China Lodging Group, Limited Reports Fourth Quarter and Full Year 2014 Financial Results

• A total of 1,995 hotels or 209,955 hotel rooms in operation as of December 31, 2014
• Net revenues increased 15.7% year-over-yearto RMB1,296.2 million (US$208.9 million)¹ for the fourth quarter and 19.1% to RMB4,964.7million (US$800.2 million) for the full year of 2014, in line with the guidance previously announced.
• Adjusted EBITDA (non-GAAP) decreased 4.8% year-over-year to RMB206.2 million (US$33.2 million)for the fourth quarter and increased 14.8% to RMB1,001.5 million (US$161.4 million)for the full year of 2014.
• Net income attributable to China Lodging Group, Limited was RMB46.8 million (US$7.5 million) for the fourth quarter and RMB307.3million (US$49.5 million) for the full year of 2014, decreasing 20.0% year-over-year for the fourth quarter and increasing 9.8% for the full year of 2014.
• Basic earnings per ADS ² were RMB0.75 (US$0.12) for the fourth quarter of 2014 and RMB4.94 (US$0.80) for the full year of 2014. Diluted earnings per ADS were RMB0.74 (US$0.12) for the fourth quarter of 2014 and RMB4.86 (US$0.78) for the full year of 2014. Excluding share-based compensation expenses, adjusted basic earnings per ADS were RMB0.79 (US$0.13) for the fourth quarter of 2014 and RMB5.45 (US$0.88) for the full year of 2014 and adjusted diluted earnings per ADS (non-GAAP) were RMB0.77 (US$0.12) for the fourth quarter of 2014 and RMB5.36 (US$0.86) for the full year of 2014.
• Operating cash flow for the full year of 2014 increased 36% to RMB1,454.0 million (US$234.3 million). Free cash flow turned positive.
• The Company provided guidance for Q1 2015 net revenues growth of 12% to 14% and full year 2015 net revenue growth of 7.5% to 11.5%.

SHANGHAI, China, March 10, 2015 (GLOBE NEWSWIRE) -- China Lodging Group, Limited (Nasdaq:HTHT) ("China Lodging Group", "Huazhu" or the "Company"), a leading and fast-growing multi-brand hotel group in China, today announced its unaudited financial results for the fourth quarter and full year ended December 31, 2014.

Operational Highlights of Fourth Quarter 2014

• During the fourth quarter of 2014, the Company opened 7 net leased ("leased-and- operated") hotels and 139 net manachised ("franchised-and-managed") hotels.
   
• The ADR, which is defined as the average daily rate for all hotels in operation (excluding franchised Starway hotels), was RMB176 in the fourth quarter of 2014, compared with RMB178 in the fourth quarter of 2013 and RMB187 in the previous quarter. The year-over-year decrease of 1% was mainly attributable to the city mix shifting toward lower-tier cities, partially offset by a 0.3% increase in same-hotel ADR. The sequential decrease resulted mainly from seasonality.
   
• The occupancy rate for all hotels in operation (excluding franchised Starway hotels) was 86.5% in the fourth quarter of 2014, compared with 90.0% in the fourth quarter of 2013 and 92.5% in the previous quarter. The year-over-year decrease was mainly due to soft macro economy, and a higher percentage of newly-opened hotels in lower-tier cities as a result of the Company's accelerated growth in manachise business nationwide. The sequential decrease resulted mainly from seasonality.
   
• RevPAR, defined as revenue per available room for all hotels in operation (excluding franchised Starway hotels), was RMB153 in the fourth quarter of 2014, compared with RMB160 in the fourth quarter of 2013 and RMB173 in the previous quarter.  The year-over-year decrease was a result of both lower ADR and lower occupancy rate. The sequential decrease resulted mainly from seasonality. 
   
