Home Inns Reports Third Quarter Unaudited Financial Results

SHANGHAI, Nov. 12 /Xinhua-PRNewswire/ -- Home Inns & Hotels Management Inc. (Nasdaq: HMIN), a leading economy hotel chain in China, today announced its unaudited financial results for the quarter ended September 30th, 2008.

Third Quarter 2008 Financial Highlights

-- Total revenues for the quarter increased 98.0% year-over-year to RMB

527.3 million (US$ 77.7 million). This includes revenues of RMB 39.0

million (US$ 5.7 million) from the Top Star hotel chain which we

acquired and took control of in November of 2007.

-- EBITDA (non-GAAP) was RMB 93.5 million (US$ 13.8 million). Excluding

foreign exchange losses and share-based compensation expenses, adjusted

EBITDA (non-GAAP) was RMB 102.5 million (US$ 15.1 million), up 53.9%

year-over-year. Excluding the impact of Top Star, foreign exchange

losses and share-based compensation expenses, adjusted EBITDA (non-GAAP)

was RMB 101.4 million (US$ 14.9 million), up 52.3% year-over-year.

-- Income from operations was RMB 41.8 million (US$ 6.2 million). Income

from operations excluding share-based compensation expenses was RMB

48.4 million (US$ 7.1 million). Excluding the impact of Top Star,

income from operations excluding share-based compensation expenses was

RMB 53.4 million (US$ 7.9 million), an increase of 21.9% year-over-year.

-- Net income was RMB 29.5 million (US$ 4.3 million). Adjusted net income

(non-GAAP) was RMB 38.4 million (US$ 5.7 million), excluding share-

based compensation expenses of RMB 6.6 million (US$ 1.0 million) and

foreign exchange losses of RMB 2.4 million (US$ 0.3 million).

Excluding the impact of Top Star, foreign exchange losses and share-

based compensation expenses, adjusted net income (non-GAAP) was RMB

42.8 million (US$ 6.3 million), up 7.5% year-over-year.

-- Diluted earnings per ADS was RMB 0.79 (US$ 0.12). Non-GAAP adjusted

diluted earnings per ADS was RMB 1.02 (US$ 0.15). Excluding the impact

of Top Star, diluted earnings per ADS was RMB 0.90 (US$ 0.13), while

non-GAAP adjusted diluted earnings per ADS was RMB 1.13 (US$ 0.17).

Reconciliation between the adjusted earnings per ADS versus US GAAP

figures is included at the end of this press release.

"I am pleased that during our third quarter, in addition to achieving robust year-on-year growth in revenues, we also improved margins from previous quarters and resumed year-over-year growth in income from operations," remarked Mr. David Sun, Home Inns' Chief Executive Officer. "Our business is stable and healthy, and our expansion plan remains on schedule. We continue to be committed to growing our business profitably."

Operational Highlights

-- Hotel expansion accelerated with 48 net new hotels opened during the

quarter, consisting of a net of 20 leased-and-operated hotels and 28

franchised-and-managed hotels, compared with 30 net new hotels opened

in the third quarter of 2007, which consisted of a net of 26 leased-

and-operated hotels and four franchised-and-managed hotels. Home Inns

opened a net total of 148 hotels in the first three quarters of 2008,

or 74.0% of its targeted total new opening number for this year. In

comparison, only 50.8% of the new hotels scheduled for completion in

2007 were completed in the first three quarters of that year. As of

September 30, 2008, the Home Inns hotel chain included 414 hotels in

operation with an average of 120 rooms per hotel in operation, covering

83 cities in China and consisting of 291 leased-and-operated hotels and

123 franchised-and-managed hotels.

-- As of September 30, 2008, Home Inns had an additional 131 hotels

contracted, which consisted of 79 leased-and-operated hotels and 52

franchised-and-managed hotels. As of September 30, 2007, Home Inns had

96 hotels contracted, which consisted of 69 leased-and-operated hotels

and 27 franchised-and-managed hotels.

-- The occupancy rate for the Home Inns hotel chain was 85.9% in the third

quarter of 2008 and 95.4% in the same period of 2007. Occupancy rates

for the third quarter of 2008 were negatively impacted by the higher

proportion of hotels that had been opened for less than six months,

especially those in newly entered cities, as well as lower occupancy

rates at our Top Star hotels. Excluding Top Star, the occupancy rate

was 87.7% in the third quarter of 2008.

-- RevPAR, defined as revenue per available room, was RMB 155 in the third

quarter of 2008. RevPAR excluding Top Star was RMB 160 in the third

quarter of 2008, compared with RMB 174 in the same period in 2007.

RevPAR was negatively impacted by the same factors that negatively

impacted occupancy rate, as discussed above.

-- RevPAR for Home Inns' hotels which had been in operation for at least

18 months as of July 1, 2008 was RMB 193 in the third quarter of 2008,

compared to RevPAR of RMB 189 during the same period of 2007. The

increase was mainly due to a higher RevPAR of hotels in Beijing during

the Olympics, offsetting a reduction in overall travel activities

during the same period.

