Shanghai-based Home Inns & Hotels Management Inc. recently announced the completion of the acquisition of two hotel chain operators in Anhui Province for approximately RMB59.8 million ($9.4 million). The acquisition is a part of company’s strategy to strengthen the presence of the brand in the emerging economy of Anhui Province.
The local hotel chain operators – Anhui Youle Fashion Hotel Management Co., Ltd. and Anhui Meibang Hotel Management Co., Ltd – are collectively referred to as ‘eJia Express.’ The eJia Express’ portfolio consists of 13 leased-and-operated hotels that comprise 1,284 rooms. The portfolio includes nine hotels located at the heart of the city of Hefei, the capital of Anhui Province. The average remaining lease term for all the hotels is approximately eight years.
Post-acquisition, all the hotels of eJia Express will be rebranded and will operate under the Home Inns brand. The company projects the cost of acquisition per room, including conversion, to be less than the average cost of per room of previously developed hotels under the Home Inns brand. The expected average cost per room is around $7,416.
The company projects to invest about $1,578 per room for rebranding and redevelopment. The refurbishment is expected to be completed by the next six months.
Management remains upbeat regarding the acquisition as it expects it to be a quality addition to the Home Inns Brand portfolio and enhance shareholders’ value in the long term. Following the acquisition, the company now owns 18 hotels under Home Inns brand and 14 hotels under the Motel 168 brand in Anhui Province.
Home Inns & Hotels engages in development, leasing, operation and management of a chain of economy hotels in China. As of March 31, 2012, the company operates 1,479 hotels in 219 cities across China.
The company, which competes with the likes of Wyndham Worldwide Corporation (WYN - Analyst Report) , and Marriott International, Inc. (MAR - Analyst Report) currently holds a Zacks #4 Rank (a short-term Sell rating). We also have long-term Neutral recommendation on the stock.