Document and Entity Information
Document and Entity Information | 12 Months Ended |
Dec. 31, 2017shares | |
Document and Entity Information | |
Entity Registrant Name | China Lodging Group, Ltd |
Entity Central Index Key | 1,483,994 |
Document Type | 20-F |
Document Period End Date | Dec. 31, 2017 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Entity Well-known Seasoned Issuer | Yes |
Entity Voluntary Filers | No |
Entity Current Reporting Status | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 290,943,470 |
Document Fiscal Year Focus | 2,017 |
Document Fiscal Period Focus | FY |
Trading Symbol | htht |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS ¥ in Thousands, $ in Thousands | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) |
Current assets: | |||
Cash and cash equivalents | $ 534,054 | ¥ 3,474,719 | ¥ 3,235,007 |
Restricted cash | 73,982 | 481,348 | 500 |
Short-term investments measured at fair value | 19,967 | 129,911 | |
Accounts receivable, net of allowance of RMB11,424 and RMB10,277 as of December 31, 2016 and 2017, respectively | 25,039 | 162,910 | 141,649 |
Loan receivables | 58,494 | 380,580 | 22,410 |
Amounts due from related parties | 18,219 | 118,537 | 98,453 |
Prepaid rent | 101,436 | 659,973 | 446,127 |
Inventories | 3,690 | 24,006 | 21,606 |
Other current assets | 50,588 | 329,140 | 208,929 |
Total current assets | 885,469 | 5,761,124 | 4,174,681 |
Property and equipment, net | 695,154 | 4,522,878 | 3,710,468 |
Intangible assets, net | 252,674 | 1,643,972 | 342,694 |
Land use rights | 21,534 | 140,108 | 145,521 |
Long-term investments, including marketable securities measured at fair value of RMB204,945 and RMB907,716 as of December 31, 2016 and 2017, respectively | 363,028 | 2,361,969 | 1,064,321 |
Goodwill | 348,087 | 2,264,758 | 171,504 |
Loan receivables | 6,506 | 42,330 | 7,269 |
Other assets | 56,047 | 364,660 | 200,492 |
Deferred tax assets | 50,050 | 325,643 | 176,414 |
Total assets | 2,678,549 | 17,427,442 | 9,993,364 |
Current liabilities: | |||
Short-term debt | 20,106 | 130,815 | 298,291 |
Accounts payable | 117,819 | 766,565 | 584,731 |
Amounts due to related parties | 5,670 | 36,890 | 11,058 |
Salary and welfare payables | 65,640 | 427,070 | 274,259 |
Deferred revenue | 127,879 | 832,021 | 749,793 |
Accrued expenses and other current liabilities | 194,412 | 1,264,902 | 895,837 |
Income tax payable | 33,542 | 218,238 | 152,112 |
Total current liabilities | 565,068 | 3,676,501 | 2,966,081 |
Long-term debt | 756,463 | 4,921,774 | |
Deferred rent | 212,177 | 1,380,484 | 1,023,843 |
Deferred revenue | 26,394 | 171,735 | 166,963 |
Other long-term liabilities | 58,494 | 380,578 | 323,991 |
Deferred tax liabilities | 64,874 | 422,090 | 96,329 |
Total liabilities | 1,683,470 | 10,953,162 | 4,577,207 |
Commitments and contingencies (Note 22) | |||
Equity: | |||
Ordinary shares (US$0.0001 par value per share; 8,000,000,000 shares authorized; 281,379,130 and 294,040,234 shares issued as of December 31, 2016 and 2017, and 278,282,366 and 280,518,358 shares outstanding as of December 31, 2016 and 2017, respectively) | 33 | 212 | 204 |
Treasury shares (3,096,764 and 3,096,764 shares as of December 31 2016 and 2017, respectively) | (16,496) | (107,331) | (107,331) |
Additional paid-in capital | 557,019 | 3,624,135 | 3,699,056 |
Retained earnings | 423,238 | 2,753,715 | 1,812,174 |
Accumulated other comprehensive (loss) income | 25,816 | 167,965 | (4,503) |
Total China Lodging Group, Limited shareholders' equity | 989,610 | 6,438,696 | 5,399,600 |
Noncontrolling interest | 5,469 | 35,584 | 16,557 |
Total equity | 995,079 | 6,474,280 | 5,416,157 |
Total liabilities and equity | $ 2,678,549 | ¥ 17,427,442 | ¥ 9,993,364 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) ¥ in Thousands | Dec. 31, 2017CNY (¥)shares | Dec. 31, 2016CNY (¥)shares |
CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, allowance | ¥ | ¥ 10,277 | ¥ 11,424 |
Long-term investments, marketable securities measured at fair value | ¥ | ¥ 907,716 | ¥ 204,945 |
Ordinary shares, shares authorized | 8,000,000,000 | 8,000,000,000 |
Ordinary shares, shares issued | 294,040,234 | 281,379,130 |
Ordinary shares, shares outstanding | 280,518,358 | 278,282,366 |
Treasury stock, shares | 3,096,764 | 3,096,764 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ¥ in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2017USD ($)$ / sharesshares | Dec. 31, 2017CNY (¥)¥ / sharesshares | Dec. 31, 2016CNY (¥)¥ / sharesshares | Dec. 31, 2015CNY (¥)¥ / sharesshares | |
Revenues: | ||||
Leased and owned hotels | $ 974,944 | ¥ 6,343,279 | ¥ 5,212,405 | ¥ 4,986,872 |
Manachised and franchised hotels | 274,605 | 1,786,660 | 1,411,156 | 1,123,979 |
Others | 6,187 | 40,257 | 31,219 | |
Total revenues | 1,255,736 | 8,170,196 | 6,654,780 | 6,110,851 |
Less: Business tax and related taxes | ¥ | 116,149 | 336,227 | ||
Net revenues | 1,255,736 | 8,170,196 | 6,538,631 | 5,774,624 |
Operating costs and expenses: | ||||
Hotel operating costs | 872,101 | 5,674,151 | 4,932,173 | 4,512,147 |
Other operating costs | 2,663 | 17,324 | 7,606 | |
Selling and marketing expenses | 33,039 | 214,959 | 146,525 | 179,568 |
General and administrative expenses | 106,200 | 690,970 | 492,141 | 403,008 |
Pre-opening expenses | 31,731 | 206,454 | 71,847 | 110,011 |
Total operating costs and expenses | 1,045,734 | 6,803,858 | 5,650,292 | 5,204,734 |
Other operating income (expenses), net | 10,940 | 71,175 | (17,440) | 31,264 |
Income from operations | 220,942 | 1,437,513 | 870,899 | 601,154 |
Interest income | 17,313 | 112,645 | 67,366 | 26,712 |
Interest expense | (13,421) | (87,320) | (11,056) | (3,854) |
Other income (expense), net | 25,157 | 163,678 | 133,755 | 6,979 |
Foreign exchange gain (loss) | (2,786) | (18,128) | 16,481 | 7,814 |
Income before income taxes | 247,205 | 1,608,388 | 1,077,445 | 638,805 |
Income tax expense | (55,325) | (359,958) | (287,120) | (196,529) |
Income (loss) from equity method investments | (1,811) | (11,783) | 6,157 | (2,896) |
Net income | 190,069 | 1,236,647 | 796,482 | 439,380 |
Less: net income (loss) attributable to noncontrolling interest | (86) | (555) | (8,133) | 2,780 |
Net income attributable to China Lodging Group, Limited | 190,155 | 1,237,202 | 804,615 | 436,600 |
Other comprehensive income | ||||
Unrealized securities holding gains, net of tax of 7,151, (1,810) and (7,965) for 2015, 2016 and 2017 | 133 | 868 | 16,449 | 68,069 |
Reclassification of realized gains to net income, net of tax | (812) | (5,282) | (67,921) | |
Foreign currency translation adjustments, net of tax of nil for 2015, 2016 and 2017 | 27,186 | 176,882 | (12,627) | 3,535 |
Comprehensive income | 216,576 | 1,409,115 | 732,383 | 510,984 |
Comprehensive income (loss) attributable to the noncontrolling interest | (86) | (555) | (8,133) | 2,780 |
Comprehensive income attributable to China Lodging Group, Limited | $ 216,662 | ¥ 1,409,670 | ¥ 740,516 | ¥ 508,204 |
Earnings per share: | ||||
Basic (in RMB and dollars per share) | (per share) | $ 0.68 | ¥ 4.43 | ¥ 2.92 | ¥ 1.74 |
Diluted (in RMB and dollars per share) | (per share) | $ 0.65 | ¥ 4.24 | ¥ 2.84 | ¥ 1.70 |
Weighted average number of shares used in computation: | ||||
Basic (in shares) | 279,272,140 | 279,272,140 | 275,139,070 | 250,533,204 |
Diluted (in shares) | 293,073,978 | 293,073,978 | 282,889,494 | 256,104,167 |
CONSOLIDATED STATEMENTS OF COM5
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - CNY (¥) ¥ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||
Unrealized securities holding gains (loss), tax | ¥ (7,965) | ¥ (1,810) | ¥ 7,151 |
Foreign currency translation adjustments, tax | ¥ 0 | ¥ 0 | ¥ 0 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY ¥ in Thousands, $ in Thousands | Ordinary SharesCNY (¥)shares | Treasury SharesCNY (¥)shares | Additional Paid-in CapitalCNY (¥) | Retained EarningsCNY (¥) | Accumulated Other Comprehensive (Loss) IncomeCNY (¥) | Noncontrolling InterestCNY (¥) | USD ($)shares | CNY (¥)shares |
Balance at Dec. 31, 2014 | ¥ 184 | ¥ 2,381,568 | ¥ 847,220 | ¥ (12,008) | ¥ 1,749 | ¥ 3,218,713 | ||
Balance issued (in shares) at Dec. 31, 2014 | shares | 250,747,255 | |||||||
Balance outstanding (in shares) at Dec. 31, 2014 | shares | 250,747,255 | 250,747,255 | ||||||
Increase (Decrease) in Stockholders' Equity | ||||||||
Issuance of ordinary shares upon exercise of options and vesting of restricted stocks | ¥ 2 | 23,158 | ¥ 23,160 | |||||
Issuance of ordinary shares upon exercise of options and vesting of restricted stocks (in shares) | shares | 3,231,068 | 3,231,068 | 3,231,068 | |||||
Share-based compensation | 52,535 | ¥ 52,535 | ||||||
Excess tax benefit from share-based compensation | 12,838 | 12,838 | ||||||
Noncontrolling interest recognized in connection with acquisitions | 8,264 | 8,264 | ||||||
Net income | 436,600 | 2,780 | 439,380 | |||||
Cash dividends declared/paid | (276,261) | (276,261) | ||||||
Unrealized securities holding gains, net of tax | 68,069 | 68,069 | ||||||
Dividends paid to noncontrolling interest holders | (4,604) | (4,604) | ||||||
Capital contribution from noncontrolling interest holders | 2,450 | 2,450 | ||||||
Repurchase of shares | ¥ (107,331) | ¥ (107,331) | ||||||
Repurchase of shares (in shares) | shares | 3,096,764 | (3,096,764) | (3,096,764) | |||||
Foreign currency translation adjustments | 3,535 | ¥ 3,535 | ||||||
Balance at Dec. 31, 2015 | ¥ 186 | ¥ (107,331) | 2,470,099 | 1,007,559 | 59,596 | 10,639 | ¥ 3,440,748 | |
Balance issued (in shares) at Dec. 31, 2015 | shares | 253,978,323 | |||||||
Balance outstanding (in shares) at Dec. 31, 2015 | shares | 250,881,559 | 250,881,559 | ||||||
Treasury shares, balance (in shares) at Dec. 31, 2015 | shares | 3,096,764 | |||||||
Increase (Decrease) in Stockholders' Equity | ||||||||
Issuance of ordinary shares upon exercise of options and vesting of restricted stocks | ¥ 2 | 10,581 | ¥ 10,583 | |||||
Issuance of ordinary shares upon exercise of options and vesting of restricted stocks (in shares) | shares | 2,505,264 | 2,505,264 | 2,505,264 | |||||
Issuance of ordinary shares for acquisition | ¥ 16 | 1,143,505 | ¥ 1,143,521 | |||||
Issuance of ordinary shares for acquisition (in shares) | shares | 24,895,543 | 24,895,543 | 24,895,543 | |||||
Share-based compensation | 55,436 | ¥ 55,436 | ||||||
Excess tax benefit from share-based compensation | 18,645 | 18,645 | ||||||
Net income | 804,615 | (8,133) | 796,482 | |||||
Unrealized securities holding gains, net of tax | 16,449 | 16,449 | ||||||
Reclassification of realized gains to net income, net of tax | (67,921) | (67,921) | ||||||
Dividends paid to noncontrolling interest holders | (3,677) | (3,677) | ||||||
Capital contribution from noncontrolling interest holders | 790 | 44,814 | 45,604 | |||||
Disposal of noncontrolling interest for deconsolidation | (27,086) | (27,086) | ||||||
Foreign currency translation adjustments | (12,627) | (12,627) | ||||||
Balance at Dec. 31, 2016 | ¥ 204 | ¥ (107,331) | 3,699,056 | 1,812,174 | (4,503) | 16,557 | ¥ 5,416,157 | |
Balance issued (in shares) at Dec. 31, 2016 | shares | 281,379,130 | 281,379,130 | 281,379,130 | |||||
Balance outstanding (in shares) at Dec. 31, 2016 | shares | 278,282,366 | 278,282,366 | ||||||
Treasury shares, balance (in shares) at Dec. 31, 2016 | shares | 3,096,764 | (3,096,764) | (3,096,764) | |||||
Increase (Decrease) in Stockholders' Equity | ||||||||
Issuance of ordinary shares upon exercise of options and vesting of restricted stocks | ¥ 1 | 9,301 | ¥ 9,302 | |||||
Issuance of ordinary shares upon exercise of options and vesting of restricted stocks (in shares) | shares | 2,235,992 | 2,235,992 | 2,235,992 | |||||
Share-based compensation | 66,367 | ¥ 66,367 | ||||||
Issuance of ordinary shares under ADS lending arrangement | ¥ 7 | 7 | ||||||
Issuance of ordinary shares under ADS lending arrangement (in shares) | shares | 10,425,112 | |||||||
Capped Call options in connection with issuance of convertible senior notes | (177,476) | (177,476) | ||||||
ADS lending arrangement in connection with issuance of convertible senior notes | 26,499 | 26,499 | ||||||
Noncontrolling interest recognized in connection with acquisitions | 4,206 | 4,206 | ||||||
Net income | 1,237,202 | (555) | $ 190,069 | 1,236,647 | ||||
Cash dividends declared/paid | (295,661) | (295,661) | ||||||
Unrealized securities holding gains, net of tax | 868 | 133 | 868 | |||||
Reclassification of realized gains to net income, net of tax | (5,282) | (812) | (5,282) | |||||
Dividends paid to noncontrolling interest holders | (2,810) | (2,810) | ||||||
Capital contribution from noncontrolling interest holders | 25,575 | 25,575 | ||||||
Disposal of noncontrolling interest for deconsolidation | (3,488) | (3,488) | ||||||
Noncontrolling interest recognized from partial disposal | 237 | 237 | ||||||
Acquisition of noncontrolling interest | 388 | (4,138) | (3,750) | |||||
Foreign currency translation adjustments | 176,882 | 27,186 | 176,882 | |||||
Balance at Dec. 31, 2017 | ¥ 212 | ¥ (107,331) | ¥ 3,624,135 | ¥ 2,753,715 | ¥ 167,965 | ¥ 35,584 | $ 995,079 | ¥ 6,474,280 |
Balance issued (in shares) at Dec. 31, 2017 | shares | 294,040,234 | 294,040,234 | 294,040,234 | |||||
Balance outstanding (in shares) at Dec. 31, 2017 | shares | 280,518,358 | 280,518,358 | ||||||
Treasury shares, balance (in shares) at Dec. 31, 2017 | shares | 3,096,764 | (3,096,764) | (3,096,764) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS ¥ in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015CNY (¥) | |
Operating activities: | ||||
Net income | $ 190,069 | ¥ 1,236,647 | ¥ 796,482 | ¥ 439,380 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Share-based compensation | 10,200 | 66,367 | 55,436 | 52,535 |
Depreciation and amortization | 121,306 | 789,252 | 694,894 | 661,404 |
Amortization of issuance cost of convertible senior notes | 399 | 2,598 | ||
Deferred taxes | (11,717) | (76,237) | 33,446 | (50,149) |
Bad debt expenses | 376 | 2,446 | 1,082 | 1,997 |
Deferred rent | 32,134 | 209,074 | 103,322 | 130,301 |
(Gain) loss from disposal of property and equipment | 1,980 | 12,884 | 9,333 | (5,519) |
Impairment loss | 26,008 | 169,213 | 153,741 | 95,608 |
Loss (Income) from equity method investments | 1,811 | 11,783 | (6,157) | 2,896 |
Investment (income) loss | (24,588) | (159,974) | (116,763) | (2,767) |
Changes in operating assets and liabilities, net of effect of acquisitions: | ||||
Accounts receivable | 647 | 4,207 | (46,211) | (5,749) |
Prepaid rent | (28,995) | (188,653) | (25,380) | (44,430) |
Inventories | 425 | 2,766 | 3,923 | 5,952 |
Amounts due from related parties | (4,788) | (31,151) | (9,314) | |
Other current assets | (11,730) | (76,320) | (40,813) | (15,518) |
Other assets | (8,363) | (54,411) | (5,046) | 1,787 |
Accounts payable | 1,251 | 8,141 | 59,129 | 14,194 |
Amounts due to related parties | 475 | 3,093 | 7,489 | 1,250 |
Salary and welfare payables | 20,464 | 133,142 | 60,669 | 24,532 |
Deferred revenue | 617 | 4,016 | 19,529 | 216,805 |
Accrued expenses and other current liabilities | 44,293 | 288,185 | 202,351 | 121,502 |
Income tax payable | 6,868 | 44,688 | 64,087 | 56,019 |
Other long-term liabilities | 7,813 | 50,840 | 51,072 | 60,481 |
Net cash provided by (used in) operating activities | 376,955 | 2,452,596 | 2,066,301 | 1,762,511 |
Investing activities: | ||||
Purchases of property and equipment for hotels in operation and headquarters | (62,273) | (405,166) | (296,353) | (315,117) |
Purchases of property and equipment for hotels under development | (63,685) | (414,357) | (206,783) | (325,105) |
Purchases of intangibles | (1,207) | (7,854) | (13,557) | (8,818) |
Amount received as a result of government zoning | 399 | 2,593 | 2,099 | 6,721 |
Acquisitions, net of cash received | (575,686) | (3,745,588) | 131,501 | (19,153) |
Proceeds from disposal of subsidiary and branch, net of cash disposed | 2,103 | 13,684 | (20,668) | 5,000 |
Purchases of long-term investments | (204,034) | (1,327,508) | (293,125) | (105,707) |
Proceeds from maturity/sale of long-term investments | 19,700 | 128,174 | 14,842 | 14,410 |
Payment for shareholder loan to equity investees | (17,399) | (113,206) | (39,387) | (1,386) |
Collection of shareholder loan from equity investees | 18,421 | 119,855 | 9,285 | 1,522 |
Purchases of short-term investments | (14,724) | (95,802) | (434,811) | |
Proceeds from maturity/sale of short-term investments | 526,443 | |||
Payment for the origination of loan receivables | (68,532) | (445,892) | (36,420) | (53,000) |
Proceeds from collection of loan receivables | 8,554 | 55,662 | 45,885 | 45,587 |
(Increase) decrease in restricted cash | (73,905) | (480,849) | 360,000 | (360,500) |
Net cash (used in) provided by investing activities | (1,032,268) | (6,716,254) | 183,762 | (1,550,357) |
Financing activities: | ||||
Net proceeds from issuance of ordinary shares upon exercise of options | 1,394 | 9,073 | 12,206 | 22,619 |
Payment of share repurchase | (107,331) | |||
Proceeds from short-term bank borrowings | 20,978 | 136,488 | 281,719 | 589,376 |
Repayment of short-term bank borrowings | (45,291) | (294,677) | (332,555) | (283,516) |
Proceeds from long-term bank borrowings | 558,409 | 3,633,174 | ||
Repayment of long-term bank borrowings | (253,741) | (1,650,917) | ||
Funds advanced from noncontrolling interest holders | 12,845 | 83,573 | 11,453 | 5,432 |
Repayment of funds advanced from noncontrolling interest holders | (1,342) | (8,730) | (600) | (900) |
Acquisitions of noncontrolling interest | (576) | (3,750) | (4,083) | (4,083) |
Contribution from noncontrolling interest holders | 3,931 | 25,575 | 45,604 | 2,450 |
Dividends paid to noncontrolling interest holders | (432) | (2,810) | (3,677) | (4,604) |
Dividends paid | (47,084) | (306,343) | (276,261) | |
Proceeds from issuance of convertible senior notes, net of issuance cost and capped call option | 449,595 | 2,925,203 | ||
Debt financing costs paid | (1,501) | (9,763) | ||
Proceeds from ADS lending | 1 | 7 | ||
Net cash provided by (used in) financing activities | 697,186 | 4,536,103 | (266,194) | 219,443 |
Effect of exchange rate changes on cash and cash equivalents | (5,031) | (32,733) | 13,300 | (2,624) |
Net (decrease) increase in cash and cash equivalents | 36,842 | 239,712 | 1,997,169 | 428,973 |
Cash and cash equivalents at the beginning of the period | 497,212 | 3,235,007 | 1,237,838 | 808,865 |
Cash and cash equivalents at the end of the period | 534,054 | 3,474,719 | 3,235,007 | 1,237,838 |
Supplemental disclosure of cash flow information: | ||||
Interest paid, net of amounts capitalized | 28,687 | 186,648 | 9,415 | 3,854 |
Income taxes paid | 58,447 | 380,272 | 184,414 | 190,660 |
Supplemental schedule of non-cash investing and financing activities: | ||||
Purchases of property and equipment included in payables | 94,140 | 612,503 | 453,281 | 513,168 |
Consideration payable for business acquisition | 18,173 | 118,242 | 172,813 | 113,458 |
Purchase of intangible assets included in payables | 924 | 6,015 | 7,267 | 7,646 |
Reimbursement of government zoning included in receivables | 318 | 2,068 | 2,700 | 2,099 |
Proceeds from disposal of subsidiary and branch included in receivables | $ 46 | ¥ 300 | ||
Acquisition of noncontrolling interest included in payables | ¥ 4,083 | |||
Issuance of ordinary shares for acquisition of AccorHotels (Note 3) | ¥ 1,143,521 |
ORGANIZATION AND PRINCIPAL ACTI
ORGANIZATION AND PRINCIPAL ACTIVITIES | 12 Months Ended |
Dec. 31, 2017 | |
ORGANIZATION AND PRINCIPAL ACTIVITIES | |
ORGANIZATION AND PRINCIPAL ACTIVITIES | 1. ORGANIZATION AND PRINCIPAL ACTIVITIES China Lodging Group, Limited (the “Company”) was incorporated in the Cayman Islands under the laws of the Cayman Islands on January 4, 2007. The principal business activities of the Company and its subsidiaries (the “Group”) are to develop leased and owned, manachised and franchised hotels under the “Joya Hotel”, “Crystal Orange”, “Manxin Hotel”, “Orange Hotel Select”, “Orange Hotel”, “JI Hotel”, “Starway Hotel”, “HanTing Hotel”, “HanTing Premium”, “Elan Hotel” and “Hi Inn” brands in the People’s Republic of China (“PRC”). The Group also has the rights as master franchisee for “Mercure”, “Ibis” and “Ibis Styles”, and co-development rights for “Grand Mercure” and “Novotel”, in Pan-China region. Leased and owned hotels The Group leases hotel properties from property owners or purchases properties directly and is responsible for all aspects of hotel operations and management, including hiring, training and supervising the managers and employees required to operate the hotels. In addition, the Group is responsible for hotel development and customization to conform to the standards of the Group brands at the beginning of the lease or the construction, as well as repairs and maintenance, operating expenses and management of properties over the term of the lease or the land and building certificate. Under the lease arrangements, the Group typically receives rental holidays of two to six months and pays rent on a quarterly or biannual basis. Rent is typically subject to the fixed escalations of three to five percent every three to five years. The Group recognizes rental expense on a straight-line basis over the lease term. As of December 31, 2016 and 2017, the Group had 624 and 671 leased and owned hotels in operation, respectively. Manachised and franchised hotels Typically the Group enters into certain franchise and management arrangements with franchisees for which the Group is responsible for providing branding, quality assurance, training, reservation, hiring and appointing of the hotel general manager and various other support services relating to the hotel renovation and operation. Those hotels are classified as manachised hotels. Under typical franchise and management agreements, the franchisee is required to pay an initial franchise fee and ongoing franchise and management service fees, the majority of which are equal to a certain percentage of the revenues of the hotel. The franchisee is responsible for the costs of hotel development, renovation and the costs of its operations. The term of the franchise and management agreements are typically eight to ten years and are renewable upon mutual agreement between the Group and the franchisee. The Group also has some franchised hotels in which cases the Group does not provide a hotel general manager. As of December 31, 2016 and 2017, the Group had 2,471 and 2,874 manachised hotels in operation and 174 and 201 franchised hotels in operation, respectively. |
SUMMARY OF PRINCIPAL ACCOUNTING
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2017 | |
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES | |
