Retell the dialogue in details.

PE: How does GreenTree Inns position itself in China’s budget hotel market?

D.Hu: We target business travelers looking for an economic hotel option. About

80 % of our guests are business travelers. We provide free wireless Inter-

net in the lobby and a free broadband connection in all rooms. There is also

a small meeting room for guests. We try to add some “extras” for the guests

such as larger lobbies than you will find in many other budget hotels, car-

pets in all hallways and rooms and better-quality furniture. The rooms are

almost three-star quality and parking is free. GreenTree Inns also has better

locations than many other budget hotels.

PE: What does a three star hotel room cost in Shanghai? Is GreenTree Inns more

expensive than other budget hotels?

D.Hu: A three star hotel room will cost more than 400 Yuan in Shanghai.

GreenTree Inn charges 219 Yuan to 249 Yuan per room in Shanghai. We are

priced about 20 Yuan higher than Home Inns. We also have a membership

program with 100, 000 members; 40 percent of customers are members.
PE: How many hotels will GreenTree open this year?

D.Hu: Before 2007 we had 24 hotels – 14 in Shanghai and up to 40 hotels in

China. By the end of 2007, GreenTree had 70 hotels in China.
PE: How many employees does GreenTree have?

D.Hu: We have more than 100 employees working at the company headquarters

and a total of almost 2, 000 employees. For budget hotels, you normally

need about 30 employees for every 100 rooms, while for five star hotels,

you need 150 employees for every 100 rooms.

PE: Who are GreenTree’s investors?

D.Hu: GreenTree Inns chairman and general manager, Alex Xu, has studied and

worked in the US for twenty years. Xu set up a real estate company called

American Pacific Homes (APH) in the US, then returned to China in 2004

and founded GreenTree Inns. APH, along with several US companies

including George Realty, COX and Castle & Nicholson, provided the fund-

ing for and set GreenTree Inn. APH is the largest shareholder. GreenTree’s

initial registered capital was US$20 million. The next injection of capital is

US$120 million over two rounds; the first round of US$50 million has

already been used and we recently received the remaining US$70 million.

PE: Does GreenTree own the property for its hotels?

D.Hu: No. The majority of hotel buildings are leased or franchised; GreenTree

owns very few hotel buildings.

PE: Does GreenTree use the franchise model?

D.Hu: We do direct operation and franchising. For both models, the minimum

contract is for 15 to 20 years. GreenTree Inns authorizes franchise hotels to

use the GreenTree Inn brand, trademark and operating systems. We charge

franchisees a one-time up-front fee of 300, 000 Yuan plus 1, 000 Yuan per

room. We also take 3.5 percent to six percent of gross income (depending

on occupancy; paid monthly). GreenTree Inns appoints the general manager

for franchise hotels; the general manager will set room rates. In some cities,

the rooms are only 149 Yuan. Currently, 70 percent of our hotels are direct-

ly operated and 30 percent are franchise hotels. We will consider increasing

the percentage of franchise hotels in the future.

PE: How much does it cost to set up a hotel?

D.Hu: It costs from five million Yuan to 10 million Yuan; the average is eight

million Yuan for each hotel, or about 40, 000 Yuan per room. This does not

include the cost to lease the property; this is just remodeling costs. By com-

parison, a new three star hotel with 100 rooms would cost 100 million Yuan

to build.

PE: How long does it take to open a new franchise hotel from the start of negotia-

tions?
D.Hu: It normally takes five months to six months, including two to three months

for the remodeling.

PE: How long does it take to recoup your investment on a new hotel?

D.Hu: It takes three to five years. However, this is just a forecast based on our

current data because the first GreenTree Inn hotel has been opened for less

than three years. However, in the future, it will take longer to recover your

investment since there are more and more companies entering the market.
PE: Are occupancy rates starting to drop due to the increased competition?

D.Hu: Yes, the occupancy rate is already falling and there will soon be a price war

in the industry.

PE: What is GeenTree’s occupancy rate?

D.Hu: GreenTree Inn’s overall occupancy rate is above 80 percent. Some hotels

are at 60 to 70 percent and some are at 100 percent. The occupancy rate for

GreenTree’s hotel near Shanghai’s Jing An Temple is at least 98 percent.
PE: Do you think the budget hotel market is in danger of a bubble?

D.Hu: It is not a bubble now. If occupancy rates drop to 70 percent, then I would

be worried about a bubble.

PE: What are the major challenges facing the budget hotel industry?

D.Hu: I think there are three major problems: first, real estate costs are rising.

Rents are increasing because there are many budget hotels competing for the

best and most affordable locations and also because prices in China’s real

estate market as a whole are rising. Second, there is a human resource

shortage. GreenTree Inns is opening 50 new hotels a year; therefore, we will

need 50 general managers and 200 other managers. Third, only a limited

number of players will survive. As more and more players enter the market,

the slice of the overall pie for each player drops. I believe we will start to see

some consolidation in the industry in two to three years. Only five to six big

chains will survive in the end. The industry’s occupancy rate and room rates

will rebound after the market restructures.

PE: What is the status of the market in second and third-tier cities? How do you

compete with the many local budget hotels (that may only have a few

locations) in the smaller cities?

D.Hu: The big players do not have much of a competitive edge in smaller cities.

First of all, the local hotels have their own networks and can get cheaper

and better locations. Second, hotel rates in smaller cities are already relati-

vely cheap, so budget hotels do not have the same price advantage that they

have in big cities. GreenTree Inn’s rates are half the rates for three star

hotels in Shanghai. However, some three star hotels in smaller cities only

charge 150 Yuan; we cannot drop our prices to 80 Yuan.
PE: What parts of China will GreenTree focus on for expansion?

D.Hu: We will focus on the Yangtze River Delta and southern China first, then on

to provincial capitals, such as Wuhan, Chongqing and Chengdu. We will

then expand to second-tier cities where conditions are favorable.

(original interview see: https://www.jlmpacificepoch.com/pecontent? id=96049_0_3_0_M)

XXI. 1) Review the words and word-combinations you’ve learnt while