Source Code Capital portfolio company "Qingzhu" announces completion of tens of millions of dollars in Series B funding — Source Code Capital was the sole angel round investor

源码资本·March 19, 2020·0·4

Qingzhu currently has over 3,000 partner hotels under contract, with full coverage across all first-tier, new first-tier, and second-tier cities nationwide.

Today, Qingzhu Hotel Group announced it has raised tens of millions of dollars in Series B funding, co-led by GGV Capital and Sofina Group, with continued participation from existing shareholders HSG and XVC. Qianyue Capital served as the exclusive financial advisor. Founded in January 2019, Qingzhu completed three rounds totaling tens of millions of dollars within its first six months, with investors including Source Code Capital, HSG, and XVC. Source Code Capital was Qingzhu Hotel Group's sole angel-round investor and continued to increase its stake in the Pre-A and Series A rounds.

Qingzhu founder and CEO Nan Zhao stated that the funding will be used primarily for multi-brand store expansion, optimization and technological innovation of its technology platform, enhancement of core product R&D, and strategic partnership and business development.

Nan Zhao, Founder & CEO of Qingzhu Hotel

Digging Deep into the Pain Points of the Fragmented Market, Qingzhu Hotel Makes a Hardcore Debut

After a decade of rapid expansion, major economy hotel brands quickly rose to prominence. Yet in the China market, a massive gap remains between chain and non-chain hotels in terms of volume — 80% are still scattered independent properties. Faced with rising property costs, declining occupancy rates, and shrinking profits, these independent hotels are searching for a way out. How to penetrate the independent hotel market has become a thorny problem for the industry.

The existing stock market holds enormous potential, and with the competitive landscape still far from settled, numerous players have poured in with heavy bets. From a business model perspective, Qingzhu represents a breed built on tech support plus comprehensive empowerment. While riding the market's tailwinds, it seized on the hard demand for independent hotels to be chain-ified, achieving rapid growth through continuous optimization of product categories and sustained operations and marketing.

In March 2019, Qingzhu launched its first brand, "Qingzhu Hotel." From the outset, the company analyzed the stock market and identified three core pain points for independent hotels: first, operationally, they relied entirely on third-party channels for customer acquisition; second, management quality varied widely, making it impossible to effectively boost store revenue; third, in branding and supply chain, fragmented procurement made it difficult to achieve economies of scale, driving costs up. These pain points became the creative starting point for Qingzhu Hotel's brand design. The company proposed solutions: comprehensive operational efficiency and customer acquisition, professional talent development for better management, and branding and supply chain empowerment — hitting all three pain points in sequence. Qingzhu Hotel became the preferred brand for independent hotel chain-ification in 2019, achieving rapid brand development and elevation that shaped a nearly irreplicable industry case study.

The defining characteristic of China's consumption upgrade is its breakneck iteration speed. The brand growth opportunities created by market development and evolving consumption habits meant that, at that point in time, Qingzhu Hotel had already influenced consumer hotel selection habits through its market scale. After the first half of 2019's wave of innovation and exploration by players in the space, the vitality unleashed in the independent hotel stock market exceeded everyone's imagination: rapid development, rapid revenue growth. By July 2019, Qingzhu Hotel surpassed 1,000 properties — accomplishing in less than six months what traditional hotel brands took a year to achieve at a pace of 100 stores.

Consumption Upgrade Tailwinds: Qingzhu Yuexiang Carves Out a Market Niche and Wins Word of Mouth

As is well understood, the ideal hotel product design path runs: renovate a single property, deliver a good customer experience, drive high repeat rates, and achieve quick payback — a perfect closed loop of experience and profit. Yet full-property renovation costs represent a crushing burden for independent hoteliers. Cost concerns and consumer experience seemed to form an irreconcilable contradiction. While the product system was still being built out, surging consumer demand created another opportunity for sharp players to capture. In August 2019, Qingzhu Yuexiang officially launched.

Qingzhu Yuexiang adopted a dual-center strategy, using both merchant and consumer needs as the origin point for product design. First, it employed a "modular" renovation approach, selecting the core touchpoints of the consumer's on-property experience for targeted modular upgrades. Second, through a "low-cost" investment philosophy, it leveraged Qingzhu Group's centralized procurement advantages, using new materials and new technologies to reduce renovation costs for merchants. Qingzhu Yuexiang also offered multiple style options, allowing merchants to choose according to their preferences and renovation budgets for efficient, rapid upgrades — giving consumers more choices, more experiences, and more delight.