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES | 2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES Basis of presentation The consolidated financial statements of the Group have been prepared in accordance with the accounting principles generally accepted in the United States of America (“US GAAP”). Basis of consolidation The consolidated financial statements include the financial statements of the Company, its majority-owned subsidiaries and consolidated variable interest entities (the “VIEs”). All intercompany transactions and balances are eliminated on consolidation. Variable Interest Entities The Group evaluates the need to consolidate certain variable interest entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. The Company is deemed as the primary beneficiary of and consolidates variable interest entities when the Company has the power to direct the activities that most significantly impact the economic success of the entities and effectively assumes the obligation to absorb losses and has the rights to receive benefits that are potentially significant to the entities. In November 2017, the Company through one of its subsidiaries entered into a series of contractual agreements with Tianjin Mengguang Information Technology Co., Ltd. (“TJ Mengguang”), a newly established limited liability company, and its shareholder, pursuant to which the Company has obtained control over the VIE of TJ Mengguang and is entitled to receive effectively all economic benefits generated from TJ Mengguang. Accordingly, the Company consolidates TJ Mengguang in the consolidated financial statements. The Company can have assets transferred freely out of TJ Mengguang without any restrictions. Therefore, the Group considers that there is no asset of a consolidated TJ Mengguang that can be used only to settle obligations of TJ Mengguang, except for registered capital and PRC statutory reserves of TJ Mengguang amounting to a total of RMB12,059 as of December 31, 2017. As the consolidated TJ Mengguang is incorporated as a limited liability company under the PRC Company Law, creditors of TJ Mengguang do not have recourse to the general credit of the Company for any of the liabilities of the consolidated TJ Mengguang. As of December 31, 2017, excluding inter-group balance, the assets of VIE of TJ Mengguang mainly consisted of cash and cash equivalent RMB21,353 and other current assets RMB3,095, and this VIE’s liabilities of RMB2,585 mainly consisted of deferred revenue RMB1,371 and accrued expenses and other current liabilities RMB1,032. For the year ended December 31, 2017, excluding inter-group transactions, net revenues and cost of revenues generated by this VIE of TJ Mengguang are RMB534 and RMB653, respectively. In addition, the Group, as general partner, has the power to direct the activities that most significantly impact the economic success of the fund of Ningbo Hongting Investment Management LLP (“NB Hongting”, the “Fund”) and effectively assumes the obligation to absorb losses and has the rights to receive benefits that are potentially significant to the Fund. As of December 31, 2017, the assets of NB Hongting mainly consisted of cash and cash equivalent RMB8,816 and long term investment RMB25,000, and the Fund’s liabilities is RMB461. For the year ended December 31, 2017, the net loss of RMB398 is due to some pre-operation expenses. The Group evaluates its business activities and arrangements with the entities that operate the manachised and franchised hotels and the funds that it serves as general partner or fund manager to identify potential variable interest entities. Generally, these entities that operate the manachised and franchised hotels qualify for the business scope exception, therefore consolidation is not appropriate under the variable interest entity consolidation guidance. For the disclosure of significant non-consolidated variable interest entities, see Note.9 Long-Term Investments. Use of estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Group bases its estimates on historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant accounting estimates reflected in the Group’s consolidated financial statements include the useful lives and impairment of property and equipment and intangible assets, valuation allowance of deferred tax assets, purchase price allocation, impairment of goodwill, fair value measurement and impairment of investments, share-based compensation, costs related to its customer loyalty program and contingent liabilities. Cash and cash equivalents Cash and cash equivalents consist of cash on hand and demand deposits, which are unrestricted as to withdrawal and use, and which have original maturities of three months or less when purchased. Restricted cash Restricted cash mainly represents deposits used as security against borrowings and deposits restricted due to contract disputes or lawsuit. Investments Investments represent trading securities, available-for-sale securities, cost-method investments, and equity-method investments. Investments in equity securities that have readily determinable fair values are classified as either trading securities or available-for-sale securities depending on the Group’s intention. Trading securities are equity securities of public companies that are bought and held principally for the purpose of selling them in the near term, and are reported at fair value, with unrealized gains and losses included in other income (loss) in the consolidated statements of comprehensive income. The fair value of the Company’s investments in trading securities is based on the quoted market price on the last business day of the fiscal year. Available-for-sale securities are investments in equity securities that the Group does not have intention to sell in near term, reported at fair value, with unrealized gains and losses recorded as a component of other comprehensive income or loss. Realized gains or losses are recognized in the consolidated statements of comprehensive income during the period in which the gains or losses are realized. If the Group determines that a decline in the fair value of the individual available-for-sale security is other-than-temporary, the cost basis of the security is written down to the fair value as a new cost basis and the amount of the write-down is accounted for as a realized loss. The new cost basis will not be changed for subsequent recoveries in fair value. The Group reviews several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to: (1) the nature of the investment; (2) the cause and duration of the impairment; (3) the extent to which fair value is less than cost; (4) financial conditions and near term prospects of the issuers; and (5) the Group’s ability to hold the security for a period of time sufficient to allow for any anticipated recovery of its amortized cost or fair value. The Group accounts for equity investment in a private entity of which the Group owns less than 20% of the voting securities and does not have the ability to exercise significant influence over operating and financial policies of the entity as cost-method investment. The Group’s cost-method investment is carried at historical cost in its consolidated financial statements and measured at fair value on a nonrecurring basis when there are events or changes in circumstances that may have a significant adverse effect. An impairment loss is recognized in the consolidated statements of comprehensive income equal to the excess of the investment’s cost over its fair value when the impairment is deemed other-than-temporary. The Group accounts for equity investment in entities with significant influence under equity-method accounting. Under this method, the Group’s pro rata share of income (loss) from investment is recognized in the consolidated statements of comprehensive income. Dividends received reduce the carrying amount of the investment. When the Group’s share of loss in an equity-method investee equals or exceeds its carrying value of the investment in that entity, the Group continues to report its share of equity method losses in the statements of comprehensive income to the extent and as an adjustment to the carrying amount of its other investments in the investee. Equity-method investment is reviewed for impairment by assessing if the decline in market value of the investment below the carrying value is other-than-temporary. In making this determination, factors are evaluated in determining whether a loss in value should be recognized. These include consideration of the intent and ability of the Group to hold investment and the ability of the investee to sustain an earnings capacity, justifying the carrying amount of the investment. Impairment losses are recognized in other expense when a decline in value is deemed to be other-than- temporary. The Group also considers it has significant influence over the funds that it serves as general partner or fund manager. For funds that the Group is not deemed as the primary beneficiary, the equity method of accounting is accordingly used for these investments by the Group. In addition, the investee funds do not meet the definition of an Investment Company and are not required to report their investment assets at fair value. The Group records its equity pick-up based on its percentage ownership of the investee funds’ operating result. As a result of the impairment analysis, the Group recorded an impairment of nil, RMB3,208 and nil in 2015, 2016 and 2017, respectively. Accounts receivable, net of allowance Accounts receivable mainly consist of franchise fee receivables, amounts due from corporate customers, travel agents, hotel guests and credit card receivables, which are recognized and carried at the original invoice amount less an allowance for doubtful accounts. The Group establishes an allowance for doubtful accounts primarily based on the age of the receivables and factors surrounding the credit risk of specific customers. Loan receivables Loan receivables are measured at amortized cost with interest accrued based on the contract rate. The Group classified loan receivables as long-term or short-term investments according to their contractual maturity or expected holding time. The Group evaluates the credit risk associated with the loans, and estimates the cash flow expected to be collected over the life of loans on an individual basis based on the Group’s past experiences, the borrowers’ financial position, their financial performance and their ability to continue to generate sufficient cash flows. A valuation allowance will be established for the loans unable to collect. No valuation allowance has been recorded in 2015, 2016 or 2017 based on the result of the assessment. Inventories Inventories mainly consist of small appliances, bedding and daily consumables. Small appliances and bedding for new hotels opened are stated at cost, less accumulated amortization, and are amortized over their estimated useful lives, generally one year, from the time they are put into use. Daily consumables and beddings replacement are expensed when used. Property and equipment, net Property and equipment, net are stated at cost less accumulated depreciation and amortization. The renovations, betterments and interest cost incurred during construction are capitalized. Depreciation and amortization of property and equipment is provided using the straight line method over their expected useful lives. The expected useful lives are as follows: Leasehold improvements Shorter of the lease term or their estimated useful lives Buildings 20-40 years Furniture, fixtures and equipment 3-10 years Motor vehicles 5 years Construction in progress represents leasehold improvements under construction or being installed and is stated at cost. Cost comprises original cost of property and equipment, installation, construction and other direct costs. Construction in progress is transferred to leasehold improvements and depreciation commences when the asset is ready for its intended use. Expenditures for repairs and maintenance are expensed as incurred. Gain or loss on disposal of property and equipment, if any, is recognized in the consolidated statements of comprehensive income as the difference between the net sales proceeds and the carrying amount of the underlying asset. Intangible assets, net and unfavorable lease Intangible assets consist primarily of brand name, master brand agreement, non-compete agreements, franchise agreements and favorable leases acquired in business combinations and purchased software. Intangible assets acquired through business combinations are recognized as assets separate from goodwill if they satisfy either the “contractual-legal” or “separability” criterion. Intangible assets, including brand name, master brand agreement, non-compete agreements, franchise agreements and favorable lease agreements acquired from business combination are recognized and measured at fair value upon acquisition. Non-compete agreements, franchise agreements and favorable lease agreements are amortized over the expected useful life, remaining franchise contract terms and remaining operating lease terms respectively. Unfavorable lease agreements from business combination transactions are recognized as other long-term liabilities and are amortized over the remaining operating lease terms. Purchased software is stated at cost less accumulated amortization. Brand name is considered to have an indefinite life. Master brand agreement, acquired in Accor acquisition (Note 3), granted the Group the exclusive franchise rights in respect of “Mercure”, “Ibis” and “Ibis Styles” in the PRC, Taiwan and Mongolia and the non-exclusive franchise rights in respect of “Grand Mercure” and “Novotel” in the PRC, Taiwan and Mongolia with initial term of 70 years, and can be renewed without substantial obstacles. As a result, the useful life is also determined to be indefinite. Brand name of Crystal Orange is considered to have an indefinite life which granted the Group to use for its products and provide to other market players. The Group evaluates the brand name and master brand agreement each reporting period to determine whether events and circumstances continue to support an indefinite useful life. Impairment is tested annually or more frequently if events or changes in circumstances indicate that it might be impaired. The Group measures the impairment by comparing the fair value of brand name and master brand agreement with its carrying amount. If the carrying amount of brand name and master brand agreement exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess. The Group measures the fair value of the brand name under the relief-from-royalty method, the master brand agreement under the multi-period excess earnings method. Management performs its annual brand name and master brand agreement impairment test on November 30. Land use rights Land use rights, which are all located in PRC, are recorded at cost and amortized on a straight-line basis over the remaining term of the land certificates, between 30 to 50 years. Impairment of long-lived assets The Group evaluates its long-lived assets and finite lived intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When these events occur, the Group measures impairment by comparing the carrying amount of the assets to future undiscounted net cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Group recognizes an impairment loss equal to the difference between the carrying amount and fair value of these assets. The Group performed a recoverability test of its long-lived assets associated with certain hotels due to the continued underperformance relative to the projected operating results, of which the carrying amount of the property and equipment exceed the future undiscounted net cash flows, and recognized an impairment loss of RMB93,163, RMB150,533 and RMB169,213 during the years ended December 31, 2015, 2016 and 2017, respectively. Fair value of the property and equipment was determined by the Group based on the income approach using the discounted cash flow associated with the underlying assets, which incorporated certain assumptions including projected hotels’ revenue, growth rates and projected operating costs based on current economic condition, expectation of management and projected trends of current operating results. Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the identifiable assets less liabilities acquired. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. The Group completes a two-step goodwill impairment test. The first step compares the fair values of each reporting unit to its carrying amount, including goodwill. A reporting unit is identified as a component for which discrete financial information is available and is regularly reviewed by management. All the acquired business has been migrated to the Group’s business, and the Group’s management regularly reviews operation data including industrial metrics of revenue per available room, occupancy rate, and number of hotels by scale/brand, rather than discrete financial information for the purpose of performance evaluation and resource allocation. The Company concluded that it had only one reporting unit, and therefore the goodwill impairment testing was performed on consolidation level. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only performed for purposes of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or liabilities. An impairment loss is recognized in general and administrative expenses for any excess in the carrying value of goodwill over the implied fair value of goodwill. Management performs its annual goodwill impairment test on November 30. The Group recognized goodwill impairment of RMB2,445, nil and nil for years ended December 31, 2015, 2016 and 2017, respectively. Accruals for customer loyalty program The Group invites its customers to participate in a customer loyalty program. The membership has an unlimited life. Members enjoy favorable treatment such as more convenient check-out procedures and late check-out, discounts on room rates and accumulate membership points for their paid stays or their purchasing of products and services provided in the hotels, which can be redeemed for offset the room charges, or used to buy products in Hua Zhu mall within two years after the points are earned. The estimated incremental costs to provide room night awards and other products are accrued and recorded as accruals for customer loyalty program as members accumulate points and are recognized as cost and expense in the accompanying consolidated statements of comprehensive income. As members redeem awards or their entitlements expire, the provision is reduced correspondingly. As of December 31, 2016 and 2017, the accruals for estimated liabilities under the customer loyalty program amounted to RMB121,066 and RMB156,092, respectively. Deferred revenue Deferred revenue generally consists of non-refundable advances received from customers for rental of rooms, cash received for membership fees and initial franchise fees received prior to the Group fulfilling its commitments to the franchisees. Revenue recognition Revenue from leased and owned hotels is derived from hotel operations, mainly including the rental of rooms, food and beverage sales and souvenir sales. Revenue is recognized when rooms are occupied and food and beverages and souvenirs are sold. Revenues from manachised and franchised hotels are derived from franchise agreements where the franchisees are primarily required to pay (i) an initial one-time franchise fee, and (ii) continuing franchise fees, which mainly consist of (a) on-going management and service fees mainly based on a certain percentage of the room revenues of the franchised hotels, and (b) system maintenance, support fees and central reservation system usage fees. The one-time franchise fee is recognized when the manachised and franchised hotel opens for business, the fee becomes non-refundable, and the Group has fulfilled all its commitments and obligations, including the assistance to the franchisees in property design, leasehold improvement construction project management, systems installation and personnel recruiting and training. The ongoing management and service fees are recognized when the underlying service revenue is recognized by the franchisees’ operations. The system maintenance, support fee and central reservation system usage fee is recognized over the period when services are provided. In addition, the Group accounts for hotel manager fees related to the manachised hotels under the franchise program as revenues. Pursuant to the franchise agreements, the Group charges the franchisees fixed hotel manager fees to cover the manachised hotel managers’ payroll, social welfare benefits and certain other out-of-pocket expenses that the Group incurs on behalf of the manachised hotels. The hotel manager fee is recognized as revenue monthly. During the years ended December 31, 2015, 2016 and 2017, the hotel manager fees that were recognized as revenue were RMB261,743, RMB321,346 and RMB371,625, respectively. Membership fees from the Group’s customer loyalty program are earned and recognized on a straight-line basis over the expected membership duration of the different membership levels. Such duration is estimated based on the Group’s and management’s experience and is adjusted on a periodic basis to reflect changes in membership retention. The membership duration is estimated to be two to five years which reflects the expected membership retention. Revenues recognized from the customer loyalty program were RMB130,644, RMB145,459 and RMB160,200 for the years ended December 31, 2015, 2016 and 2017, respectively. Other revenues are derived from activities other than the operation of hotel businesses, which mainly include revenues from Hua Zhu mall and the provision of IT products and services to hotels. Revenues from Hua Zhu mall are commissions charged from suppliers for goods sold through the platform and are recognized upon delivery of goods to end customers when its suppliers’ obligation is fulfilled and collectability is reasonably assured. Revenues from IT products are recognized when goods are delivered and revenues from IT services are recognized when services are rendered. Business tax and related taxes The Group is subject to business tax, education surtax and urban maintenance and construction tax, on the services provided in the PRC. Such taxes are primarily levied based on revenue at applicable rates and are recorded as a reduction of revenues. On 24 March 2016, the Ministry of Finance (MOF) and the State Administration of Taxation (SAT) jointly published Caishui [2016] No. 36 (Circular 36), which provides the detailed implementation guidance on the further rollout of the Value-Added Tax (VAT) reform to sectors such as construction, real estate, financial services and lifestyle services. Circular 36 takes effect from 1 May 2016. Lifestyle services have a broad coverage to include a variety of services which are to meet the daily needs of the residents, and accommodation and associated services are included in such category with the applicable tax rate of 6%. As such, starting from May 2016, the accommodation services of the Group are subject to 6% of VAT. Advertising and promotional expenses Advertising related expenses, including promotion expenses and production costs of marketing materials, are charged to the consolidated statements of comprehensive income as incurred, and amounted to RMB47,971, RMB64,666 and RMB90,578 for the years ended December 31, 2015, 2016 and 2017, respectively. Government grants Government grants represent cash received by the Group in the PRC from local governments as incentives for investing in certain local districts, and are typically granted based on the amount of investments the Group made as well as income generated by the Group in such districts. Such subsidies allow the Group full discretion to utilize the funds and are used by the Group for general corporate purposes. The local governments have final discretion as to whether the Group has met all criteria to be entitled to the subsidies. Normally, the Group does not receive written confirmation from local governments indicating the approval of the cash subsidy before cash is received, and therefore cash subsidies are recognized when received and when all the conditions for their receipts have been satisfied. Government grants recognized were RMB28,188, RMB83,498 and RMB55,389 for the years ended December 31, 2015, 2016 and 2017, respectively, which were recorded as other operating income. Leases A lease of which substantially all the benefits and risks incidental to ownership remain with the lessor is classified as an operating lease. All leases of the Group are currently classified as operating leases. When a lease contains rent holidays or requires fixed escalations of the minimum lease payments, the Group records the total rental expense on a straight-line basis over the initial lease term and the difference between the straight-line rental expense and cash payment under the lease is recorded as deferred rent. As of December 31, 2016 and 2017, deferred rent of RMB37,648 and RMB49,857 were recorded as other current liabilities and RMB1,023,843 and RMB1,380,484 were recorded as long-term liabilities, respectively. Capitalization of interest Interest cost incurred on funds used to construct leasehold improvements during the active construction period is capitalized. The interest capitalized is determined by applying the borrowing interest rate to the average amount of accumulated capital expenditures for the assets under construction during the period. The interest expense incurred for the years ended December 31, 2015, 2016 and 2017 were RMB5,383, RMB11,056 and RMB87,320, of which RMB1,529, nil and nil were capitalized as additions to assets under construction, respectively. Income taxes Current income taxes are provided for in accordance with the relevant statutory tax laws and regulations. Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. Net operating losses are carried forward and credited by applying enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of the Group, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. Foreign currency translation The reporting currency of the Group is the Renminbi (“RMB”). The functional currency of the Company is the United States dollar (“US dollar”). Monetary assets and liabilities denominated in currencies other than the functional currency are translated into functional currency at the rates of exchange ruling at the balance sheet date. Transactions in currencies other than the functional currency during the year are converted into the functional currency at the applicable rates of exchange prevailing on the day transactions occurred. Transaction gains and losses are recognized in the statements of comprehensive income. Assets and liabilities are translated into RMB at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange rates and revenues, expenses, gains and losses are translated using the average rate for the year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive loss in the consolidated statements of comprehensive income. The financial records of the Group’s subsidiaries are maintained in local currencies, which are the functional currencies. Comprehensive income Comprehensive income includes all changes in equity except for those resulting from investments by owners and distributions to owners and is comprised of net income, foreign-currency translation adjustments and unrealized securities holding gains (losses). Concentration of credit risk Financial instruments that potentially expose the Group to concentration of credit risk consist primarily of cash and cash equivalents, restricted cash, short-term and long-term investments, loan receivables, amount due from related parties and accounts receivable. All of the Group’s cash and cash equivalents and restricted cash are held with financial institutions that Group management believes to be high credit quality. In addition, the Group’s investment policy limits its exposure to concentrations of credit risk and the Group’s short-term and long-term investments consist of equity investments in listing and private companies. The Group’s loan receivables are lent to entities with high credit quality. The Group conducts credit evaluations on its group and agency customers and generally does not require collateral or other security from such customers. The Group periodically evaluates the creditworthiness of the existing customers in determining an allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers. Fair value The Group defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. The established fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs may be used to measure fair value include: Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable marke |
ACQUISITIONS
ACQUISITIONS | 12 Months Ended |
Dec. 31, 2017 | |
ACQUISITIONS | |
