HMIN

Home Inns & Hotels Management Inc. (HMIN)

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Industry: Consumer Services
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Home Inns & Hotels Management Inc. (HMIN)

Q1 2013 Earnings Call

May 13, 2013 9:00 PM ET

Executives

Johnny Wang – Director, IR

David Sun – CEO

Hui Ping Yan – CFO

Analysts

Justin Kwok – Goldman Sachs

Ella Ji – Oppenheimer

Billy Ng – Merrill Lynch

Tian Hou – TH Capital

Vivian Hao – Deutsche Bank

Lin He – Morgan Stanley

Jamie Zhou – Macquarie

Presentation

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Home Inns Group’s First Quarter 2013 Financial Results Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by question-and-answer session. (Operator Instructions).

I must advise you that this conference is being recorded today, Tuesday the 14th of May 2013 and now, I would like to hand the conference over to your host for today’s call, Johnny Wang, the Investor Relations Director for Home Inns Group. Thank you. Please go ahead.

Johnny Wang

Thank you, Ben. Hello, everybody and welcome to our earnings conference call. Our first quarter 2013 earnings results were released earlier and are available on the company’s website. In addition, we have posted a slide show presentation on our website, which you can download and use to follow along with today’s call.

With us today is David Sun, our Chief Executive Officer; and Hui Ping Yan, our Chief Financial Officer, who will be discussing our performance for the past quarter. After the prepared remarks, David and Hui Ping will be available to answer your questions.

Before we continue, please note that today’s discussion will include forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks, uncertainties; as such our results may be materially different from the views expressed today.

A number of potential risks and uncertainties are outlined in our public filings with the SEC. Home Inns Group does not undertake any obligation to update any forward-looking statement except as required under applicable law. As a reminder, this conference is being recorded.

In addition, the webcast of this conference call will be available on Home Inns Group’s Investor Relations website at english.homeinns.com.

I will now turn the call over to our CEO, Mr. David Sun.

David Sun

Hello, everyone, and thank you for joining us today to discuss our first quarter 2013 results.

On back job of continued microeconomic weakness and senior impact of Chinese New Year holidays, we achieved sum results in the first quarter of 2013. We delivered a total revenue target within the RMB 1.4 billion gross sales.

Our mature hotel group remained at fat stem hotels RevPAR year-over-year inspire of higher exposure of small market in low Tier cities net our peers. Motel 168s RevPAR improve 4.5% as a result of continued increase in occupancy rate. Our operating margin improved 1.7 percentage points as a result of high franchise mix, better expense ratio for both leased-and-operated hotels and corporate spending given by effective cost control and a productivity measures.

Let’s take a more detailed look at operation result. RevPAR for the group was down 0.8% for RMB 131 from RMB 132 a year ago resulting from 83.6% occupancy rate and ASR of RMB 156 compared to 80.7% occupancy rate and ADR of RMB 165 in the first quarter of 2012.

At the end of the quarter, 1,278 of the gross hotels has been in operation inefficient for at least 18 months. RevPAR for this group of hotels was RMB 107 same as that in the first quarter of 2012. Occupancy rates was 86% increasing from 83.4% same period last year while ADR decreased to RMB 160 from RMB 165 a year ago.

Normal first quarter low seasonal volume was further negatively impacted by continued overall market softness. We experienced pressure on both ADR and occupancy rate. In response, the company carried out a series of organized promotion to protect occupancy rate and maximize utilization. The impact of this promotional activity on average day rate was minimum.

RevPAR for the core business of Home Inns and Yitel hotels was RMB 135 for the quarter compared to RMB 139 in the same period of 2012. Occupancy rate increased year-over-year to 85.6% from 84.4%. Of the 989 matured hotels under the Home Inns and Yitel brands, occupancy rate was up one percentage points at 89.6% from last year while ADR decreased RMB 4 resulted in 1.4% decrease in RevPAR or RMB 145 compared to RMB 147 in the first quarter of 2012.

Looking at Motel 168, integration efforts continue to generate positive operating result. RevPAR increased by RMB116 primary as a result of improvements in occupancy rates, which increased significantly to 76.7% from 70.4% year-over-year. Conventions of large scale Motel 168 hotels to do brand operations are well off schedule and are expected to be completed by the end of second quarter. Total revenues from Motel 168 was within our initial expectation for quarter and we are on track to conclude the integrations in the second half of 2013.

During the quarter, we opened 91 new hotels including 75 franchised-and-managed hotels and 16 leased-and-operating hotels. Franchised-and-managed hotels development has become a main driver for our network expansion. As of end of first quarter of 2013, about 56% of our hotels were franchised-and-managed hotels and 152 out of a total of 216 hotels in the pipeline is franchised-and-managed hotels.

Read the rest of this transcript for free on seekingalpha.com