Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Alex Xu - Brean Murray Carret & Co.
Alex Xu - Brean Murray Carret & Co.
First of all, you have a RMB 4.6 million restructuring charge during the quarter. Can you give us a little bit of color in terms of what these charges are related to? Are they personnel-related or you some facility or something like that?
May Wu
The RMB 4.6 million restructuring charges are all pertaining to the integration of Top Star. That included about RMB 500,000 severance payments for personnel realignment and the remainder, by and large, are write off of intangible assets such as the software that Top Star was previously using which is of no value to us going forward.
Alex Xu - Brean Murray Carret & Co.
In terms of integration, have you already finished the IT part of the integration as well as the personnel training, that sourcing?
David Sun
Yes, we take over all operations from November 1 and the system integration had been completed before the Chinese New Year in early February. Also, the new management team, the operational procedure and the service standards have already been implemented in the Top Star hotels before the Chinese New Year.
Alex Xu - Brean Murray Carret & Co.
What will it take, say from this point on, to let's say three, four, five months later to bring Top Star to your satisfied operations level? Will you need to do a lot of marketing to promote the Top Star brand or just put the right people in the right place to run the hotel more efficiently?
David Sun
I think mostly we put the right people in the right position and also strongly implemented our Home Inns operational procedure and service standard; also we put the customer platform link with Top Star hotels. So I think by this effort we have received some positive change come out after Chinese New Year so we believe by another three to six months we are able to bring the Top Star hotels to the normal Home Inns hotel level.
Alex Xu - Brean Murray Carret & Co.
My last question is going forward, can you walk us through a little bit regarding how you look at the 2008 RevPAR trend compared to year over year in 2007?
May Wu
Looking to 2008, as we mentioned, entering into lower tier cities remains an important part of our strategy. Because of that, we do not expect RevPAR pick up on a year-over-year basis in 2008 versus 2007. We may experience a 3% to 4% type of RevPAR decrease on a year-over-year basis is how we see it right now. But we may end up doing a little better than that but given the city mix that we plan to enter we are planning on a 3% to 4% RevPAR decrease on a year-over-year basis.
- To read the full transcript on Seeking Alpha, click here »