ACQUISITIONS | 3. ACQUISITIONS (i) In January 2016, the Group completed the transaction of strategic alliance with AccorHotels (“Accor”). Pursuant to the master purchase agreement, the Group acquired 100% equity interest of certain wholly-owned subsidiaries of Accor engaged in the business of owning, leasing, franchising, operating and managing hotels under Accor brands in the midscale and economy market in the PRC, Taiwan and Mongolia, as well as a non-controlling stake of 28% for Accor Luxury and Upscale hotel operating platform, held by AAPC Hotel Management Limited (“AAPC LUB”) in Greater China. The total consideration consists of consideration amounted to RMB1,143,521, which was measured at the market price of the 24,895,543 ordinary shares on the issuance date and cash consideration of RMB120,439. The net revenue and net income of the acquiree included in the consolidated statements of operations for the year ended December 31, 2016 were RMB152,595 and RMB64,047, respectively. The following table summarizes unaudited pro forma results of operation for the years ended December 31, 2015 and 2016 assuming that the acquisition occurred as of January 1, 2015. The pro forma results have been prepared for comparative purpose only based on management’s best estimate and do not purport to be indicative of the results of operations which actually would have resulted had the acquisition occurred as of January 1, 2015. Year Ended December 31, Year Ended December 31, Pro forma net revenue Pro forma net income The following is a summary of the fair values of the assets acquired and liabilities assumed: 2016 Amortization Period Current assets Property and equipment 5-30 years Favorable leases remaining lease terms Master brand agreement Land use rights remaining contracts terms Long-term investments Goodwill Other noncurrent assets Current liabilities ) Deferred tax liabilities ) Total (ii) On May 25, 2017, the Group completed the acquisition of 100% of the equity interest of Crystal Orange Hotel Holdings Limited (the “Crystal Orange”) engaged in the business of owning, leasing, franchising, operating and managing hotels under Crystal Orange brands in the midscale market in the PRC, with an aggregated consideration in cash of approximately RMB3.76 billion. The net revenue and net income of the acquiree included in the consolidated statements of operations for the year ended December 31, 2017 were RMB776,922, and RMB100,197, respectively. The following table summarizes unaudited pro forma results of operation for the years ended December 31, 2016 and 2017 assuming that the acquisition occurred as of January 1, 2016. The pro forma results have been prepared for comparative purpose only based on management’s best estimate and do not purport to be indicative of the results of operations which actually would have resulted had the acquisition occurred as of January 1, 2016. Years Ended December 31, 2016 2017 Pro forma net revenue Pro forma net income The Group incurred transaction cost of RMB46 million for the acquisition, which was expensed in 2017. In addition, Crystal Orange incurred certain costs directly attributable to the business combination including RMB256.3 million related to the consultation services agreements and option cancellation agreement. These expenses are non-recurring in nature, and were eliminated from the calculation of pro forma net income above. The following is a summary of the fair values of the assets acquired and liabilities assumed: 2017 Amortization Period Current assets Property and equipment 3-20 years Favorable leases remaining lease terms Franchise agreement remaining contract terms Brand Name indefinite life Goodwill Other noncurrent assets Current liabilities ) Noncurrent liabilities ) Deferred tax liabilities ) Noncontrolling interest ) Total Goodwill was recognized as a result of expected synergies from combining operations of the Group and acquired business and other intangible assets that don’t qualify for separate recognition. Goodwill is not amortized and is not deductible for tax purposes. In accordance with ASC 350, the Group assigned and assessed goodwill for impairment at the reporting unit level. All the acquired business has been migrated to the Group’s business. The Group concluded that it had only one reporting unit. Accordingly goodwill is allocated to one single reporting unit. (iii) During the years ended December 31, 2015, 2016 and 2017, the Group acquired one hotel chain and two individual hotels, two individual hotels, and two individual hotels for total cash consideration of RMB127,226, RMB3,000 and nil, respectively. The individual hotels were in the form of leased hotel and the hotel chain acquired contained 13 leased hotels and several manachised and franchised hotels. The business acquisitions were accounted for under purchase accounting. The following is a summary of the fair values of the assets acquired and liabilities assumed: 2015 2016 2017 Amortization Period Current assets Property and equipment 5-10 years Favorable leases remaining lease terms Deferred tax assets — — Franchise agreements — — remaining contracts terms Goodwill — — Other noncurrent assets — — Current liabilities ) ) ) Deferred tax liabilities ) ) ) Noncontrolling interest ) — — Total — |
SHORT-TERM INVESTMENTS MEASURED
SHORT-TERM INVESTMENTS MEASURED AT FAIR VALUE | 12 Months Ended |
Dec. 31, 2017 | |
SHORT-TERM INVESTMENTS MEASURED AT FAIR VALUE | |
SHORT-TERM INVESTMENTS MEASURED AT FAIR VALUE | 4. SHORT -TERM INVESTMENTS MEASURED AT FAIR VALUE The short-term investments measured at fair value as of December 31, 2016 and 2017 were as follows: As of December 31, 2016 2017 Hotel Group A — In 2015, the Group purchased 2,282,951 ADS of HOMEINNS HOTEL GROUP (“HMIN”), a hotel chain listed in NASDAQ in the USA, from open market for consideration of RMB434,811. As of December 31, 2015, the Group holds approximately 5% of HMIN’s total outstanding shares. Given the level of investment, the Group accounts for its investment in HMIN as “available-for-sale” and measured the fair value at every period end. The unrealized holding gains and losses for available-for-sale securities are reported in other comprehensive income until realized. In 2016, the Group sold all the 2,282,951 ADS and reclassified the accumulated unrealized gain of RMB67,921 from other comprehensive income to other income accordingly. In 2017, the Group purchased 8,756,000 shares of Hotel Group A, a public listed hotel group, from open market for consideration of RMB95,802. As of December 31, 2017, the Group holds less than 1% of Hotel Group A’s total outstanding shares. Considering the purpose of the investment, the Group accounts for its investment in Hotel Group A as “trading securities” and measured the fair value at every period end. The changes of fair value for trading securities are reported in other income. As of December 31, 2017, the Group recorded the investment in Hotel Group A at the fair value of RMB129,911, with the fair value increase of RMB35,540 recorded to other income. |
LOAN RECEIVABLES
LOAN RECEIVABLES | 12 Months Ended |
Dec. 31, 2017 | |
LOAN RECEIVABLES | |
LOAN RECEIVABLES | 5. LOAN RECEIVABLES The loan receivables, current and non-current portion, as of December 31, 2016 and 2017 were as follows: As of December 31, 2016 2017 Loan receivables, current portion Loan receivables from franchisees Loan receivables from other entities Total Loan receivables, non-current portion Loan receivables from franchisees Loan receivables from other entities — Total The Group entered into entrusted loan agreements with certain franchisees with the typical terms to be two to three years and annual interest rates ranging from 8.0% to 8.5%. The Group recognized RMB2,110, RMB2,383 and RMB2,608 interest income for these entrusted loans in 2015, 2016 and 2017, respectively. Loan receivables from other entities represent the loans the Group lent to other un-related third-parties with the annual interest rates ranging from 6% to 12%. The Group recognized RMB2,273, RMB1,186 and RMB8,471 interest income for the loans in 2015, 2016 and 2017, respectively. |
PROPERTY AND EQUIPMENT, NET
PROPERTY AND EQUIPMENT, NET | 12 Months Ended |
Dec. 31, 2017 | |
PROPERTY AND EQUIPMENT, NET | |
PROPERTY AND EQUIPMENT, NET | 6. PROPERTY AND EQUIPMENT, NET Property and equipment, net consist of the following: As of December 31, 2016 2017 Cost: Buildings Leasehold improvements Furniture, fixtures and equipment Motor vehicles Less: Accumulated depreciation ) ) Construction in progress Property and equipment, net Depreciation expense was RMB648,277, RMB673,784 and RMB752,960 for the years ended December 31, 2015, 2016 and 2017, respectively. The Group occasionally demolishes certain leased hotels due to local government zoning requirements, which typically results in receiving compensation from the government. The Group demolished one, two and three leased hotels due to local government zoning requirements in 2015, 2016 and 2017, respectively. As a result, the Group wrote off property and equipment of RMB2,301, RMB9,905 and RMB2,829 associated with respective hotels and recognized a gain of RMB5,519 and losses of RMB7,205 and RMB868 as other operating income (expenses) in 2015, 2016 and 2017, respectively. As of December 31, 2017, the Group has been formally notified by local government authorities that seven additional leased hotels of the Group will be demolished due to local government zoning requirements. The aggregate carrying amount of property and equipment at the associated hotels was RMB21,792 as of December 31, 2017. Neither of the associated hotels has recorded intangible assets or goodwill. No impairment was recognized because the expected cash flow to be received as a result of the demolition will exceed the carrying value of such assets. The Group estimated amounts to be received based on the relevant PRC laws and regulations, terms of the lease agreements, and the prevailing market practice. |
INTANGIBLE ASSETS, NET AND UNFA
INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE | 12 Months Ended |
Dec. 31, 2017 | |
INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE | |
INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE | 7. INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE Intangible assets, net consist of the following: As of December 31, 2016 2017 Intangible assets with indefinite life: Brand name (Note 3) Master brand agreement (Note 3) Intangible assets with definite life: Franchise agreements Non-compete agreement Favorable lease agreements Purchased software Total Less: Accumulated amortization ) ) Total Unfavorable lease As of December 31, 2016 2017 Unfavorable lease agreements Less: Accumulated amortization ) ) Unfavorable lease agreements, net The values of favorable lease agreements were determined based on the estimated present value of the amount the Group has avoided paying as a result of entering into the lease agreements. Unfavorable lease agreements were determined based on the estimated present value of the acquired lease that exceeded market prices and are recognized as other long-term liabilities. The value of favorable and unfavorable lease agreements is amortized using the straight-line method over the remaining lease term. Amortization expense of intangible assets for the years ended December 31, 2015, 2016 and 2017 amounted to RMB13,415, RMB17,173 and RMB31,009, respectively. The annual estimated amortization expense for the above intangible assets and unfavorable lease excluding brand name and master brand agreement for the following years is as follows: Amortization for Amortization for Net Amortization 2018 ) 2019 ) 2020 ) 2021 ) 2022 ) Thereafter ) Total ) |
LAND USE RIGHTS
LAND USE RIGHTS | 12 Months Ended |
Dec. 31, 2017 | |
LAND USE RIGHTS | |
LAND USE RIGHTS | 8. LAND USE RIGHTS Land use rights consist of the following: As of December 31, 2016 2017 Land use rights (Note 3) Less: Accumulated amortization ) ) Total Amortization expense of land use rights for the years ended December 31, 2016 and 2017 amounted to RMB4,147 and RMB5,413, respectively. |
LONG-TERM INVESTMENTS
LONG-TERM INVESTMENTS | 12 Months Ended |
Dec. 31, 2017 | |
LONG-TERM INVESTMENTS | |
LONG-TERM INVESTMENTS | 9. LONG-TERM INVESTMENTS The long-term investments as of December 31, 2016 and 2017 were as follows: As of December 31, 2016 2017 Ownership% Amount Ownership% Amount Available-for-sale securities: Quanjude Tang Palace — Banyan Tree — Hotel Group B — Cjia CREATER — Cost-method investments: UBOX/BJ UBOX % % BJ GOOAGOO/GOOAGOO % % Founder Service % % Qingpu % % Mobike — — Less than 1 % Blossom Hill — — % OYO — — % Other investments Equity-method investments: Sheen Star % % Distrii % % AAPC LUB % % China Young % % CREATER % % Hitone — — % Hanmo — — % Other investments Total Available-for-sale securities: In June 2014, the Group purchased 7,241,131 ordinary shares of China Quanjude (Group) Co., Ltd. (“Quanjude”), a top restaurant brand listed in Shenzhen Stock Exchange in China, through a private placement. The purchase price was set at RMB13.81 per ordinary share and the total purchase cost was RMB100,000. Upon the closing of the transaction described above, the Group holds approximately 2% of Quanjude’s total outstanding shares. In December 2017, the Group purchased 2,309,981 ordinary shares of Hotel Group B, a public listed hotel group, from open market for consideration of RMB760,215. As of December 31, 2017, the Group holds less than 1% of Hotel Group B’s total outstanding shares. Given the level of investments, the Group accounts for its investments in Quanjude, Tang Palace, Banyan Tree, and Hotel Group B as “available-for-sale” and measured the fair value at every period end. The unrealized holding gains and losses for available-for-sale securities are reported in other comprehensive income until realized. For the years ended December 31, 2016 and 2017, the Group recorded RMB4,856 decrease and RMB868 increase in fair value of these available-for-sale securities, net of tax, in other comprehensive income, respectively. In May 2016, the Group sold its subsidiary, Chengjia Hotel Management Co., Ltd. to Chengjia (Shanghai) Apartment Management Co., Limited (“Cjia”), the Group’s equity investee. As a result, the Group recognized a gain of RMB49,630 in other income. As of December 31, 2016, the Group had approximately 23% equity interest of Cjia and a sixty-month convertible note with original value of RMB51,200. In 2017, the Group invested in Cjia for another two convertible notes totaled RMB200,300. With the injection from an unrelated investor to Cjia, the Group recognized gain on deemed disposal of RMB40,148 in other income in 2017. As of December 31, 2017, the Group had approximately 17% equity interest and three convertible notes with original value totaled RMB251,500 of Cjia. The Group accounted for the equity investment in Cjia under equity-method as the Group has the ability to exert significant influence. The convertible notes are convertible upon satisfaction of certain conditions or at the option of the Group to ordinary shares at any time, while other investors can also require the Group to convert within the last twelve months of the notes. The convertible note is recorded as an available-for-sale investment. Meanwhile, the Group recognized investment loss of RMB24,615 and RMB32,711 in income (loss) from equity method investments in 2016 and 2017, respectively. Loss from equity method investments reduced the cost of equity-method investment to zero and further adjusted the carrying amount of convertible notes balance to RMB42,140 and RMB246,070 for the years ended December 31, 2016 and 2017, respectively. The remaining carrying amount of the convertible notes approximated its fair value as of December 31, 2016 and 2017. In September 2017, the Group invested in Shanghai CREATER Industrial Co., Ltd. (“CREATER”), a staged office space company in China, for two-year convertible notes amounted RMB100,000 with the interest rate of 10% per year. The convertible notes with equity pledge are convertible upon satisfaction of certain conditions or at the option of the Group to ordinary shares in the last month before the expiration. The convertible notes are recorded as available-for-sale investments. Cost-method investments: In November 2014, the Group purchased approximately 8% equity interest in Beijing GOOAGOO Technology Service Co., Ltd. (“BJ GOOAGOO”), a high-tech service provider for Offline-To-Online data processing and platform operation, for the consideration of RMB10,289. BJ GOOAGOO started restructuring process in 2015. In September 2015, the Group purchased 45,000,000 series A preferred share for the consideration of RMB45,000 and RMB4,650 convertible notes in Gooagoo Group Holdings Limited (“GOOAGOO”). Each series A preferred share and convertible note shall be convertible at the option of the holder at any time to ordinary shares. As a result of restructuring of GOOAGOO group in 2016, the Group’s investments in BJ GOOAGOO had been all converted to equity interest of GOOAGOO. As of December 31, 2016 and 2017, the Group had approximately 19% equity interest of GOOAGOO. The Group accounted for the investment under cost method since the Group does not have the ability to exert significant influence over those companies. In January 2017, the Group purchased 1,316,205 preferred shares for consideration of US$5.0 million and invested in convertible notes with principal amount of US$5.0 million and interest rate of 8% of Mobike Ltd. (“Mobike”), a Chinese bike-sharing company. In May 2017, the Group converted the entire outstanding principal amount and accrued interest of the convertible notes into 648,559 preferred shares. In November 2017, the Group disposed 55,015 shares, and recognized a loss of RMB53 in other income, net. As of December 31, 2017, the Group had less than 1% equity interest of Mobike. The investment in preferred shares of Mobike is not considered to be in-substance common stock. As a result, the Group accounted the investment under cost method. In September 2017, the Group purchased approximately 1% equity interest of Oravel Stays Private limited (“OYO”), an India leading hospitality company, for the consideration of RMB66,467. The Group accounted the investment under cost method since the Group does not have the ability to exert significant influence over OYO. Other investments included several insignificant cost method investments in certain privately-held companies. Equity-method investments: In January 2016, the Group set up Shanghai Distrii Technology Development Co., Ltd. (“Distrii”) together with another founder. Distrii is an office rental service company in which the Group contributed RMB35,000 and owned equity interest of 39%. In 2017, the Group sold 6% of Distrii’s equity interest for consideration of RMB18,000 and aggregately recognized gain of RMB42,097 along with the deemed disposal as a result of the capital injection from unrelated investors. As of December 31, 2017, the Group had approximately 18% equity interest of Distrii. The Group accounted for the investment in Distrii under equity-method as the Group has the ability to exert significant influence through the Group’s board member, and recognized investment loss of RMB6,438 and RMB7,503 in income (loss) from equity method investments in 2016 and 2017, respectively. In January 2016, the Group acquired approximately 28% equity interest in AAPC LUB (Note 3). The Group accounted for the investment in AAPC LUB under equity-method as the Group has the ability to exert significant influence. The Group recognized investment income of RMB28,496 and RMB31,459 in income (loss) from equity method investments in 2016 and 2017, respectively. In 2016, the Group accumulatively purchased 982 ordinary shares and 5,610 Series B Preferred Shares of China Young Professionals Apartment Management Limited (“China Young”), which in total accounts for approximately 37% of its equity interest, for consideration of RMB44,904. Each series B preferred shares shall be convertible at the option of the holder at any time to ordinary shares. The Group accounted for the investment in China Young under equity-method as the Group has the ability to exert significant influence. The Group recognized investment loss of RMB1,851 and RMB2,243 in income (loss) from equity method investments in 2016 and 2017, respectively. In December 2016, the Group acquired approximately 20% equity interest in CREATER for consideration of RMB100,000. The Group accounted for the investment under equity-method because the Group has the ability to exert significant influence over CREATER. The Group recognized investment gain of nil and RMB2,709 in income (loss) from equity method investments in 2016 and 2017, respectively. In September 2017, the Group invested approximately 20% and 60% equity interest in Shenzhen Hitone Investment Fund (“Hitone”) and Shenzhen Hanmo Investment Fund (“Hanmo”), limited partnership enterprises, for consideration of RMB30,300 and RMB26,000, respectively. Hitone and Hanmo were VIEs. However, the Group determined that they were not the primary beneficiary of this VIE since the Group did not have the power to direct the activities of these VIEs that most significantly impacted its economic performance. The Group accounted for the investment under equity-method because the Group has the ability to exert significant influence over Hitone and Hanmo. The Group recognized investment gain of nil in income (loss) from equity method investments in 2017. The maximum potential financial statement loss the Group could incur if the investment funds were to default on all of their obligations is the loss of value of the interests in such investments of RMB56,300 that the Group holds as of December 31, 2017. Other investments included several insignificant equity investments in certain privately-held companies. |
GOODWILL
GOODWILL | 12 Months Ended |
Dec. 31, 2017 | |
GOODWILL | |
GOODWILL | 10. GOODWILL The changes in the carrying amount of goodwill for the years ended December 31, 2015, 2016 and 2017 were as follows: Gross Accumulated Net Balance at January 1, 2015 ) Increase in goodwill related to acquisitions — Impairment losses recognized — ) ) Balance at December 31, 2015 ) Increase in goodwill related to acquisitions — Balance at December 31, 2016 ) Increase in goodwill related to acquisitions — Balance at December 31, 2017 ) |
DEBT
DEBT | 12 Months Ended |
Dec. 31, 2017 | |
DEBT | |
