Home Inn's Expansion Slows Despite 85.4% Income Growth,

Despite 85.4% year on year income growth in 2008, Home Inn, China’s largest economy hotel chain, is not satisfied with its profit in the fourth quarter of 2008. It is slowing its expansion and will control costs by developing franchise hotels.  

Home Inn’s recently released fourth quarter and full year financial reports for 2008 show the company’s operations income totaled 1.87 billion yuan (about $274.3 million) for the year, a leap of 85.4% over 2007. It’s annual net profit reached 101.2 million yuan (about $14.80 million), while in 2007 it was 35.8 million yuan (about $4.9 million).  

Home Inn CEO Sun Jian explained the main reason for Home Inn’s profit. "Small and medium-sized cities are less influenced than big cities by the financial turmoil. We are now running 471 hotels nationwide, among which those in small and medium cities account for 75% to 80%. A hotel in a small and medium city begins to make profit only six to nine months after beginning operation," he said.  

Market analysts expected the adjusted diluted earning per Home Inn’s ADR in the fourth quarter to be $0.10, but in fact it was only 0.32 yuan (about $0.05).  

Sun Jian also said that due to many uncertainties in the market this year and heavy pressure on hotel operations, Home Inn was properly slowing its development and expansion, as were its rivals such as Hanting Inn and 7Day Inn. To cut costs, most of the 130 to 150 hotels to be opened this year will be franchise hotels, as they need less company investment compared with hotels directly under Home Inn’s management.