During an earnings call with investors, China Lodging Group executives said they will invest in new opportunities with the cash generated from closing 52 hotels during the third quarter.
SHANGHAI—China Lodging Group executives on a third-quarter earnings call said the company closed a number of properties and is using the cash generated to reinvest in opportunities to upgrade its quality of service and product, and to build the business.
Three factors led to the closing of these properties. Thirteen hotels were closed “on a temporary basis for brand-upgrade purposes,” and eight were “permanently removed from (the) network for their non-compliance with the brand and operating standards,” the release states.
Twenty-two properties were closed due to property-related issues such as rezoning, lease expirations and returning to military ownership. Nine of the 52 hotels were closed because of “operating losses from hotels located mainly in selected third- or lower-tier cities,” according to the release.
Also during the quarter, China Lodging opened 167 hotels, which included seven leased properties and 160 franchised and manachised hotels, the earnings release states.
CEO Jenny Zhang told analysts on the call that the company will reinvest most of the cash generated during the quarter into new opportunities.
“That includes strengthening our own hotel portfolio,” she said. “We are considering not only expanding our business in China; we are also considering overseas opportunities. … And secondly, we (will) also leverage out scale and the business know-how to create or support more new business.”
China Lodging is also investing in India’s online travel agency platform OYO Rooms, Zhang said.
“OYO is an interesting player in India,” she said. “We actually have combined the business model of hotel operator and OTA. They face the interesting market, which is the strategy of supply of quality (and) reasonable price inventory.”
Zhang added that she anticipates the platform will “have a significant contribution to the travel industry in India.”
For the third quarter, China Lodging had a 93.1% occupancy rate for all hotels in operation, according to the earnings release. Revenue per available room was at 203 Chinese yuan ($30.70) and average daily rate increased 12.1% year over year to 218 Chinese yuan ($32.97).
The company also had 97 million loyalty program members who contributed 76% of roomnights sold during the third quarter as of 30 September.
As of press time, China Lodging’s stocks were up 98.8% year to date. The Baird/STR Hotel Stock Index was up 34.1% for the same time period.