DEBT | 11. DEBT The short-term and long-term debt as of December 31, 2016 and 2017 were as follows: As of December 31, 2016 2017 Short-term debt: Long-term bank borrowings, current portion — Short-term bank borrowings Total Long-term debt: Long-term bank borrowings, non-current portion — Convertible senior notes — Total — Bank borrowings In September 2012, the Group entered into a three-year revolving bank credit facility under which the Group can draw-down up to RMB300,000 by October 9, 2015. In December 2013, the Group renewed the bank credit facility under which the Group can borrow up to RMB500,000 by December 11, 2016. The interest rate for this credit facility was determined on the draw-down date and the credit facility was not collateralized. From 2013 to 2015, the Group has drawn down the credit facility of RMB204,540 and repaid all of them. The weighted average interest rate for borrowings drawn under such credit facility was 6.0% and 5.61% for the years ended December 31, 2013 and 2015, respectively. This facility expired on December 11, 2016. In July 2015, the Group entered into a one-year bank loan contract, under which the Group can borrow up to US$50 million for the period ended June 30, 2016, and the Group had a RMB360,000 deposit pledged accordingly. The interest rate of this borrowing is based on the three-month London Interbank Offered Rate (“Libor”) on draw-down date plus 1.2%. In 2015, the Group had drawn down US$50 million under this contract and fully repaid the amount in 2016. The weighted average interest rate for borrowings drawn under such credit facility was 1.50% and 1.81% for the years ended December 31, 2015 and 2016, respectively. In January 2016, the Group entered into a one-year bank revolving loan contract under which the Group can borrow up to US$43 million for the period ended January 1, 2017. The interest rate is based on the one-, two- or three-month Libor on draw-down date plus no less than 2%. In 2016, the Group had drawn down US$43 million under this agreement and fully repaid the amount in 2017. The weighted average interest rate of borrowings drawn under this agreement was 2.70% and 2.88% for the years ended December 31, 2016 and 2017, respectively. In May 2016, the Group entered into a one-year revolving corporation overdraft facility agreement under which the Group can borrow up to RMB50,000, of which each draw-down should last no longer than three months, by May 16, 2017. The interest rate for each draw-down is established on the draw-down date and is based on the People’s Bank of China’s one-year benchmark interest rate for loans on the draw-down date. As of December 31, 2016, the Group had drawn down nil under this agreement. This facility expired on May 17,2017. In September 2016, the Group entered into a one-year revolving general credit facility under which the Group can borrow up to RMB200,000 by September 30, 2017. The interest rate for each draw-down will be established in each draw-down agreement. In 2017, the Group had drawn down RMB1,000 under this contract and fully repaid the amount. The interest rate was 4.4%. This facility expired on September 30, 2017. In February 2017, the Group entered into a three-year revolving general credit facility under which the Group can borrow up to RMB500,000 by February 2020. The interest rate for each draw-down will be established in each draw-down agreement. As of December 31, 2017, the Group had not drawn down any amount under this contract. In April 2017, the Group entered into a three-year bank loan contract under which the Group can borrow up to US$40 million by September 30, 2017, and the Group had a RMB307,000 deposit pledged accordingly. The interest rate is based on the three-month Libor on draw-down date plus 1.4%. In 2017, the Group had drawn down US$40 million under this agreement and repaid US$0.01 million. As of December 31,2017, according to the contract, there are US$0.02 million needs to be repaid within one year, which was recorded in current portion. The weighted average interest rate of borrowings drawn under this agreement was 2.68% for the years ended December 31, 2017. In May 2017, the Group entered into an US$250 million term facility and US$250 million revolving credit facility agreement with several banks. The US$250 million revolving credit facility is available for 35 months after the date of the agreement. The interest rate on the loan is Libor plus 1.75%. There are some financial covenants including interest coverage ratio, leverage and tangible net worth related to this facility and the Group was in compliance as of December 31, 2017. In 2017, the Group had drawn down US$250 million under the term facility agreement and repaid nil. For revolving credit facility agreement, the Group had drawn down US$250 million in May 2017 and fully repaid the amount in November 2017. The weighted average interest rate of borrowings drawn under this agreement was 3.04% for the years ended December 31, 2017. In June 2017, the Group entered into a one-year bank loan contract under which the Group can borrow up to US$20 million for the period ended May 31, 2018, and the Group had a RMB160,000 deposit pledged accordingly. The interest rate is based on the twelve-month Libor on draw-down date plus 1.5%. In 2017, the Group had drawn down US$20 million under this agreement and repaid nil. The weighted average interest rate of borrowings drawn under this agreement was 3.22% for the years ended December 31, 2017. Convertible Senior Notes due 2022 On November 3, 2017, the Company issued US$475 million of Convertible Senior Notes (“the Notes”). The Notes mature on November 1, 2022 and bear interest at a rate of 0.375% per annum, payable in arrears semi-annually on May 1 and November 1, beginning May 1, 2018. Holders of the Notes have the option to convert their Notes at any time prior to the close of business on the second business day immediately preceding the maturity date. The Notes can be converted into the Company’s ADSs at an initial conversion rate of 5.4869 of the Company’s ADSs per US$1,000 principal amount of the Notes (equivalent to an initial conversion price of US $182.25 per ADS). The conversion rate is subject to adjustment in some events but is not adjusted for any accrued and unpaid interest. In addition, following a make-whole fundamental change (as defined in the Indenture) that occur prior to the maturity date or following the Company’s delivery of a notice of a tax redemption, the Company will increase the conversion rate for a holder who elects to convert its notes in connection with such a corporate event or such tax redemption. The holders may require the Company to repurchase all or portion of the Notes for cash on November 3, 2020, or upon a fundamental change, at a repurchase price equal to 100% of the principal amount, plus accrued and unpaid interest. The Company believes that the likelihood of occurrence of events considered a fundamental change is remote. The conversion option meets the definition of a derivative. However, since the conversion option is considered indexed to the Company’s own stock and classified in stockholders’ equity, the scope exception is met, accordingly the bifurcation of conversion option from the Notes is not required. There is no beneficial conversion feature (“BCF”) attribute to the Notes as the set conversion prices for the Notes are greater than the respective fair values of the ordinary share price at date of issuance. The feature of mandatory redemption upon maturity is clearly and closely related to the debt host and this feature is no need to be bifurcated. Furthermore, the Company concluded that the feature of contingent put options upon tax events or fundamental changes does not need to be considered as an embedded derivative to be bifurcated. Therefore, the Company accounted for the Notes in accordance with ASC 470, as a single instrument under long-term debt. Issuance costs related to the Notes is recorded in consolidated balance sheet as a direct deduction from the principal amount of the Notes, and is amortized over the period from November 3, 2017, the date of issuance, to November 1, 2020, the first put date of the Notes, using the effective interest method. Proceeds to the Company were RMB3,092,850 (equivalently US$466,866,463), net of issuance costs of RMB53,882 (equivalently US$8,133,537). ADS Lending Arrangement Concurrent with the offering of the Notes, the Company entered into ADS lending agreements with the affiliates of the initial purchasers of the Notes (“ADS Borrowers”), pursuant to which the Company lent to the ADS Borrowers 2,606,278 ADSs (the “Loaned ADSs”) at a price equal to par, or $0.0004 per ADS (“ADS lending arrangement”). The purpose of the ADS lending arrangements is to facilitate privately negotiated transactions in which the ultimate holders of the Notes may elect to hedge their investment in the related notes. As of December 31, 2017, the outstanding number of Loaned ADSs was 2,606,278. The Loaned ADSs must be returned to the Company by the earliest of (a) the maturity date of the Notes, November 1, 2022, (b) upon the Company’s election to terminate the ADS lending agreement at any time after the later of (x) the date on which the entire principal amount of the Notes ceases to be outstanding, and (y) the date on which the entire principal amount of any additional convertible securities that the Company has in writing consented to permit the ADS Borrower to hedge under the ADS lending agreement ceases to be outstanding, in each case, whether as a result of conversion, redemption, repurchase, cancellation or otherwise; and (c) the termination of the ADS lending agreement. The Company is not required to make any payment to the initial purchasers or ADS Borrower upon the return of the Loaned ADSs. The ADS Borrowers do not have the choice or option to pay cash in exchange for the return of the Loaned ADSs. No collateral is required to be posted for the Loaned ADSs. The initial purchasers are required to remit to the Company any dividends paid to the holders of the Loaned ADSs. An ADS Borrower has the ability to vote without restriction. However, the ADS Borrowers have agreed not to vote on the Loaned ADSs. In accordance with FASB ASC Sub-topic 470-20, the Company has accounted for the ADS lending agreement initially at fair value and recognized it as an issuance cost associated with the convertible debt offering. As a result, additional debt issuance costs of RMB26,499 (equivalently US$4,000,000) were recorded on the issuance date with a corresponding increase to additional paid-in-capital. This debt issuance costs have also been amortized from the date of issuance to the put date of Notes, using the effective interest method. In accordance with ASC Topic 470-20, although legally issued, the Loaned ADSs are not considered outstanding, and then excluded from basic and diluted earnings per share unless default of the ADS lending arrangement occurs, at which time the Loaned ADSs would be included in the basic and diluted earnings per share calculation. As of December 31, 2017, it is not probable that the ADS Borrower or the counterparty to the ADS lending arrangement will default. Capped Call Options In connection with the issuance of the Notes, the Company has entered into capped call option transactions with some of the initial purchasers or their affiliates (the “Option Counterparties”) to reduce the potential dilution to existing shareholders of the Company upon conversion of the Notes. The cap price of the capped call transactions will initially be US$221.31 per ADS, subject to adjustment under the terms of the capped call transactions. The total premium paid by the Company for the capped call transactions was RMB177,476 (equivalently US$26,790,000) on the purchased date. The capped call option is classified in stockholders’ equity, recorded at the cost with no subsequent changes in fair value be recorded. |
ACCRUED EXPENSES AND OTHER CURR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 12 Months Ended |
Dec. 31, 2017 | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 12. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES As of December 31, 2016 2017 Payable for business acquisitions Accrual for customer loyalty program Payable to noncontrolling interest holders Payable to franchisees Other payables Accrued rental Accrued utilities Deferred rent, current Other accrued expenses Total From time to time, the Group receives cash advances from noncontrolling interest holders of hotels that are not wholly owned by the Group. Such advances are non-interest bearing and are payable within one year. Payable to franchisees mainly represents room charges received on behalf of franchisees and are payable within one year. |
HOTEL OPERATING COSTS
HOTEL OPERATING COSTS | 12 Months Ended |
Dec. 31, 2017 | |
HOTEL OPERATING COSTS | |
HOTEL OPERATING COSTS | 13. HOTEL OPERATING COSTS Hotel operating costs include all direct costs incurred in the operation of the leased and owned hotels, manachised and franchised hotels and consist of the following: Years Ended December 31, 2015 2016 2017 Rents Utilities Personnel costs Depreciation and amortization Consumable, food and beverage Others Total |
PRE-OPENING EXPENSES
PRE-OPENING EXPENSES | 12 Months Ended |
Dec. 31, 2017 | |
PRE-OPENING EXPENSES | |
PRE-OPENING EXPENSES | 14. PRE-OPENING EXPENSES The Group expenses all costs incurred in connection with start-up activities, including pre-operating costs associated with new hotel facilities and costs incurred with the formation of the subsidiaries, such as organization costs. Pre-opening expenses primarily include rental expenses and employee costs incurred during the hotel pre-opening period. Years Ended December 31, 2015 2016 2017 Rents Personnel costs Others Total |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2017 | |
SHARE-BASED COMPENSATION | |
SHARE-BASED COMPENSATION | 15. SHARE-BASED COMPENSATION In February 2007, the Group adopted the 2007 Global Share Plan which allows the Group to offer incentive awards to employees, officers, directors and consultants or advisors (the “Participants”). Under the 2007 Global Share Plan, the Group may issue incentive awards to the Participants to purchase not more than 10,000,000 ordinary shares. In June 2007, the Group adopted the 2008 Global Share Plan which allows the Group to offer incentive awards to Participants to purchase up to 3,000,000 ordinary shares. In October 2008, the Group increased the maximum number of incentive awards available under the 2008 Global Share Plan to 7,000,000. In September 2009, the Group adopted the 2009 Share Incentive Plan which allows the Group to offer incentive awards to Participants. Under the 2009 Share Incentive Plan, the Group may issue incentive awards to purchase up to 3,000,000 ordinary shares. In August 2010, the Group increased the maximum number of incentive awards available under the 2009 Share Incentive Plan to 15,000,000. In March 2015, the Group increased the maximum number of incentive awards available under the 2009 Share Incentive Plan to 43,000,000. The 2007 and 2008 Global Share Plans and 2009 Share Incentive Plan (collectively, the “Incentive Award Plans”) contain the same terms and conditions. The incentive awards granted under the Incentive Award Plans typically have a maximum life of ten years and vest in typical ways as listed below: a.) Vest 50% on the second anniversary of the stated vesting commencement date with the remaining 50% vesting ratably over the following two years; b.) Vest over a period of ten years in equal yearly installments; As of December 31, 2017, the Group had granted 24,577,669 options and 22,256,782 nonvested restricted stocks. Share options In 2015, the Group granted 85,292 options with performance conditions to senior officers. The actual number of the options each grantee is entitled to is indexed to performance conditions of the grantees including various annual performance target, i.e. number of hotel rooms added, revenue etc., in the coming two years. As of December 31, 2016, the Group has adjusted the number of options granted to 88,224 based on the actual performance. The weighted-average grant date fair value for options granted during the year ended December 31, 2015 was RMB11.73 (US$1.88), computed using the binomial option pricing model. The binomial model requires the input of subjective assumptions including the expected stock price volatility and the expected price multiple at which employees are likely to exercise stock options. The Group uses historical data to estimate forfeiture rate. Expected volatilities are based on the average volatility of the Group and comparable companies. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The fair value of stock options was estimated using the following significant assumptions: 2015 Suboptimal exercise factor 4.16 Risk-free interest rate 1.49 to 1.74% Volatility 38.88 to 39.25% Dividend yield — Life of option 6 years The following table summarized the Group’s share option activity under the option plans: Number of Weighted Average Weighted Average Aggregate Intrinsic US$ Years US$’000 Share options outstanding at January 1, 2017 Forfeited ) Exercised ) Share options outstanding at December 31, 2017 Share options vested or expected to vest at December 31, 2017 Share options exercisable at December 31, 2017 As of December 31, 2017, there was RMB844 in total unrecognized compensation expense related to unvested share-based compensation arrangements, which is expected to be recognized over a weighted-average period of 1.07 years. During the years ended December 31, 2015, 2016 and 2017, 1,528,104, 684,632 and 609,224 options were exercised having an aggregate intrinsic value of RMB46,433, RMB40,717 and RMB77,302, respectively. Nonvested restricted stocks The fair value of nonvested restricted stock with service conditions or performance conditions is based on the fair market value of the underlying ordinary shares on the date of grant. In 2015 and 2016, the Group granted 6,599,106 and 1,876,975 nonvested restricted stocks, respectively to senior officers, each was in ten tranches with performance conditions. Each tranche is accounted for as a separate award with the same grant date, its own service inception date and requisite service period. The share-based compensation cost is recognized for each vesting tranche during the respective service period based on the estimated performance conditions at the service inception date. The Group reassesses the performance condition at each reporting period for true up. For each tranche, 50% vests on the second anniversary of the vesting commencement date with the remaining 50% vesting ratably over the following two years. The following table summarized the Group’s nonvested restricted stock activity in 2017. Number of Restricted Weighted Average Grant US$ Nonvested restricted stocks outstanding at January 1, 2017 Granted Forfeited ) Vested ) Adjusted Nonvested restricted stocks outstanding at December 31, 2017 As of December 31, 2017, there was RMB433,474 in unrecognized compensation costs, net of estimated forfeitures, related to unvested restricted stocks, which is expected to be recognized over a weighted-average period of 4.43 years. The total fair value of nonvested restricted stocks vested in 2015, 2016 and 2017 was RMB69,130, RMB123,129 and RMB273,800, respectively. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 12 Months Ended |
Dec. 31, 2017 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | 16. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share for the years indicated: Years Ended December 31, 2015 2016 2017 Net income attributable to ordinary shareholders — basic Eliminate the dilutive effect of interest expense of convertible senior notes — — Net income attributable to ordinary shareholders — diluted Weighted average ordinary shares outstanding — basic Incremental weighted-average ordinary shares from assumed exercise of share options and nonvested restricted stocks using the treasury stock method Dilutive effect of convertible senior notes — — Weighted average ordinary shares outstanding — diluted Basic earnings per share Diluted earnings per share For the years ended December 31, 2015, 2016 and 2017, the Group had no securities which could potentially dilute basic earnings per share in the future, but which were excluded from the computation of diluted earnings per share as their effects would have been anti-dilutive. |
Cash Dividend
Cash Dividend | 12 Months Ended |
Dec. 31, 2017 | |
Cash Dividend | |
Cash Dividend | 17. Cash Dividend On December 21, 2015, the Group approved and declared a cash dividend of US$0.17 per ordinary share on its outstanding shares as of the close of trading on December 31, 2015. Such dividend of RMB276,261 was recorded as a reduction against retained earnings as of December 31, 2015. On October 23, 2017, the Group approved and declared a cash dividend of US$0.16 per ordinary share on its outstanding shares as of the close of trading on December 15, 2017. Such dividend of RMB295,661 was recorded as a reduction against retained earnings, and the dividend of RMB10,682 attributable to ADS issued under the ADS lending arrangement was recorded as a receivable in other current assets as of December 31, 2017. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2017 | |
INCOME TAXES | |
INCOME TAXES | 18. INCOME TAXES Cayman Islands Under the current laws of the Cayman Islands, the Company, China Lodging Investment Limited, City Home Group Limited and CLG Special Investments Limited are not subject to tax on income or capital gain. Hong Kong China Lodging Holdings (HK) Limited, Starway Hotels (Hong Kong) Limited, IBIS China Investment Limited, ACL Greater China Limited, TAHM Investment Limited, City Home Investment Limited, Orange Hotel Hong Kong Limited, Huazhu Investment I Limited and Huazhu Investment II Limited are subject to Hong Kong profit tax at a rate of 16.5%. No Hong Kong profit tax has been provided as the Group has not had assessable profit that was earned in or derived from Hong Kong during the years presented. Singapore China Lodging Holdings Singapore Pte. Ltd. is subject to Singapore corporate income tax at a rate of 17% in 2015, 2016 and 2017. No Singapore profit tax has been provided as the Group has not had assessable profit that was earned in or derived from Singapore during the years presented. British Virgin Islands Under the current tax laws of the British Virgin Islands, Crystal Orange Hotel Holdings Limited is not subject to tax on income or capital gain. Seychelles Under the current tax laws of Seychelles, Sheen Step Group Limited is not subject to tax on income or capital gain. PRC Under the Law of the People’s Republic of China on Enterprise Income Tax (“EIT Law”), which was effective from January 1, 2008, domestically-owned enterprises and foreign-invested enterprises are subject to a uniform tax rate of 25%. Hanting Technology (Suzhou) Co., Ltd (“Hanting Suzhou”), as a recognized software development entity located at Suzhou Industrial Park in Suzhou of PRC, is entitled to a two-year exemption and three-year 50% reduction starting from the first profit making year after absorbing all prior years’ tax losses. Hanting Suzhou has entered into the first tax profitable year in 2011. Therefore, Hanting Suzhou applied tax exemption from 2011 to 2012, and tax rate of 12.5% from 2013 to 2015. Since 2016, Hanting Suzhou is entitled tax rate of 15% as it is qualified as high and new tech enterprise. The high and new tech enterprise qualification is expired in September, 2017, resulting Hanting Suzhou subject to a uniform tax rate of 25% in 2017. Jizhu Information and Technology (Shanghai) Co., Ltd. (“Jizhu Shanghai”), which once called Mengguang Information and Technology (Shanghai) Co., Ltd, is a recognized software development entity located in Shanghai of PRC. Jizhu Shanghai are entitled to a two-year exemption and three-year 50% reduction starting from the first profit making year after absorbing all prior years’ tax losses, and has entered into the first tax profitable year in 2014. Therefore, Jizhu Shanghai applied tax exemption from 2014 to 2015, and tax rate of 12.5% from 2016 to 2018. Tax expense (benefit) is comprised of the following: Years Ended December 31, 2015 2016 2017 Current Tax Deferred Tax ) ) Total A reconciliation between the effective income tax rate and the PRC statutory income tax rate is as follows: Years Ended December 31, 2015 2016 2017 PRC statutory tax rate % % % Tax effect of other expenses that are not deductible in determining taxable profit % % % Effect of different tax rate of group entities operating in other jurisdictions — )% % Effect of change in valuation allowance % % — Effect of tax holiday )% )% )% Effect of cash dividends % % )% Effect of disposal of subsidiary — )% — Effect of excess tax benefit of rewards — — )% Effective tax rate % % % The aggregate amount and per share effect of the tax holidays are as follows: Years Ended December 31, 2015 2016 2017 Aggregate amount Per share effect—basic Per share effect—diluted The principal components of the Group’s deferred income tax assets and liabilities as of December 31, 2016 and 2017 are as follows: As of December 31, 2016 2017 Deferred tax assets: Net loss carryforward Deferred revenue Deferred rent Long-term assets Bad debt provision Accrual for customer loyalty program Accrued payroll Other accrued expenses Share-based compensation Others Valuation allowance ) ) Total deferred tax assets Deferred tax liabilities: Favorable lease, building and land use rights-fair value adjustment Capitalized interest Unrealized gain for investment Others Total deferred tax liabilities For the years ended December 31, 2016 and 2017, valuation allowance of RMB55,757 and RMB59,929 were provided, respectively, RMB11,724 and RMB2,963 were added due to acquisition, respectively, RMB17,064 and RMB46,903 were reversed, respectively, and RMB28,319 and RMB7,476 were written off, respectively. The Group considers positive and negative evidence to determine whether some portion or all of the deferred tax assets will more likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carryforward periods, the Group’s experience with tax attributes expiring unused and tax planning alternatives. Valuation allowances have been established for deferred tax assets based on a more likely than not threshold. The Group’s ability to realize deferred tax assets depends on its ability to generate sufficient taxable income within the carryforward periods provided for in the tax law. As of December 31, 2017, the Group had tax loss carryforwards of RMB558,598 which will expire between 2018 and 2022 if not used. The Group determines whether or not a tax position is “more-likely-than-not” of being sustained upon audit based solely on the technical merits of the position. At December 31, 2016 and 2017, the Group had recorded liabilities for uncertain tax benefit of approximately RMB19,787 and RMB26,410 associated with the interests on intercompany loans, respectively. No interest or penalty expense was recorded for the years ended December 31, 2015, 2016 and 2017. The Group does not anticipate any significant changes to its liability for unrecognized tax benefits within the next 12 months. Years Ended December 31, 2015 2016 2017 Balance at January 1 Addition for tax positions Balance at December 31 In accordance with the EIT Law, dividends, which arise from profits of foreign invested enterprises (“FIEs”) earned after January 1, 2008, are subject to a 10% withholding income tax. A lower withholding tax rate may be applied if there is a favorable tax treaty between mainland China and the jurisdiction of the foreign holding company. For example, holding companies in Hong Kong that are also tax residents in Hong Kong are eligible for a 5% withholding tax on dividends under the Tax Memorandum between China and the Hong Kong Special Administrative Region if the holding company is the beneficial owner of the dividends. Under applicable accounting principles, a deferred tax liability should be recorded for taxable temporary differences attributable to the excess of financial reporting basis over tax basis in a domestic subsidiary. The cumulated undistributed earnings of the Group’s PRC subsidiaries were RMB2,761,814 as of December 31, 2017. To facilitate the Company’s declaration of a special cash dividend, PRC dividend withholding tax of RMB30,696 and RMB32,570 was accrued in years 2015 and 2016 along with the declaration of special cash dividends from the Group’s PRC subsidiaries to the Company. As of December 31, 2017, the accrued PRC dividend withholding tax liability was RMB8,552. Going forward the Group plans to maintain a moderate dividend distribution of approximately RMB300,000 a year from current year net income starting from 2018. Other than these dividends distributions, the Group intends to indefinitely reinvest the remaining undistributed earnings of the Group’s PRC subsidiaries, and therefore, no additional provision for PRC dividend withholding tax was accrued. According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of income taxes is due to computational errors made by the taxpayer. The statute of limitations will be extended to five years under special circumstances, which are not clearly defined, but an underpayment of income tax liability exceeding RMB100 is specifically listed as a special circumstance. In the case of a transfer pricing related adjustment, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion. The Group’s PRC subsidiaries are therefore subject to examination by the PRC tax authorities from 2013 through 2017 on non-transfer pricing matters, and from 2008 through 2017 on transfer pricing matters. |
