Adjusted EBITDA from operating hotels (non-GAAP) was RMB155.0 million (US$24.0 million), representing 28.3% of net revenue
Net Revenues increased 24.8% year-over-year for the second quarter to RMB547.7 million (US$84.7 million)(1), at the high end of the guidance previously announced
Adjusted EBITDA from operating hotels (non-GAAP) was RMB155.0 million (US$24.0 million), representing 28.3% of net revenue
Net income attributable to China Lodging Group, Limited was RMB40.3 million (US$6.2 million); adjusted Net income attributable to China Lodging Group, Limited (non-GAAP) was RMB44.5 million (US$6.9 million)
Diluted earnings per ADS (2) for the quarter was RMB0.65 (US$0.10); adjusted diluted earnings per ADS (non-GAAP) was RMB0.72 (US$0.11).
43 net new hotels were opened in the second quarter of 2011, increasing hotel count to 516
SHANGHAI, Aug. 15, 2011 /PRNewswire-Asia-FirstCall/ -- China Lodging Group, Limited (NASDAQ: HTHT) ("China Lodging Group" or the "Company"), a leading and high-growth economy hotel chain operator in China, today announced its unaudited financial results for the second quarter ended June 30, 2011.
Operational Highlights
Second Quarter of 2011 Financial Results
Total revenues for the quarter were RMB580.8 million (US$89.9 million), representing a 25.2% year-over-year increase and a 29.0% increase sequentially. The year-over-year increase was primarily due to our increased number of hotels, partially offset by the absence of one-time benefit from the Shanghai Expo. The sequential increase was mainly due to seasonality.
Total revenues from leased-and-operated hotels for the second quarter of 2011 were RMB529.7 million (US$82.0 million), representing a 22.4% year-over-year increase and a 29.1% increase sequentially.
Total revenues from franchised-and-managed hotels for the second quarter of 2011 were RMB51.1 million (US$7.9 million), representing a 64.0% year-over-year increase and a 27.7% increase sequentially.
Net revenues for the second quarter of 2011 were RMB547.7 million (US$84.7 million), representing an increase of 24.8% year-over-year and an increase of 29.1% sequentially.
Hotel operating costs for the second quarter of 2011 were RMB395.7 million (US$61.2 million), compared to RMB273.6 million (US$40.4 million) in the second quarter of 2010 and RMB361.3 million (US$55.2 million) in the previous quarter, representing a 44.6% and 9.5% increase, respectively. Our hotel network expansion, especially growth in leased-and-operated hotels, was the main driver for the increase in hotel operating costs. The average number of leased-and-operated hotels in operation (3) during the second quarter of 2011 increased 47.9% from the same period of 2010 and 7.6% sequentially. Total hotel operating costs excluding share-based compensation expenses (non-GAAP) for the second quarter of 2011 were RMB395.1 million (US$61.1 million), representing 72.1% of net revenues, compared to 62.3% for the second quarter in 2010 and 85.0% in the previous quarter. The fluctuation was mainly driven by different levels of RevPAR achievement during those periods, with hotel operating cost per room night remaining largely stable.
Selling and marketing expenses for the second quarter of 2011 were RMB22.7 million (US$3.5 million), compared to RMB16.5 million (US$2.4 million) in the second quarter of 2010 and RMB17.9 million (US$2.7 million) in the previous quarter. Selling and marketing expenses excluding share-based compensation expenses (non-GAAP) for the second quarter of 2011 were RMB22.5 million (US$3.5 million), or 4.1 % of net revenues, compared to 3.8% for the second quarter in 2010 and 4.2% for the previous quarter.
General and administrative expenses for the second quarter of 2011 were RMB42.4 million (US$6.6 million), compared to RMB25.6 million (US$3.8 million) in the second quarter of 2010 and RMB34.6 million (US$5.3 million) in the previous quarter. General and administrative expenses excluding share-based compensation expenses (non-GAAP) were RMB38.9 million (US$6.0 million), representing 7.1% of net revenues, compared with 5.2% of net revenues in the second quarter of 2010 and 7.5% in the previous quarter. The year-over-year increase in general and administrative expenses as a percentage of net revenue was mainly driven by lower RevPAR and increased personnel cost as a result of network expansion.
