China Lodging Group, Ltd (ADR)(NASDAQ: HTHT) stock crashed over 7.1% on March 14th, 2018 pre market session (as of 5:03AM EDT; Source: Google finance) due to their lower than expected fourth quarter of 2017 performance.
The Net revenues from leased and owned hotels rose 33.2% yoy to RMB1, 718.8 million (US$264.2 million), but fell 7.5% against last quarter. Even Net revenues from manachised and franchised hotels fell 4.7% on a sequential basis despite a 31.3% yoy increase. As a result, the Net revenues rose to RMB2, 214.9 million (US$340.4 million) during the fourth quarter which is a 32.6% year-over year rise and a 6.7% sequential decrease. The adjusted operating margin, defined as adjusted income from operations (non-GAAP) as a percentage of net revenues, fell to 11.6% during the quarter from 11.8% in pcp and 25.5% against the earlier quarter. The sequential decrease in the operating margin was mainly on the back of seasonality.
On the other hand, the group’s basic earnings per ADS rose to RMB3.28 (US$0.50) during the fourth quarter of 2017 and reached RMB17.72 (US$2.72) for the full year of 2017. They opened 137 hotels during the quarter, including 2 leased (“leased-and operated”) hotels and 135 manachised (“franchised-and-managed”) hotels and franchised hotels. They even closed a total of 47 hotels, which included 15 leased hotels and 32 manachised and franchised hotels as a part of their strategic focus to upgrade the quality of the product and service.
Meanwhile, RevPAR, defined as revenue per available room for all hotels in operation, rose to RMB181 during the fourth quarter of 2017, from RMB158 in pcp and RMB203 in the earlier quarter. The year-over-year increase of 15.0% was mainly on the back of ADR as well as occupancy.
During 2017, the group launched midscale brands like HanTing Premium, CitiGo, and urban Manxin. They have enhanced their midscale brand portfolio by acquiring Crystal Orange and successfully integrating the Crystal Orange hotels into their network, which is expected to accelerate their growth and enhance their profitability by 2018. The group intends to maintain their asset-light growth strategy and continue to invest in the brands to improve their operational efficiency.