Atour Hotel Case Study – Cross-Industry Experience Creates New Species
During our discussion on opportunity identification last time, we could adopt the dot-line-surface-body thinking method as a supplement to our decision-making process (Read more at “Identifying Opportunities? The Essential Dot-Line-Surface-Body Thinking Method”), which elevates and widens our thinking.
Today I would like to talk about innovation, i.e. how to add new elements into existing patterns and create a competitive edge. This widens our thinking. Next I will share a case that I really like – how the Atour Hotel stepped outside of the box of a hotel and further shaped its unique product proposition.
Back in 2010, 60% of the hotel business in Mainland China are budget hotels (Home Inn, 7 Days Inn, Huazhu Hotels, and others), while the remainder are high-end hotels. The overall budget hotel business growth acceleration gradually slowed down, and in 2012, Home Inn recorded a loss for the first time. It is increasingly difficult for budget hotels to operate under the trends of rising cost and consumption upgrades.
In 2015, mid-range hotels began to emerge. Some were renovated and upgraded budget hotels, which sped up the scaling up process but failed to satisfy the massive need for personalization. Others were new brands, including Atour.
Atour Hotel was founded in 2013 and positioned itself as a mid-range hotel. Its core philosophy is to become a cultural, heart-felt, and fun brand, and its target customers are young white-collar workers.
“They like beautiful things and have more interests and hobbies. They are cultural and artsy and do not think that a good product would be cheap, but rather cost a bit higher than normal.”
At this point, you might think that Atour is just like your average “Industry+Cultural and Creative” mode. However, in less than six years, Atour opened 259 hotels in 144 cities in China. How did Atour achieve all this from scratch?
Innovation Does Not Mean Invention, But Empowerment
If you closely observe innovative and fun products around you, you will find that many of them have drawn their inspiration from cross-industry concepts to inject new elements. Atour Hotel has tried many different methods on its products, customer flow and space.
▲Atour’s brand structure / Image source: Official website
#1 Product: Fine-tune core demands.
When corporations attempt diversification and innovation, they need to secure its core business to avoid over dispensing and wasting resources. For those living in a hotel, sleep, shower, and the Internet are the three core demands. As a people-oriented business, Atour Hotel strives to provide the best of the three key points.
Therefore, Atour opted to partner with the top suppliers in the industry, “Healthcare Co., Ltd.” and “Jiangsu Canasin Weaving Co., Ltd.” to customize the bedding product series, PLANET BED, which has qualities comparable to those of 5-star hotels. Atour also chose the affordable luxury brand BODY LABO for its bathroom products, and offers 50M-100M wifi to satisfy the guests’ need for Internet access at any time.
▲Atour sells daily necessaries through e-commerce channels / Image source: Official website
The user experience created by carefully examining core demands has extended into an O2O business model, in which Atour opened its shops on Taobao and Weidian. If a guest likes any product in the hotel, he/she can scan the QR code to make an order and receive the product at home.
Now, we must speak about the very important concept of “customer flow.” Atour Hotel plays the role of the inflow entrance (many guests stay at the hotel every day), and the corresponding hotel services can become natural platforms for living/product experiences. The product order transaction service is provided by the partners, therefore, aside from the hotel room revenue, the O2O revenue also becomes a very important source for profits.
#2 Customer Flow: Obtain optimal locations through franchising.
“A hotel has four different dimensions: the lowest being selling rooms, the one above is selling service; Atour’s first step is to sell experiences, and the more advance step would be to sell customer flow.” – Ye Lu Yin (Atour CEO)
In the physical economy, competition for locations is required, because location means customer flow. Atour expanded rapidly through franchising and is in charge of recruitment and hotel management. The alliance businesses are mainly in charge of the settlement, such as the process of finding suitable houses for new locations, repairment, and human resource fees.
Why are alliance businesses attracted by Atour? More people are willing to join the franchise because firstly, Atour has the service-drive incremental value. Secondly, among the O2O product revenue, alliance businesses could receive a higher cut of the profit, and Atour has certain demands in its alliance business quality control to ensure a consistent service and an outstanding brand image.
#3 Space: Not just a hotel brand, but a lifestyle.
If home is the first space, the office is the second space, and Starbucks is the third space, then Atour is devoted in creating the concept of the fourth space, which aims to breakthrough the single space restriction and focus more on a cultural lifestyle. The fourth space can be a hotel, an apartment, a bookstore, or traveling on holidays, the dining conditions, combining functions such as on-the-road, at home, in the office, and social interactions, etc.
For example, as a platform, Atour created two cultural cores: reading and photography. Through gathering a group of traveling and photography lovers, photos of different cities are collected and exhibited in the hotel of said cities. At the same time, the hotel also offers 24-hour free reading space. Guests or local residents can all borrow the books for free without a deposit and return the books at other hotels.
Atour also developed the “Hotel + IP” partnership model, such as the themed rooms jointly offered with Zihu and NetEase Cloud Music to expand IP offline and redirect IP traffic to the Atour brand. As a cultural and service platform, Atour plays the brand provider that converges many professional partners to co-create the fourth space and creates a diverse source of revenue, of which 40% is currently from O2O platforms.
▲Atour and NetEase Cloud Music co-created the “Sleep Music” themed hotel / Image source: zgjsrx.com
Atour started out as a hotel but did not stop there. It learned from Starbucks’ experiences and focuses on managing people and creating deeper emotional connections. It mimics Apple in its strict standards for user experience and simplistic style. It borrowed ideas from Disney and combined IP resources with self-created content and partnership with others. By introducing cross-industry new elements, it gradually evolved into a new species.
Let’s go back to product design: in order to gain a competitive edge, you cannot just focus on your original industry, but rather think about the vision you want to offer. Look at different things, experience different lives, and interact with people more. These will all help us think outside the box of our existing experiences, create innovation and differentiation, and help us become “Transformers” in the industry.
Reposted from” Is Having Many Interests a Good Thing? Turn Yourself Into a Transformer with Cross-Industry Thinking” by Livia Yang, with permission by the author