Service Quality Management Of Hotel Chain

Expansion Strategy And Service Quality Management Of Hotel Chain: Home Inn (A Budget Hotel Chain Of China


The Hotel Industry in China/ (Market Size analysis). 1

The Budget hotel industry in China. 1

Home Inn: Company Profile. 2

Justification for expansion. 2

Introduction. 2

Aim and objectives. 3

Research Questions. 4

Justification for the research question. 4

Review of literature. 4

Internal and external drivers of Change. 5

Barriers or challenges to expansion/ change programmes. 6


The Hotel Industry in China/ (Market Size analysis)

The Hotel industry in China has been characterized by stiff competition between the four or five star luxurious hotels on one side and the ‘basic’ budget hotels on the other side. According to Wolff (2011), the growth of the hotel industry in China has been facilitated by the corresponding rapid growth in the tourism and travel industries. Millions of tourists and businessmen, both foreign and domestic, had continued to frequent China causing a necessity for the country’s hotel industry to strategize themselves to benefit from the increased demand for their services (Shen 2008).

The Budget hotel industry in China

In reference to Shen’s (2008) works, China’s budget hotel industry had rapidly expanded as a result of their unique branding as affordable and middle class hotels. Their branding has been justified by their offering of competitive prices to the populous visitors in their cities. For example, as of 2010, these budget hotels had offered their clients competitive prices ranging from $50 to $100 a night as compared to the five-star hotels which offered a high accommodation fee of $300 to $500 a night.

The growth in the budget industry had seen hotel rooms increase to a high of over 100,000 in the period spanning the years 2000-2008. This industry has seen over 100 brands emerge to compete for the increased opportunities. Most of these 100 budget brands are domestically owned.

Home Inn: Company Profile

Hotel Inn is China’s is the largest budget hotel (Yingying 2011). The hotel was opened with a vision of offering a comfortable experience in lodging: through offering courteous and professional services, competitive prices and locating its hotels in convenient places in the country’s cities (Home Inn Homepage 2011). As of September 2010, Home Inn had established an extensive home network to reach a sum of 728 hotels spread across 143 Chinese cities

Justification for expansion

As noted earlier, China’s hotel industry has continued to expand as a result increase business and tourism opportunities. The increased opportunities have attracted an influx of both foreign and domestic investors who have come to maximize on the increased opportunities. The emergence of many players in the Chinese hotel industry has called for the existing hotels to review their service and product lines with the mains aim of improving on them to win on the stiff competition. Hotel Inn, having been founded on the vision of offering a comfortable experience in the 21st Century has not been left behind in the expansion and quality improvement programmes to meet the changing market demands and the stiff competition.


The modern day business markets exhibit extreme volatilities that make it difficult for business leaders to rely on their “traditional” and conventional wisdoms and past experiences when trying to effect best management strategies (Uva. 2006, p.1).The selection of best management frameworks have called for top managers to carry out both intensive and extensive research to determine their unique needs and challenges manifest in their organizations. As the effects of modern-day globalization continue to pose considerable challenges to the existing management patterns, current managers have been called upon to ‘upgrade’ their skills to cope with the ever changing and demanding business situations.

As a result of the increased challenges facing modern-day business ventures, this proposed study aims to study the ccompetitive business environment, expansion and service quality management issues as implemented by various hotel chains. This study narrows down to the Chinese budget hotel industry and selects the country’s largest budget hotel, Hotel Inn, as its case study.

The study will highlight the aim, the objectives, research questions and the methodology the researcher aims to adopt and implement for this dissertation. Furthermore, the researcher will go ahead to propose the literature to be reviewed in this dissertation.

Aim and objectives

This dissertation aims to study the how business ventures have been able to carry out successful expansion and quality of service improvement issues to overcome the stiff competition as posed by foreign and local investors.

  • To meet the above aim, the study will adopt and implement the following objectives:
  • To identify and investigate the external and internal drivers of change
  • To highlight some of the factors to consider in the expansion program
  • To select on Hotel Inn, a budget hotel in China, and study its expansion strategy and its service quality improvement programme.
  • To analyze China’s hotel industry by reviewing its market size and its growth patterns.
  • To list and briefly explain some of the challenges that hotel managements encounter while implementing expansion or service quality improvement programs.