-- For the third quarter of 2008, our Top Star hotels had revenues of RMB

39.0 million, a loss from operations of RMB 4.9 million, and EBITDA

(non-GAAP) of RMB 1.0 million. Top Star's delayed ramp-up schedule is

mainly due to the impact of the Sichuan earthquake in May of this year

as well as the reduced travel activities during the Olympics. For this

October, Top Star's RevPAR recovered to RMB 106, exceeding its pre-

earthquake level.

"We again successfully executed on our expansion plan by opening 48 net new hotels during the quarter, meaning we have completed 148 of the 200 new hotels targeted for 2008," said Mr. Sun. "While these new hotels, especially those in new markets, had an anticipated effect of depressing some metrics, we are pleased that our mature hotels continue to provide stable revenues and income, further justifying the sensible investments we are currently making across China. Although we have not yet seen any significant impact on our business from the recent global financial turmoil, we are cautious at this time of uncertainty and have taken steps to ensure that our corporate plan remains flexible, allowing us to be well-positioned for continued growth and profitability."

Third Quarter 2008 Financial Results

For the third quarter of 2008, Home Inns had total revenues of RMB 527.3 million (US$ 77.7 million), representing a 98.0% increase year-over-year and a 17.7% increase sequentially. Excluding the impact of Top Star, total revenues were RMB 488.3 million (US$ 71.9 million), representing an 83.3% increase year-over-year and a 19.2% increase sequentially.

Total revenues from leased-and-operated hotels for the third quarter of 2008 were RMB 499.4 million (US$ 73.6 million), representing a 96.5% increase year-over-year and a 17.6% increase sequentially. Excluding the impact of Top Star, total revenues from leased-and-operated hotels for the third quarter of 2008 were RMB 460.4 million (US$ 67.8 million), representing an 81.1% increase year-over-year and a 19.2% increase sequentially. Home Inns opened a net of 20 new leased-and-operated hotels during the third quarter of 2008 to reach a total of 291 leased-and-operated hotels, including 25 Top Star hotels. Home Inns opened 26 new lease-and-operated hotels during the same period a year ago and ended the third quarter 2007 with 143 leased-and-operated hotels.

Total revenues from franchised-and-managed hotels for the third quarter of 2008 were RMB 27.9 million (US$ 4.1 million), representing a 129.1% increase year-over-year and a 18.6% increase sequentially. Home Inns opened 28 new franchised-and-managed hotels during the third quarter of 2008 to reach a total of 123 such hotels. Home Inns opened four net new franchised-and-managed hotels during the same period a year ago and ended the third quarter 2007 with 58 franchised-and-managed hotels.

The overall occupancy rate for the entire Home Inns hotel chain was 85.9% in the third quarter of 2008. Excluding the impact of Top Star, the occupancy rate for the Home Inns hotel chain was 87.7% for the quarter, compared with 95.4% in the same period in 2007 and 90.8% in the previous quarter. The decline was caused primarily by the impact of the higher proportion of new hotels, especially those in newly entered cities, as well as the reduced travel activities during the Olympics as we have discussed earlier.

Average daily rate (ADR) for the quarter was RMB 180. Excluding the impact of Top Star, ADR for the Home Inns hotel chain was RMB 183 for the quarter, compared with RMB 182 in the same period in 2007 and RMB 176 in the previous quarter. The higher ADR for the quarter was mainly due to a higher price for those hotels in Beijing during the Olympics.

RevPAR for the quarter was RMB 155. Excluding the impact of Top Star, RevPAR for the quarter was RMB 160, compared with RevPAR of RMB 174 in the same period in 2007 and RMB 160 in the previous quarter. RevPAR was negatively impacted by the same factors that negatively impacted occupancy rate, as discussed above.

Total operating costs and expenses for the third quarter of 2008 were RMB 454.3 million (US$ 66.9 million). Total operating costs and expenses excluding share-based compensation expenses (non-GAAP) for the quarter were RMB 447.8 million (US$ 65.9 million), or 84.9% of total revenues. Excluding the impact of Top Star, total operating costs and expenses for the quarter were RMB 412.4 million (US$ 60.7 million). Excluding the impact of Top Star, total operating costs and expenses excluding share-based compensation expenses (non-GAAP) for the quarter were RMB 405.8 million (US$ 59.8 million), or 83.1% of total revenues, compared to 77.7% in the same quarter 2007 and 84.6 % in the previous quarter.

Total leased-and-operated hotel costs for the third quarter of 2008 were RMB 406.3 million (US$ 59.8 million), representing 81.4 % of the leased-and-operated hotel revenues. Excluding the impact of Top Star, total leased-and-operated hotel costs were RMB 365.3 million (US$ 53.8 million), representing 79.3% of the leased-and-operated hotel revenues. Total leased-and-operated hotel costs represented 71.2% of the leased-and-operated hotel revenues for the same quarter in 2007 and 80.6% for the previous quarter excluding Top Star. Compared to a year ago, the large number of hotels under construction as well as longer duration these hotels remained under construction during the quarter led to higher rents and utilities and caused personnel costs and certain other costs to be a higher percentage of leased-and-operated hotel revenue for the quarter. Typically, once construction starts on a site, we begin to incur these costs, though we will not see revenue until the hotel is in operation. The costs associated with hotels under construction were RMB 30.3 million (US$ 4.5 million) in the third quarter of 2008, representing 6.6% of leased-and-operated hotel revenue without Top Star. These costs were RMB 9.7 million in the third quarter of 2007, representing 3.8% of leased-and-operated hotel revenue.