MAINLAND CHINA CONTRIBUTION PLA
MAINLAND CHINA CONTRIBUTION PLAN | 12 Months Ended |
Dec. 31, 2017 | |
MAINLAND CHINA CONTRIBUTION PLAN | |
MAINLAND CHINA CONTRIBUTION PLAN | 19. MAINLAND CHINA CONTRIBUTION PLAN Full time employees of the Group in the PRC participate in a government-mandated defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. PRC labor regulations require the Group to accrue for these benefits based on a certain percentage of the employees’ salaries. The total contribution for such employee benefits were RMB182,321, RMB212,723 and RMB264,258 for the years ended December 31, 2015, 2016 and 2017, respectively. The Group has no ongoing obligation to its employees subsequent to its contributions to the PRC plan. |
RESTRICTED NET ASSETS
RESTRICTED NET ASSETS | 12 Months Ended |
Dec. 31, 2017 | |
RESTRICTED NET ASSETS | |
RESTRICTED NET ASSETS | 20. RESTRICTED NET ASSETS Pursuant to laws applicable to entities incorporated in the PRC, the subsidiaries of the Group in the PRC must make appropriations from after-tax profit to non-distributable reserve funds. These reserve funds include one or more of the following: (i) a general reserve, (ii) an enterprise expansion fund and (iii) a staff bonus and welfare fund. Subject to certain cumulative limits, the general reserve fund requires annual appropriation of 10% of after tax profit (as determined under accounting principles generally accepted in the PRC at each year-end) until the accumulative amount of such reserve fund reaches 50% of their registered capital; the other fund appropriations are at the subsidiaries’ discretion. These reserve funds can only be used for specific purposes of offsetting future losses, enterprise expansion and staff bonus and welfare and are not distributable as cash dividends and amounted to RMB209,782, RMB277,342 and RMB378,591 as of December 31, 2015, 2016 and 2017, respectively. In addition, due to restrictions on the distribution of share capital from the Company’s PRC subsidiaries, the PRC subsidiaries share capital of RMB3,102,568 at December 31, 2017 is considered restricted. As a result of these PRC laws and regulations, as of December 31, 2017, approximately RMB3,481,159 is not available for distribution to the Company by its PRC subsidiaries in the form of dividends, loans or advances. |
RELATED PARTY TRANSACTIONS AND
RELATED PARTY TRANSACTIONS AND BALANCES | 12 Months Ended |
Dec. 31, 2017 | |
RELATED PARTY TRANSACTIONS AND BALANCES | |
RELATED PARTY TRANSACTIONS AND BALANCES | 21. RELATED PARTY TRANSACTIONS AND BALANCES Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities. The following entities are considered to be related parties to the Group. The related parties mainly act as service providers and service recipients to the Group. The Group is not obligated to provide any type of financial support to these related parties. Related Party Nature of the Party Relationship with the Group Ctrip.com International, Ltd. (“Ctrip”) Online travel services provider Mr. Qi Ji is a director Sheen Star Group Limited (“Sheen Star”) Investment holding company Equity method investee of the Group, controlled by Mr. Qi Ji Accor Hotels (“Accor”) Hotel Group Shareholder of the Group Chengjia (Shanghai) Apartment Management Co., Ltd. (“Cjia”) Apartment Management Group Equity method investee of the Group Shanghai CREATER Industrial Co., Ltd. (“CREATER”) Staged office space company Equity method investee of the Group (a) Related party balances Amounts due from related parties were mainly comprised of shareholder loans to Sheen Star, Cjia and CREATER, which are short-term in nature and payable on demand, and receivable for service fee from Accor, service fee and room charges withheld by Ctrip. As of December 31, 2016 2017 Sheen Star Accor Cjia Ctrip CREATER — Others Total Amounts due to related parties were mainly comprised of payables for brand use fee, reservation fee and other service fee from Ctrip and Accor, which are short-term in nature and payable on demand. As of December 31, 2016 2017 Ctrip Accor Others Total (b) Related party transactions During the years ended December 31, 2015, 2016 and 2017, significant related party transactions were as follows: Years Ended December 31, 2015 2016 2017 Commission expenses to Ctrip Brand use fee, reservation fee and other related service fee to Accor — Marketing and training fee from Ctrip — Service fee from Accor — Goods sold and service provided to Cjia — Interest income from Sheen Star — — Loan payment to Sheen Star — — Loan payment to Cjia — — Loan payment to CREATER — — In 2016, the Group sold its subsidiary Chengjia Hotel Management Co., Ltd. to Cjia for consideration of RMB10,000. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2017 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | 22. COMMITMENTS AND CONTINGENCIES (a) Operating lease commitments The Group has entered into lease agreements for certain hotels which it operates. Such leases are classified as operating leases. Future minimum lease payments under non-cancellable operating lease agreements at December 31, 2017 were as follows: Year Ending December 31, 2018 2019 2020 2021 2022 Thereafter Total (b) Purchase Commitments As of December 31, 2017, the Group’s commitments related to leasehold improvements and installation of equipment for hotel operations was RMB160,334, which is expected to be incurred within one year. (c) Contingencies The Group is subject to periodic legal or administrative proceedings in the ordinary course of our business. As of December 31, 2016, the Group had several cases outstanding, including lease contract terminations and disputes, and construction contract disputes. The Group believed it is probable that settlement liabilities will be involved, and therefore accrued contingencies of RMB66,234 in other operating expense based on the terms of contract, laws and regulations and latest negotiation result. For the year ended December 31, 2017, the Group had settled several cases and undergoes new cases. Therefore, the Group reversed contingencies of RMB35,969 and further accrued RMB10,719 based on latest negotiation or arbitration result with the remaining accrued contingencies of RMB40,984. The Group does not believe that any other currently pending legal or administrative proceeding to which the Group is a party will have a material adverse effect on the financial statements. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2017 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | 23. SUBSEQUENT EVENTS In January 2018, the Group had drawn down US$250 million under a revolving credit facility agreement signed in 2017. Further in early 2018, the Group entered into one three-year facility agreement of total amount of EUR260 million with banks, among which EUR241 million was drawn down in first quarter of 2018. In first quarter of 2018, the Group further purchased 10,782,131 shares of Hotel Group B from public market at cash consideration of EUR489 million. As of March 31, 2018, the Group accumulatively hold 13,092,112 shares of Hotel Group B, and all of these shares was pledged by the Group for the three-year facility agreement of total amount of EUR260 million. |
SCHEDULE I FINANCIAL INFORMATIO
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY | 12 Months Ended |
Dec. 31, 2017 | |
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY | |
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY | ADDITIONAL FINANCIAL INFORMATION — FINANCIAL STATEMENTS SCHEDULE I CHINA LODGING GROUP, LIMITED FINANCIAL INFORMATION FOR PARENT COMPANY BALANCE SHEETS (Renminbi in thousands, except share data and per share data, unless otherwise stated) As of December 31, 2016 2017 2017 US$’000 Assets Current assets: Cash and cash equivalents Short-term investments — Other current assets Total current assets Other assets — Investment in subsidiaries Long-term investments Total assets Liabilities and equity Current liabilities: Short-term debt Amount due to related parties Accrued expenses and other current liabilities Total current liabilities Long-term debt — Total liabilities Equity: Ordinary shares(US$0.0001 par value per share; 8,000,000,000 shares authorized; 281,379,130 and 294,040,234 shares issued as of December 31, 2016 and 2017, and 278,282,366 and 280,518,358 shares outstanding as of December 31, 2016 and 2017, respectively) Treasury shares (3,096,764 and 3,096,764 shares as of December 31 2016 and 2017, respectively) ) ) ) Additional paid-in capital Retained earnings Accumulated other comprehensive (loss) income ) Total equity Total liabilities and equity ADDITIONAL FINANCIAL INFORMATION — FINANCIAL STATEMENTS SCHEDULE I STATEMENTS OF COMPREHENSIVE INCOME Years Ended December 31, 2015 2016 2017 2017 US$’000 Operating costs and expenses: Selling and marketing expenses — — — General and administrative expenses Total operating costs and expenses Loss from operations ) ) ) ) Interest income Interest expense Foreign exchange gain (loss) ) ) Other income, net Income in investment in subsidiaries Net income attributable to China Lodging Group, Limited Other comprehensive income Unrealized securities holding gains, net of tax of 7,151, (1,810) and (7,965) for 2015, 2016 and 2017 Reclassification of realized gains to net income, net of tax — ) ) ) Foreign currency translation adjustments, net of tax of nil for 2015, 2016 and 2017 ) Comprehensive income ADDITIONAL FINANCIAL INFORMATION — FINANCIAL STATEMENTS SCHEDULE I STATEMENTS OF CASH FLOWS Years Ended December 31, 2015 2016 2017 2017 US$’000 Operating activities: Net income Adjustments to reconcile net income to net cash used in operating activities: Share-based compensation Income in investment in subsidiaries ) ) ) ) Investment income — ) ) ) Amortization of issuance cost of convertible notes — — Changes in operating assets and liabilities: Deferred revenue ) — — — Other current assets ) ) Other assets — — ) ) Salary and welfare payable ) ) — — Accrued expenses and other current liabilities ) Net cash provided by (used in) operating activities ) ) Investing activities: Investment in subsidiaries ) — ) ) Receipt of investment in subsidiaries — — — Purchase of long-term investments — ) ) ) Proceeds from sale of long-term investments — Purchase of short-term investments ) — ) ) Proceeds from sale of short-term investment — — — Net cash (used in) provided by investing activities ) ) ) Financing activities: Net proceeds from issuance of ordinary shares upon exercise of option Payment of share repurchase ) — — — Proceeds of advances from subsidiaries — Proceeds from short-term bank borrowings Repayment of short-term bank borrowings ) ) ) ) Proceeds from long-term bank borrowings — — Repayment of long-term bank borrowings — — ) ) Proceeds from issuance of convertible senior notes, net of issuance cost and capped call option — — Debt financing costs paid — — ) ) Proceeds from ADS lending — — Dividends paid — ) ) ) Net cash provided by (used in) financing activities ) Effect of exchange rate changes on cash and cash equivalents ) ) Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year The accompanying notes are an integral part of these consolidated financial statements ADDITIONAL FINANCIAL INFORMATION — FINANCIAL STATEMENTS SCHEDULE I Note to Schedule I Schedule I has been provided pursuant to the requirements of Rule 12-04(a) and 5-04-(c) of Regulation S-X, which require condensed financial information as to the financial position, change in financial position and results of operations of a parent company as of the same dates and for the same periods for which audited consolidated financial statements have been presented when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year. The condensed financial information has been prepared using the same accounting policies as set out in the accompanying consolidated financial statements except that the equity method has been used to account for investments in its subsidiaries. Such investments in subsidiaries are presented on the balance sheets as investment in subsidiaries and the profit of the subsidiaries is presented as income in investment in subsidiaries. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The footnote disclosures contain supplemental information relating to the operations of the Company and, as such, these statements should be read in conjunction with the notes to the accompanying consolidated financial statements. As of December 31, 2017, there are no material contingencies, mandatory dividend, and significant provision of long-term obligation or guarantee of the Company, except for those which have separately disclosed in the consolidated financial statements. |
SCHEDULE II VALUATION AND QUALI
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS | 12 Months Ended |
Dec. 31, 2017 | |
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS | |
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS | ADDITIONAL INFORMATION — FINANCIAL STATEMENTS SCHEDULE II CHINA LODGING GROUP, LIMITED This financial information has been prepared in conformity with accounting principles generally accepted in the United States. VALUATION AND QUALIFYING ACCOUNT S Balance at Charge to Costs and Addition Due to Charge Taken Write off Balance at (Renminbi in thousands) Allowance for doubtful accounts of accounts receivables and other receivables: 2015 — — ) 2016 — ) 2017 — — ) Valuation allowance for deferred tax assets 2015 — ) ) 2016 ) ) 2017 ) ) ****** |
SUMMARY OF PRINCIPAL ACCOUNTI33
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES | |
Basis of presentation | Basis of presentation The consolidated financial statements of the Group have been prepared in accordance with the accounting principles generally accepted in the United States of America (“US GAAP”). |
Basis of consolidation | Basis of consolidation The consolidated financial statements include the financial statements of the Company, its majority-owned subsidiaries and consolidated variable interest entities (the “VIEs”). All intercompany transactions and balances are eliminated on consolidation. |
Variable Interest Entities | Variable Interest Entities The Group evaluates the need to consolidate certain variable interest entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. The Company is deemed as the primary beneficiary of and consolidates variable interest entities when the Company has the power to direct the activities that most significantly impact the economic success of the entities and effectively assumes the obligation to absorb losses and has the rights to receive benefits that are potentially significant to the entities. In November 2017, the Company through one of its subsidiaries entered into a series of contractual agreements with Tianjin Mengguang Information Technology Co., Ltd. (“TJ Mengguang”), a newly established limited liability company, and its shareholder, pursuant to which the Company has obtained control over the VIE of TJ Mengguang and is entitled to receive effectively all economic benefits generated from TJ Mengguang. Accordingly, the Company consolidates TJ Mengguang in the consolidated financial statements. The Company can have assets transferred freely out of TJ Mengguang without any restrictions. Therefore, the Group considers that there is no asset of a consolidated TJ Mengguang that can be used only to settle obligations of TJ Mengguang, except for registered capital and PRC statutory reserves of TJ Mengguang amounting to a total of RMB12,059 as of December 31, 2017. As the consolidated TJ Mengguang is incorporated as a limited liability company under the PRC Company Law, creditors of TJ Mengguang do not have recourse to the general credit of the Company for any of the liabilities of the consolidated TJ Mengguang. As of December 31, 2017, excluding inter-group balance, the assets of VIE of TJ Mengguang mainly consisted of cash and cash equivalent RMB21,353 and other current assets RMB3,095, and this VIE’s liabilities of RMB2,585 mainly consisted of deferred revenue RMB1,371 and accrued expenses and other current liabilities RMB1,032. For the year ended December 31, 2017, excluding inter-group transactions, net revenues and cost of revenues generated by this VIE of TJ Mengguang are RMB534 and RMB653, respectively. In addition, the Group, as general partner, has the power to direct the activities that most significantly impact the economic success of the fund of Ningbo Hongting Investment Management LLP (“NB Hongting”, the “Fund”) and effectively assumes the obligation to absorb losses and has the rights to receive benefits that are potentially significant to the Fund. As of December 31, 2017, the assets of NB Hongting mainly consisted of cash and cash equivalent RMB8,816 and long term investment RMB25,000, and the Fund’s liabilities is RMB461. For the year ended December 31, 2017, the net loss of RMB398 is due to some pre-operation expenses. The Group evaluates its business activities and arrangements with the entities that operate the manachised and franchised hotels and the funds that it serves as general partner or fund manager to identify potential variable interest entities. Generally, these entities that operate the manachised and franchised hotels qualify for the business scope exception, therefore consolidation is not appropriate under the variable interest entity consolidation guidance. For the disclosure of significant non-consolidated variable interest entities, see Note.9 Long-Term Investments. |
Use of estimates | Use of estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Group bases its estimates on historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant accounting estimates reflected in the Group’s consolidated financial statements include the useful lives and impairment of property and equipment and intangible assets, valuation allowance of deferred tax assets, purchase price allocation, impairment of goodwill, fair value measurement and impairment of investments, share-based compensation, costs related to its customer loyalty program and contingent liabilities. |
Cash and cash equivalents | Cash and cash equivalents Cash and cash equivalents consist of cash on hand and demand deposits, which are unrestricted as to withdrawal and use, and which have original maturities of three months or less when purchased. |
Restricted cash | Restricted cash Restricted cash mainly represents deposits used as security against borrowings and deposits restricted due to contract disputes or lawsuit. |
Investments | Investments Investments represent trading securities, available-for-sale securities, cost-method investments, and equity-method investments. Investments in equity securities that have readily determinable fair values are classified as either trading securities or available-for-sale securities depending on the Group’s intention. Trading securities are equity securities of public companies that are bought and held principally for the purpose of selling them in the near term, and are reported at fair value, with unrealized gains and losses included in other income (loss) in the consolidated statements of comprehensive income. The fair value of the Company’s investments in trading securities is based on the quoted market price on the last business day of the fiscal year. Available-for-sale securities are investments in equity securities that the Group does not have intention to sell in near term, reported at fair value, with unrealized gains and losses recorded as a component of other comprehensive income or loss. Realized gains or losses are recognized in the consolidated statements of comprehensive income during the period in which the gains or losses are realized. If the Group determines that a decline in the fair value of the individual available-for-sale security is other-than-temporary, the cost basis of the security is written down to the fair value as a new cost basis and the amount of the write-down is accounted for as a realized loss. The new cost basis will not be changed for subsequent recoveries in fair value. The Group reviews several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to: (1) the nature of the investment; (2) the cause and duration of the impairment; (3) the extent to which fair value is less than cost; (4) financial conditions and near term prospects of the issuers; and (5) the Group’s ability to hold the security for a period of time sufficient to allow for any anticipated recovery of its amortized cost or fair value. The Group accounts for equity investment in a private entity of which the Group owns less than 20% of the voting securities and does not have the ability to exercise significant influence over operating and financial policies of the entity as cost-method investment. The Group’s cost-method investment is carried at historical cost in its consolidated financial statements and measured at fair value on a nonrecurring basis when there are events or changes in circumstances that may have a significant adverse effect. An impairment loss is recognized in the consolidated statements of comprehensive income equal to the excess of the investment’s cost over its fair value when the impairment is deemed other-than-temporary. The Group accounts for equity investment in entities with significant influence under equity-method accounting. Under this method, the Group’s pro rata share of income (loss) from investment is recognized in the consolidated statements of comprehensive income. Dividends received reduce the carrying amount of the investment. When the Group’s share of loss in an equity-method investee equals or exceeds its carrying value of the investment in that entity, the Group continues to report its share of equity method losses in the statements of comprehensive income to the extent and as an adjustment to the carrying amount of its other investments in the investee. Equity-method investment is reviewed for impairment by assessing if the decline in market value of the investment below the carrying value is other-than-temporary. In making this determination, factors are evaluated in determining whether a loss in value should be recognized. These include consideration of the intent and ability of the Group to hold investment and the ability of the investee to sustain an earnings capacity, justifying the carrying amount of the investment. Impairment losses are recognized in other expense when a decline in value is deemed to be other-than- temporary. The Group also considers it has significant influence over the funds that it serves as general partner or fund manager. For funds that the Group is not deemed as the primary beneficiary, the equity method of accounting is accordingly used for these investments by the Group. In addition, the investee funds do not meet the definition of an Investment Company and are not required to report their investment assets at fair value. The Group records its equity pick-up based on its percentage ownership of the investee funds’ operating result. As a result of the impairment analysis, the Group recorded an impairment of nil, RMB3,208 and nil in 2015, 2016 and 2017, respectively. |
Accounts receivable, net of allowance | Accounts receivable, net of allowance Accounts receivable mainly consist of franchise fee receivables, amounts due from corporate customers, travel agents, hotel guests and credit card receivables, which are recognized and carried at the original invoice amount less an allowance for doubtful accounts. The Group establishes an allowance for doubtful accounts primarily based on the age of the receivables and factors surrounding the credit risk of specific customers. |
Loan receivables | Loan receivables Loan receivables are measured at amortized cost with interest accrued based on the contract rate. The Group classified loan receivables as long-term or short-term investments according to their contractual maturity or expected holding time. The Group evaluates the credit risk associated with the loans, and estimates the cash flow expected to be collected over the life of loans on an individual basis based on the Group’s past experiences, the borrowers’ financial position, their financial performance and their ability to continue to generate sufficient cash flows. A valuation allowance will be established for the loans unable to collect. No valuation allowance has been recorded in 2015, 2016 or 2017 based on the result of the assessment. |
Inventories | Inventories Inventories mainly consist of small appliances, bedding and daily consumables. Small appliances and bedding for new hotels opened are stated at cost, less accumulated amortization, and are amortized over their estimated useful lives, generally one year, from the time they are put into use. Daily consumables and beddings replacement are expensed when used. |
Property and equipment, net | Property and equipment, net Property and equipment, net are stated at cost less accumulated depreciation and amortization. The renovations, betterments and interest cost incurred during construction are capitalized. Depreciation and amortization of property and equipment is provided using the straight line method over their expected useful lives. The expected useful lives are as follows: Leasehold improvements Shorter of the lease term or their estimated useful lives Buildings 20-40 years Furniture, fixtures and equipment 3-10 years Motor vehicles 5 years Construction in progress represents leasehold improvements under construction or being installed and is stated at cost. Cost comprises original cost of property and equipment, installation, construction and other direct costs. Construction in progress is transferred to leasehold improvements and depreciation commences when the asset is ready for its intended use. Expenditures for repairs and maintenance are expensed as incurred. Gain or loss on disposal of property and equipment, if any, is recognized in the consolidated statements of comprehensive income as the difference between the net sales proceeds and the carrying amount of the underlying asset. |
