HMIN

Home Inns & Hotels Management Inc. (HMIN)

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

Q2 2011 Earnings Call

August 10, 2011 9:00 PM ET

Executives

Ethan Ruan – IR Manager

David Sun – CEO

Huiping Yan – CFO

May Wu – Chief Strategy Officer and CEO, Yitel brand

Analysts

Tinny Lu – Cowan & Company

Ella Ji – Oppenheimer

Billy Ng – Merrill Lynch

Adam Krejcik – Roth Capital Partners

Fawne Jiang – Brean, Murray

Sean Chan – Goldman Sachs

Lin He – Morgan Stanley

Grace Lam – Citi

Presentation

Operator

Hello, and thank you for standing by for Home Inns’ 2011 Second Quarter Earnings Conference Call. At this time, all participants are in listen-only mode. After management’s prepared remarks, there will be a question-and-answer session. Today’s conference is being recorded. If you have any objections, you may disconnect at this time.

I’d now like to turn the call over to your host for today’s conference, Ethan Ruan, Home Inns’ Investor Relations Manager.

Ethan Ruan

Hello, everyone, and welcome to our earnings conference call. Our second quarter earnings results were released earlier and are available on the company’s website.

With us today is David Sun, our Chief Executive Officer; Huiping Yan, our Chief Financial Officer, and May Wu, our Chief Strategy Officer and Chief Executive Officer of Yitel brand who will be further discussing our performance for the past quarter. After prepared remarks, David, Huiping, and May will be available to answer your questions.

Before we continue, please note that the discussion today 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 and 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 does not undertake any obligation to update any forward-looking statements, except as required under applicable law.

As a reminder, this conference is being recorded. In addition, a webcast of this conference call will be available on Home Inns’ Investor Relations’ website, at english.homeinns.com.

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

David Sun

Hello, everyone, and thank you for joining us today as we discuss our results from the second quarter of 2011. Total revenues for the second quarter increased 12.2% year-over-year to RMB905.2 million. We achieved our revenue target despite delayed revenue contributing by newly opened hotels and then temporary closure of number of classrooms during the quarter due to proactive confrontations of most stringent than customary public safety measures. The underlying operating environment continues to be – continue to be stable which allow our previous opened new hotels to ramp up within (inaudible) and our matured hotels that have been in operation 80 months or more outside of Shanghai delivered year-over-year improvements in both occupancy rate and average day rate.

The 88 new hotels we added this quarter scheduled with another 203 additional hotels under development by the end of the quarter resulted from our strengthened development process, which will enable us to achieve higher growth in 2012 and beyond.

Furthermore, even high pre-opening costs, high mix of new hotels, inflationary pressure and absence of the Shanghai World Expo benefits from last year, our hotel level operating margin remained stable. Our improved effectiveness in managing pricing as well as our cost control and productivity initiatives are producing positive results.

Average daily rate was RMB173 compared to RMB177 second quarter a year ago, occupancy rate was 94% compared with 96.4% in the second quarter of 2010. Shanghai World Expo commenced on May 1, 2010 and brought about 25% to 30% price premium in second quarter last year for our hotels located in Shanghai. This price premium coupled with a high occupancy rate due to the high cover volume in Shanghai during the World Expo. The one-time favorable impact to our overall RevPAR for the second quarter last year was admitted to be RMB9. Excluding this admit onetime benefit, RevPAR was RMB152 in the second quarter of 2010. We achieved RevPAR of RMB163 in the second quarter this year, a slight improvement even with a high mix of new hotels in the portfolio. This largely attributed by – to performance improvement by our major hotels, offsetting new hotels dilutive impact.

There was 607 hotels that had been in operation for at least 18 months during the second quarter of 2011. RevPAR decreased to RMB170 from RMB173 for this same group of hotels in the second quarter of 2010. RevPAR for home being hotels located outside of Shanghai that have been in operation for at least 18 months during the second quarter of 2011 was RMB169 compared to 162 – RMB163 for the same group of hotels in the second quarter of 2010. This favorable comparison was attributable by increased in occupancy rates from 97% to 97.5% and increase in ADR from 164 – RMB163 to RMB169 for this group of hotels.

Our membership program continues to strengthen and provide a stable revenue base and as of June 30, 2011, Home Inns had 4.28 million active non-corporate members representing a 42% increase from last year. Room nights sold to active non-corporate members consistently represent over 50% of total room nights sold.

On the development front, Home Inns opened 28 new leased-and-operated hotel and 60 new franchised-and-managed hotels during the quarter. As of June 30, 2011, Home Inns operated across 164 cities in China with a total of 934 hotels.

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