• For all hotels which had been in operation for at least 18 months (excluding franchised Starway hotels), the same-hotel RevPAR was RMB161 for the fourth quarter of 2014, a 3% decrease from RMB165 for the fourth quarter of 2013, with a 0.3% increase in ADR and a three-percentage-point decrease in occupancy rate. The increase in same-hotel ADR was driven by price increase to enhance yield. The decrease in same-hotel occupancy rate was mainly due to a temporary drop in demand caused by APEC in Beijing, and the soft macro economy.

Operational Highlights of Full Year 2014

• For the full year of 2014, the Company opened 46 net new leased hotels and 541 net new manachised hotels, exceeding the Company's previously announced guidance. As of December 31, 2014, the Company had 611 leased hotels, 1,376 manachised hotels, and 8 franchised Starway hotels in operation in 300 cities. The number of hotel rooms in operation totaled 209,955, an increase of 37% from 2013. The rooms of leased and manachised hotel in operation increased by 10% and 62%, respectively, from a year ago.
   
• As of December 31, 2014, the Company had 29 leased hotels and 644 manachised hotels contracted or under construction.
   
• For the full year of 2014, the ADR was RMB179, compared to RMB180 in 2013. The year-over-year decrease of 0.5% was primarily due to the city mix shifting toward lower-tier cities; partially offset by a 0.6% increase in same-hotel ADR.
   
• For the full year of 2014, the occupancy rate for all hotels in operation (excluding franchised Starway hotels) was 89.0%, compared with 90.7% in 2013. The decline in occupancy rate was mainly due to soft macro economy, and a higher percentage of newly-opened hotels in lower-tier cites as a result of the Company's accelerated growth in manachise business nationwide.
   
• For the full year of 2014, the RevPAR for all hotels in operation, excluding franchised Starway hotels, was RMB159, a 2% decrease from RMB163 in 2013. The decrease was a result of both lower occupancy rate and lower ADR.
   
• For all the hotels which had been in operation for at least 18 months, excluding franchised Starway hotels, the same-hotel RevPAR was RMB170 in 2014, a 1% decrease from RMB171 in 2013, with a 1% increase in ADR and a two-percentage-point drop in occupancy rate. On average, those hotels achieved an occupancy of 92.8% for the full year of 2014.
   
• As of December 31, 2014, the Company's loyalty program had more than 31 million members, who contributed more than 85% of room nights sold during the full year of 2014. In 2014, more than 90% of room nights were sold through the Company's own channels.

"We are excited about our rapid build-up of hotel network in 2014, largely driven by our solid growth in manachise business and wide choice of brands. A record high of net 570 hotels were added into our system in a single year, more than 90% of which are under manachise model and more than 25% are under new brands." said Mr. Qi Ji, founder, executive Chairman and Chief Executive Officer of China Lodging Group.

Mr. Ji continued, "On the front of digital innovation, we have implemented the proprietary Cloud-based HPMS across our entire hotel network, and introduced new functionalities on Huazhu.com and Huazhu mobile apps. These digital initiatives will enable us to further enhance customer experience and improve hotel operational efficiency on a large scale. Looking ahead, we are confident to fortify our leading position as a hotel management group in China by executing our strategies."

"In the fourth quarter, we signed agreements to form a strategic alliance with Accor. Under the agreements, Accor's economy and midscale hotel platform will become part of our network. We will receive the exclusive rights as a master franchisee for brands, including Grand Mercure, Novotel, Mercure, Ibis and Ibis Styles, in mainland China, Taiwan region and Mongolia. We believe the collaboration will create the most successful hotel business in China, and make the Accor-Huazhu alliance an unprecedented success." Mr. Ji added.

Fourth Quarter and Full Year of 2014 Financial Results

Total revenues for the fourth quarter of 2014 were RMB1,372.9 million (US$221.3 million), representing a 15.5% year-over-year increase and an 6.7% sequential decrease. The year-over-year increase was primarily due to our hotel network expansion. The sequential decrease was due to seasonality.

Total revenues for the full year of 2014 were RMB5,265.2 million (US$848.6 million), representing an increase of 19.1% from the full year of 2013.

