Opinion | Hotels: Hanting slows, Home Inns' ad play
China Lodging's major expansion and Home Inns' new advertising tie-up look like good moves to position the companies for future growth as the hotel sector heads into a downturn
The latest results from China Lodging Group (Nasdaq: HTHT) are showing the highly cyclical hotel industry may be headed into a new downturn, while industry leader Home Inns (Nasdaq: HMIN) is taking an interesting new tack into the outdoor advertising business in its search for new revenue sources. Let's start our look at the latest hotel news with China Lodging, operator of the popular Hanting chain of hotels. The company's stock is now trading near a 52-week high, as China's hotel industry has made a steady comeback following a downturn that began in late 2010 after the Shanghai World Expo.
Based on its latest results, now might be a good time to sell those shares, as the figures seem to point to a prolonged slowdown. The one positive point in the report is that China Lodging appears to be positioning itself for the industry's next uptick, with ambitious plans to boost its hotel count by about a third this year alone.
The slowdown looks likely to continue into 2013, with the company forecasting around 31 per cent revenue growth in the current quarter and slowing to around 27 per cent for all of this year. As a longtime hotel watcher, I can say with confidence that this kind of slowdown is very common for the high-cyclical industry and probably isn't company specific. Still, company stocks do tend to move in sync with the cycles, meaning China Lodging shares could come under pressure in the year ahead.
As I said above, the company does seem to be positioning itself well for the next upcycle, with plans to open about 350 hotels this year. That equates to about a 30 per cent increase over its current hotel count of 1,035, indicating the company is confident about the future.