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Interview with David Sun, Chief Executive Officer, Home Inns Group

David Jian Sun has served as director and chief executive officer since December 2004. Mr. Sun has over ten years of consumer industry experience. From 2003 to December 2004, he was vice president of operations for B&Q (China) Ltd., a subsidiary of Kingfisher plc, the third largest home improvement retail group in the world, overseeing the operation of 15 B&Q superstores in China. From 2000 to 2003, Mr. Sun served as a vice president of marketing for B&Q (China) Ltd., leading B&Q’s market positioning and branding efforts in China. Mr. Sun holds a bachelor’s degree from Shanghai Medical University in China.

By reaching the 9th place in the worldwide hotel ranking, only 10 years after its creation, Home Inns is certainly the fastest growing hotel group in the history of the industry. Was it easy to manage such growth in such a short period of time?

It was really rapid growth for Home Inns to reach nearly 2,000 hotels from zero within the past 10 years. And it was not easy to maintain a healthy and profitable operation during this rapid growth period. We did it. We benefited from the boom in business activities and leisure travel in China, and also from a technically innovative era. The success we have achieved is also attributed to the ability to execute and entrepreneurship of our management team.What were the most difficult challenge(s) the management had to face?The most difficult challenge we have faced is the management of human resources. From a force of hundreds of employees to nearly 70 thousand in the past 10 years, the challenges we faced were not only the rapid growth of our labor force, but also an evolving management of human resources in every aspect, including employee training, focus alignment at all levels of management, the growing needs of our people as well as the growth opportunity of our people in such a rapidly growing company.Would you say that the Chinese market is becoming more mature?The Chinese economy hotel industry has been developing for over 10 years. This industry has experienced rapid growth in China, and is now at a relatively mature and rational growth stage. What we are thinking of more today is the balance between growth and quality control, balance between growth and profitability, improvement of customers’ satisfaction, customers’ new needs in this new era, etc. A mature market, a big company and a successful brand really need to think more.Is there a specific Chinese economic model for the hotel industry?The specific Chinese economy hotel model includes elements, such as the source of the property and the tailoring of services. Our hotels are usually converted from various existing buildings. And we tailored traditional hotel services based on customers’ basic needs. These specifications helped Chinese economy hotels grow rapidly and even astonishingly in the past. After the acquisition of Top Star, Motel 168 and eJia Express, more recently, does Home Inns still privilege external growth? Do you consider there to still be room for restructuring in the Chinese market?We acquired Top Star in 2007, Motel 168 in 2011, and eJia Express in 2012. However, organic growth is still our main growth strategy. M&A is a complementary measure. We only do M&A when the opportunity appears and the valuation is attractive. For the future, we will keep our organic growth strategy, while switching the growth toward a more franchised-and-managed business model. Meanwhile, I expect there will be some M&A and consolidation opportunities in this industry in the next 3-5 years.Home Inns is concentrated on the budget and economy segments, would you like to diversify your portfolio with midscale or upscale brands?Home Inns Group is the market leader in China’s economy hotel segment. We have two brands in this segment, the Home Inn Brand and Motel 168 Brand. We will continue to focus on the development of these two brands as we believe there is still room for potential development in this segment. However, as we have been gaining more experiences in China’s lodging industry, we saw some other opportunities and started to look beyond the economy segments. We established our midscale brand, Yitel in the past years. There are 7 Yitel hotels now. And we expect to have close to 20 Yitel hotels by the end of this year. Yitel is popular in the market. We are gaining experiences on Yitel’s operation now. I believe this midscale brand will be another engine for our growth in the future.Do you have any plan to expand the group outside the boundaries of Greater China?So far, all of our hotels are located in mainland China. We believe there are opportunities in Asia, especially in East Asia, and Greater China region including Taiwan and Hong Kong. We will consider the opportunities in Taiwan and Hong Kong.Your recent financial results revealed a slowdown in hotel activity in China, are you confident in the strength of the market? Does the global crisis affect the Chinese economy as well?Since the fourth quarter of 2011, the Chinese hotel market has been experiencing a slowdown due to the global crisis and the Chinese economic slowdown. There is still no positive sign at this moment. The Chinese economy hotel segment is switching from an accelerating growth to a stable growth now. This helps us minimize the negative impact from the recent economic slowdown, while it provides us withopportunities to concentrate on brand building, product innovation, quality control, team building and human development. We still believe in the mid-long term development of the Chinese economy hotel market, as we believe in healthy economic growth and a boom in the leisure travel market in China in the long run.How do you consider the interest of so many international hotel groups for Asia and more specifically for China?The growing interest of international hotel groups in China indicates that the Chinese hotel industry is still attractive and open. I believe the international hotel groups will help promote the overall Chinese lodging industry and we are ready to learn from our international peers. This will be a win-win competition for both domestic and international hotel brands. And I believe the learning and competition with international brands will help us grow into an international brand in the future.

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