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Home Inns & Hotels Management's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Total revenues for Motel 168 came below our previous guidance due to worse than expected market conditions and accelerated overhaul of the food and beverage operations. About 55% of Motel 168 lease-and-operated hotels are located in the Yangtze Delta region, including Jiangsu and Zhejiang province, with relatively more concentrated manufacturing and export dependability impacted by the overall structural form of the China economy.

Net of this fact however, Motel 168 continued to achieve improvement in occupancy rate without decreasing average daily rates. Second quarter occupancy rate for Motel 168 increased to 80.8% from 70.4% in the first quarter of 2012, and from 74.6% in the second quarter of 2011. Our integration efforts are generating positive results. Meanwhile, we furthered our initiatives to restructure Motel 168 food and beverage operations in the second quarter. Part of the room revenue growth was offset by the sharp reduction in food and beverage revenues. The immediate benefit of such initiative were reduced costs associated with an inefficiently stressful structure of food and beverage operations.

We are in the process of ramping a more profitable food and beverage in line with that of the Home Inns brand. On the development front, we opened a total of 103 new hotels, including 32 new lease-and-operate hotels and 71 new franchised-and-managed hotels, of which six were franchised-and-managed Motel 168 hotels. We are on track to open a total of 330 to 360 new hotels in 2012. At the end of second quarter, we have a robust pipeline of 240 fellow hotels contracted or under constructions. Of which, 75 were lease-and-operate hotels and 172 were franchise-and-managed hotels.

Since our rebuilding of development pipeline post-global financial crisis in 2009, we have built a strongest franchise hotel pipeline as of the end of second quarter. We are well prepared to further leverage our proven franchise management program and platforms to maximize our brand value. Franchising is an increasingly important component of our business.

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