Hotels: Expo Hangover Set to Linger into 2012
China’s hotel operators have been suffering from an “Expo hangover” for much of this year, as room prices dip sharply in the key Shanghai market after business returned to more normal from inflated levels during the city’s 6-month-long mega-event in 2010. Most were expecting the hangover to start easing in the fourth quarter of this year as the Expo effect faded, though early signals from 7 Days (NYSE: SVN), the first operator to report third-quarter results, seem to indicate the headache could continue a while longer. The company, based in Guangzhou and therefore less exposed to the Expo effect than peers like Shanghai-based Home Inns (Nasdaq: HMIN), saw its third-quarter total net revenue jump 33 percent year-on-year, even as its profit dipped 26 percent on lower occupancy and room rates and higher expenses. (company announcement) The company blamed the Expo for the profit decline, but perhaps more worrisome was its fourth-quarter forecast for revenue to grow just 22 percent, a sharp slowdown from the third-quarter’s 33 percent growth rate. In fact, I would have expected just the opposite, for revenue growth to accelerate in the fourth-quarter with the fading of the difficult comparisons from 2010, since the Expo officially closed in October that year. Thus the fact that revenue growth is slowing may reflect broader problems for the industry, possibly due to a slowdown in travel resulting from the government’s efforts to cool the economy. It’s hard to say if this is a company- or industry-specific issue until we see more results. But in the meantime, investors are also worried, with 7 Days shares dipping 4 percent on Wednesday in New York and Home Inns down an even sharper 7 percent, amid a broader market sell-off. It seems the hangover may linger for a while still.
Bottom line: New results and guidance from 7 Days hint that the hotel industry’s Expo hangover could extend into 2012.
Related postings 相关文章:
◙ China Hotels: Is the Holiday Over?
◙ Ctrip’s Latest Initiative: Insurance 携程新举动：保险
◙ Hotel Consolidation Moves Ahead With 7 Days Deal 七天连锁酒店收购表明酒店业整合继续
