\u3000\u3000 Btg Hotels (Group) Co.Ltd(600258) (600258)
Main points:
Short term: the epidemic situation catalyzes small and medium-sized single hotels to pursue chain improvement and sink a broad market space. Affected by the epidemic situation, the operation of chain and single hotels accelerates differentiation. Chain hotels reduce the operation pressure of franchisees by reducing franchise fees and providing epidemic response plans. Due to the lack of mature management system Member flow and intensive operation support are facing business crisis. The epidemic has accelerated the chain process. By the end of 2020, the chain rate in China was 31.5% (+ 6.6pct, with an average annual increase of 2.3pct from 2016 to 2019), compared with the global average chain rate (41.9%) and the U.S. chain rate (72.9%), there is still room for improvement. In terms of city level, the chain rate of third and fourth tier cities is only 24%; In terms of room allocation, the chain rate of Hotels with less than 70 rooms is generally low, and the chain rate of 15 ~ 29 / 30 ~ 69 rooms is 6.1% / 20.5% respectively. The sinking market is expected to become an opportunity area for the improvement of chain rate in the future. In the short term, small and medium-sized single hotels may become the main body of development. With the advantages of scale, brand and operation, the leading chain hotels expand against the trend by joining in. On the one hand, it can improve the operating performance of individual hotels, on the other hand, it can alleviate the cyclical effect brought by RevPAR, drive the stable growth of performance and achieve a win-win situation.
Medium and long term: supply and demand are two-way catalysis, and the structure is transformed and upgraded to medium and high-end
From the demand side, tourism and business travel are analyzed as the main audience groups. (1) from the perspective of tourism, consumption upgrading is superimposed on the increase of travel frequency to jointly promote demand growth. Regardless of the impact of the epidemic, by the end of 2019, the number of tourists in China had reached 6.01 billion, and the CAGR from 2014 to 2019 was 10.71%. China's per capita single travel expenditure increased from 839.7 yuan in 2014 to 953.3 yuan in 2019. (2) From the perspective of business travel, business travel demand has an increased preference for medium and high-end hotels. In 2020, Chinese business travel consumers prefer medium-end hotels, accounting for 58.16% (+ 3.33pct). Guided by the continuous growth of demand, the hotel side has accelerated the transformation and upgrading of economy hotels to medium and high-end in order to alleviate the pressure of narrowing profits caused by the rise of house prices less than the cost of economy hotels. In the medium and long term, the hotel grade structure matches the population income structure. By the end of 2020, the proportion of middle-end hotels in China (32%) is lower than that of the middle class in China (46%), and there is still much room for the development of middle-end hotels.
Company development: start the three-year ten thousand store plan, focusing on medium and high-end and cloud hotels
The company focuses on Franchise Exhibition stores, focusing on medium and high-end and cloud hotels, with both profitability and stability. (1) In 2020, the company plans to open 10000 hotels in the next three years, and about 5000 hotels will be added from 2021 to 2023. The newly added stores of the company are mainly based on the franchise mode. As of 2021q3, the proportion of franchise stores has reached 86%, which still has room for improvement from the average level of the same echelon. With the increase of the proportion of the company's franchise stores, the smooth direct marketing model brings periodicity, which is expected to drive the further improvement of profitability. While adopting the franchise model to expand stores, the company has launched a cloud Hotel model with small investment, light management and high empowerment to deeply cultivate and sink the market and develop small and medium-sized single hotels. Cloud hotel charges according to room volume and city level to enhance profit stability. (2) The company carried out product structure transformation, upgraded the existing hotels in order to improve customer experience and brand image, and developed new product models by integrating various elements to further meet the needs of diversified consumers. Among them, the company focuses on medium and high-end brands, forming a pattern of medium and high-end product clusters with home business travel and home selection as the middle-end core brands and Yifan, Puyin and Heyi as the middle and high-end product clusters.
Investment advice
Under the influence of the epidemic, the chain has improved, and the leading advantage of the hotel has been highlighted. The company accelerated the expansion of stores, laid out medium and high-end hotels, and launched cloud hotels to deeply cultivate and sink the market and develop small and medium-sized single hotels. With the weakening impact of the epidemic, the demand is expected to fully recover, driving the release of the company's performance. We expect that the company's EPS from 2021 to 2023 will be 0.12, 0.55 and 0.77 yuan / share respectively, corresponding to 222, 47 and 34 times of the current share price PE respectively. For the first time, give a "buy" rating.
Risk tips
The epidemic repeatedly affected the recovery of demand, and the speed of expanding stores was lower than expected
