The Shanghai-based China Lodging Group added a record number of hotels into its system in 2014 and remains committed to growing its footprint.

In 2014, China Lodging Group added a record number of hotels into its system for a single year, and the company continues its growth model focusing on its manchised business.

Still, the company’s performance did show some fourth-quarter declines that executives attribute to softening macroeconomic activity.

“A record high of net 570 hotels were added into our system in a single year, more than 90% of which are under (the) manchise model and more than 25% are under new brands,” said Qi Ji, CEO and executive chairman of China Lodging Group in the company’s fourth-quarter and 2014 year-end financial statement. Manchising refers to properties that are managed and franchised by the same company.

During a conference call with analysts Wednesday morning in China, Qi and Jenny Zhang, CFO and chief strategy officer, outlined the company’s continuing push to grow its footprint, largely through the manchising model.

“Rapid expansion remains our primary strategy,” Zhang said.

Year to date, the company’s stock price is down 31.7%, as of press time. By comparison, the Baird/STR Hotel Stock Index is down 0.6% through the same period.

As of 31 December 2014, the company had 1,995 hotels in operation (209,955 guestrooms), of which 611 were leased (31%), eight were franchised and 1,376 were manchised (69%). The company added 570 hotels total to its opened portfolio in 2014.

Of those openings, Zhang said many in 2014 were in lower-tier cities in China, which contributed to lower fourth-quarter metrics overall: Portfolio-wide occupancy for the quarter was 86.5%, down from 90% in the fourth quarter of 2013. Revenue per available room during the fourth quarter was 153 renminbi ($24.44), down from 160 renminbi ($25.56) in the fourth-quarter of 2013. Average daily rate was 176 renminbi ($28.12) for the quarter, down from 178 renminbi ($28.44) in the previous year’s comparable quarter.

Pipeline

The company remains committed to its pipeline growth, despite growing operational challenges.

“In 2015, we plan to add 680 to 730 leased and manchised hotels, with 20 to 30 leased hotels and 660 to 700 manchised and franchised hotels. Among these new hotels, 80% will be economy hotels, and 20% will be midscale and upscale hotels,” Qi said.

Zhang said that for new openings in 2015, the company expects approximately 56% will come from the company’s flagship brand, HanTing Hotels. An additional 25% of the new openings will be from other economy brands, and the company’s midscale to upscale brands will generate the remaining openings.

Still Qi and Zhang acknowledged that expansion won’t be completely smooth sailing.

“We’re prepared to face a very challenging operational environment, but we are confident in the travel industry and have no plans to slow down our expansion,” Zhang said. “We think our efforts to revitalize and expand our product will (allow us) to gradually improve our profitability over today’s level.”

To boost RevPAR and other operating profitability, Zhang said the company is working on plans to offer more services to its hotel owners and operators to help them grow both rooms revenue and non-rooms revenue.

“In the long run, we’re confident that by introducing more services and expanded product offerings that we’ll be able to bring the margins back,” she said.

Accor partnership

Qi said he looks forward to developing the company’s strategic alliance with Accor, which it signed in mid-December to develop Accor’s brands in China.

“We believe economy hotels will continue to expand and grow well over the next 10 years, and we also see great opportunities for midscale hotels over the next 10 years,” he said through a translator. “Through our collaboration with Accor, we will manage Mercure and Novotel and Grand Mercure brands … and we will also operate Ibis and Ibis Styles.”