China Lodging: Rebound Ahead 中国经济型酒店业绩回升在望

By newsdoug on November 14, 2011

Hotels: still room at the inn for growth It seems I may have been a bit premature last week in forecasting a prolonged slowdown for China’s hotel industry, as new results released from industry leader Home Inns (Nasdaq: HMIN) and number 3 player China Lodging Group (Nasdaq: HTHT) look a bit better than the weaker results from 7 Days (NYSE: SVN) that prompted my initial forecast. (previous post) Unlike 7 Days, which forecast a slowdown in revenue growth from the third to fourth quarters (previous post), both Home Inns and China Lodging, operator of the Hanting brand, forecast their revenue growth will accelerate over that period. (Home Inns announcement; China Lodging announcement). Home Inns forecast 26 percent revenue growth in the fourth quarter, or nearly double its rate in the third, while China Lodging forecast 40-45 percent fourth-quarter growth, again nearly double its third-quarter rate. All 3 companies cited a lingering “Expo hangover” for a difficult third quarter, since the Shanghai Expo helped to strongly boost their performance in 2010’s third quarter but was absent this year. An important part of the growth equation for both Home Inns and China Lodging, which 7 Days lacks, is the franchised business, which offers higher profit margins and makes opening of new hotels faster, facilitating quicker growth than the traditional self-managed hotels business. Both Home Inns and China Lodging reported their franchised hotel business few by more than 40 percent in the third quarter, far faster than their overall hotel business. Home Inns also consolidated its place as the clear industry leader by closing its purchase of Motel 168, which will immediately boost its revenue by a third and raise its hotel count to around 1,300 — clearly ahead of 7 Days, the second biggest operator with 838 hotels. Meantime, leading online travel services firm Ctrip (Nasdaq: CTRP) released third-quarter results over the weekend that showed a less robust picture, with revenue growth expected to slow to 15-20 percent in the fourth quarter from 20 percent in the third. (company announcement) Among its various segments, hotel bookings was the weakest with just 17 percent growth, most likely reflecting the Expo effect and perhaps a broader cooling economy. That means the broader hotel segment may still be looking at moderating growth in the year ahead.

Bottom line: New results from Home Inns and China Lodging show a resumption in accelerating growth for the hotel sector, with franchised hotels playing an increasingly important role.

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