Home Inns under scrutiny

China's hotel chains need to strengthen management amid rapid expansion, analysts told the Global Times Sunday, after Home Inns Group's 95 Beijing-based budget hotels were found by the local authority to have safety risks.

According to a report posted Friday on the website of Beijing Administration of Work Safety, 32 percent of the 95 inspected hotels had safety problems in electricity distribution rooms and firefighting equipment.

The administration asked Home Inns to fix the problems and the group pledged to follow the instructions, said the report.

Experts attributed the risks to a lack of proper management and supervision over the company's chain hotels after rapid expansion mainly through franchising.

Franchising is an economical and easy way for rapid expansion, said Zhao Huanyan, chief consultant at Shanghai-based SAO Hotel Solution.

"However, the more franchised hotels are opened, the harder the group will find to strictly supervise them, resulting in safety and sanitary problems," Zhao told the Global Times Sunday.

The company has opened 103 hotels in the second quarter of 2012, 71 of which are franchised ones, with 247 hotels in the pipeline by June 30, of which 172 are franchised hotels, according to its financial report for the second quarter of 2012 released on August 10.

By June 30, 7 Days Group Holding Ltd has 226 hotels in the pipeline, 175 of which are franchised and China Lodging Group Ltd has 377 hotels in the pipeline, 265 of which are franchised.

"The whole industry should strengthen management of the franchised hotels at the time of rapid expansion," Xiao Mingchao, deputy director of marketing research company Sinomonitor, told the Global Times Sunday. "The expansion should not be carried out at the cost of service quality."

"Besides rapid expansion through franchising, Home Inns should also enhance its brand value by entering into the mid- and high-range chain hotel market, which will increase its profits," Zhao said.

By July, Home Inns had four branches under its only mid-range brand, Yitel, lagging far behind China Lodging that has 157 mid-range chain hotels in operation, according to data released by market consulting firm iResearch in August.

Home Inns reported a net profit of 36.4 million yuan ($5.7 million) in the second quarter of 2012, a drop of 70 percent from the same period a year ago.

China Lodging, by comparison, reported a 68.5 percent year-on-year increase in its net profit to 75 million yuan in the same quarter.