Total revenues from leased hotels for the fourth quarter of 2014 were RMB1,160.9 million (US$187.1 million), representing a 12.0% year-over-year increase and a 7.6% sequential decrease.

For the full year of 2014, total revenues from leased hotels were RMB4,522.4 million (US$728.9 million), representing a 16.8% year-over-year increase.

Total revenues from manachised and franchised hotels for the fourth quarter of 2014 were RMB212.1 million (US$34.2 million), representing a 39.8% year-over-year increase and a 1.2% sequential decrease.

For the full year of 2014, total revenues from manachised and franchised hotels were RMB 742.8 million (US$119.7 million), representing a 35.1% year-over-year increase. It accounts for 14.1% of total revenues, compared to 12.4% of total revenues for the year of 2013. 

Net revenues for the fourth quarter of 2014 were RMB1,296.2 million (US$208.9 million), representing a 15.7% year-over-year increase and a 6.6% sequential decrease.

Net revenues for the full year of 2014 were RMB4,964.7 million (US$800.2 million), representing a 19.1% year-over-year increase.

Hotel operating costs for the fourth quarter of 2014 were RMB1,048.9 million (US$169.1 million), compared to RMB876.7 million (US$144.8 million) in the fourth quarter of 2013 and RMB983.3 million (US$160.2 million) in the previous quarter, representing a 19.6% year-over-year increase and a 6.7% sequential increase. The Company's hotel network expansion, especially the increased number of midscale leased hotel rooms which incurred a significant amount of rental and depreciation costs, was the main driver for the increase in hotel operating costs. Total hotel operating costs excluding share-based compensation expenses (non-GAAP) for the fourth quarter of 2014 were RMB1,046.9 million (US$168.7 million), representing 80.7% of net revenues, compared to 78.2% for the fourth quarter in 2013 and 70.7% for the previous quarter. The year-over-year increase in the percentage was mainly attributable to the decrease of RevPAR and the cost inflation. The sequential increase in the percentage was mainly due to seasonality.

For the full year of 2014, total hotel operating costs were RMB3,878.0 million (US$625.0 million), compared to RMB3,181.7 million (US$525.6 million) in 2013. Excluding share-based compensation, hotel operating costs (non-GAAP) were RMB3,871.2 million (US$623.9 million), representing 78.0% of net revenues, compared to 76.2% in 2013. The year-over-year increase was mainly driven by the decrease in RevPAR and the cost inflation.

Selling and marketing expenses for the fourth quarter of 2014 were RMB65.2 million (US$10.5 million), compared to RMB45.1 million (US$7.4 million) in the fourth quarter of 2013 and RMB53.6 million (US$8.7 million) in the previous quarter. Selling and marketing expenses excluding share-based compensation expenses (non-GAAP) for the fourth quarter of 2014 were RMB64.9 million (US$10.5 million), or 5.0% of net revenues, compared to 4.0% for the fourth quarter of 2013 and 3.9% for the previous quarter. The year-over-year and sequential increase was mainly due to various promotional activities to attract more new members. During the fourth quarter of 2014, the Company acquired 6.9 million new members, compared with 2.0 million in the fourth quarter of 2013 and 4.9 million in the previous quarter.

For the full year of 2014, total selling and marketing expenses were RMB187.4 million (US$30.2 million), compared to RMB138.1 million (US$22.8 million) in 2013. Selling and marketing expenses excluding share-based compensation expenses (non-GAAP) were RMB186.5 million (US$30.1 million), representing 3.8% of net revenues, compared to 3.3% in 2013. The year-over-year increase in the percentage was mainly due to various promotional activities to attract more new members and higher portion of reservations through third-party agencies from new brands.