Qingzhu Yuexiang — Urban Business Style Rendering

The Qingzhu Yuexiang model represented a new approach to brand product design. Many independent hoteliers remained in a wait-and-see posture toward this new concept, so the first batch of merchants who joined Yuexiang got to experience the uplift brought by the new brand. Take the Qingzhu Yuexiang Guangzhou Baiyun Airport property as an example: after joining in September 2019 and two months of operations, strategic adjustments led to markedly improved performance and a comprehensive boost to the hotel's competitive position. Daily occupancy remained above 90%, RevPAR grew 59%, and revenue increased substantially. OTA ratings rose from 4.5 to 5.0. By December 2019, less than six months after launch, Qingzhu Yuexiang had surpassed 100 properties.

Merchant Stratification, Needs Disaggregation: Qingzhu Alliance Tests the Waters

Qingzhu's product design thinking and traffic control became an industry benchmark for a considerable time. When the COVID-19 pandemic erupted in 2020, hotel merchants preparing for peak holiday consumption instead found themselves in deep freeze. Every crisis is an opportunity — and Qingzhu spotted one once again.

As the new year began, consumer migration to online channels occurred at massive scale, with more and more consumers using internet platforms to book hotels for post-holiday travel. In this consumption scenario, the Qingzhu team asked what product model could create alignment between consumer demand and merchant development. On March 8, 2020, Qingzhu held an online merchant conference to officially launch Qingzhu Alliance, which drew 8,000 viewers.

"As a hotel group brand, Qingzhu's approach is to continuously enhance core product competitiveness, enabling the brand to experiment at a relatively fast pace with high flexibility, allowing products to land softly," said Nan Zhao, Qingzhu's founder and CEO, regarding the brand's launch and rapid upgrades.

Optimizing Service Experience: "Qingzhu Safe Stay" Builds Customer Word of Mouth

Qingzhu's product innovations all center on "customer-centricity." Operations, talent, marketing, systems, supply chain, and brand transform and synergize to form Qingzhu's fundamental strengths. In 2019, based on big data analysis, Qingzhu developed the "Qingzhu Hotel Quality Evaluation and Classification" model, which assesses individual franchised properties across six categories: safety, hygiene, service, hardware, linens, and operations. With the help of this evaluation system, an increasing number of quality merchants emerged, achieving leaps in service capability and quality. According to statistics, compared to pre-franchise levels, franchise hotels saw hygiene negative review rates on OTA channels drop by 40.3% and service negative review rates drop by 39.7%.

Building on the "Qingzhu Hotel Quality Evaluation and Classification," and focusing on the eight touchpoints consumers care about most, "Qingzhu Safe Stay" upgraded its services to provide comprehensive safety and peace of mind. It has now covered more than 140 cities, with 50% of hotels having received "Safe Stay" certification. According to statistics, certified properties have seen clear improvement in operational metrics. Going forward, as Safe Stay services advance in depth, Qingzhu will continue upgrading standards and, through a series of marketing initiatives, help more consumers learn about the program.

Customer-Centricity: Qingzhu's Commitment to What Changes and What Doesn't

Today's independent hotel market still has vast untapped stock. How to provide stable supply and deliver safe, reliable, high-quality service to target customer groups is now the key competitive capability. "Supply" here obviously refers to both merchants and consumers. To this end, Qingzhu conducts platform-based service operations, with a strategic logic behind it: by providing high-quality products and services to both merchants and consumers, merchants can in turn provide equally high-quality service to consumers, and consumers receiving high-quality service will in turn further solidify Qingzhu's market position. The three parties form a virtuous ecological closed loop, thereby establishing true competitive moats. Many of Qingzhu's initiatives have already quietly launched, including mid-to-high-end hotel incubation, membership system operations, and system iteration upgrades, all showing stable and positive results.

As Nan Zhao, founder and CEO of Qingzhu Hotel, put it: "In the development ahead, what won't change is Qingzhu's commitment to being 'customer-centric,' investing more energy in business exploration, team building, and innovative R&D. What will change is our precision in capturing core customer demands, continuous optimization, and a more mature mindset for solving pain points to improve service quality. We hope that before long, no matter where consumers find themselves, they'll discover a Qingzhu nearby — becoming the preferred choice for more people's peace-of-mind travel."