamline operations.
In a year, Fliggy intends to attract 40,000 independent hotels in the country that do not belong to any owners and are run independently, and give them a standardized digital makeover, said company executives.
A trial run of three months that ended early December saw 15,000 such hotels being recruited into the bloc. According to Zhuang Hai, who manages the project and also heads the FlyZoo Future Hotel, the local, tech-driven hospitality prototype of Alibaba, the ultimate goal is to increase their annual occupancy rate by 10 percent.
"The alliance's essence is to empower these scattered hotels with a common client pool and help them build their brands by injecting online traffic," he said.
Trillion-Yuan Business
Over 85 percent of China's hospitality industry reported over 920,000 independent hotels, each of which usually hosts 80 hotel rooms or less. The market value stood at almost 1 trillion yuan ($142.7 billion), said the June-published China Hotel Industry Survey.
Common pain points, however, lie in its low brand power, lack of membership scheme, and the consequent lack of standardization of service, the report said.
Zhuang said participating hotels are expected to enjoy more priority positions on the search page, as each of them carries a prominent logo under the label.
Certain benefits include a performance-based fee rebate program, as well as a membership card system that can provide customers with an 8 percent discount and conduct customized consumer profile marketing.
Technology Meets Hospitality
In China, H Chain Hotel's large and fragmented hospitality market is coveted by like-minded players backed by Huazhu Hotels Group to India-headquartered Oyo.
For starters, Oyo has penetrated more than 2,000 cities and townships in the country since its entry into China two years ago, signing over 19,000 hotels and boasting over 780,000 rooms, the company said last month.
"Competition in the market is high," said Huamei's hospitality consultancy based in Shenzhen, chief analyst Zhao Huanyan. "Scaling by collecting more hotel capital is a prerequisite for platforms like Fliggy before technology can make a difference and generate profits."
Alibaba has focused on the hospitality market for a long time. In addition to inking strategic agreements with global industry gurus such as the US hotel chain Marriott and the French hospitality group Accor, the company has stepped up efforts to build its own hotel brand where technology meets hospitality.
On December 17, the Chinese e-commerce and cloud computing giant achieved an annual record, ending the trading session on Tuesday at $208.18. The 52 percent rise in share price of the internet behemoth has comfortably outpaced its strong 27 percent gain of the S&P 500.