General and administrative expenses for the fourth quarter of 2014 were RMB103.0 million (US$16.6 million), compared to RMB80.8 million (US$13.3 million) in the fourth quarter of 2013 and RMB99.5 million (US$16.2 million) in the previous quarter. General and administrative expenses excluding share-based compensation expenses (non-GAAP) for the fourth quarter of 2014 were RMB103.2 million (US$16.6 million), representing 7.9% of net revenues, compared with 6.8% of net revenues in the fourth quarter of 2013 and 6.2% in the previous quarter. The year-over-year increase in the percentage was mainly attributable to our investments in technology for digital related initiatives and new brands and a significant growth in the number of manachised hotels.

General and administrative expenses were RMB342.1 million (US$55.1 million) for the year of 2014, compared to RMB284.8 million (US$47.0 million) in 2013. General and administrative expenses excluding share-based compensation expenses (non-GAAP) were RMB318.0 million (US$51.2 million), representing 6.4% of net revenues, compared to 6.2% in 2013. The year-over-year increase in the percentage was mainly attributable to our investments in technology personnel for digital related initiatives and new brands and a significant growth in the number of manachised hotels.

Pre-opening expenses for the fourth quarter of 2014 were RMB43.2 million (US$7.0 million), representing an 11.7% year-over-year decrease and a 3.9% sequential decrease. The decrease was mainly due to fewer leased hotels opened and in the pipeline in the fourth quarter of 2014.

Pre-opening expenses for the full year of 2014 were RMB186.3 million (US$30.0 million), compared to RMB211.3 million (US$34.9 million) in 2013, representing a year-over-year decrease of 11.8%. The decrease in pre-opening expenses was mainly due to fewer leased hotel opened and in the pipeline in 2014. The pre-opening expenses as a percentage of net revenues decreased to 3.8% in 2014 from 5.1% in 2013.

Income from operations for the fourth quarter of 2014 was RMB48.8 million (US$7.9 million), compared to RMB85.2 million (US$14.1 million) in the fourth quarter of 2013 and RMB202.1 million (US$32.9 million) in the previous quarter. Excluding share-based compensation expenses, adjusted income from operations (non-GAAP) for the fourth quarter of 2014 was RMB51.0 million (US$8.2 million), compared to adjusted income from operation (non-GAAP) of RMB91.4 million (US$15.1 million) for the fourth quarter of 2013 and RMB218.0 million (US$35.5 million) for the previous quarter. The adjusted operating margin for the fourth quarter of 2014 was 4.0%, compared with 8.1% in the fourth quarter of 2013 and 15.8% in the previous quarter.

Income from operations for the year was RMB389.4 million (US$62.8 million), compared to RMB380.5 million (US$62.9 million) in 2013. Excluding share-based compensation expenses, adjusted income from operations (non-GAAP) for the year of 2014 was RMB421.3 million (US$67.9 million), compared to RMB411.0 million (US$67.9 million) for the year of 2013. The growth in income from operations was attributable to rapid expansion of our hotel network and lower pre-opening expenses in 2014. The adjusted operating margin (non-GAAP) for the year of 2014 was 8.5%, compared with 9.8% for the year of 2013.

Net income attributable to China Lodging Group, Limited for the fourth quarter of 2014 was RMB46.8 million (US$7.5 million), compared to RMB58.5 million (US$9.7 million) in the fourth quarter of 2013 and RMB149.6 million (US$24.4 million) in the previous quarter. Excluding share-based compensation expenses, adjusted net income attributable to China Lodging Group, Limited (non-GAAP) for the fourth quarter of 2014 was RMB49.0 million (US$7.9 million), representing a 24.3% year-over-year decrease and a 70.4% sequential decrease.

Net income attributable to China Lodging Group, Limited for the full year of 2014 was RMB307.3 million (US$49.5 million), compared to RMB279.9 million (US$46.2 million) in 2013. Excluding share-based compensation expenses, adjusted net income attributable to China Lodging Group (non-GAAP) for the full year of 2014 was RMB339.3 million (US$54.7 million), compared to RMB310.3 million (US$51.3 million) in 2013. The year-over-year increase of 9.3% was mainly attributable to the expansion of our hotel network and lower pre-opening expenses.