Intangible assets, net and unfavorable lease | Intangible assets, net and unfavorable lease Intangible assets consist primarily of brand name, master brand agreement, non-compete agreements, franchise agreements and favorable leases acquired in business combinations and purchased software. Intangible assets acquired through business combinations are recognized as assets separate from goodwill if they satisfy either the “contractual-legal” or “separability” criterion. Intangible assets, including brand name, master brand agreement, non-compete agreements, franchise agreements and favorable lease agreements acquired from business combination are recognized and measured at fair value upon acquisition. Non-compete agreements, franchise agreements and favorable lease agreements are amortized over the expected useful life, remaining franchise contract terms and remaining operating lease terms respectively. Unfavorable lease agreements from business combination transactions are recognized as other long-term liabilities and are amortized over the remaining operating lease terms. Purchased software is stated at cost less accumulated amortization. Brand name is considered to have an indefinite life. Master brand agreement, acquired in Accor acquisition (Note 3), granted the Group the exclusive franchise rights in respect of “Mercure”, “Ibis” and “Ibis Styles” in the PRC, Taiwan and Mongolia and the non-exclusive franchise rights in respect of “Grand Mercure” and “Novotel” in the PRC, Taiwan and Mongolia with initial term of 70 years, and can be renewed without substantial obstacles. As a result, the useful life is also determined to be indefinite. Brand name of Crystal Orange is considered to have an indefinite life which granted the Group to use for its products and provide to other market players. The Group evaluates the brand name and master brand agreement each reporting period to determine whether events and circumstances continue to support an indefinite useful life. Impairment is tested annually or more frequently if events or changes in circumstances indicate that it might be impaired. The Group measures the impairment by comparing the fair value of brand name and master brand agreement with its carrying amount. If the carrying amount of brand name and master brand agreement exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess. The Group measures the fair value of the brand name under the relief-from-royalty method, the master brand agreement under the multi-period excess earnings method. Management performs its annual brand name and master brand agreement impairment test on November 30. |
Land use rights | Land use rights Land use rights, which are all located in PRC, are recorded at cost and amortized on a straight-line basis over the remaining term of the land certificates, between 30 to 50 years. |
Impairment of long-lived assets | Impairment of long-lived assets The Group evaluates its long-lived assets and finite lived intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When these events occur, the Group measures impairment by comparing the carrying amount of the assets to future undiscounted net cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Group recognizes an impairment loss equal to the difference between the carrying amount and fair value of these assets. The Group performed a recoverability test of its long-lived assets associated with certain hotels due to the continued underperformance relative to the projected operating results, of which the carrying amount of the property and equipment exceed the future undiscounted net cash flows, and recognized an impairment loss of RMB93,163, RMB150,533 and RMB169,213 during the years ended December 31, 2015, 2016 and 2017, respectively. Fair value of the property and equipment was determined by the Group based on the income approach using the discounted cash flow associated with the underlying assets, which incorporated certain assumptions including projected hotels’ revenue, growth rates and projected operating costs based on current economic condition, expectation of management and projected trends of current operating results. |
Goodwill | Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the identifiable assets less liabilities acquired. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. The Group completes a two-step goodwill impairment test. The first step compares the fair values of each reporting unit to its carrying amount, including goodwill. A reporting unit is identified as a component for which discrete financial information is available and is regularly reviewed by management. All the acquired business has been migrated to the Group’s business, and the Group’s management regularly reviews operation data including industrial metrics of revenue per available room, occupancy rate, and number of hotels by scale/brand, rather than discrete financial information for the purpose of performance evaluation and resource allocation. The Company concluded that it had only one reporting unit, and therefore the goodwill impairment testing was performed on consolidation level. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only performed for purposes of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or liabilities. An impairment loss is recognized in general and administrative expenses for any excess in the carrying value of goodwill over the implied fair value of goodwill. Management performs its annual goodwill impairment test on November 30. The Group recognized goodwill impairment of RMB2,445, nil and nil for years ended December 31, 2015, 2016 and 2017, respectively. |
Accruals for customer loyalty program | Accruals for customer loyalty program The Group invites its customers to participate in a customer loyalty program. The membership has an unlimited life. Members enjoy favorable treatment such as more convenient check-out procedures and late check-out, discounts on room rates and accumulate membership points for their paid stays or their purchasing of products and services provided in the hotels, which can be redeemed for offset the room charges, or used to buy products in Hua Zhu mall within two years after the points are earned. The estimated incremental costs to provide room night awards and other products are accrued and recorded as accruals for customer loyalty program as members accumulate points and are recognized as cost and expense in the accompanying consolidated statements of comprehensive income. As members redeem awards or their entitlements expire, the provision is reduced correspondingly. As of December 31, 2016 and 2017, the accruals for estimated liabilities under the customer loyalty program amounted to RMB121,066 and RMB156,092, respectively. |
Deferred revenue | Deferred revenue Deferred revenue generally consists of non-refundable advances received from customers for rental of rooms, cash received for membership fees and initial franchise fees received prior to the Group fulfilling its commitments to the franchisees. |
Revenue recognition | Revenue recognition Revenue from leased and owned hotels is derived from hotel operations, mainly including the rental of rooms, food and beverage sales and souvenir sales. Revenue is recognized when rooms are occupied and food and beverages and souvenirs are sold. Revenues from manachised and franchised hotels are derived from franchise agreements where the franchisees are primarily required to pay (i) an initial one-time franchise fee, and (ii) continuing franchise fees, which mainly consist of (a) on-going management and service fees mainly based on a certain percentage of the room revenues of the franchised hotels, and (b) system maintenance, support fees and central reservation system usage fees. The one-time franchise fee is recognized when the manachised and franchised hotel opens for business, the fee becomes non-refundable, and the Group has fulfilled all its commitments and obligations, including the assistance to the franchisees in property design, leasehold improvement construction project management, systems installation and personnel recruiting and training. The ongoing management and service fees are recognized when the underlying service revenue is recognized by the franchisees’ operations. The system maintenance, support fee and central reservation system usage fee is recognized over the period when services are provided. In addition, the Group accounts for hotel manager fees related to the manachised hotels under the franchise program as revenues. Pursuant to the franchise agreements, the Group charges the franchisees fixed hotel manager fees to cover the manachised hotel managers’ payroll, social welfare benefits and certain other out-of-pocket expenses that the Group incurs on behalf of the manachised hotels. The hotel manager fee is recognized as revenue monthly. During the years ended December 31, 2015, 2016 and 2017, the hotel manager fees that were recognized as revenue were RMB261,743, RMB321,346 and RMB371,625, respectively. Membership fees from the Group’s customer loyalty program are earned and recognized on a straight-line basis over the expected membership duration of the different membership levels. Such duration is estimated based on the Group’s and management’s experience and is adjusted on a periodic basis to reflect changes in membership retention. The membership duration is estimated to be two to five years which reflects the expected membership retention. Revenues recognized from the customer loyalty program were RMB130,644, RMB145,459 and RMB160,200 for the years ended December 31, 2015, 2016 and 2017, respectively. Other revenues are derived from activities other than the operation of hotel businesses, which mainly include revenues from Hua Zhu mall and the provision of IT products and services to hotels. Revenues from Hua Zhu mall are commissions charged from suppliers for goods sold through the platform and are recognized upon delivery of goods to end customers when its suppliers’ obligation is fulfilled and collectability is reasonably assured. Revenues from IT products are recognized when goods are delivered and revenues from IT services are recognized when services are rendered. |
Business tax and related taxes | Business tax and related taxes The Group is subject to business tax, education surtax and urban maintenance and construction tax, on the services provided in the PRC. Such taxes are primarily levied based on revenue at applicable rates and are recorded as a reduction of revenues. On 24 March 2016, the Ministry of Finance (MOF) and the State Administration of Taxation (SAT) jointly published Caishui [2016] No. 36 (Circular 36), which provides the detailed implementation guidance on the further rollout of the Value-Added Tax (VAT) reform to sectors such as construction, real estate, financial services and lifestyle services. Circular 36 takes effect from 1 May 2016. Lifestyle services have a broad coverage to include a variety of services which are to meet the daily needs of the residents, and accommodation and associated services are included in such category with the applicable tax rate of 6%. As such, starting from May 2016, the accommodation services of the Group are subject to 6% of VAT. |
Advertising and promotional expenses | Advertising and promotional expenses Advertising related expenses, including promotion expenses and production costs of marketing materials, are charged to the consolidated statements of comprehensive income as incurred, and amounted to RMB47,971, RMB64,666 and RMB90,578 for the years ended December 31, 2015, 2016 and 2017, respectively. |
Government grants | Government grants Government grants represent cash received by the Group in the PRC from local governments as incentives for investing in certain local districts, and are typically granted based on the amount of investments the Group made as well as income generated by the Group in such districts. Such subsidies allow the Group full discretion to utilize the funds and are used by the Group for general corporate purposes. The local governments have final discretion as to whether the Group has met all criteria to be entitled to the subsidies. Normally, the Group does not receive written confirmation from local governments indicating the approval of the cash subsidy before cash is received, and therefore cash subsidies are recognized when received and when all the conditions for their receipts have been satisfied. Government grants recognized were RMB28,188, RMB83,498 and RMB55,389 for the years ended December 31, 2015, 2016 and 2017, respectively, which were recorded as other operating income. |
Leases | Leases A lease of which substantially all the benefits and risks incidental to ownership remain with the lessor is classified as an operating lease. All leases of the Group are currently classified as operating leases. When a lease contains rent holidays or requires fixed escalations of the minimum lease payments, the Group records the total rental expense on a straight-line basis over the initial lease term and the difference between the straight-line rental expense and cash payment under the lease is recorded as deferred rent. As of December 31, 2016 and 2017, deferred rent of RMB37,648 and RMB49,857 were recorded as other current liabilities and RMB1,023,843 and RMB1,380,484 were recorded as long-term liabilities, respectively. |
Capitalization of interest | Capitalization of interest Interest cost incurred on funds used to construct leasehold improvements during the active construction period is capitalized. The interest capitalized is determined by applying the borrowing interest rate to the average amount of accumulated capital expenditures for the assets under construction during the period. The interest expense incurred for the years ended December 31, 2015, 2016 and 2017 were RMB5,383, RMB11,056 and RMB87,320, of which RMB1,529, nil and nil were capitalized as additions to assets under construction, respectively. |
Income taxes | Income taxes Current income taxes are provided for in accordance with the relevant statutory tax laws and regulations. Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. Net operating losses are carried forward and credited by applying enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of the Group, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. |
Foreign currency translation | Foreign currency translation The reporting currency of the Group is the Renminbi (“RMB”). The functional currency of the Company is the United States dollar (“US dollar”). Monetary assets and liabilities denominated in currencies other than the functional currency are translated into functional currency at the rates of exchange ruling at the balance sheet date. Transactions in currencies other than the functional currency during the year are converted into the functional currency at the applicable rates of exchange prevailing on the day transactions occurred. Transaction gains and losses are recognized in the statements of comprehensive income. Assets and liabilities are translated into RMB at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange rates and revenues, expenses, gains and losses are translated using the average rate for the year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive loss in the consolidated statements of comprehensive income. The financial records of the Group’s subsidiaries are maintained in local currencies, which are the functional currencies. |
Comprehensive income | Comprehensive income Comprehensive income includes all changes in equity except for those resulting from investments by owners and distributions to owners and is comprised of net income, foreign-currency translation adjustments and unrealized securities holding gains (losses). |
Concentration of credit risk | Concentration of credit risk Financial instruments that potentially expose the Group to concentration of credit risk consist primarily of cash and cash equivalents, restricted cash, short-term and long-term investments, loan receivables, amount due from related parties and accounts receivable. All of the Group’s cash and cash equivalents and restricted cash are held with financial institutions that Group management believes to be high credit quality. In addition, the Group’s investment policy limits its exposure to concentrations of credit risk and the Group’s short-term and long-term investments consist of equity investments in listing and private companies. The Group’s loan receivables are lent to entities with high credit quality. The Group conducts credit evaluations on its group and agency customers and generally does not require collateral or other security from such customers. The Group periodically evaluates the creditworthiness of the existing customers in determining an allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers. |
Fair value | Fair value The Group defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. The established fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs may be used to measure fair value include: Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The Group’s financial instruments include cash and cash equivalent, restricted cash, loan receivables current and non-current portion, receivables, payables, short-term debt and long-term debt. The carrying amounts of these short-term financial instruments approximates their carrying value due to their short-term nature. The long-term debt and long-term loan receivable approximate their fair values, because the bearing interest rate approximates market interest rate, and market interest rates have not fluctuated significantly since the commencement of loan contracts signed. Cost-method investments are presented at cost unless impaired based on the result of impairment assessment, as the investees are all private entities and their fair values are not practicable to obtain without undue cost. As of December 31, 2016 and 2017, cost-method investments were RMB172,571 and RMB355,717, respectively. When available, the Group uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Group measures fair value using valuation techniques that use, when possible, current market-based or independently sourced market parameters, such as interest rates. As of December 31, 2016 and 2017, information about inputs into the fair value measurements of the Group’s assets and liabilities that are measured at fair value on a recurring basis in periods subsequent to their initial recognition is as follows: Fair Value Measurements at Reporting Date Using Years Ended Description Fair Value Quoted Prices in Active Significant Other Significant 2016 Long-term available-for-sale securities 2017 Short-term trading securities 2017 Long-term available-for-sale securities The following table presents the Group’s assets measured at fair value on a non-recurring basis for the years ended December 31, 2015, 2016 and 2017: Fair Value Measurements at Reporting Date Using Years Ended Description Fair Value for Quoted Prices Significant Significant Total 2015 Property and equipment 2015 Goodwill — — 2016 Property and equipment 2016 Long-term investments — — 2017 Property and equipment As a result of reduced expectations of future cash flows from certain leased hotels, the Group determined that the hotels property and equipment with a carrying amount of RMB115,042, RMB171,239 and RMB220,963 was not fully recoverable and consequently recorded an impairment charge of RMB93,163, RMB150,533 and RMB169,213 for the years ended December 31, 2015, 2016 and 2017, respectively. The Group also determined that the goodwill amount with a carrying amount of RMB2,445, nil and nil was impaired as a result of the impairment assessment for the years ended December 31, 2015, 2016 and 2017. As a result of the impairment assessment, the Group determined that the long term investment amount with a carrying amount of nil, RMB3,208 and nil was impaired as a result of the impairment assessment for the years ended December 31, 2015, 2016 and 2017. Fair value of the property and equipment as well as the reporting units for goodwill impairment testing was determined by the Group based on the income approach using the discounted cash flow associated with the underlying assets, which incorporated certain assumptions including projected hotels’ revenue, growth rates and projected operating costs based on current economic condition, expectation of management and projected trends of current operating results. As a result, the Group has determined that the majority of the inputs used to value its long-lived assets held and used and its reporting units are unobservable inputs that fall within Level 3 of the fair value hierarchy. The revenue growth rate and the discount rate were the significant unobservable input used in the fair value measurement, which are 4% and 20%, respectively, for the years ended December 31, 2015, 2016 and 2017. |
Share-based compensation | Share-based compensation The Group recognizes share-based compensation in the consolidated statements of comprehensive income based on the fair value of equity awards on the date of the grant, with compensation expenses recognized over the period in which the grantee is required to provide service to the Group in exchange for the equity award. Vesting of certain equity awards are based on the performance conditions for a period of time following the grant date. Share-based compensation expense is recognized according to the Group’s judgement of likely future performance and will be adjusted in future periods based on the actual performance. The share-based compensation expenses have been categorized as either hotel operating costs, general and administrative expenses or selling and marketing expenses, depending on the job functions of the grantees. For the years ended December 31, 2015, 2016 and 2017, the Group recognized share-based compensation expenses of RMB52,535, RMB55,436 and RMB66,367, respectively, which was classified as follows: Years Ended December 31, 2015 2016 2017 Hotel operating costs Selling and marketing expenses General and administrative expenses Total |
Earnings per share | Earnings per share Basic earnings per share is computed by dividing income attributable to holders of ordinary shares by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised or converted into ordinary shares, which consist of the ordinary shares issuable upon the conversion of the convertible senior notes (using the if-converted method) and ordinary shares issuable upon the exercise of stock options and vest of nonvested restricted stocks (using the treasury stock method). The loaned shares under the ADS Lending Agreement are excluded from both the basic and diluted earnings per share calculation unless default of the ADS lending arrangement occurs which the Group considered the possibility is remote. |
Segment reporting | Segment reporting The Group identifies a business as an operating segment if: i) it engages in business activities from which it may earn revenues and incur expenses; ii) its operating results are regularly reviewed by the Chief Operating Decision Maker (“CODM”) to make decisions about resources to be allocated to the segment and assess its performance; and iii) it has available discrete financial information. The Group’s chief operating decision maker has been identified as the chief executive officer. CODM regularly reviews the operation data, such as industrial metrics of revenue per available room, occupancy rate, and number of hotels by scale/brand, to assess the performance and allocate the resources. All the acquired business including Accor and Crystal Orange has been migrated to the Group’s business, and the Group operates and manages its business as a single segment. Therefore, the Group has one single operating segment. The Group primarily generates its revenues from customers in the PRC. Substantially all of the Group’s long-lived assets are located in the PRC. |
Treasury shares | Treasury shares Treasury shares represent shares repurchased by the Company that are no longer outstanding and are held by the Company. Treasury shares are accounted for under the cost method. As of December 31, 2017, under the repurchase plan, the Company had repurchased an aggregate of 3,096,764 ordinary shares on the open market for total cash consideration of RMB107,331. The repurchased shares were presented as “treasury shares” in shareholders’ equity on the Group’s consolidated balance sheets. |
