HMIN

Homeinns Hotel Group (HMIN)

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Home Inns & Hotels Management Inc. (HMIN)

Q3 2011 Earnings Call

November 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

Liping Cai – William Blair

Tinny Lu – Cowan & Company

Ella Ji – Oppenheimer

Adam Krejcik – Roth Capital Partners

Justin Kwok – Goldman Sachs

Fawne Jiang – Brean Murray, Carret & Charge-offs

Kenneth Fong – JP Morgan

Presentation

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Home Inns’ reports third quarter 2011 financial results call. At this time, all participants are in a listen-only mode. There will be a presentation, followed by a question-and-answer session. (Operator instructions)

I must advice that this conference is being recorded today Friday, November 11, 2011. I’d now like to turn the conference over to your host for today, Mr. Ethan Ruan, IR Manager. Thank you. Please go ahead.

Ethan Ruan

Hello, everyone, and welcome to our earnings conference call. Our third 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, who will be further discussing our performance for the past quarter; and May Wu, our Chief Strategy Officer and Chief Executive Officer of Yitel brand. After their 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 third quarter of 2011. We are pleased to report higher than expected revenue results from the third quarter. Total revenue increased 12.3% year-over-year to RMB988 million. this is primarily due to the better than expected performance and continued operational environments from our mature hotels outside of Shanghai.

The overall market perspective remains stable, and we continue to experience consistency in our operational environment, both of which have helped drive strong performance from our expanding base of mature hotels, and enable our new hotels to ramp up within [inaudible]. Further, our operational cost structure remained stable, and our underlying profitability is in line with normalized historical levels.

We added 71 new hotels during the quarter, including 22 new leased-and-operated hotels and 49 franchised-and-managed hotels as of September 30, 2011. Home Inns operates across 174 cities in China, with a total of 1004 hotels. In addition, there was another 82 leased-and-operated hotels, and 120 franchised-and-managed hotels, constructed or under conversion.

We are on track to achieve our 100 to 110 new leased-and-operated hotels opening target for the year, and we expect to exceed our full-year new hotels opening target with more franchised-and-managed hotels opening this year. Our franchised-and-managed hotel programs [ph] with its support systems has matured over the years. The unique franchise business dynamics combined with Home Inns strong brand is attracting more and more qualified franchisees.

Average daily rate was RMB180 compared to RMB180 during the third quarter last year, occupancy rate was 94.1% compared with 96.7% in the third quarter of 2010. RevPAR was RMB169 compared with RMB183 for the same period a year ago. The one-time benefit of the Shanghai World Expo price premium together with the high occupancy rate boosted overall RevPAR by an estimated RMB16 in the third quarter of 2010. Excluding this estimated one-time benefit; RevPAR was RMB167 for the third quarter of 2010. We achieved an overall RevPAR of RMB169 for this quarter, which increased by an estimated 2RMB year-over-year. This is largely attributable to healthy performance improvements by our mature hotels.

There was 626 hotels that had been in operation for at least 18 months during the third quarter of 2011. RevPAR decreased to RMB179 from RMB185 for this same group of hotels in the third quarter of 2010. RevPAR for Home Inns hotels located outside of Shanghai that have been in operation for at least 18 months during the third quarter of 2011 was RMB178 compared to RMB168 for the same group of hotels in the third quarter of 2010. This favorable comparison was attributable to an increase in occupancy rates from 97.5% to 98.7%, as well as an increase in ADR from RMB173 to RMB181 for this group of hotels, indicating a relatively stable operating environment.

Our membership program continues to strengthen. As of September 30, 2011, Home Inns had 4.61 million active non-corporate members representing a 39% increase from 3.31 million as of September 30, 2010. Room nights sold to active non-corporate members consistently representing over 50% of total room nights sold, providing a stable revenue base to our business.

In addition to achieving our 1000 hotel opening during this quarter under our home grown brand of Home Inns and Yitel. We record another historic event in our growth history with the acquisition of Motel 168 with its over 290 hotels volumes on September 30 of this year. Motel 168 established brand and attractive hotel network provide us a valuable launch pad into a new era of growth of the company.

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