Sales and marketing expenses for the third quarter were RMB 7.4 million (US$ 1.1 million), an increase of 17.5% year-over-year and an increase of 35.8% sequentially. Excluding the impact of Top Star, sales and marketing expenses were RMB 6.8 million (US$ 1.0 million), an increase of 7.0% year-over-year and an increase of 40.7% sequentially. The increase was due to newly implemented advertising activities during the quarter.

General and administrative expenses for the third quarter were RMB 40.6 million (US$ 6.0 million). General and administrative expenses excluding share-based compensation expenses (non-GAAP) were RMB 34.0 million (US$ 5.0 million), or 6.5% of the total revenues. Excluding the impact of Top Star, general and administrative expenses were RMB 40.4 million (US$ 5.9 million). General and administrative expenses excluding Top Star and share-based compensation expenses (non-GAAP) were RMB 33.8 million (US$ 5.0 million), or 6.9% of the total revenues, compared with 7.4% of the total revenues in the same period of 2007 and 7.4% in the previous quarter.

Income from operations for the quarter was RMB 41.8 million (US$ 6.2 million). Income from operations excluding share-based compensation expenses (non-GAAP) was RMB 48.4 million (US$ 7.1 million). Excluding the impact of Top Star, income from operations for the quarter was RMB 46.8 million (US$ 6.9 million), and income from operations excluding share-based compensation expenses (non-GAAP) was RMB 53.4 million (US$ 7.9 million) or 10.9% of total revenues, compared to 16.4% in the same period of 2007 and 9.5% in the previous quarter.

EBITDA (non-GAAP) for the third quarter of 2008 was RMB 93.5 million (US$ 13.8 million). Excluding foreign exchange losses and share-based compensation expenses, adjusted EBITDA (non-GAAP) was RMB 102.5 million (US$ 15.1 million), an increase of 53.9% year-over-year and up 24.7% from the previous quarter. Excluding the impact of Top Star, EBITDA (non-GAAP) for the quarter was RMB 92.5 million (US$ 13.6 million). Excluding the impact of Top Star, foreign exchange losses and share-based compensation expenses, adjusted EBITDA (non-GAAP) was RMB 101.4 million (US$ 14.9 million), up 52.3% year-over-year and up 28.9% from the previous quarter.

Excluding foreign exchange losses and share-based compensation expenses, adjusted net income (non-GAAP) for the third quarter of 2008 was RMB 38.4 million (US$ 5.7 million), a decrease of 3.4% year-over-year. GAAP net income for the quarter was RMB 29.5 million (US$ 4.3 million). Excluding the impact of Top Star, foreign exchange losses and share-based compensation expenses, adjusted net income (non-GAAP) was RMB 42.8 million (US$ 6.3 million), up 7.5% year-over-year. Excluding Top Star, GAAP net income for the quarter was RMB 33.8 million (US$ 5.0 million).

For the third quarter of 2008, excluding foreign exchange losses and share-based compensation expenses, adjusted basic and diluted earnings per share (non-GAAP) were RMB 0.54 (US$ 0.08) and RMB 0.51 (US$ 0.08), respectively. Adjusted basic and diluted earnings per ADS (non-GAAP) were RMB 1.08 (US$ 0.16) and RMB 1.02 (US$ 0.15), respectively. GAAP basic and diluted earnings per share were RMB 0.42 (US$ 0.06) and RMB 0.40 (US$ 0.06), respectively. GAAP basic and diluted earnings per ADS were RMB 0.83 (US$ 0.12) and RMB 0.79 (US$ 0.12) respectively. For the third quarter of 2008, excluding the impact of Top Star, foreign exchange losses and share-based compensation expenses, adjusted basic and diluted earnings per share (non-GAAP) were RMB 0.60 (US$ 0.09) and RMB 0.57 (US$ 0.08), respectively, and adjusted basic and diluted earnings per ADS (non-GAAP) were RMB 1.21 (US$ 0.18) and RMB 1.13 (US$ 0.17), respectively.

Net operating cash flow for the third quarter of 2008 was RMB 127.9 million (US$ 18.8 million). Capital expenditures for the quarter were RMB 260.4 million (US$ 38.4 million).

As of September 30, 2008, Home Inns had cash and cash equivalents of RMB 947.9 million (US$ 139.6 million). We had convertible bonds outstanding of RMB 1.1 billion (US$ 164.1 million) including principal and accrued interest. These are zero coupon bonds with a maturity on or around December 10, 2012, with a yield of 0.50% per annum. The bonds can be converted into a total of 5,650,780 Home Inns' ordinary shares at the option of the holders. The bonds have a non-call and non-put period of three years from the issuance date.

"Overall, our business is healthy and we are in a secure financial position. We have the necessary capital on hand for our business plan and a blueprint to reach a stage of self-funded growth. We are not facing any near-term refinancing needs, and we are mindful of the uncertainty in the global business and economic environment," remarked Ms. May Wu, Home Inns' Chief Financial Officer. "We will be flexible in our corporate planning so that we can respond in a timely manner to any changes and position ourselves for the growth and profitability of our business in the long run, about which we remain confident," continued Ms. Wu.

