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Home Inns & Hotels' CEO Discusses Q1 2012 Results - Earnings Call Transcript

Six months into integration, we focus our efforts on implementing effective sales and market initiatives, facility upgrades for enhanced customer experience, and a personnel training and motivation to drive performance improvement. The results of these efforts continue to be encouraging.

For the month of April, Motel 168 portfolio achieved RevPAR of RMB140, with 85% of occupancy rate and ADR of RMB165. Motel 168 is a significant investment we made for the future of our company. We are very pleased with the integration results so far, and we expect to achieved 80% or higher occupancy rate on a full-year basis.

Furthermore, we have begun building a developed pipeline for Motel 168 and at end of the first quarter, we had five leased-and-operated hotels and 21 franchised-and-managed hotels contracted and under construction. Given the integration results, we are confident in the future development of the Motel 168 brand and its contribution of the company.

Now, let’s turn our attention to profitability. Excluding Motel 168, underlying operation margin for core Home Inns including Yitel hotels was 4.7% compared 7.9% in the first quarter of 2011. There are two key factors impacting operating margins.

First, dilutions from 80 leased-and-operated hotels including three Yitel hotels that were in operation for six months or less during the quarter impacted the overall margin rates by approximately 5 percentage points. These hotels contributed limited revenue yet incur full operation cost. Our new hotels are ramping within [our expectations] and are expected to continue doing so in a stable growth environment. The new hotels’ dilutive impact will continue to diminish as we steadily expand our portfolio base and attain healthy mix going forward.

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