Basic and diluted earnings per share/ADS. For the fourth quarter of 2014, basic earnings per share were RMB0.19 (US$0.03) and diluted earnings per share were RMB0.18 (US$0.03); basic earnings per ADS were RMB0.75 (US$0.12) and diluted earnings per ADS were RMB0.74 (US$0.12). For the fourth quarter of 2014, excluding share-based compensation expenses, adjusted basic earnings per share were RMB0.20 (US$0.03) and adjusted diluted earnings per share (non-GAAP) were RMB0.19 (US$0.03); adjusted basic earnings per ADS (non-GAAP) were RMB0.79 (US$0.13) and adjusted diluted earnings per ADS (non-GAAP) were RMB0.77 (US$0.12).

For the full year of 2014, basic earnings per share were RMB1.23 (US$0.20) and diluted earnings per share were RMB1.21 (US$0.20); basic earnings per ADS were RMB4.94 (US$0.80), while diluted earnings per ADS were RMB4.86 (US$0.78). For the full year of 2014, excluding share-based compensation expenses, adjusted basic earnings per share (non-GAAP) were RMB1.36 (US$0.22), while adjusted diluted earnings per share (non-GAAP) were RMB1.34 (US$0.22), and adjusted basic earnings per ADS (non-GAAP) were RMB5.45 (US$0.88), while adjusted diluted earnings per ADS (non-GAAP) were RMB5.36 (US$0.86).

EBITDA (non-GAAP) for the fourth quarter of 2014 was RMB204.0 million (US$32.9 million), compared with RMB210.5 million (US$34.8 million) in the fourth quarter of 2013 and RMB349.5 million (US$56.9 million) in the previous quarter. Excluding share-based compensation expenses, adjusted EBITDA (non-GAAP) for the fourth quarter of 2014 was RMB206.2 million (US$33.2 million), compared with RMB216.7 million (US$35.8 million) for the fourth quarter of 2013 and RMB365.4 million (US$59.5 million) for the previous quarter.

EBITDA (non-GAAP) for the full year of 2014 was RMB969.5 million (US$156.3 million), compared to RMB841.8 million (US$139.1 million) in 2013. Excluding share-based compensation expenses, adjusted EBITDA (non-GAAP) for the full year of 2014 was RMB1,001.5 million (US$161.4 million), compared with RMB872.2 million (US$144.1 million) in 2013, representing a 14.8% year-on-year increase. The year-over-year increase was mainly due to the expansion of the Company's hotel network. The adjusted EBITDA margin (non-GAAP) for the year of 2014 was 20.2%, compared with 20.9% for the year of 2013.

Hotel income (non-GAAP), which is the difference between net revenues and hotel operating costs, was RMB247.3 million (US$39.9 million) for the fourth quarter of 2014, compared with RMB243.5 million (US$40.2 million) in the fourth quarter of 2013 and RMB404.2 million (US$65.9 million) in the previous quarter. The hotel income from the leased hotels was RMB93.2 million (US$15.0 million) during the fourth quarter of 2014. The hotel income from the manachised and franchised hotels was RMB154.1 million (US$24.9 million) during the fourth quarter of 2014, or accounting for approximately 62% of total hotel income.

Hotel income (non-GAAP) for the full year of 2014 was RMB1,086.7 million (US$175.1 million), compared with RMB987.0 million (US$163.0 million) for 2013. The hotel income from the leased hotels was RMB548.4 million (US$88.4 million) for the full year of 2014. The hotel income from the manachised and franchised hotels was RMB538.3 million (US$86.7 million) during the full year of 2014, or accounting for approximately 50% of total hotel income.

Cash flow. Operating cash inflow for the fourth quarter of 2014 was RMB457.5 million (US$73.7 million). Investing cash outflow for the fourth quarter was RMB201.2 million (US$32.4 million).