Outlook for Fourth Quarter 2008

Home Inns continues to expect to open a total of approximately 200 new hotels in 2008. Home Inns expects its total revenues in the fourth quarter of 2008 to be in the range from RMB 535 million (US$ 78.8 million) to RMB 555 million (US$ 81.7 million). This forecast reflects Home Inns' current and preliminary view, which is subject to change.

Conference Call Information

Home Inns' management will hold an earnings conference call at 8 PM on November 11, 2008 U.S. Eastern Standard Time (9 AM on November 12, 2008 Beijing/Hong Kong time).

Dial-in details for the earnings conference call are as follows:

China Mainland (toll free): 10.800.130.0399

Hong Kong: +852.3002.1672

U.S (toll free): +1.888.396.2298

U.S. and International: +1.617.847.8708

Pass code for all regions: Home Inns

A replay of the conference call may be accessed by phone at the following number until 10 PM on December 11, 2008 U.S. Eastern Standard Time.

US toll free: +1.888.286.8010

International: +1.617.801.6888

Passcode: 12904234

Additionally, a live and archived webcast of this conference call will be available at http://english.homeinns.com .

About Home Inns

Home Inns is a leading economy hotel chain in China based on the number of hotels and hotel rooms, as well as the geographic coverage of the hotel chain. Since Home Inns commenced operations in 2002, it has become one of the best-known economy hotel brands in China. Home Inns offers a consistent product and high-quality services to primarily serve the fast growing population of value-conscious individual business and leisure travelers who demand clean, comfortable and convenient lodging. Home Inns' ADS's, each of which represents two ordinary shares, are currently trading on the NASDAQ Global Market under the symbol "HMIN." For more information about Home Inns, please visit http://english.homeinns.com .

Safe Harbor

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the outlook for the fourth quarter of 2008 and quotations from management in this announcement, as well as Home Inns' strategic and operational plans, contain forward-looking statements. Home Inns may also make written or oral forward-looking statements in its periodic reports to the Securities and Exchange Commission (the "SEC"), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to first parties. Statements that are not historical facts, including statements about Home Inns' beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: our anticipated growth strategies; our future business development, results of operations and financial condition; expected changes in our revenues and certain cost or expense items; our ability to attract customers and leverage our brand; trends and competition in the lodging industry; our ability to hire, train and retain qualified managerial and other employees; our ability to develop new hotels at desirable locations in a timely and cost-effective manner; the expected growth of the Chinese economy hotel market; and Chinese governmental policies relating to private managers and operators of hotels and applicable tax rates.

Further information regarding these and other risks is included in our annual report on Form 20-F and other documents filed with the SEC. Home Inns does not undertake any obligation to update any forward-looking statement, except as required under applicable law. All information provided in this press release and in the attachments is as of November 11, 2008, and Home Inns undertakes no duty to update such information, except as required under applicable law.

Non-GAAP Financial Measures

To supplement Home Inns' un-audited consolidated financial results presented in accordance with U.S. GAAP, Home Inns uses the following non-GAAP measures defined as non-GAAP financial measures by the SEC: total operating expenses excluding share-based compensation expenses, general and administrative expenses excluding share-based compensation expenses, income from operations excluding share-based expenses, adjusted net income excluding foreign exchange losses and share-based compensation, adjusted basic and diluted earnings and ADS per share excluding foreign exchange losses and share-based compensation, EBITDA and adjusted EBITDA excluding foreign exchange losses and share-based compensation. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliations of GAAP and non-GAAP results" set forth at the end of this release.

Home Inns believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding share-based expenses that may not be indicative of its operating performance from a cash perspective and by excluding foreign exchange losses which may not be indicative of its operating performance. Home Inns believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to Home Inns' historical performance and liquidity. Home Inns computes its non-GAAP financial measures using the same consistent method from quarter to quarter. Home Inns believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. A limitation of using non-GAAP financial measures excluding share-based compensation expenses is that share-based compensation expenses have been and will continue to be a significant recurring expense in our business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.

Home Inns' management also believes that EBITDA, defined as earnings before interest, income tax expense, depreciation and amortization, is a useful financial metric to assess our operating and financial performance before the impact of investing and financing transactions and income taxes. In addition, Home Inns' management believes that EBITDA is widely used by other companies in the lodging industry and may be used by investors as a measure of our financial performance. Given the significant investments that Home Inns has made in property, plant and equipment, depreciation and amortization expense comprises a meaningful portion of our cost structure. Home Inns' management believes that EBITDA will provide investors with a useful tool for comparability between periods because it eliminates depreciation and amortization expense attributable to capital expenditures. The presentation of EBITDA should not be construed as an indication that our future results will be unaffected by other charges and gains we consider to be outside the ordinary course of our business.

