hantingshanghai.jpg[UPDATED] Forget economy hotels, as the real money in China's fast-growing lodging sector is to be made in mid-range business hotels. That's the argument of Hanting Hotels, which has just received $85m in first-round VC funding to expand its network of three-star hotels in China.

China's economic boom has led to an explosion in business travel, but those who cannot afford internationally branded five-star and four-star hotels can be in for unpleasant surprises if they check into a locally run three-star hotel, where service and quality can leave much to be desired.

Ji Qi, Hanting's founder and chief executive, says such failings create an opportunity for chains to build nationwide brands focussed on the price-sensitive business traveller.

According to this Financial Times article, Hanting's strategy is to lease existing buildings — like the the Hanting Shanghai pictured –and invest about $1m in renovations to meet its format. The company aims to recover upfront costs within five years.

Mr Ji says his target market is wide open, with no rivals operating nationally on a similar scale to Hanting, but he does not expect it to stay that way.

Hanting, which has been operating since 2005, has signed up 100 hotels in 20 cities and currently has 40 properties operational. It will use the investment to develop its two brands of Hanting Business and Hanting Franchise, and may launch other brands in the future.

The VC investors are CDH Venture Partners, IDG-Accel China Growth Fund, Chenwei Ventures, Northlight Venture Capital and PinPoint Capital.

EngagingChina last wrote about China's budget hotel boom here.

Elsewhere on the hotel front:

  • China is the third largest market for Intercontinental Hotels, the UK-based chain, and is set to soon become the second most important thanks to the 30,000 rooms in IHG's China pipeline. By the end of 2008, it is on track to have 125 hotels in China, and it sees “significant growth opportunites” for international brands — as well as the Intercontinental brand, IHG ownes Crowne Plaza and Holiday Inn. IHG says only 15% of the hotel rooms in China are branded — much lower than in the west — yet increasingly brand-conscious Chinese consumers are now seeking out international brands. More in this IHG presentation on China.

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