Sector Watch: Let the games begin

It’s that year again, when the torch is lit and the world turns its attention to the most talented athletes on the planet. With piqued attention comes piqued spending: the Beijing Olympics are expected to draw 4.5 million tourists to the city in 2008, with inbound spending by visitors to the games estimated at $4.5 billion. Beijing is not China’s only winner in Olympic tourism — 90% of overseas visitors to the city plan to visit other Chinese cities as well.
 
Not bad, especially if you’re Home Inns & Hotels Management, Inc. (Nasdaq:HMIN) and AirMedia Group Inc. (Nasdaq:AMCN), two companies catering to the wanderers of the world.

Home Inns & Hotels is China’s leading budget hotel chain and benefits directly from tourism growth. The company operates hotels across China under its well-known Home Inns brand name. At year end 2007, the Home Inns chain consisted of 266 hotels across 66 cities in China, including 195 leased-and-operated hotels, and 71 franchised-and-managed hotels. Home Inns & Hotels has experienced rapid earnings growth, with per-share earnings rising 46% annually over the past three years.

During 2007, Home Inns & Hotels opened 107 new hotels, including 25 hotels acquired from the Top Star chain in the fourth quarter. Occupancy rates in 2007 averaged 91.1% and revenues per available room were RMB163 (approximately $22.33).

The company’s overall revenues grew 72% in 2007 to $138.4 million from $80.7 million and operating income expanded 43% to $14.6 million from $10.2 million. However, per-share earnings declined 43% year-over-year, to $0.50 from $0.83, because of non-cash charges that included foreign exchange losses, share-based compensation, a non-recurring provision for deferred tax assets and restructuring costs relating to the Top Star hotel acquisition.   

A typical Home Inns hotel has 80 to 150 guest rooms and a standardized design, appearance, décor, color scheme, lighting scheme and set of guest amenities, including free in-room broadband Internet access and air conditioning. The company plans to deepen its penetration . . .

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