The use of EBITDA and adjusted EBITDA has certain limitations. Depreciation and amortization expense for various long-term assets, income tax expense, interest expense and interest income have been and will be incurred and are not reflected in the presentation of EBITDA. Further, foreign exchange losses and share-based compensation expenses have been and will be incurred and are not reflected in the presentation of adjusted EBITDA. Each of these items should also be considered in the overall evaluation of our financial results. Additionally, EBITDA does not consider capital expenditures and other investing activities and should not be considered as a measure of our liquidity. Home Inns compensates for these limitations by providing the relevant disclosure of our depreciation and amortization, interest expense and interest income, income tax expense, capital expenditures and other relevant items both in our reconciliations to the U.S. GAAP financial measures and in our consolidated financial statements, all of which should be considered when evaluating our performance. The term EBITDA or adjusted EBITDA is not defined under U.S. GAAP, and EBITDA or adjusted EBITDA is not a measure of net income, operating income, operating performance or liquidity presented in accordance with U.S. GAAP. When assessing our operating and financial performance, you should not consider this data in isolation or as a substitute for our net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP. In addition, our EBITDA and adjusted EDITDA may not be comparable to EBITDA or similarly titled measures utilized by other companies since such other companies may not calculate EBITDA in the same manner as we do.

Reconciliations of Home Inns' non-GAAP financial measures, including EBITDA and adjusted EBITDA, to consolidated statement of operations information are included at the end of this press release.

Home Inns & Hotels Management Inc.

Consolidated Balance Sheet Information

December 31, 2007 September 30, 2008

RMB '000 RMB '000 US$ '000

(audited) (unaudited)(unaudited)

ASSETS

Current assets:

Cash and cash equivalents 1,562,600 947,946 139,611

Restricted cash 173,849 -- --

Accounts receivable 16,913 29,920 4,407

Receivables from related parties 1,372 882 130

Consumables 18,992 25,499 3,755

Prepayments and other current assets 61,927 53,166 7,829

Deferred tax assets, current 16,574 30,907 4,552

Total current assets 1,852,227 1,088,320 160,284

Property and equipment, net 1,147,682 1,756,821 258,740

Goodwill 397,778 390,882 57,568

Intangible assets, net 46,739 45,775 6,742

Other assets 68,088 49,558 7,299

Deferred tax assets, non-current 49,024 76,229 11,227

Total assets 3,561,538 3,407,585 501,860

LIABILITIES

Current liabilities:

Accounts payable 13,007 22,359 3,293

Payables to related parties 6,651 5,881 866

Short-term borrowings 269,000 -- --

Salaries and welfare payable 48,260 69,905 10,295

Income tax payable 43,083 44,670 6,579

Other taxes payable 8,901 12,263 1,806

Deferred revenues 23,807 37,086 5,462

Provisions for customer reward

program 5,439 8,406 1,238

Other unpaid and accruals 36,570 51,252 7,548

Other payables 350,204 370,265 54,532

Total current liabilities 804,922 622,087 91,619

Deferred rental 94,226 121,714 17,926

Deferred revenues, non-current 14,031 17,317 2,550

Long-term loan 18,036 -- --

Unfavorable lease liability 19,894 16,223 2,389

Convertible bond 1,110,308 1,114,521 164,144

Deferred tax liability, non-current 13,637 15,158 2,232

Total liabilities 2,075,054 1,907,020 280,860

Minority interest 11,087 18,140 2,672

Commitments and contingencies

Shareholders' equity

Ordinary shares (US$0.005 par value;

177,075,114 and 200,000,000 shares

authorized, 70,487,385 and

70,972,396 shares issued and

outstanding as of December 31, 2007

and September 30, 2008, respectively) 2,874 2,891 426

Additional paid-in capital 1,362,942 1,383,317 203,732

Statutory reserves 41,333 41,333 6,087

Retained earnings 68,248 54,884 8,083

Total shareholders' equity 1,475,397 1,482,425 218,328

Total liabilities and shareholders'

equity 3,561,538 3,407,585 501,860

Note 1: The conversion of Renminbi (RMB) into United States dollars (US$)

is based on the noon buying rate of US$1.00=RMB6.7899 on September

30, 2008 in The City of New York for cable transfers of RMB as

certified for customs purpose by Federal Reserve Bank of New York.

Home Inns & Hotels Management Inc.

Consolidated Statement of Operations Information

Quarter Ended

September

30, 2007 June 30, 2008

RMB '000 RMB '000 US$ '000 RMB '000 RMB '000

(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)

Top Star excluding

Top Star

Revenues:

Leased-and

-operated

hotels 254,182 424,569 61,899 38,408 386,161

Franchised-

and-managed

hotels 12,179 23,521 3,429 -- 23,521

Total revenues 266,361 448,090 65,328 38,408 409,682

Less: Business

tax and

related

surcharges (15,618) (26,359) (3,843) (2,076) (24,283)

Net revenues 250,743 421,731 61,485 36,332 385,399

Operating costs

and expenses:

Leased-and

-operated

hotel costs -

Rents and

utilities (73,729) (149,429) (21,786) (16,504) (132,925)

Personnel

costs* (39,683) (82,175) (11,980) (7,522) (74,653)

Depreciation

and

amortization (20,827) (43,961) (6,409) (5,532) (38,429)

Consumables,

food and

beverage (21,259) (31,851) (4,644) (1,860) (29,991)

Others (25,442) (41,274) (6,017) (6,082) (35,192)

