While personal computers are ubiquitous in Chinese families, and internet speeds are accelerating, esports fans still prefer to go out and play games with friends. Meanwhile, internet cafes are declining in China, but esports hotels come out, and bring a higher level of entertainment to the video game players.

What is esports hotel and how did it came about

Essentially, an esports hotel comes with gaming PCs in its rooms. A typical room may be equipped with 2 to 5 gaming PCs, (higher-end than your work laptop) and several bunk beds so that it can accommodate more people than the room is usually intended for in the normal hotel business. For some esports hotels, they might also have a common area that's no different than a regular Chinese internet cafe, where gamers can host tournaments during the day and sleep upstairs in the night.

The hotel industry has fierce competition. To cope with it, hotel owners have to think of ways to differentiate themselves. As a result, a variety of themed hotels have come into being.

"Since there are automobile or cartoon-themed inns, why can't there be an esports themed hotel?" Zhang Pan, a gamer with two decades of experience and the owner of an esports hotel in Wuhan, central China, told PingWest. "I am quite optimistic about the development of esports related industries, so I started this hotel," the 33-year-old added.

Hidden behind the esports is a burgeoning market with great potential. According to an esports research by Tencent, one of the country's largest game developers, the overall value of China's esports market will reach $2.06 billion (13.8 billion RMB) in 2019, whilst the total output value of the country’s esports industry is expected to reach a considerable amount of $3.15 billion or (21.1 billion RMB) by 2020, representing a drastic annual increase of 53%.

This comes as esports finally being recognized by the Chinese government as a category for professional sports competition, according to the Sports Industry Statistics Classification (2019) published by the National Bureau of Statistics of China.

Last August, esports joined the 2018 Asian Games as a demonstration sport, which showed that it is gaining popularity and has the potential to be accepted as an official sport. Then, in early November last year, Chinese esports team IG won the championship in The 2018 League of Legends World Championship, one of the world's most high-end esports tournaments.

Mr. Liu, owner of an esports hotel in Hefei, east China, told PingWest that the events above were the most significant moments in his life. "The mainstream media began to report esports news, which led to positive public opinions in the mass," said Liu, “it was at that moment I made up my mind to start my esports hotel business."

Statistics show that as of July 2018, there were more than 400 esports hotels in China with more than 50 newly opened hotels per month, in stark contrast to the current state of growth of the hotel industry as a whole.

Xiao Feng recently opened his own esports hotel in Zhengzhou, one of China's largest cities. Like nearly every owner who've talked to PingWest, he is an esports enthusiast himself. "I am engaged in the cultural industry, and investing in the hotel business is a try," he told PingWest, "Internet cafes have fallen, but the demands for people to go out and play games with friends is not declining."

In Xiao's perspective, esports hotel is an upgraded version of internet cafe that better meets the needs of customers.  They offer a wide variety of services, such as food delivery and errands running to lure customers-that is the hotel owner's operations strategy. What impressed Xiao the most is when a young man managed to live in the hotel for seven days straight without stepping out of his room. "He said that the room is like a paradise to him!" Xiao Feng added.

Wang Junting, a 21-year-old university student in Hefei, said that he used to play games with friends in noisy internet cafes filled with harmful substances caused by other gamers' chain-smoking. For him, hotel rooms are much quieter and more private, giving him and his friends a much more comfortable gaming experience. "Although a triple bed hotel room costs $45 (300 RMB) per night, which is quite expensive, splitting the room rates with three people makes it better for all of us," said Wang.

The hype is on, but location still matters

Wondering where you can spot an esports hotel? Most people would be surprised because they are not easily found in the tier-1 cities such as Beijing and Shanghai, but tier-2 cities like Zhengzhou, Xi'an and Wuhan.

DT Caijing, a financial data platform which was jointly created by China Business Network and the ecommerce giant Alibaba, released a report based on the figures of Meituan Dianping's reviews platform, China's equivalent of Yelp. It shows that Zhengzhou has 121 esports hotels, far ahead of other cities. 

"Zhengzhou, indubitably, owns the greatest amount of esports hotels. Having a large population base with plenty of colleges and universities, esports hotels attract gamers while the city attracts esports investors." Xiao Feng told PingWest.

Meanwhile, he stressed that in order for esports hotels to be successful, they should be within a 5-kilometer radius of colleges and universities, since customers are mostly composed of college students. According to official data, Wuhan, Xi’an and Zhengzhou have 1.18 million, 0.96 million and 0.87 million college student in 2017, respectively.

Zhang Pan’s hotel is located in Wuhan University Town, he told PingWest that his customers come from surrounding colleges, and with some young white-collar workers who live nearby.

Zhang's market research told him that even though tier-1 cities have an abundance of students and young professionals, the fast-paced lives and intense daily work there reduced people's willingness to spend time and energy in esports hotels. "Plus, the rent there is too expensive, so I chose Wuhan." the hotel owner said.

Smaller esports hotel owners fears competition from real estate giants

As the esports hotel business gains traction, it is now highly sought after by capital, and now even Greenland Holdings is involved.

Founded in 1992, the Shanghai-based real estate magnate is also one of the biggest hotel operators in China, ranking #252 in Fortune Global 500 and #341 in Forbes Global 2000 Top Public Companies in 2018. Last August, Greenland Holdings ventured into the esports hotel business with its Moqi Hotel, causing panic to its existing competitors.

"The entry of Greenland shows that I have not misread this industry. Great minds think alike." Mr. Zhang joked about the competition, "however, I do feel anxious. Compared with Moqi, regardless of service or hardware facilities, I have no advantage at all," he told PingWest.

An average economy hotel room would cost $3,727 (25,000 RMB) to decorate, while that figure may double for esports hotel room's, since high-performance gaming PCs are involved. Also, an esports hotel owner should never underestimate the electricity bill, which may go as high as $224 (1500 RMB) a month per room.

The occupancy rate is another critical issue. Although esports hotels are usually fully-booked on Fridays and Saturdays, the same could not be said for weekdays. 

According to Liu, it would take him more than 3 years to recover the initial cost. Liu told PingWest that he is running a medium-sized esports hotel with 30 rooms in Hefei, and he invested about $750,000 (5 million RMB). "While the room rates of an esports hotel could be slightly higher than that of an economy hotel, the the margins have not increased by much. Besides, younger customers are more sensitive to the rates, and we don't raise them very often during a long period in order to avoid losing customers. Currently, it’s getting harder and harder to boost the hotel's revenue," he said.

But he is still optimistic about it,"With the popularity of esports, there will be an increasing number of gamers coming to esports hotels for entertainment, and I have faith in this market. However, for newcomers, be cautious. You'd better not step into this field unless you've got a sufficient financial support."