Novel marketing opportunities, standardization provide lifeline for emerging hospitality industry amid challenging times

Chinese homestay hospitality businesses, which have suffered from market uncertainties created by COVID-19, are looking for new ways to stay open and thrive given quarantine measures that dim their chances for survival, not to mention growth.

While 846 licensed homestay businesses closed in 2018, that number had more than tripled to 2,755 in 2020, according to business information provider Tianyancha. Homestay operators that survived in 2021 lowered average room rates to below 300 yuan ($47.19) per night to attract customers, according to homestay management services provider Yunzhanggui.

Hopes were high when Yang Changle, appointed CEO of online travel agency Tujia in February 2019, said that homestays would be a major pillar of Tujia's plans, with the goal of building Tujia into a comprehensive homestay business provider. Yang, however, stepped down from the post one year later as Tujia shut down all its directly managed homestay businesses in 20 Chinese cities in 2020 to enable the company to navigate the COVID-19 pandemic.

In late September, online travel portal Fliggy announced it would work closely with homestay reservation platform Xiaozhu in what industry insiders interpreted as an attempt to use each company's strengths to weather a tough winter for the homestay industry.

Lin Lu, founder of seven-year-old standardized homestay services management platform Keys, also had to deal with the contraction of the business, especially in urban areas. While more than 20,000 homestay operators in major Chinese cities used Keys' services prior to the pandemic, that number plummeted to 2,700 in 2021.

"The tourism and accommodation industries in China experienced intense competition in 2019, and a lot of opinions were voiced about the future of the industry. But now, those industries have been completely reshuffled, eliminating many of the players," he said.

At this tipping point, new business models or ideas are especially important. A new strategy that Lin has provided for homestays is creation of a new marketing node for offline retailing.

"Homestays can work as a new method of advertising through which immersive marketing campaigns can be launched and firsthand experiences with products provided to consumers," he said.

That is what Keys has done. In November 2019, Keys first tried the new strategy at some of its homestays by selling Palace Museum lipstick－a souvenir product of the six-century-old former imperial palace－first released in late 2018. In one month's time, nearly 4,000 lipsticks were sold at homestays that were working with Keys.

"Quite a few homestay businesses managed to survive the first few months of the pandemic in 2020 by selling lipstick," he said.