Total leased

-and-operated

hotel costs (180,940) (348,690) (50,836) (37,500) (311,190)

Sales and

marketing

expenses (6,306) (5,454) (795) (655) (4,799)

General and

administrative

expenses* (24,001) (36,307) (5,293) (461) (35,846)

Total operating

costs and

expenses (211,248) (390,451) (56,924) (38,616) (351,835)

Income from

operations 39,495 31,280 4,561 (2,284) 33,564

Interest income 8,610 5,935 865 40 5,894

Interest expense (1,274) (7,435) (1,084) (88) (7,347)

Other non-operating

income 2,315 1,666 243 231 1,435

Foreign exchange

gain or loss, net (10,238) (13,742) (2,003) 900 (14,642)

Income before income

tax expense, minority

interests and share

of income of

affiliated companies 38,908 17,704 2,582 (1,201) 18,905

Income tax expense (12,518) (8,954) (1,305) -- (8,954)

Minority interests (1,122) (1,287) (188) -- (1,287)

Net income 25,267 7,463 1,089 (1,201) 8,664

Amount allocated

to participating

preference

shareholders -- -- -- -- --

Net income available

to ordinary

shareholders 25,267 7,463 1,089 (1,201) 8,664

Earnings per share

- Basic 0.36 0.11 0.02 0.12

- Diluted 0.35 0.10 0.01 0.12

Weighted average

ordinary shares

outstanding

- Basic 69,294 70,821 70,821 70,821

- Diluted 72,166 72,743 72,743 72,743

* Share-based

compensation

expense was

included in

the statement

of operations

as follows:

Leased-and-

operated hotel

costs -

Personnel costs 3 3 -- 3

General and

administrative

expenses 4,270 5,432 792 5,432

Quarter Ended

September 30, 2008

RMB '000 US$ '000 RMB '000 RMB '000

(unaudited)(unaudited)(unaudited)(unaudited)

Top Star excluding

Top Star

Revenues:

Leased-and-operated

hotels 499,409 73,552 39,023 460,386

Franchised-and-managed

hotels 27,907 4,110 -- 27,907

Total revenues 527,316 77,662 39,023 488,293

Less: Business tax and

related surcharges (31,153) (4,588) (2,035) (29,119)

Net revenues 496,163 73,074 36,988 459,175

Operating costs and expenses:

Leased-and-operated hotel

costs -

Rents and utilities (170,872) (25,166) (17,826) (153,046)

Personnel costs* (93,609) (13,787) (7,830) (85,779)

Depreciation and

amortization (50,136) (7,384) (5,451) (44,685)

Consumables, food and

beverage (41,818) (6,159) (3,961) (37,857)

Others (49,869) (7,345) (5,966) (43,903)

Total leased-and-operated

hotel costs (406,305) (59,841) (41,035) (365,270)

Sales and marketing

expenses (7,407) (1,091) (657) (6,750)

General and administrative

expenses* (40,631) (5,984) (243) (40,388)

Total operating costs and

expenses (454,342) (66,916) (41,935) (412,407)

Income from operations 41,821 6,158 (4,947) 46,768

Interest income 3,597 530 40 3,557

Interest expense (5,800) (854) -- (5,800)

Other non-operating income 3,123 460 540 2,584

Foreign exchange gain or

loss, net (2,360) (348) (1) (2,359)

Income before income tax expense,

minority interests and share of

income of affiliated companies 40,381 5,946 (4,369) 44,750

Income tax expense (9,785) (1,441) -- (9,785)

Minority interests (1,134) (167) -- (1,134)

Net income 29,463 4,338 (4,369) 33,832

Amount allocated to participating

preference shareholders -- -- -- --

Net income available to ordinary

shareholders 29,463 4,338 (4,369) 33,832

Earnings per share

- Basic 0.42 0.06 0.48

- Diluted 0.40 0.06 0.45

Weighted average ordinary shares

outstanding

- Basic 70,897 70,897 70,897

- Diluted 78,128 78,128 78,128

* Share-based compensation

expense was included in the

statement of operations as

follows:

Leased-and-operated hotel

costs - Personnel costs 3 -- 3

General and administrative

Expenses 6,586 970 6,586

Note 1: The conversion of Renminbi (RMB) into United States dollars

(US$) is based on the noon buying rate of US$1.00=RMB6.7899 on

September 30, 2008 in The City of New York for cable transfers of

RMB as certified for customs purpose by Federal Reserve Bank of

New York.

Home Inns & Hotels Management Inc.

