Tuesday, Home Inns & Hotels Management Inc. (HMIN), an economy hotel chain in China, said that the recent earthquake in western China will have only a slight impact on the second quarter financial performance.
The company said it expects the recent earthquake to only have a short-term impact on its operational and financial performance and believes demand for its product and services remains strong as a result of the resilient domestic business travel activities.
Home Inns said it incurred no serious property damage during the recent earthquake. But the earthquake has both directly impacted the affected region and indirectly reduced overall travel activities.
Total revenue for the second quarter is expected to remain within its current guidance range due partly to the accelerated expansion progress.
The earthquake will negatively impact RevPAR for the quarter by an estimated 2% to 4% across the Home Inns chain, in addition to the reduced RevPAR the company had expected as it continues to expand into lower tier cities and the holiday schedule change this year.
The company said that the five Top Star properties located in Chengdu and Chongqing experienced a severe decline in travel activities. Lower travel activities together with a less robust loyal customer base in that category are expected to result in a 10% to 15% negative RevPAR impact and a small net loss for the Top Star hotels in the second quarter.
Home Inns is seeing the ongoing impact of the earthquake on RevPAR decreasing to about 1% and expects RevPAR to fully recover gradually over the next several months.
Separately, Home Inns said that the upcoming Olympic Games will not have any significant impact on its operational and financial performance. It believes that the high interest for attending the Beijing Olympic Games and visiting other cities in China will be offset by reduced business activities, as well as traffic and entry restrictions during the Olympic Games period.
Home Inns' expansion plan remains ahead of schedule, with the expectation of 100 new hotels completed in the first half of 2008, compared to 37 in the same period a year ago. The company's target remains 200 hotels for the 2008 full year. The Company therefore expects to benefit in the second half of the year, as the larger number of hotels in operation will offset the hotels under construction.
HMIN closed Tuesday's regular trading session at $18.26.
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