Net Revenues increased 23.8% year-over-year for the third quarter to RMB626.7 million (US$98.3 million)(1), exceeding the high end of the guidance previously announced
SHANGHAI, Nov. 10, 2011 /PRNewswire-Asia-FirstCall/ --
Operational Highlights
Third Quarter of 2011 Financial Results
Total revenues for the third quarter of 2011 were RMB664.5 million (US$104.2 million), representing a 24.2% year-over-year increase and a 14.4% sequential increase. 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 our expanded network and a higher RevPAR.
Total revenues from leased-and-operated hotels for the third quarter of 2011 were RMB606.1 million (US$95.0 million), representing a 21.8% year-over-year increase and a 14.4% sequential increase.
Total revenues from franchised-and-managed hotels for the third quarter of 2011 were RMB58.4 million (US$9.2 million), representing a 56.8% year-over-year increase and a 14.4% sequential increase.
Net revenues for the third quarter of 2011 were RMB626.7 million (US$98.3 million), representing an increase of 23.8% year-over-year and an increase of 14.4% sequentially.
Hotel operating costs for the third quarter of 2011 were RMB452.6 million (US$71.0 million), compared to RMB311.1 million (US$46.5 million) in the third quarter of 2010 and RMB395.7 million (US$61.2 million) in the previous quarter, representing a 45.5% and 14.4% increase, respectively. Our hotel network expansion, especially the 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 third quarter of 2011 increased 53.7% from the same period of 2010 and 10.2% sequentially. Compared to the previous quarter, utility cost increased this quarter due to seasonality. Total hotel operating costs excluding share-based compensation expenses (non-GAAP) for the third quarter of 2011 were RMB452.0 million (US$70.9 million), representing 72.1% of net revenues, compared to 61.4% for the third quarter in 2010 and 72.1% in the previous quarter. The year-over-year increase was mainly driven by the absence of one-time benefit from Shanghai Expo this year, with hotel operating cost per room night remaining largely stable.
Selling and marketing expenses for the third quarter of 2011 were RMB24.9 million (US$3.9 million), compared to RMB20.6 million (US$3.1 million) in the third quarter of 2010 and RMB22.7 million (US$3.5 million) in the previous quarter. Selling and marketing expenses excluding share-based compensation expenses (non-GAAP) for the third quarter of 2011 were RMB24.6 million (US$3.9 million), or 4.0% of net revenues, compared to 4.1% for the third quarter in 2010 and 4.1% for the previous quarter.
General and administrative expenses for the third quarter of 2011 were RMB39.4 million (US$6.2 million), compared to RMB35.2 million (US$5.3 million) in the third quarter of 2010 and RMB42.4 million (US$6.6 million) in the previous quarter. General and administrative expenses excluding share-based compensation expenses (non-GAAP) for the third quarter of 2011 were RMB35.1 million (US$5.5 million), representing 5.6% of net revenues, compared with 6.4% of net revenues in the third quarter of 2010 and 7.1% in the previous quarter.
Pre-opening expenses for the third quarter of 2011 were RMB54.0 million (US$8.5 million), compared to RMB35.5 million (US$5.3 million) in the third quarter of 2010 and RMB46.5 million (US$7.2 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. 33 leased-and-operated hotels were opened during this quarter and another 88 were in the pipeline at the end of the quarter, compared to 13 opened and 76 in the pipeline during the same quarter in 2010, and 22 opened and 90 in the pipeline for the previous quarter.
Income from operations for the third quarter of 2011 was RMB55.9 million (US$8.8 million), compared to income from operations of RMB103.7 million (US$15.5 million) in the third quarter of 2010 and income from operations of RMB40.5 million (US$6.3 million) in the previous quarter. Excluding share-based compensation expenses, adjusted income from operations (non-GAAP) for the third quarter of 2011 was RMB60.9 million (US$9.6 million).