Reconciliation of GAAP and Non-GAAP Results

Quarter Ended September 30, 2008

Share-

% of based % of Non- % of

GAAP Total Compen- Total GAAP Total

Result Revenue sation Revenue Result Revenue

RMB '000 RMB '000 RMB '000

Leased-and-operated hotel

costs (406,305) 77.1% 3 0.0% (406,302) 77.1%

Sales and marketing

expenses (7,407) 1.4% -- 0.0% (7,407) 1.4%

General and administrative

expenses (40,631) 7.7% 6,586 1.2% (34,045) 6.5%

Total operating costs and

expenses (454,342) 86.2% 6,589 1.2% (447,753) 84.9%

Income from operations 41,821 7.9% 6,589 1.2% 48,410 9.2%

Quarter Ended September 30, 2008

(excluding Top Star)

Share-

% of based % of Non- % of

GAAP Total Compen- Total GAAP Total

Result Revenue sation Revenue Result Revenue

RMB '000 RMB '000 RMB '000

Leased-and-operated hotel

costs (365,270) 74.8% 3 0.0% (365,267) 74.8%

Sales and marketing

expenses (6,750) 1.4% -- 0.0% (6,750) 1.4%

General and administrative

expenses (40,388) 8.3% 6,586 1.3% (33,802) 6.9%

Total operating costs and

expenses (412,407) 84.5% 6,589 1.3% (405,819) 83.1%

Income from operations 46,768 9.6% 6,589 1.3% 53,357 10.9%

Quarter Ended September 30, 2008

Share-

% of based % of Non- % of

GAAP Total Compen- Total GAAP Total

Result Revenue sation Revenue Result Revenue

US$ '000 US$ '000 US$ '000

Leased-and-operated hotel

costs (59,841) 77.1% -- 0.0% (59,841) 77.1%

Sales and marketing expenses (1,091) 1.4% -- 0.0% (1,091) 1.4%

General and administrative

expenses (5,984) 7.7% 970 1.2% (5,014) 6.5%

Total operating costs and

expenses (66,916) 86.2% 970 1.2% (65,946) 84.9%

Income from operations 6,158 7.9% 970 1.2% 7,128 9.2%

Quarter Ended September 30, 2008

(excluding Top Star)

Share-

% of based % of Non- % of

GAAP Total Compen- Total GAAP Total

Result Revenue sation Revenue Result Revenue

US$ '000 US$ '000 US$ '000

Leased-and-operated hotel

costs (53,796) 74.8% -- 0.0% (53,796) 74.8%

Sales and marketing expenses (994) 1.4% -- 0.0% (994) 1.4%

General and administrative

expenses (5,948) 8.3% 970 1.3% (4,978) 6.9%

Total operating costs and

expenses (60,738) 84.5% 970 1.3% (59,768) 83.1%

Income from operations 6,888 9.6% 970 1.3% 7,858 10.9%

Quarter Ended June 30, 2008

Share-

% of based % of Non- % of

GAAP Total Compen- Total GAAP Total

Result Revenue sation Revenue Result Revenue

RMB '000 RMB '000 RMB '000

Leased-and-operated hotel

costs (348,690) 77.8% 3 0.0% (348,688) 77.8%

Sales and marketing

expenses (5,454) 1.2% -- 0.0% (5,454) 1.2%

General and administrative

expenses (36,307) 8.1% 5,432 1.2% (30,875) 6.9%

Total operating costs and

expenses (390,451) 87.1% 5,435 1.2% (385,017) 85.9%

Income from operations 31,280 7.0% 5,435 1.2% 36,714 8.2%

Quarter Ended June 30, 2008

(excluding Top tar)

Share-

% of based % of Non- % of

GAAP Total Compen- Total GAAP Total

Result Revenue sation Revenue Result Revenue

RMB '000 RMB '000 RMB '000

Leased-and-operated hotel

costs (311,190) 76.0% 3 0.0% (311,187) 76.0%

Sales and marketing

expenses (4,799) 1.2% -- 0.0% (4,799) 1.2%

General and administrative

expenses (35,846) 8.7% 5,432 1.3% (30,414) 7.4%

Total operating costs and

expenses (351,835) 85.9% 5,435 1.3% (346,400) 84.6%

Income from operations 33,564 8.2% 5,435 1.3% 38,999 9.5%

Quarter Ended September 30, 2007

Share-

% of based % of Non- % of

GAAP Total Compen- Total GAAP Total

Result Revenue sation Revenue Result Revenue

RMB '000 RMB '000 RMB '000

Leased-and-operated hotel

costs (180,940) 67.9% 3 0.0% (180,937) 67.9%

Sales and marketing

expenses (6,306) 2.4% -- 0.0% (6,306) 2.4%

General and administrative

expenses (24,002) 9.0% 4,270 1.6% (19,732) 7.4%

Total operating costs and

expenses (211,248) 79.3% 4,273 1.6% (206,975) 77.7%

Income from operations 39,495 14.8% 4,273 1.6% 43,768 16.4%

Note 1: The conversion of Renminbi (RMB) into United States dollars (US$)

is based on the noon buying rate of US$1.00=RMB6.7899 on September

30, 2008 in The City of New York for cable transfers of RMB as

certified for customs purpose by Federal Reserve Bank of New York.

Home Inns & Hotels Management Inc.