Operating cash inflow for the full year of 2014 was RMB1,454.0 million (US$234.3 million), representing an increase of 36% from 2013. The significant growth was mainly due to the Company's fast network expansion with manachise model. Investing cash outflow for the full year of 2014 was RMB1,063.2 million (US$171.4 million), representing a decrease of 8% from 2013. The Company's free cash flow turned positive.

Cash and cash equivalents. As of December 31, 2014, the Company had a total balance of cash and cash equivalents of RMB808.9 million (US$130.4 million).

Debt financing

In the fourth quarter of 2014, the company repaid the loan of RMB300 million. As of December 31, 2014, the Company had a total credit facility of RMB898.3 million available and had not drawn down any of the credit facility.

Business Outlookand Guidance for 2015

"We remain confident about the long-term growth potential of travel demand in China. We will continue to invest in our new brands to meet diversified needs. In 2015, we plan to add 680 to 730 leased and manachised hotels, with 20 to 30 leased hotels and 660 to 700 manachised and franchised hotels. Among these new hotels, 80% will be economy hotels, and 20% will be midscale and upscale hotels." commented Mr. Ji.

In the first quarter of 2015, the Company expects net revenues to grow 12% to 14% year-over-year. For the full year 2015, the Company expects net revenues to grow 7.5% to 11.5% from 2014.

The above forecast reflects the Company's current and preliminary view, which is subject to change.

Conference Call

China Lodging Group's management will host a conference call at 9 p.m. ET, Tuesday, March 10, 2015 (or 9 a.m. on Wednesday, March 11, 2015 in the Shanghai/Hong Kong time zone) following the announcement. To participate in the event by telephone, please dial +1 (855) 500 8701 (for callers in the US), +86 400 120 0654 (for callers in China Mainland), +852 3018 6776 (for callers in Hong Kong) or +65 6723 9385 (for callers outside of the US, China Mainland, and Hong Kong) and entering pass code 8517 6017. Please dial in approximately 10 minutes before the scheduled time of the call.

A recording of the conference call will be available after the conclusion of the conference call through March 18, 2015. Please dial +1 (855) 452 5696 (for callers in the US) or +61 2 9003 4211 (for callers outside the US) and entering pass code 8517 6017.

The conference call will also be webcast live over the Internet and can be accessed by all interested parties at the Company's Web site, http://ir.huazhu.com .

Use of Non-GAAP Financial Measures

To supplement the Company's unaudited consolidated financial results presented in accordance with U.S. GAAP, the Company uses the following non-GAAP measures defined as non-GAAP financial measures by the SEC: hotel operating costs excluding share-based compensation expenses; general and administrative expenses excluding share-based compensation expenses; selling expenses excluding share-based compensation expenses; adjusted income from operations excluding share-based compensation expenses; adjusted operating margin excluding share-based compensation expenses; adjusted net income attributable to China Lodging Group, Limited excluding share-based compensation expenses; adjusted basic and diluted earnings per share and per ADS excluding share-based compensation expenses; EBITDA; adjusted EBITDA excluding share-based compensation expenses; and hotel income. 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. The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding Company performance by excluding share-based compensation expenses that may not be indicative of Company operating performance. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing Company performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to the Company's historical performance. The Company believes these non-GAAP financial measures are also useful to investors in allowing for greater transparency with respect to supplemental information used regularly by Company management in 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 the Company's 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.

The Company believes that EBITDA is a useful financial metric to assess the operating and financial performance before the impact of investing and financing transactions and income taxes, given the significant investments that the Company has made in leasehold improvements, depreciation and amortization expense that comprise a significant portion of the Company's cost structure. In addition, the Company believes that EBITDA is widely used by other companies in the lodging industry and may be used by investors as a measure of financial performance. The Company 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 Company also uses adjusted EBITDA, which is defined as EBITDA before share-based compensation expenses, to assess operating results of the hotels in operation. The Company believes that the exclusion of share-based compensation expenses helps facilitate year-on-year comparison of the results of operations as the share-based compensation expenses may not be indicative of Company operating performance. Therefore, the Company believes adjusted EBITDA more closely reflects the performance capability of hotels currently in operation. The presentation of EBITDA and adjusted EBITDA should not be construed as an indication that the Company's future results will be unaffected by other charges and gains considered to be outside the ordinary course of business.

