Home Inns and Hotel Management Inc. enters into the new business segment of China hotel Industry

The limited liability company Home Inns and Hotel Management Inc., which was incorporated 4 years ago in Hong Kong and now, being based in Shanghai, operates under its own brand 82 hotels in 26 cities of China, is now going to develop the chain of economy hotels for budget travelers in the country. It is one of the newest business segments in China’s growing economy in the last years, and there is an increasing demand for a standardized chain of lower-priced hotels. Observers note that Home Inns is already a well-known brand name in China, and the fact that it is focused solely on the country internal market in a relatively new business segment, could seem attractive to investors.

The biggest shareholder of Home Inns and Hotel Management Inc. is Poly Victory Investments Inc., a company incorporated in the British Virgin Islands and having registered office at Palm Grove House, P.O. Box 438, Road Town, Tortola. Poly Victory is owned by the Chinese state enterprise Beijing Tourism Group. On May 24, 2004, by the bilateral agreement with Home Inns, it has agreed to subscribe for 13,219,140 Ordinary Shares of the Hong Kong company. This amount makes 55% of all the Ordinary Shares of Home Inns and Hotels Management Limited.

The second major shareholder is another Hong Kong company Top Sterling International Limited, which holds 9,000,000, or 37% of Ordinary Shares.

The minor shareholders holding less than 5% Ordinary Shares are Qi Ji, Hui Chen, Ri Xin Liang (Mainland companies), Nan Pen Shen (Hong Kong company); Hong Kong company AsiaStar IT Fund L.P. and China mainland company IDG Technology Venture Investments, LP are the major shareholders of Series A and Series B Shares.

Along with the new hotel chain project, Home Inns has another 57 hotel properties under development. In the first half of 2006, the company’s total revenue more than doubled to $31.2 million, and its net income tripled to $3.4 million, as the number of its hotels grew from the same period of 2005.

About 77% of Home Inn’s hotel properties involve leased real estate on which the company develops and operates hotels. The rest 23% include franchise agreements with hotel owners, with Home Inns managing the properties. The company’s model is to focus most of its business on franchising and management aagreements, selling off their properties to third parties rather than holding on to real estate assets.

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