Pre-opening expenses for the second quarter of 2011 were RMB46.5 million (US$7.2 million), compared to RMB18.6 million (US$2.7 million) in the second quarter of 2010 and RMB34.3 million (US$5.2 million) in the previous quarter. The pre-opening expenses were primarily driven by the number of leased-and-operated hotels under conversion during the period. 22 leased-and-operated hotels were opened during this quarter and another 90 were in the pipeline at the end of the quarter, compared to nine opened and 56 in the pipeline during the same quarter in 2010, and 16 opened and 74 in the pipeline for the previous quarter. In addition, the Company experienced some delay in new hotel openings mainly due to lengthened business licenses application process.
Income from operations for the quarter was RMB40.5 million (US$6.3 million), compared to income from operations of RMB104.5 million (US$15.4 million) in the second quarter of 2010 and loss from operations of RMB23.6 million (US$3.6 million) in the previous quarter. Excluding share-based compensation expenses, adjusted income from operations (non-GAAP) for the second quarter of 2011 was RMB44.7 million (US$6.9 million).
Net income attributable to China Lodging Group, Limited for the second quarter was RMB40.3 million (US$6.2 million), compared to net income attributable to China Lodging Group, Limited of RMB79.7 million (US$11.8 million) in the second quarter of 2010 and net loss attributable to China Lodging Group, Limited of RMB14.0 million (US$2.1 million) in the previous quarter. Excluding share-based compensation expenses, adjusted net income attributable to China Lodging Group, Limited (non-GAAP) for the second quarter of 2011 was RMB44.5 million (US$6.9 million), compared to adjusted net income attributable to China Lodging Group, Limited (non-GAAP) of RMB82.7 million (US$12.2 million) in the second quarter of 2010 and adjusted net loss attributable to China Lodging Group, Limited (non-GAAP) of RMB10.6 million (US$1.6 million) in the previous quarter. The year-on-year decrease in net income was mainly due to the absence of one-time benefit of Shanghai Expo, higher pre-opening expenses and more leased-and-operated hotels in the ramp-up stage, as a result of our accelerated expansion. In the second quarter of 2011, our leased-and-operated hotels in operation less than 6 months contributed 21% of the leased-and-operated room nights for sale, compared with 5% for the second quarter of 2010. The sequential improvement in net income was mainly attributable to normal seasonality, performance improvement in our Shanghai hotels and increased number of mature leased-and-operated hotels in the portfolio.
Basic and diluted net income per share/ADS. For the second quarter of 2011, basic net income per share was RMB0.17 (US$0.03) and diluted net income per share was RMB0.16 (US$0.03); basic net income per ADS was RMB0.67 (US$0.10) and diluted net income per ADS was RMB0.65 (US$0.10). Excluding share-based compensation expenses, adjusted basic net income per share (non-GAAP) and adjusted diluted net income per share (non-GAAP) for the second quarter of 2011 were both RMB0.18 (US$0.03), adjusted basic net income per ADS (non-GAAP) was RMB0.74 (US$0.11) and adjusted diluted net income per ADS (non-GAAP) was RMB0.72 (US$0.11).
EBITDA (non-GAAP) for the second quarter of 2011 was RMB104.3 million (US$16.1 million), compared with RMB144.5 million (US$21.3 million) in the second quarter of 2010 and RMB35.9 million (US$5.5 million) in the previous quarter. The year-over-year decrease in EBITDA was mainly due to the absence of one-time benefit of Shanghai Expo, higher pre-opening expenses and more leased-and-operated hotels in the ramp-up stage, as a result of our accelerated expansion. Excluding share-based compensation expenses and pre-opening expenses, adjusted EBITDA from operating hotels (non-GAAP) for the second quarter of 2011 was RMB155.0 million (US$24.0 million), compared with RMB166.0 (US$24.5 million) for the second quarter of 2010. The slight year-over-year decrease was mainly a result of the absence of one-time benefit from Shanghai Expo and more leased-and-operated hotels in the ramp-up stage.