The use of EBITDA and adjusted EBITDA has certain limitations. Depreciation and amortization expense for various long-term assets, income tax and interest expense have been and will be incurred and are not reflected in the presentation of EBITDA. 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 the results. The Company compensates for these limitations by providing the relevant disclosure of the depreciation and amortization, interest income, interest expense, income tax expense, share-based compensation expenses and other relevant items both in the reconciliations to the U.S. GAAP financial measures and in the consolidated financial statements, all of which should be considered when evaluating the performance of the Company.

The terms EBITDA and adjusted EBITDA are not defined under U.S. GAAP, and neither EBITDA nor adjusted EBITDA is a measure of net income, operating income, operating performance or liquidity presented in accordance with U.S. GAAP. When assessing the operating and financial performance, investors should not consider these data in isolation or as a substitute for the Company's net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP. In addition, the Company's EBITDA or adjusted EBITDA may not be comparable to EBITDA or adjusted EBITDA - or similarly titled measures utilized by other companies - since such other companies may not calculate EBITDA or adjusted EBITDA in the same manner as the Company does.

To monitor performance of hotels at different maturity level and of different form, the Company also tracks hotel income, which is the difference between net revenues and hotel operating costs.

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

About China Lodging Group, Limited

China Lodging Group, Limited is a leading and fast-growing multi-brand hotel group in China. The Company provides business and leisure travelers with high-quality, and conveniently-located hotel products under seven brands, namely, Joya Hotel, Manxin Hotels & Resorts, JI Hotel, Starway Hotel, HanTing Hotel, Elan Hotel and Hi Inn. For more information, please visit the Company's website: http://ir.huazhu.com .

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: The information in this release contains forward-looking statements which involve risks and uncertainties, including statements regarding the Company's capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements, which may be identified by terminology such as "may," "should," "will," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "potential," "forecast," "project," or "continue," the negative of such terms or other comparable terminology. Readers should not rely on forward-looking statements as predictions of future events or results. Any or all of the Company's forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions, risks and uncertainties and other factors which could cause actual events or results to be materially different from those expressed or implied in the forward-looking statements. In evaluating these statements, readers should consider various factors, including the anticipated growth strategies of the Company, the future results of operations and financial condition of the Company, the economic conditions of China, the regulatory environment in China, the Company's ability to attract customers and leverage its brand, trends and competition in the lodging industry, the expected growth of the lodging market in China and other factors and risks outlined in the Company's filings with the Securities and Exchange Commission, including its annual report on Form 20-F and other filings. These factors may cause the Company's actual results to differ materially from any forward-looking statement. In addition, new factors emerge from time to time and it is not possible for the Company to predict all factors that may cause actual results to differ materially from those contained in any forward-looking statements. Any projections in this release are based on limited information currently available to the Company, which is subject to change. This release also contains statements or projections that are based upon information available to the public, as well as other information from sources which the Company believes to be reliable, but it is not guaranteed by the Company to be accurate, nor does the Company purport it to be complete. The Company disclaims any obligation to publicly update any forward-looking statements to reflect events or circumstances after the date of this document, except as required by applicable law.

¹ The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on the exchange rate of US$1.00=RMB6.2046 on December 31, 2014 as set forth in H.10 statistical release of the U.S. Federal Reserve Board and available at http://www.federalreserve.gov/releases/h10/hist/dat00_ch.htm.

² Each ADS represents four of the Company's ordinary shares.

--Financial Tables and Operational Data Follow—

CONTACT: Ida Yu

         Sr. Manager of Investor Relations

         Tel:  +86 (21) 6195 9561

         Email: ir@huazhu.com

         http://ir.huazhu.com