Net income attributable to China Lodging Group, Limited for the third quarter of 2011 was RMB58.2 million (US$9.1 million), compared to net income attributable to China Lodging Group, Limited of RMB88.7 million (US$13.3 million) in the third quarter of 2010 and RMB40.3 million (US$6.2 million) in the previous quarter. Excluding share-based compensation expenses, adjusted net income attributable to China Lodging Group, Limited (non-GAAP) for the third quarter of 2011 was RMB63.2 million (US$9.9 million), compared to adjusted net income attributable to China Lodging Group, Limited (non-GAAP) of RMB92.0 million (US$13.7 million) in the third quarter of 2010 and RMB44.5 million (US$6.9 million) in the previous quarter. The year-over-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 third quarter of 2011, our leased-and-operated hotels in operation less than 6 months contributed 16% of the leased-and-operated room nights available for sale, compared with 8% for the third quarter of 2010. The sequential improvement in net income was mainly attributable to increased number of mature leased-and-operated hotels in the portfolio and performance improvement in our Shanghai hotels, partially offset by higher pre-opening expenses.
Basic and diluted net earnings per share/ADS. For the third quarter of 2011, basic net earnings per share and diluted net earnings per share were RMB0.24 (US$0.04); basic net earnings per ADS was RMB0.96 (US$0.15) and diluted net earnings per ADS was RMB0.94 (US$0.15). Excluding share-based compensation expenses, adjusted basic net earnings per share (non-GAAP) and adjusted diluted net earnings per share (non-GAAP) for the third quarter of 2011 were RMB0.26 (US$0.04), adjusted basic net earnings per ADS (non-GAAP) was RMB1.04 (US$0.16) and adjusted diluted net earnings per ADS (non-GAAP) was RMB1.03 (US$0.16).
EBITDA (non-GAAP) for the third quarter of 2011 was RMB125.1 million (US$19.6 million), compared with RMB155.0 million (US$23.2 million) in the third quarter of 2010 and RMB104.3 million (US$16.1 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 third quarter of 2011 was RMB184.2 million (US$28.9 million), compared with RMB193.8 (US$29.0 million) for the third quarter of 2010 and RMB155.0 million (US$24.0 million) for the previous quarter. 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 sequential increase was attributable to strong travel demand in the summer, performance improvement in our Shanghai hotels and increased number of mature leased-and-operated hotels in the portfolio.
Hotel income (non-GAAP), which is the difference between net revenues and hotel operating cost, was RMB174.1 million (US$27.3 million) for the third quarter of 2011, compared with RMB194.9 million (US$29.1 million) in the third quarter of 2010 and RMB152.1 million (US$23.5 million) in the previous quarter. The year-over-year decrease of hotel income was mainly attributable to the absence of one-time benefit from Shanghai Expo. For leased-and-operated hotels in operation for at least 6 months, the hotel income was RMB131.2 million (US$20.5 million) during the third quarter of 2011, or 26% of net revenues derived from those hotels. Leased-and-operated hotels in operation for less than 6 months accounted for 16% of leased-and-operated room nights available for sale in the third quarter of 2011. Those hotels derived a hotel loss of RMB3.0 million (US$0.5 million), or 5% of net revenues derived from those hotels this quarter, mainly due to lower revenue achievement of those hotels during their ramp-up stage. For franchised-and-managed hotels, the hotel income was RMB45.9 million (US$7.2 million), or 84% of net revenue derived from those hotels. As an increasing number of leased-and-operated hotels reach maturity and the franchised-and-managed hotel network grows, the Company expects the profit base to expand steadily.
Cash flow. Net operating cash flow for the third quarter of 2011 was RMB124.0 million (US$19.4 million). Cash spent on the purchase of property and equipment, purchase of intangible and acquisitions, which are part of investing cash flow, was RMB226.6 million (US$35.5 million).
Cash and cash equivalents, Restricted cash, and Short-term investment. As of September 30, 2011, the Company had a total balance of cash and cash equivalents, restricted cash and short-term investment of RMB872.6 million (US$136.8 million).
Guidance for Fourth Quarter of 2011
"We are pleased to achieve 142 net new hotel openings in the first nine months of 2011, and remain confident in achieving our full year target of 200 new openings." commented CEO Mr. Zhang.
The Company expects to achieve net revenues in the range of RMB635 to RMB655 million in the fourth quarter of 2011, representing a 40% to 45% year-over-year growth
The above forecast reflects the Company's current and preliminary view, which is subject to change.
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