New Accounting Pronouncements Recently Adopted or Not Yet Adopted | New Accounting Pronouncements Recently Adopted In March 2016, the FASB issued ASU 2016-07, which eliminates the requirement to retroactively adopt the equity method of accounting. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. The Group adopted the ASU effective January 1, 2017 and there was no impact on the Group’s consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, which simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. For public entities, the ASU is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those annual reporting periods. The new standard requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid in capital pools, prospectively. In addition, excess tax benefits shall be classified as an operating activity rather than financing activity flows using either a prospective transition method or a retrospective transition method. The Group adopt the ASU on January 1, 2017. The adoption of ASU 2016-09 resulted in a decrease in our provision for income taxes of RMB46,235 in fiscal year 2017, due to the recognition of excess of tax benefits for options exercised and the vesting of equity awards in year 2017. The Group adopted the cash flow presentation retrospectively and accordingly, excess tax benefits from equity-based compensation of RMB46,235 in fiscal year 2017 are presented as an operating activity, and RMB12,838 and RMB18,645 for fiscal years 2015 and 2016 were reclassified from financing activities to operating activities. New Accounting Pronouncements Not Yet Adopted In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) which amended the existing accounting standards for revenue recognition. The core principle of the new guidance is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. The new guidance also will result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple element arrangements. Subsequently, the FASB has issued the following standards related to ASU 2014-09: ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing ; ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients ; and ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers . The Company must adopt ASU 2016-10, ASU 2016-12 and ASU 2016-20 with ASU 2014-09 (collectively, the “new revenue standards”). The new revenue standards may be applied retrospectively to each prior period presented (full retrospective method) or retrospectively with the cumulative effect recognized as of the date of initial application (the modified retrospective method). The new revenue standards become effective for the Group on January 1, 2018. The Group currently anticipates adopting the new revenue standards using the full retrospective method. While the Group continue to evaluate possible impacts on our consolidated financial statements, ASU 2014-09 and the related ASUs are currently expected to impact either the amount or timing of revenue recognition as follows: · Under existing guidance, initial one-time franchise fee was recognized when the hotels opened for business and the Group had fulfilled its commitments and obligations. Upon adoption of new revenue standards the one-time franchise fee will be recognized over the term of the franchise contract. This change is expected to reduce franchise revenue by approximately RMB17,003 for year 2017. · Under existing guidance, the Group adopted the incremental cost model to account for customer loyalty program. The estimated incremental costs, net of the reimbursement received from the franchisees, are accrued and recorded as accruals for customer loyalty program as members accumulate points and are recognized as cost and expense in the accompanying consolidated statements of comprehensive income. Under the new revenue standards, loyalty program is considered a separate performance obligation and the consideration allocated to the loyalty program will be recognized as revenue upon point redemption, net of any cost paid to the franchisees and other third parties. These changes are expected to increase total revenues and operating expenses by RMB68,607 and RMB63,469 respectively for year 2017. The new standard will require the Group to provide more robust disclosures than required by previous guidance, including disclosures related to disaggregation of revenue into appropriate categories, performance obligations, and the judgments made in revenue recognition determinations. In January, 2016, the FASB issued ASU No. 2016-01, to improve the recognition and measurement of financial instruments. The new guidance requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income and separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. The guidance also eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities and the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Upon adoption, the unrealized gains (losses), net of tax, on the Available-for-Sale Securities will be reclassified from accumulated other comprehensive loss to retained earnings as of January 1 2018. The reclassification is estimated to be approximately RMB40,640 at January 1, 2018. Subsequent changes in fair value will be recognized in net income on the consolidated statements of income. The Group does not expect that other requirements of ASU 2016-01 will have a material impact on the consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU will be effective for fiscal years beginning after December 15, 2018 for public entities, and for all other organizations, it will be effective for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. The Group expects material changes to its consolidated balance sheet. As of December 31, 2017, the Group has RMB25,087,674 of future minimum operating lease commitments that are not currently recognized on its consolidated balance sheets (Note 22). In August, 2016, the FASB issued ASU 2016-15, which amends the guidance in ASC 230 on the classification of certain cash receipts and payments in the statement of cash flows. The primary purpose of the ASU is to reduce the diversity in practice that has resulted from the lack of consistent principles on this topic. The ASU’s amendments add or clarify guidance on eight cash flow issues, including debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted for all entities. Entities must apply the guidance retrospectively to all periods presented but may apply it prospectively from the earliest date practicable if retrospective application would be impracticable. The Group does not expect the adoption of this ASU will have a significant impact on the consolidated financial statements. In October, 2016, the FASB issued ASU 2016-16, which removes the prohibition in ASC 740 against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. The ASU, which is part of the Board’s simplification initiative, is intended to reduce the complexity of U.S. GAAP and diversity in practice related to the tax consequences of certain types of intra-entity asset transfers, particularly those involving intellectual property. For public business entities, the ASU is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted for all entities as of the beginning of a fiscal year for which neither the annual or interim (if applicable) financial statements have been issued or made available for issuance. The Group does not expect the adoption of this ASU will have significant impact on the consolidated financial statements. In November, 2016, the FASB issued ASU 2016-18, which amends ASC 230 to add or clarify guidance on the classification and presentation of restricted cash in the statement of cash flows. Under ASU 2016-18, restricted cash and restricted cash equivalents are included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statements of cash flows. This ASU should be applied retrospectively and becomes effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, but early adoption is permitted. As a result of this update, restricted cash will be included within cash and cash equivalents on the statements of consolidated cash flows. The Group expects the adoption of this ASU will impact its cash flow statements to the extent of restricted cash. The balance of restricted cash of the Group are RMB500 and RMB481,348 as of December 31, 2016 and 2017, respectively. In January 2017, the FASB issued ASU No. 2017-01, which clarifies the framework for determining whether an integrated set of assets and activities meets the definition of a business. The revised framework establishes a screen for determining whether an integrated set of assets and activities is a business and narrows the definition of a business, which is expected to result in fewer transactions being accounted for as business combinations. Acquisitions of integrated sets of assets and activities that do not meet the definition of a business are accounted for as asset acquisitions. This ASU is effective for fiscal years, and for interim periods within those fiscal years beginning after December 15, 2017. The Group does not expect the adoption of this ASU will have a significant impact on the consolidated financial statements. In January, 2017, the FASB issued ASU 2017-04, which removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. As a result, under the ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, the ASU clarifies the requirements for excluding and allocating foreign currency translation adjustments to reporting units in connection with an entity’s testing of reporting units for goodwill impairment. The ASU also clarifies that an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. For public business entities, the ASU is effective prospectively for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Group is in the process of evaluating the impact on the consolidated financial statements. In May, 2017, the FASB issued ASU 2017-09, which provides guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. The statement is effective for annual periods beginning after December 15, 2017. Early adoption is permitted in any interim or annual period for which financial statements have not yet been issued. The Group does not expect the adoption of this ASU will have significant impact on the consolidated financial statements. |
Translation into United States Dollars | Translation into United States Dollars The financial statements of the Group are stated in RMB. Translations of amounts from RMB into United States dollars are solely for the convenience of the reader and were calculated at the rate of US$1 = RMB6.5063, on December 31, 2017, as set forth in H.10 statistical release of the Federal Reserve Board. The translation is not intended to imply that the RMB amounts could have been, or could be, converted, realized or settled into United States dollars at that rate on December 31, 2017, or at any other rate. |
SUMMARY OF PRINCIPAL ACCOUNTI34
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES | |
Schedule of expected useful lives of property and equipment | Leasehold improvements Shorter of the lease term or their estimated useful lives Buildings 20-40 years Furniture, fixtures and equipment 3-10 years Motor vehicles 5 years |
Schedule of information about inputs into the fair value measurements of the assets and liabilities that are measured at fair value on a recurring basis in periods subsequent to their initial recognition | Fair Value Measurements at Reporting Date Using Years Ended Description Fair Value Quoted Prices in Active Significant Other Significant 2016 Long-term available-for-sale securities 2017 Short-term trading securities 2017 Long-term available-for-sale securities |
Schedule of assets measured at fair value on a non-recurring basis | Fair Value Measurements at Reporting Date Using Years Ended Description Fair Value for Quoted Prices Significant Significant Total 2015 Property and equipment 2015 Goodwill — — 2016 Property and equipment 2016 Long-term investments — — 2017 Property and equipment |
Schedule of share-based compensation expense recognized | Years Ended December 31, 2015 2016 2017 Hotel operating costs Selling and marketing expenses General and administrative expenses Total |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Accor | |
Acquisitions | |
Summary of pro forma information | Year Ended December 31, Year Ended December 31, Pro forma net revenue Pro forma net income |
Summary of fair values of the assets acquired and liabilities assumed | 2016 Amortization Period Current assets Property and equipment 5-30 years Favorable leases remaining lease terms Master brand agreement Land use rights remaining contracts terms Long-term investments Goodwill Other noncurrent assets Current liabilities ) Deferred tax liabilities ) Total |
Crystal Orange | |
Acquisitions | |
Summary of pro forma information | Years Ended December 31, 2016 2017 Pro forma net revenue Pro forma net income |
Summary of fair values of the assets acquired and liabilities assumed | 2017 Amortization Period Current assets Property and equipment 3-20 years Favorable leases remaining lease terms Franchise agreement remaining contract terms Brand Name indefinite life Goodwill Other noncurrent assets Current liabilities ) Noncurrent liabilities ) Deferred tax liabilities ) Noncontrolling interest ) Total |
Individual hotels acquired | |
Acquisitions | |
Summary of fair values of the assets acquired and liabilities assumed | 2015 2016 2017 Amortization Period Current assets Property and equipment 5-10 years Favorable leases remaining lease terms Deferred tax assets — — Franchise agreements — — remaining contracts terms Goodwill — — Other noncurrent assets — — Current liabilities ) ) ) Deferred tax liabilities ) ) ) Noncontrolling interest ) — — Total — |
SHORT-TERM INVESTMENTS MEASUR36
SHORT-TERM INVESTMENTS MEASURED AT FAIR VALUE (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
SHORT-TERM INVESTMENTS MEASURED AT FAIR VALUE | |
Schedule of short-term investments measured at fair value | As of December 31, 2016 2017 Hotel Group A — |
LOAN RECEIVABLES (Tables)
LOAN RECEIVABLES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
LOAN RECEIVABLES | |
Schedule of current and non-current portion of loans receivables | As of December 31, 2016 2017 Loan receivables, current portion Loan receivables from franchisees Loan receivables from other entities Total Loan receivables, non-current portion Loan receivables from franchisees Loan receivables from other entities — Total |
PROPERTY AND EQUIPMENT, NET (Ta
PROPERTY AND EQUIPMENT, NET (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
PROPERTY AND EQUIPMENT, NET | |
Schedule of property and equipment, net | As of December 31, 2016 2017 Cost: Buildings Leasehold improvements Furniture, fixtures and equipment Motor vehicles Less: Accumulated depreciation ) ) Construction in progress Property and equipment, net |
INTANGIBLE ASSETS, NET AND UN39
INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE | |
Schedule of intangible assets with indefinite life | As of December 31, 2016 2017 Intangible assets with indefinite life: Brand name (Note 3) Master brand agreement (Note 3) |
Schedule of intangible assets with definite life | Intangible assets with definite life: Franchise agreements Non-compete agreement Favorable lease agreements Purchased software Total Less: Accumulated amortization ) ) Total |
Schedule of unfavorable lease | As of December 31, 2016 2017 Unfavorable lease agreements Less: Accumulated amortization ) ) Unfavorable lease agreements, net |
Schedule of annual estimated amortization expense for intangible assets and unfavorable lease excluding brand name and master brand agreement | Amortization for Amortization for Net Amortization 2018 ) 2019 ) 2020 ) 2021 ) 2022 ) Thereafter ) Total ) |
LAND USE RIGHTS (Tables)
LAND USE RIGHTS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
LAND USE RIGHTS | |
Schedule of land use rights | As of December 31, 2016 2017 Land use rights (Note 3) Less: Accumulated amortization ) ) Total |
LONG-TERM INVESTMENTS (Tables)
LONG-TERM INVESTMENTS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
LONG-TERM INVESTMENTS | |
Schedule of long-term investments | As of December 31, 2016 2017 Ownership% Amount Ownership% Amount Available-for-sale securities: Quanjude Tang Palace — Banyan Tree — Hotel Group B — Cjia CREATER — Cost-method investments: UBOX/BJ UBOX % % BJ GOOAGOO/GOOAGOO % % Founder Service % % Qingpu % % Mobike — — Less than 1 % Blossom Hill — — % OYO — — % Other investments Equity-method investments: Sheen Star % % Distrii % % AAPC LUB % % China Young % % CREATER % % Hitone — — % Hanmo — — % Other investments Total |
GOODWILL (Tables)
GOODWILL (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
GOODWILL | |
Schedule of changes in the carrying amount of goodwill | Gross Accumulated Net Balance at January 1, 2015 ) Increase in goodwill related to acquisitions — Impairment losses recognized — ) ) Balance at December 31, 2015 ) Increase in goodwill related to acquisitions — Balance at December 31, 2016 ) Increase in goodwill related to acquisitions — Balance at December 31, 2017 ) |
DEBT (Tables)
DEBT (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
DEBT | |
Schedule of short-term and long-term debt | As of December 31, 2016 2017 Short-term debt: Long-term bank borrowings, current portion — Short-term bank borrowings Total Long-term debt: Long-term bank borrowings, non-current portion — Convertible senior notes — Total — |
ACCRUED EXPENSES AND OTHER CU44
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |
Schedule of accrued expenses and other current liabilities | As of December 31, 2016 2017 Payable for business acquisitions Accrual for customer loyalty program Payable to noncontrolling interest holders Payable to franchisees Other payables Accrued rental Accrued utilities Deferred rent, current Other accrued expenses Total |
HOTEL OPERATING COSTS (Tables)
HOTEL OPERATING COSTS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
HOTEL OPERATING COSTS | |
Schedule of hotel operating costs | Years Ended December 31, 2015 2016 2017 Rents Utilities Personnel costs Depreciation and amortization Consumable, food and beverage Others Total |
PRE-OPENING EXPENSES (Tables)
PRE-OPENING EXPENSES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
PRE-OPENING EXPENSES | |
Schedule of pre-opening expenses incurred during the hotel pre-opening period | Years Ended December 31, 2015 2016 2017 Rents Personnel costs Others Total |
SHARE-BASED COMPENSATION (Table
SHARE-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
SHARE-BASED COMPENSATION | |
Summary of significant assumptions used for estimating fair value of stock options | 2015 Suboptimal exercise factor 4.16 Risk-free interest rate 1.49 to 1.74% Volatility 38.88 to 39.25% Dividend yield — Life of option 6 years |
Summary of the Group's share option activity under the option plans | Number of Weighted Average Weighted Average Aggregate Intrinsic US$ Years US$’000 Share options outstanding at January 1, 2017 Forfeited ) Exercised ) Share options outstanding at December 31, 2017 Share options vested or expected to vest at December 31, 2017 Share options exercisable at December 31, 2017 |
Summary of the Group's nonvested restricted stock activity | Number of Restricted Weighted Average Grant US$ Nonvested restricted stocks outstanding at January 1, 2017 Granted Forfeited ) Vested ) Adjusted Nonvested restricted stocks outstanding at December 31, 2017 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
EARNINGS PER SHARE | |
Schedule of computation of basic and diluted earnings per share | Years Ended December 31, 2015 2016 2017 Net income attributable to ordinary shareholders — basic Eliminate the dilutive effect of interest expense of convertible senior notes — — Net income attributable to ordinary shareholders — diluted Weighted average ordinary shares outstanding — basic Incremental weighted-average ordinary shares from assumed exercise of share options and nonvested restricted stocks using the treasury stock method Dilutive effect of convertible senior notes — — Weighted average ordinary shares outstanding — diluted Basic earnings per share Diluted earnings per share |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
INCOME TAXES | |
Schedule of tax expense (benefit) | Years Ended December 31, 2015 2016 2017 Current Tax Deferred Tax ) ) Total |
Schedule of a reconciliation between the effective income tax rate and PRC statutory income tax rate | Years Ended December 31, 2015 2016 2017 PRC statutory tax rate % % % Tax effect of other expenses that are not deductible in determining taxable profit % % % Effect of different tax rate of group entities operating in other jurisdictions — )% % Effect of change in valuation allowance % % — Effect of tax holiday )% )% )% Effect of cash dividends % % )% Effect of disposal of subsidiary — )% — Effect of excess tax benefit of rewards — — )% Effective tax rate % % % |
Schedule of the aggregate amount and per share effect of the tax holidays | Years Ended December 31, 2015 2016 2017 Aggregate amount Per share effect—basic Per share effect—diluted |
Schedule of the principal components of the Group's deferred income tax assets and liabilities | As of December 31, 2016 2017 Deferred tax assets: Net loss carryforward Deferred revenue Deferred rent Long-term assets Bad debt provision Accrual for customer loyalty program Accrued payroll Other accrued expenses Share-based compensation Others Valuation allowance ) ) Total deferred tax assets Deferred tax liabilities: Favorable lease, building and land use rights-fair value adjustment Capitalized interest Unrealized gain for investment Others Total deferred tax liabilities |
Schedule of unrecognized tax benefits | Years Ended December 31, 2015 2016 2017 Balance at January 1 Addition for tax positions Balance at December 31 |
RELATED PARTY TRANSACTIONS AN50
RELATED PARTY TRANSACTIONS AND BALANCES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
RELATED PARTY TRANSACTIONS AND BALANCES | |
Schedule of related parties | Related Party Nature of the Party Relationship with the Group Ctrip.com International, Ltd. (“Ctrip”) Online travel services provider Mr. Qi Ji is a director Sheen Star Group Limited (“Sheen Star”) Investment holding company Equity method investee of the Group, controlled by Mr. Qi Ji Accor Hotels (“Accor”) Hotel Group Shareholder of the Group Chengjia (Shanghai) Apartment Management Co., Ltd. (“Cjia”) Apartment Management Group Equity method investee of the Group Shanghai CREATER Industrial Co., Ltd. (“CREATER”) Staged office space company Equity method investee of the Group |
Schedule of amounts due from related parties | As of December 31, 2016 2017 Sheen Star Accor Cjia Ctrip CREATER — Others Total |
Schedule of amounts due to related party | As of December 31, 2016 2017 Ctrip Accor Others Total |
Schedule of significant related party transactions | Years Ended December 31, 2015 2016 2017 Commission expenses to Ctrip Brand use fee, reservation fee and other related service fee to Accor — Marketing and training fee from Ctrip — Service fee from Accor — Goods sold and service provided to Cjia — Interest income from Sheen Star — — Loan payment to Sheen Star — — Loan payment to Cjia — — Loan payment to CREATER — — |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
COMMITMENTS AND CONTINGENCIES | |
Schedule of future minimum lease payments under operating lease agreements | Future minimum lease payments under non-cancellable operating lease agreements at December 31, 2017 were as follows: Year Ending December 31, 2018 2019 2020 2021 2022 Thereafter Total |
ORGANIZATION AND PRINCIPAL AC52
ORGANIZATION AND PRINCIPAL ACTIVITIES (Details) - item | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Leased and owned hotels | ||
Organization and presentation activities | ||
Number of hotels | 671 | 624 |
Manachised hotels | ||
Organization and presentation activities | ||
Number of hotels | 2,874 | 2,471 |
Franchised hotels | ||
Organization and presentation activities | ||
Number of hotels | 201 | 174 |
Minimum | ||
Organization and presentation activities | ||
Term of franchise and management agreement | 8 years | |
Minimum | Leased and owned hotels | ||
Organization and presentation activities | ||
Period of rental holiday | 2 months | |
Fixed escalation in rent (as a percent) | 3.00% | |
Period before rent escalations | 3 years | |
Maximum | ||
Organization and presentation activities | ||
Term of franchise and management agreement | 10 years | |
Maximum | Leased and owned hotels | ||
Organization and presentation activities | ||
Period of rental holiday | 6 months | |
Fixed escalation in rent (as a percent) | 5.00% | |
Period before rent escalations | 5 years |
SUMMARY OF PRINCIPAL ACCOUNTI53
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES - Variable Interest Entities (Details) ¥ in Thousands | 12 Months Ended |
Dec. 31, 2017CNY (¥) | |
TJ Mengguang | |
Variable Interest Entities | |
Total of registered capital and PRC statutory reserves | ¥ 12,059 |
Cash and cash equivalents | 21,353 |
Other current assets | 3,095 |
Liabilities | 2,585 |
Deferred revenue | 1,371 |
Accrued expense and other current liabilities | 1,032 |
Net revenue | 534 |
Cost of revenues | 653 |
NB Hongting | |
Variable Interest Entities | |
Cash and cash equivalents | 8,816 |
Long term investment | 25,000 |
Liabilities | 461 |
Net loss due to some pre-operation expenses | ¥ 398 |
SUMMARY OF PRINCIPAL ACCOUNTI54
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES - Investments, Loan receivables and Inventories (Details) - CNY (¥) ¥ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Investments | |||
Impairment loss | ¥ 0 | ¥ 3,208 | ¥ 0 |
Loan receivables | |||
Valuation allowance for uncollectible loans | ¥ 0 | ¥ 0 | ¥ 0 |
Inventories | |||
Estimated useful life of small appliances and bedding | 1 year |
SUMMARY OF PRINCIPAL ACCOUNTI55
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES - Property and equipment, net (Details) | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Minimum | |||
Property and equipment, net | |||
Property and equipment, estimated useful life | 5 years | 5 years | 5 years |
Maximum | |||
Property and equipment, net | |||
Property and equipment, estimated useful life | 10 years | 10 years | 10 years |
Leasehold improvements | |||
Property and equipment, net | |||
Property and equipment, estimated useful life | Shorter of the lease term or their estimated useful lives | ||
Buildings | Minimum | |||
Property and equipment, net | |||
Property and equipment, estimated useful life | 20 years | ||
Buildings | Maximum | |||
Property and equipment, net | |||
Property and equipment, estimated useful life | 40 years | ||
Furniture, fixtures and equipment | Minimum | |||
Property and equipment, net | |||
Property and equipment, estimated useful life | 3 years | ||
Furniture, fixtures and equipment | Maximum | |||
Property and equipment, net | |||
Property and equipment, estimated useful life | 10 years | ||
Motor vehicles | |||
Property and equipment, net | |||