Research Questions

This study’s key research question emanates from the need to carry out unique and best expansion strategies for various business ventures. It is from this key research question that the author will expand the study to incorporate the following minor research questions:

  • What are some of the internal or external drivers that cause businesses to review their operations and expand their services?
  • What are some of the factors to consider before choosing or implementing any expansion strategy?
  • What are some of the challenges business institutions are likely to encounter while implementing their expansion programs?
  • Who are the key personalities to steer the expansion or service improvement programmes?

Justification for the research question

In choosing the research questions, the researcher was motivated by how some business ventures have been able to successfully identify and implement best change or expansion strategies. The researcher’s case study (Hotel Inn) proved a motivator on itself since the researcher felt that by having made a late entry in the ever-growing and competitive Chinese hotel industry and going on to leave a market as the largest budget hotel only 6 years in its operations, was in itself a situation that called for more studies to be done on it to help other business enterprises.

Review of literature

The researcher intends to review literature touching on the two themes as addressed in this topic-expansion and service quality.

On expansion, the researcher will review some of the international and external drivers of change.

Internal and external drivers of Change

External drivers of change referred to factors affecting the performance of an organization; but which originated from outside. Organizations affected with external drivers of change have little, or usually, no control over such factors. As a result of this, the challenges or risks posed by them have immediate effects on the operations of affected organizations. Most external drivers have been associated with the spread of globalization across the world. External factors affected different industries unevenly, and as such, few industries could escape the effects of globalization regardless of their choice to participate in, or avoid the international arena” (Cohen and Boyd 2000, p.191). For Hotel Inn, examples of external drivers of change included low-cost hotel operators that posed stiff competition for the company’s highly priced services and products, the ever-changing customer requirements that led to market share reduction, technological innovations and the negative environmental perceptions associated with domestic budget hotel industry in the populous China.

On the other hand, internal drivers of change referred to factors affecting an organization’s performance; and which traced their origin within the organization’s system. These factors are mainly characterized by affected organizations losing grounds on the established marketing strategies. These can be as a result of poor leadership that led to inefficiencies in the 4 management functions of organizing, planning, controlling and leading. In this particular case, the affected organizations have 100 percent control over such factors. Most organizations start re-engineering processes to correct on the negative effects associated with such challenges. Examples of these factors, in the Hotel Inn case study included delayed product delivery services that led to lose of customers, high costs of Chinese foods that made it expensive in the local market and the low employee morale that made it difficult to achieve efficiency and effectiveness at the hotel.

Barriers or challenges to expansion/ change programmes

In carrying out its expansion strategy, Hotel Inn encountered a lot of barriers along the way. To start with, the company’s long-time employees failed to support fully the change frameworks on the basis that they viewed the proposed changes as a threat to their then current roles. The introduction of the changes meant that employees’ skills were put to great tests. Most employees feared that the new changes required advanced skills which they did not possess. As a result of their inexperience, they feared that the management might consider hiring “skilled” persons to implement the new changes. Hiring of new employees to service the expanded network would have meant that their services were longer of value to the steel industry; and such, the company could have laid them off to cut on its costs. These fears made the employees to oppose the implementation of the proposed changes at Hotel Inn. To provide evidence to their claims, most of them had acknowledged that the company’s previous change efforts had seen a considerable number of employees, who could not be accommodated in the new structures, laid off. The affected employees thus feared that the situation could have replicated on them.


Cohen, S S & Boyd, G 2000, Corporate governance and globalization: long range planning issues. Cheltenham,Edward Elgar Publishing.

Home Inn Homepage, 2011, Corporate information: Overview, viewed 6 May 2011, <>.

Shen, S 2008, China’s budget hotel industry is booming as tourism grows, The New York Times, viewed 6 May 2011 <>.

Uva, W 2006,Pricing your products to survive rising energy costs, Cornell University, New York.

Wolff, C 2011, Domestic brands dominate China budget market, HotelNewsNow, viewed 6 May 2011,<>.

Yingying, S 2011, China travel and tourism news: Budget hoteliers eye Motel 168 chain, China Daily, <>.

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