Zacks_Analysts' Blog : 7 Days Group Accelerates Growth - Analyst Blog

7 Days Group Holdings Limited (SVN), a leading economy hotel chain based in China, recently announced the opening of 231 net hotels in 2010. Among these, 85 were leased-and-operated hotels and 146 were managed hotels. The number of units opened was way ahead of the company’s targeted range of 170–200 for the year.

Following an economic revival, management has embarked on an aggressive expansion plan, which will keep its pace in 2011 as well. Considering the current rate of expansion, 7 Days Growth expects to surpass its target of having 1,000 hotels operational or under development (including leased and operated hotels under conversion and managed hotels contracted but not opened) by the end of 2011.

7 Days Group converts and operates limited service economy hotels across major metropolitan areas in China under the brand "7 Days Inn." During the third quarter, 7 Days Group opened 62 net hotels.

Furthermore, the company expanded its geographic footprint from 62 cities as of June 30, 2010 to 75 cities as of September 30, 2010. At the end of third quarter, 7 Days Group had 461 hotels in operation, comprising 281 leased-and-operated hotels, 180 managed hotels. It also had 201 hotels under conversion.

Management believes 7 Days Group’s steady growth record and strong operating systems will attract more franchisees and increase its operating scale. With approximately 200 hotels presently under conversion, 7 Days Group remains on track to achieve its 2011 target of 240 net hotel openings.  

China is all set to bring about a recovery in global tourism and by 2020, it is expected to be the world’s largest travel destination. The companies are keen on tapping the secular growth potential lying in that market.

One of 7 Days Group’s domestic peers, Shanghai-based Home Inns & Hotels Management Inc. (HMIN), is planning to expand its portfolio in China from 818 hotels in 2010 to 1,100 by the end of 2011. In fact, all its western peers such as Starwood Hotels & Resorts Worldwide Inc. (HOT), Marriott International Inc. (MAR) and Wyndham Worldwide Corporation (WYN) have their eyes on China.   

In the third quarter, 7 Days Group witnessed considerable improvement in RevPAR. Its occupancy rates also remained steady year over year. We believe, healthy operating metrics will allow 7 Days Group to emerge as one of the fastest growing companies in the Chinese hotel industry. 7 Days group currently retains a Zacks #1 Rank, which translates into a short-term Strong Buy rating.