The Company also tracks a metric called "Hotel income" (non-GAAP), which is the difference between net revenues and hotel operating costs. Hotel income for the second quarter of 2011 was RMB152.1 million (US$23.5 million), compared with RMB165.2 million (US$24.4 million) in the second quarter of 2010 and RMB63.2 million (US$9.6 million) in the previous quarter. The year-on-year decrease of hotel income was mainly attributable to the absence of one-time benefit from Shanghai Expo and more leased-and-operated hotels in the ramp-up stage. For leased-and-operated hotels in operation for at least 6 months, the hotel income was RMB121.6 million (US$18.8 million) during the second quarter of 2011, or 28% of net revenue derived from those hotels. For leased-and-operated hotels in operation for less than 6 months, the hotel loss was RMB8.7 million (US$1.3 million) during the second quarter of 2011, or 13% of net revenue derived from those hotels, mainly due to lower revenue achievement of those hotels before reaching maturity. The Company opened 38 new leased-and-operated hotels in the first half of 2011 and 43 in the fourth quarter of 2010. For franchised-and-managed hotels, the hotel income was RMB39.2 million (US$6.0 million), or 82% of net revenue derived from those hotels. As an increasing number of leased-and-operated hotels reach maturity and our franchised-and-managed hotel network grows, the Company expects our profit base to expand steadily.
Cash flow. Net operating cash flow for the second quarter of 2011 was RMB161.2 million (US$24.9 million), increasing 12.4% from the second quarter of 2010. Cash spent on the purchase of property and equipment, which is part of investing cash flow, was RMB180.7 million (US$28.0 million).
Cash and cash equivalents, Restricted cash, and Short-term investment. As of June 30, 2011, the Company had a total balance of cash and cash equivalents, restricted cash and short-term investment of RMB978.5 million (US$151.4 million).
Guidance for Full Year and Third Quarter of 2011 and Outlook for 2012
"We are pleased to achieve 78 net new hotel openings in the first half of 2011, and remain confident in achieving our full year target of 200 new openings," commented CEO Mr. Zhang. "At the same time, we also recognize that the Shanghai market weakness after the Expo and China's macroeconomic situation slowed down our same-hotel RevPAR appreciation in 2011. Our revenue was also reduced by the delay in new hotel opening mainly caused by lengthened business licenses application process. As a result, we adjusted our expectation of net revenue growth to 28% to 32% for the full year of 2011."
The Company expects to achieve net revenues in the range of RMB605 to RMB625 million in the third quarter of 2011.
"We continue to see significant growth and consolidation opportunities in the China lodging market. With the progress of nationwide transportation infrastructure, our business will further expand as a result of the population's increased mobility and the surge in domestic traffic. During the year of 2012, we plan to open 240 to 250 new hotels, with approximately half being leased-and-operated hotels. The new openings in 2012 will include 40 to 50 Seasons Hotels and Hi Inns combined. Our multi-brand strategy will enable us to enjoy a large base of customers and will accelerate our growth in the future years." added Mr. Zhang, "In the long run, we expect our same-hotel RevPAR to increase, through strengthening our brand and increasing customer satisfaction. We believe that our popularity among franchisees will continue to enhance as our reputation as a capable and credible hotel operator spreads. We expect that those trends will have a positive impact on our long-term margin."
The above forecast reflects the Company's current and preliminary view, which is subject to change.
Additional Information on Cash Flow
To provide more comprehensive financial disclosure to our shareholders, the Company has added the statement of cash flows to our quarterly earnings release, as attached to this press release.
About China Lodging Group, Limited
China Lodging Group, Limited is a leading economy hotel chain operator in China. The Company provides business and leisure travelers with high-quality, and conveniently-located hotel products under three brands, namely, HanTing Seasons Hotel, HanTing Express Hotel, and HanTing Hi Inn. As of June 30, 2011, the Company had 516 hotels and 58,786 rooms in 80 cities across China.
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