Chinese budget hotel operator Home Inns & Hotels Management has announced its unaudited financial results for the quarter ended March 31, 2007.

"We are pleased with our first quarter results given that we typically experience lower occupancy rates during the Chinese New Year holidays," said David Sun, Home Inn's CEO. "We are maintaining our leadership position in the economy hotel industry in China and continue to capitalize on our early mover advantage by rapidly expanding our geographic coverage and increasing penetration in existing markets."

As of March 31, 2007, the Home Inns hotel chain consisted of 97 leased-and-operated hotels and 48 franchised-and-managed hotels in operation, with an additional 36 leased-and-operated hotels and 12 franchised-and-managed hotels under development, covering 53 cities in China. The average number of rooms per hotel in operation is 120.

For the first quarter of 2007, Home Inns reported total revenues of RMB183.1 million, representing a 65.5% increase year-over-year. Total revenues from leased-and-operated hotels for the first quarter of 2007 were RMB174.6 million, representing a 60.7% increase year-over-year. The company opened 3 new lease-and-operated hotels during the quarter.

Total revenues from franchised-and-managed hotels for the first quarter of 2007 were RMB8.5 million, representing a 327.0% increase year-over-year. The company opened 8 new franchised-and-managed hotels during the quarter.

Occupancy rate for the entire Home Inns hotel chain was 86% in the first quarter of 2007, compared with 90% in the same period in 2006 and 90% in the previous quarter. RevPAR in the first quarter of 2007 was RMB151, compared with RevPAR of RMB157 in the same period in 2006 and RMB165 in the previous quarter. The decrease in occupancy rate and RevPAR comparing to the fourth quarter of 2006 was primarily due to the impact of the Chinese New Year which typically results in decreased business travel activities. Compared to first quarter of 2006, we entered into more new cities and second-tier cities in late 2006 and the first quarter 2007. Hotels in these cities usually take slightly longer time to ramp up.

Total operating expenses for the quarter were RMB156.7 million. Total operating expenses excluding share-based compensation expenses were RMB154.9 million or 84.6% of total revenues, compared to 82.8% in the same period of 2006, and 81.4% in the previous quarter. Factors that led to these changes are discussed in detail below.

Income from operations for the quarter was RMB15.9 million. Net income for the quarter was RMB3.0 million.

On March 16, 2007, China's National People's Congress passed the China Corporate Income Tax Law which will reduce the income tax rate for most enterprises from 33% to 25%, effective on January 1, 2008. This is expected to lower the company's effective tax rate.

As of March 31, 2007, Home Inns had cash and cash equivalents of RMB674.2 million. Home Inns completed follow-on offering in May 2007, raising net proceeds of approximately US$48.1 million.

(average: 5.00 out of 5)

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