Reconciliation of GAAP and Non-GAAP Results (continued)

Quarter Ended

September

30, 2007 June 30, 2008

RMB '000

(excluding

RMB '000 RMB '000 US$ '000 Top Star)

(unaudited) (unaudited)(unaudited) (unaudited)

Net income (GAAP) 25,267 7,463 1,089 8,664

Foreign exchange

losses (gains), net 10,239 13,742 2,003 14,642

Share-based

compensation 4,273 5,435 792 5,435

Adjusted net income

excluding foreign

exchange losses, share-

based compensation 39,779 26,640 3,884 28,741

Quarter Ended

September 30, 2008

RMB '000

(excluding

RMB '000 US$ '000 Top Star)

(unaudited) (unaudited) (unaudited)

Net income (GAAP) 29,463 4,338 33,832

Foreign exchange losses

(gains), net 2,360 348 2,359

Share-based compensation 6,589 970 6,589

Adjusted net income excluding

foreign exchange losses, share-

based compensation 38,412 5,656 42,780

Quarter Ended

September

30, 2007 June 30, 2008

RMB '000

(excluding

RMB '000 RMB '000 US$ '000 Top Star)

(unaudited)(unaudited)(unaudited)(unaudited)

Earnings per share (GAAP)

- Basic 0.36 0.11 0.02 0.12

- Diluted 0.35 0.10 0.01 0.12

Earnings per share excluding

foreign exchange losses,

share-based compensation

- Basic 0.57 0.38 0.05 0.41

- Diluted 0.55 0.36 0.05 0.38

Weighted average ordinary shares

Outstanding

- Basic 69,294 70,821 70,821 70,821

- Diluted 72,166 78,394 78,394 78,394

September 30, 2008

RMB'000

(excluding

RMB '000 US$ '000 Top Star)

(unaudited) (unaudited) (unaudited)

Earnings per share (GAAP)

- Basic 0.42 0.06 0.48

- Diluted 0.40 0.06 0.45

Earnings per share excluding foreign

exchange losses, share-based

compensation

- Basic 0.54 0.08 0.60

- Diluted 0.51 0.08 0.57

Weighted average ordinary shares

outstanding

- Basic 70,897 70,897 70,897

- Diluted 78,128 78,128 78,128

Note 1: The conversion of Renminbi (RMB) into United States dollars (US$)

is based on the noon buying rate of US$1.00=RMB6.7899 on September

30, 2008 in The City of New York for cable transfers of RMB as

certified for customs purpose by Federal Reserve Bank of New York.

Home Inns & Hotels Management Inc.

Reconciliation of GAAP and Non-GAAP Results (continued)

Quarter Ended

September

30, 2007 June 30, 2008

RMB '000

(excluding

RMB '000 RMB '000 US$ '000 Top Star)

(unaudited)(unaudited)(unaudited)(unaudited)

Net income (GAAP) 25,268 7,463 1,089 8,664

Interest income (8,610) (5,935) (865) (5,894)

Interest expenses 1,274 7,435 1,084 7,347

Income tax expense 12,518 8,954 1,305 8,954

Depreciation and

amortization 21,622 45,080 6,572 39,548

EBITDA (Non-GAAP) 52,072 62,997 9,185 58,619

Foreign exchange losses,

net 10,239 13,742 2,003 14,642

Share-based compensation 4,273 5,435 792 5,435

EBITDA excluding foreign

exchange losses, share-based

compensation 66,584 82,173 11,981 78,695

% of total revenue 25.0% 18.3% 18.3% 19.2%

Quarter Ended

September 30, 2008

RMB'000

(excluding

RMB '000 US$ '000 Top Star)

(unaudited) (unaudited) (unaudited)

Net income (GAAP) 29,463 4,338 33,832

Interest income (3,597) (530) (3,557)

Interest expenses 5,800 854 5,800

Income tax expense 9,785 1,441 9,785

Depreciation and amortization 52,066 7,668 46,615

EBITDA (Non-GAAP) 93,516 13,771 92,475

Foreign exchange losses, net 2,360 348 2,359

Share-based compensation 6,589 970 6,589

EBITDA excluding foreign exchange

losses, share-based compensation 102,465 15,089 101,423

% of total revenue 19.4% 19.4% 20.8%

Home Inns & Hotels Management Inc.

Operating Data

As of and for the quarter ended

September

30, 2007 June 30, 2008 September 30, 2008

excluding excluding

Top Top Top Top

Star Star Star Star

Total Hotels in

operation: 201 366 26 340 414 25 389

Lease-and

operated

hotels 143 271 26 245 291 25 266

Franchised-

and-managed

hotels 58 95 0 95 123 0 123

Total rooms 23,954 44,088 4,125 39,963 49,459 3,958 45,501

Occupancy rate (as

a percentage) 95.4% 88.2% 66.8% 90.8% 85.9% 67.4% 87.7%

Average daily rate

(in RMB) 182 173 142 176 180 143 183

RevPAR (in RMB) 174 153 95 160 155 96 160

Like-for-like performance for hotels opened for at least 18 months as of the beginning of the current quarter

As of and for the quarter ended

September 30, 2007 September 30, 2008

Total Hotels in operation: 135 135

Lease-and-operated hotels 96 96

Franchised-and-managed hotels 39 39

Total rooms 16,424 16,424

Occupancy rate (as a percentage) 101.3% 97.0%

Average daily rate (in RMB) 187 199

RevPAR (in RMB) 189 193

For investor and media inquiries, please contact:

Ethan Ruan

Home Inns & Hotels Management Inc.

Tel: +86-21-3401-9898 x2004

Email: zjruan@homeinns.com

Peter Schmidt

Tel: +86-10-8591-1953

Email: peter.schmidt@fd.com