Property and equipment, estimated useful life | 5 years |
SUMMARY OF PRINCIPAL ACCOUNTI56
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Details) ¥ in Thousands, $ in Thousands | 12 Months Ended | |||||
Dec. 31, 2017CNY (¥)segmentitem | Dec. 31, 2016CNY (¥) | Dec. 31, 2015CNY (¥) | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | May 31, 2016 | |
Accounting policies | ||||||
Long-lived asset impairment loss | ¥ 169,213 | ¥ 150,533 | ¥ 93,163 | |||
Number of reporting units | item | 1 | |||||
Goodwill Impairment Loss | ¥ 0 | 0 | 2,445 | |||
Estimated liability accruals under customer loyalty program | 121,066 | ¥ 156,092 | ||||
Hotel manager fees recognized as revenue | 371,625 | 321,346 | 261,743 | |||
Revenue recognized from customer loyalty program | 160,200 | 145,459 | 130,644 | |||
VAT (as a percent) | 6.00% | |||||
Advertising related expenses | 90,578 | 64,666 | 47,971 | |||
Unrestricted government subsidies from local governmental agencies | 55,389 | 83,498 | 28,188 | |||
Deferred rent current | 37,648 | 49,857 | ||||
Deferred rent long-term | 1,023,843 | $ 212,177 | ¥ 1,380,484 | |||
Interest cost incurred | 87,320 | 11,056 | 5,383 | |||
Interest cost capitalized | ¥ 0 | ¥ 0 | ¥ 1,529 | |||
Number of operating segments | segment | 1 | |||||
Master brand agreement | ||||||
Accounting policies | ||||||
Initial term | 70 years | |||||
Minimum | ||||||
Accounting policies | ||||||
Estimated customer loyalty program membership duration | 2 years | |||||
Minimum | Land use rights | ||||||
Accounting policies | ||||||
Remaining contractual term | 30 years | |||||
Maximum | ||||||
Accounting policies | ||||||
Redemption period for points earned by members on paid stays | 2 years | |||||
Estimated customer loyalty program membership duration | 5 years | |||||
Maximum | Land use rights | ||||||
Accounting policies | ||||||
Remaining contractual term | 50 years |
SUMMARY OF PRINCIPAL ACCOUNTI57
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES - Fair value (Details) ¥ in Thousands, $ in Thousands | 12 Months Ended | ||||
Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015CNY (¥) | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | |
Fair value | |||||
Cost-method investments | ¥ 172,571 | ¥ 355,717 | |||
Short-term trading securities | $ 19,967 | 129,911 | |||
Long-lived asset impairment loss | ¥ 169,213 | 150,533 | ¥ 93,163 | ||
Goodwill impairment loss | 0 | 0 | 2,445 | ||
Long-term investments, impairment loss | ¥ 0 | ¥ 3,208 | ¥ 0 | ||
Revenue growth rate used for level 3 measurement (as a percent) | 4.00% | 4.00% | 4.00% | ||
Discount rate used for level 3 measurement (as a percent) | 20.00% | 20.00% | 20.00% | ||
Recurring basis | |||||
Fair value | |||||
Short-term trading securities | 129,911 | ||||
Long-term available-for-sale securities | ¥ 247,085 | 1,253,786 | |||
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | |||||
Fair value | |||||
Short-term trading securities | 129,911 | ||||
Long-term available-for-sale securities | 204,945 | 907,716 | |||
Recurring basis | Significant Other Observable Inputs (Level 2) | |||||
Fair value | |||||
Long-term available-for-sale securities | 42,140 | 346,070 | |||
Non-recurring basis | |||||
Fair value | |||||
Property and equipment | 20,706 | ¥ 21,879 | 51,750 | ||
Non-recurring basis | Carrying value | |||||
Fair value | |||||
Property and equipment | 171,239 | 115,042 | 220,963 | ||
Non-recurring basis | Significant Unobservable Inputs (Level 3) | |||||
Fair value | |||||
Property and equipment | ¥ 20,706 | ¥ 21,879 | ¥ 51,750 |
SUMMARY OF PRINCIPAL ACCOUNTI58
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES - Share-based compensation and Treasury shares (Details) - CNY (¥) ¥ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Share-based compensation | |||
Recognized share-based compensation expenses | ¥ 66,367 | ¥ 55,436 | ¥ 52,535 |
Treasury shares | |||
Repurchase of ordinary shares (in shares) | 3,096,764 | 3,096,764 | |
Cash consideration paid for ordinary shares repurchased | 107,331 | ||
Hotel operating costs | |||
Share-based compensation | |||
Recognized share-based compensation expenses | ¥ 19,725 | ¥ 13,603 | 8,835 |
Selling and marketing expenses | |||
Share-based compensation | |||
Recognized share-based compensation expenses | 1,530 | 811 | 907 |
General and administrative expenses | |||
Share-based compensation | |||
Recognized share-based compensation expenses | ¥ 45,112 | ¥ 41,022 | ¥ 42,793 |
SUMMARY OF PRINCIPAL ACCOUNTI59
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES - New Accounting Pronouncements Recently Adopted or Not Yet Adopted (Details) ¥ in Thousands, $ in Thousands | 12 Months Ended | |||||
Dec. 31, 2017USD ($)¥ / $ | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015CNY (¥) | Jan. 01, 2018CNY (¥) | Dec. 31, 2017CNY (¥)¥ / $ | |
Recently issued accounting pronouncements | ||||||
Income tax expense | $ 55,325 | ¥ 359,958 | ¥ 287,120 | ¥ 196,529 | ||
Franchisor Revenue | 274,605 | 1,786,660 | 1,411,156 | 1,123,979 | ||
Net revenue | 1,255,736 | 8,170,196 | 6,538,631 | 5,774,624 | ||
Retained earnings | 423,238 | 1,812,174 | ¥ 2,753,715 | |||
Accumulated other comprehensive income (loss) | 25,816 | (4,503) | 167,965 | |||
Future minimum operating lease commitments | 25,087,674 | |||||
Restricted cash | $ 73,982 | 500 | ¥ 481,348 | |||
Translation into United States Dollars | ||||||
Foreign exchange rate used to translate amounts denominated in RMB to US dollar | ¥ / $ | 6.5063 | 6.5063 | ||||
ASU 2016-09 | Adjustment | ||||||
Recently issued accounting pronouncements | ||||||
Income tax expense | (46,235) | |||||
Excess tax benefits from equity-based compensation presented as an operating activity | 46,235 | 18,645 | 12,838 | |||
Excess tax benefits from equity-based compensation reclassified from financing activity to operating activities | ¥ (18,645) | ¥ (12,838) | ||||
ASU 2014-09 | Proforma adjustment | ||||||
Recently issued accounting pronouncements | ||||||
Franchisor Revenue | (17,003) | |||||
Net revenue | 68,607 | |||||
Operating expenses | ¥ 63,469 | |||||
ASU 2016-01 | Proforma adjustment | ||||||
Recently issued accounting pronouncements | ||||||
Retained earnings | ¥ 40,640 | |||||
Accumulated other comprehensive income (loss) | ¥ (40,640) |
ACQUISITIONS - AccorHotels (Det
ACQUISITIONS - AccorHotels (Details) ¥ in Thousands, $ in Thousands | 1 Months Ended | 12 Months Ended | |||||
Jan. 31, 2016CNY (¥)shares | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2014CNY (¥) | |
Acquisitions | |||||||
Issuance of ordinary shares for acquisition of AccorHotels (Note 3) | ¥ 1,143,521 | ||||||
Net revenue | $ 1,255,736 | ¥ 8,170,196 | 6,538,631 | ¥ 5,774,624 | |||
Net income | 190,155 | ¥ 1,237,202 | 804,615 | 436,600 | |||
Fair values of assets acquired and liabilities assumed: | |||||||
Goodwill | $ 348,087 | ¥ 171,504 | ¥ 108,344 | ¥ 2,264,758 | ¥ 64,654 | ||
Minimum | |||||||
Fair values of assets acquired and liabilities assumed: | |||||||
Amortization period of property and equipment | 5 years | 5 years | 5 years | 5 years | |||
Maximum | |||||||
Fair values of assets acquired and liabilities assumed: | |||||||
Amortization period of property and equipment | 10 years | 10 years | 10 years | 10 years | |||
AAPC LUB | |||||||
Acquisitions | |||||||
Noncontrolling interest (as a percent) | 28.00% | ||||||
Accor | |||||||
Acquisitions | |||||||
Percentage of ownership interest acquired | 100.00% | ||||||
Issuance of ordinary shares for acquisition of AccorHotels (Note 3) | ¥ 1,143,521 | ||||||
Cash consideration | ¥ 120,439 | ||||||
Number of shares issued as share consideration | shares | 24,895,543 | ||||||
Net revenue | ¥ 152,595 | ||||||
Net income | 64,047 | ||||||
Business acquisition, pro forma information | |||||||
Pro forma net revenue | 6,548,083 | ¥ 5,955,538 | |||||
Pro forma net income | 806,921 | ¥ 478,770 | |||||
Fair values of assets acquired and liabilities assumed: | |||||||
Current assets | 207,396 | ||||||
Property and equipment | 311,045 | ||||||
Long-term investments | 417,604 | ||||||
Goodwill | 63,160 | ||||||
Other noncurrent assets | 1,664 | ||||||
Current liabilities | (38,634) | ||||||
Deferred tax liabilities | (42,952) | ||||||
Total | ¥ 1,263,960 | ||||||
Accor | Minimum | |||||||
Fair values of assets acquired and liabilities assumed: | |||||||
Amortization period of property and equipment | 5 years | ||||||
Accor | Maximum | |||||||
Fair values of assets acquired and liabilities assumed: | |||||||
Amortization period of property and equipment | 30 years | ||||||
Accor | Master brand agreement | |||||||
Fair values of assets acquired and liabilities assumed: | |||||||
Intangible assets | ¥ 192,000 | ||||||
Accor | Favorable lease agreements | |||||||
Fair values of assets acquired and liabilities assumed: | |||||||
Intangible assets | 3,009 | ||||||
Accor | Land use rights | |||||||
Fair values of assets acquired and liabilities assumed: | |||||||
Intangible assets | ¥ 149,668 |
ACQUISITIONS - Crystal Orange (
ACQUISITIONS - Crystal Orange (Details) ¥ in Thousands, $ in Thousands | May 25, 2017CNY (¥) | Dec. 31, 2017USD ($)segmentitem | Dec. 31, 2017CNY (¥)segmentitem | Dec. 31, 2016CNY (¥) | Dec. 31, 2015CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2014CNY (¥) |
Acquisitions | |||||||
Net revenue | $ 1,255,736 | ¥ 8,170,196 | ¥ 6,538,631 | ¥ 5,774,624 | |||
Net income | 190,155 | ¥ 1,237,202 | 804,615 | 436,600 | |||
Summary of the fair values of the assets acquired and liabilities assumed | |||||||
Goodwill | $ 348,087 | ¥ 171,504 | ¥ 108,344 | ¥ 2,264,758 | ¥ 64,654 | ||
Number of operating segments | segment | 1 | 1 | |||||
Number of reporting units | item | 1 | 1 | |||||
Minimum | |||||||
Summary of the fair values of the assets acquired and liabilities assumed | |||||||
Amortization period of property and equipment | 5 years | 5 years | 5 years | 5 years | |||
Maximum | |||||||
Summary of the fair values of the assets acquired and liabilities assumed | |||||||
Amortization period of property and equipment | 10 years | 10 years | 10 years | 10 years | |||
Crystal Orange | |||||||
Acquisitions | |||||||
Percentage of ownership interest acquired | 100.00% | ||||||
Cash consideration | ¥ 3,760,000 | ||||||
Net revenue | ¥ 776,922 | ||||||
Net income | 100,197 | ||||||
Business acquisition, pro forma information | |||||||
Pro forma net revenue | 8,571,372 | ¥ 7,473,851 | |||||
Pro forma net income | ¥ 1,275,788 | ¥ 858,012 | |||||
Summary of the fair values of the assets acquired and liabilities assumed | |||||||
Current assets | 137,314 | ||||||
Property and equipment | 842,102 | ||||||
Goodwill | 2,093,254 | ||||||
Other noncurrent assets | 130,813 | ||||||
Current liabilities | (222,205) | ||||||
Noncurrent liabilities | (179,985) | ||||||
Deferred tax liabilities | (322,797) | ||||||
Noncontrolling interest | (4,206) | ||||||
Total | 3,765,478 | ||||||
Number of reporting units | item | 1 | 1 | |||||
Number of reporting unit goodwill allocated to | item | 1 | 1 | |||||
Business combination cost related to consultation services agreements and option cancellation agreement | ¥ 256,300 | ||||||
Transaction costs | 46,000 | ||||||
Crystal Orange | Minimum | |||||||
Summary of the fair values of the assets acquired and liabilities assumed | |||||||
Amortization period of property and equipment | 3 years | 3 years | |||||
Crystal Orange | Maximum | |||||||
Summary of the fair values of the assets acquired and liabilities assumed | |||||||
Amortization period of property and equipment | 20 years | 20 years | |||||
Crystal Orange | Favorable lease agreements | |||||||
Summary of the fair values of the assets acquired and liabilities assumed | |||||||
Intangible assets | 90,704 | ||||||
Crystal Orange | Franchise agreement | |||||||
Summary of the fair values of the assets acquired and liabilities assumed | |||||||
Intangible assets | 58,691 | ||||||
Brand name | Crystal Orange | |||||||
Summary of the fair values of the assets acquired and liabilities assumed | |||||||
Intangible assets | ¥ 1,141,793 |
ACQUISITIONS - Hotels (Details)
ACQUISITIONS - Hotels (Details) ¥ in Thousands, $ in Thousands | 12 Months Ended | ||||
Dec. 31, 2017USD ($)item | Dec. 31, 2016CNY (¥)item | Dec. 31, 2015CNY (¥)item | Dec. 31, 2017CNY (¥) | Dec. 31, 2014CNY (¥) | |
Acquisitions | |||||
Goodwill | $ 348,087 | ¥ 171,504 | ¥ 108,344 | ¥ 2,264,758 | ¥ 64,654 |
Minimum | |||||
Acquisitions | |||||
Amortization period of property and equipment | 5 years | 5 years | 5 years | ||
Maximum | |||||
Acquisitions | |||||
Amortization period of property and equipment | 10 years | 10 years | 10 years | ||
One hotel chain and two individual hotels acquired in 2015 | |||||
Acquisitions | |||||
Current assets | ¥ 3,382 | ||||
Property and equipment | 74,222 | ||||
Deferred tax assets | 515 | ||||
Goodwill | 46,135 | ||||
Other noncurrent assets | 663 | ||||
Current liabilities | (22,864) | ||||
Deferred tax liabilities | (11,146) | ||||
Noncontrolling interest | (8,264) | ||||
Total | 127,226 | ||||
One hotel chain and two individual hotels acquired in 2015 | Favorable lease agreements | |||||
Acquisitions | |||||
Intangible assets | 41,283 | ||||
One hotel chain and two individual hotels acquired in 2015 | Franchise agreement | |||||
Acquisitions | |||||
Intangible assets | ¥ 3,300 | ||||
One hotel chain and two individual hotels acquired in 2015 | Hotel chain | |||||
Acquisitions | |||||
Number of acquisitions | item | 1 | ||||
Number of hotels | item | 13 | ||||
One hotel chain and two individual hotels acquired in 2015 | Individual hotel | |||||
Acquisitions | |||||
Number of acquisitions | item | 2 | ||||
Two individual hotels acquired in 2016 | |||||
Acquisitions | |||||
Current assets | ¥ 5,330 | ||||
Property and equipment | 28,412 | ||||
Current liabilities | (34,495) | ||||
Deferred tax liabilities | (1,251) | ||||
Total | 3,000 | ||||
Two individual hotels acquired in 2016 | Favorable lease agreements | |||||
Acquisitions | |||||
Intangible assets | ¥ 5,004 | ||||
Two individual hotels acquired in 2016 | Individual hotel | |||||
Acquisitions | |||||
Number of acquisitions | item | 2 | ||||
Two individual hotels acquired in 2017 | |||||
Acquisitions | |||||
Current assets | 8,018 | ||||
Property and equipment | 33,965 | ||||
Current liabilities | (65,614) | ||||
Deferred tax liabilities | (7,877) | ||||
Total | 0 | ||||
Two individual hotels acquired in 2017 | Favorable lease agreements | |||||
Acquisitions | |||||
Intangible assets | ¥ 31,508 | ||||
Two individual hotels acquired in 2017 | Individual hotel | |||||
Acquisitions | |||||
Number of acquisitions | item | 2 |
SHORT-TERM INVESTMENTS MEASUR63
SHORT-TERM INVESTMENTS MEASURED AT FAIR VALUE (Details) - Dec. 31, 2017 ¥ in Thousands, $ in Thousands | USD ($) | CNY (¥) |
Investment holdings | ||
Short-term investments measured at fair value | $ 19,967 | ¥ 129,911 |
Hotel Group A | ||
Investment holdings | ||
Short-term investments measured at fair value | ¥ 129,911 |
SHORT-TERM INVESTMENTS MEASUR64
SHORT-TERM INVESTMENTS MEASURED AT FAIR VALUE - Loans and Equity Investments (Details) ¥ in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2017USD ($)shares | Dec. 31, 2017CNY (¥)shares | Dec. 31, 2016CNY (¥)shares | Dec. 31, 2015CNY (¥)shares | |
Investment holdings | ||||
Classification of the accumulated unrealized gain from other comprehensive income to other income | $ 812 | ¥ 5,282 | ¥ 67,921 | |
HMIN | ||||
Investment holdings | ||||
American depositary shares acquired | shares | 2,282,951 | |||
Consideration | ¥ 434,811 | |||
Percentage of equity interest acquired | 5.00% | |||
American depositary shares sold | shares | 2,282,951 | |||
Classification of the accumulated unrealized gain from other comprehensive income to other income | ¥ 67,921 | |||
Hotel Group A | ||||
Investment holdings | ||||
Ordinary shares acquired | shares | 8,756,000 | 8,756,000 | ||
Consideration for purchase of shares | ¥ 95,802 | |||
Trading securities at fair value | 129,911 | |||
Amount of increase in fair value recorded to other income | ¥ 35,540 | |||
Hotel Group A | Maximum | ||||
Investment holdings | ||||
Percentage of equity interest acquired | 1.00% |
LOAN RECEIVABLES (Details)
LOAN RECEIVABLES (Details) ¥ in Thousands, $ in Thousands | 12 Months Ended | ||||
Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015CNY (¥) | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | |
LOAN RECEIVABLES | |||||
Loan receivables, current portion | ¥ 22,410 | $ 58,494 | ¥ 380,580 | ||
Loan receivables, non-current portion | 7,269 | $ 6,506 | 42,330 | ||
Franchisees | |||||
LOAN RECEIVABLES | |||||
Loan receivables, current portion | 14,649 | 29,754 | |||
Loan receivables, non-current portion | 7,269 | 31,534 | |||
Other entities | |||||
LOAN RECEIVABLES | |||||
Loan receivables, current portion | 7,761 | 350,826 | |||
Loan receivables, non-current portion | ¥ 10,796 | ||||
Loans receivables | Franchisees | |||||
LOAN RECEIVABLES | |||||
Interest income | ¥ 2,608 | 2,383 | ¥ 2,110 | ||
Loans receivables | Franchisees | Minimum | |||||
LOAN RECEIVABLES | |||||
Term of loan agreement | 2 years | ||||
Interest rate | 8.00% | 8.00% | |||
Loans receivables | Franchisees | Maximum | |||||
LOAN RECEIVABLES | |||||
Term of loan agreement | 3 years | ||||
Interest rate | 8.50% | 8.50% | |||
Loans receivables | Other entities | |||||
LOAN RECEIVABLES | |||||
Interest income | ¥ 8,471 | ¥ 1,186 | ¥ 2,273 | ||
Loans receivables | Other entities | Minimum | |||||
LOAN RECEIVABLES | |||||
Interest rate | 6.00% | 6.00% | |||
Loans receivables | Other entities | Maximum | |||||
LOAN RECEIVABLES | |||||
Interest rate | 12.00% | 12.00% |
PROPERTY AND EQUIPMENT, NET - S
PROPERTY AND EQUIPMENT, NET - Schedule (Details) ¥ in Thousands, $ in Thousands | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) |
Cost: | |||
Property and equipment, gross | ¥ 7,734,639 | ¥ 6,745,455 | |
Less: Accumulated depreciation | (3,706,856) | (3,196,496) | |
Property and equipment net excluding construction in process | 4,027,783 | 3,548,959 | |
Construction in progress | 495,095 | 161,509 | |
Property and equipment, net | $ 695,154 | 4,522,878 | 3,710,468 |
Buildings | |||
Cost: | |||
Property and equipment, gross | 247,406 | 255,646 | |
Leasehold improvements | |||
Cost: | |||
Property and equipment, gross | 6,452,472 | 5,563,815 | |
Furniture, fixtures and equipment | |||
Cost: | |||
Property and equipment, gross | 1,033,941 | 925,174 | |
Motor vehicles | |||
Cost: | |||
Property and equipment, gross | ¥ 820 | ¥ 820 |
PROPERTY AND EQUIPMENT, NET - N
PROPERTY AND EQUIPMENT, NET - Narrative (Details) ¥ in Thousands | 12 Months Ended | ||
Dec. 31, 2017CNY (¥)item | Dec. 31, 2016CNY (¥)item | Dec. 31, 2015CNY (¥)item | |
PROPERTY AND EQUIPMENT, NET | |||
Depreciation expense | ¥ 752,960 | ¥ 673,784 | ¥ 648,277 |
Number of hotels demolished | item | 3 | 2 | 1 |
Property and equipment written off | ¥ 2,829 | ¥ 9,905 | ¥ 2,301 |
Gain (loss) on demolition of property and equipment | ¥ (868) | ¥ (7,205) | ¥ 5,519 |
Number of leased hotels likely to be demolished | item | 7 | ||
Aggregate carrying amount of property and equipment at the leased hotels likely to be demolished | ¥ 21,792 | ||
Impairment loss | ¥ 0 |
INTANGIBLE ASSETS, NET AND UN68
INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE - Schedule (Details) ¥ in Thousands, $ in Thousands | 12 Months Ended | ||||
Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015CNY (¥) | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | |
Intangible assets, net | |||||
Intangible assets, gross | ¥ 422,975 | ¥ 1,752,835 | |||
Less: Accumulated amortization | (80,281) | (108,863) | |||
Total | 342,694 | $ 252,674 | 1,643,972 | ||
Unfavorable lease | |||||
Unfavorable lease agreements | 3,924 | 3,924 | |||
Less: Accumulated amortization | (3,102) | (3,232) | |||
Unfavorable lease agreements, net | 822 | 692 | |||
Amortization expense of intangible assets | ¥ 31,009 | 17,173 | ¥ 13,415 | ||
Franchise agreement | |||||
Intangible assets, net | |||||
Intangible assets, gross | 11,000 | 69,691 | |||
Non-compete agreement | |||||
Intangible assets, net | |||||
Intangible assets, gross | 400 | 400 | |||
Favorable lease agreements | |||||
Intangible assets, net | |||||
Intangible assets, gross | 135,874 | 255,657 | |||
Purchased software | |||||
Intangible assets, net | |||||
Intangible assets, gross | 55,101 | 64,694 | |||
Brand name | |||||
Intangible assets, net | |||||
Intangible assets, gross | 28,600 | 1,170,393 | |||
Master brand agreement | |||||
Intangible assets, net | |||||
Intangible assets, gross | ¥ 192,000 | ¥ 192,000 |
INTANGIBLE ASSETS, NET AND UN69
INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE - Amortization (Details) - CNY (¥) ¥ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Amortization for Intangible Assets | ||
2,018 | ¥ 33,404 | |
2,019 | 31,885 | |
2,020 | 30,830 | |
2,021 | 29,490 | |
2,022 | 27,440 | |
Thereafter | 128,530 | |
Amortization for Intangible Assets, Total | 281,579 | |
Amortization for Unfavorable Lease | ||
2,018 | (130) | |
2,019 | (130) | |
2,020 | (130) | |
2,021 | (130) | |
2,022 | (130) | |
Thereafter | (42) | |
Amortization for Unfavorable Lease, Total | (692) | ¥ (822) |
Net Amortization | ||
2,018 | 33,274 | |
2,019 | 31,755 | |
2,020 | 30,700 | |
2,021 | 29,360 | |
2,022 | 27,310 | |
Thereafter | 128,488 | |
Net Amortization, Total | ¥ 280,887 |
LAND USE RIGHTS (Details)
LAND USE RIGHTS (Details) ¥ in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | |
LAND USE RIGHTS | ||||
Land use rights (Note 3) | ¥ 149,668 | ¥ 149,668 | ||
Less: Accumulated amortization | (4,147) | (9,560) | ||
Total | 145,521 | $ 21,534 | ¥ 140,108 | |
Amortization expense of land use rights | ¥ 5,413 | ¥ 4,147 |
LONG-TERM INVESTMENTS - Schedul
LONG-TERM INVESTMENTS - Schedule (Details) ¥ in Thousands, $ in Thousands | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Jan. 31, 2016 |
Investment holdings | ||||
Long-term investments | $ 363,028 | ¥ 2,361,969 | ¥ 1,064,321 | |
Cjia | ||||
Investment holdings | ||||
Equity-method investments ownership percentage | 17.00% | 17.00% | 23.00% | |
Mobike | Maximum | ||||
Investment holdings | ||||
Cost-method investments ownership percentage | 1.00% | 1.00% | ||
Distrii | ||||
Investment holdings | ||||
Equity-method investments ownership percentage | 18.00% | 18.00% | 39.00% | |
Available-for-sale securities | Quanjude | ||||
Investment holdings | ||||
Long-term investments | ¥ 127,444 | ¥ 159,305 | ||
Available-for-sale securities | Tang Palace | ||||
Investment holdings | ||||
Long-term investments | 18,856 | |||
Available-for-sale securities | Banyan Tree | ||||
Investment holdings | ||||
Long-term investments | 26,784 | |||
Available-for-sale securities | Hotel Group B | ||||
Investment holdings | ||||
Long-term investments | 780,272 | |||
Available-for-sale securities | Cjia | ||||
Investment holdings | ||||
Long-term investments | 246,070 | ¥ 42,140 | ||
Available-for-sale securities | CREATER | ||||
Investment holdings | ||||
Long-term investments | ¥ 100,000 | |||
Cost-method investments | BJ UBOX | ||||
Investment holdings | ||||
Cost-method investments ownership percentage | 2.00% | 2.00% | 3.00% | |
Long-term investments | ¥ 33,822 | ¥ 48,220 | ||
Cost-method investments | BJ GOOAGOO | ||||
Investment holdings | ||||
Cost-method investments ownership percentage | 19.00% | 19.00% | 19.00% | |
Long-term investments | ¥ 60,000 | ¥ 60,000 | ||
Cost-method investments | Founder Service | ||||
Investment holdings | ||||
Cost-method investments ownership percentage | 11.00% | 11.00% | 11.00% | |
Long-term investments | ¥ 45,000 | ¥ 45,000 | ||
Cost-method investments | Qingpu | ||||
Investment holdings | ||||
Cost-method investments ownership percentage | 5.00% | 5.00% | 10.00% | |
Long-term investments | ¥ 17,143 | ¥ 17,143 | ||
Cost-method investments | Mobike | ||||
Investment holdings | ||||
Long-term investments | ¥ 66,288 | |||
Cost-method investments | Mobike | Maximum | ||||
Investment holdings | ||||
Cost-method investments ownership percentage | 1.00% | 1.00% | ||
Cost-method investments | Blossom Hill | ||||
Investment holdings | ||||
Cost-method investments ownership percentage | 11.00% | 11.00% | ||
Long-term investments | ¥ 60,194 | |||
Cost-method investments | OYO | ||||
Investment holdings | ||||
Cost-method investments ownership percentage | 1.00% | 1.00% | ||
Long-term investments | ¥ 66,467 | |||
Cost-method investments | Other investments | ||||
Investment holdings | ||||
Long-term investments | ¥ 6,803 | ¥ 2,208 | ||
Equity-method investments | CREATER | ||||
Investment holdings | ||||
Equity-method investments ownership percentage | 20.00% | 20.00% | 20.00% | |
Long-term investments | ¥ 102,709 | ¥ 100,000 | ||
Equity-method investments | Sheen Star | ||||
Investment holdings | ||||
Equity-method investments ownership percentage | 20.00% | 20.00% | 20.00% | |
Long-term investments | ¥ 20,864 | ¥ 20,862 | ||
Equity-method investments | Distrii | ||||
Investment holdings | ||||
Equity-method investments ownership percentage | 18.00% | 18.00% | 39.00% | |
Long-term investments | ¥ 45,156 | ¥ 28,562 | ||
Equity-method investments | AAPC LUB | ||||
Investment holdings | ||||
Equity-method investments ownership percentage | 28.00% | 28.00% | 28.00% | |
Long-term investments | ¥ 477,560 | ¥ 446,100 | ||
Equity-method investments | China Young | ||||
Investment holdings | ||||
Equity-method investments ownership percentage | 37.00% | 37.00% | 37.00% | |
Long-term investments | ¥ 40,811 | ¥ 43,054 | ||
Equity-method investments | Hitone | ||||
Investment holdings | ||||
Equity-method investments ownership percentage | 20.00% | 20.00% | ||
Long-term investments | ¥ 30,300 | |||
Equity-method investments | Hanmo | ||||
Investment holdings | ||||
Equity-method investments ownership percentage | 60.00% | 60.00% | ||
Long-term investments | ¥ 26,000 | |||
Equity-method investments | Other investments | ||||
Investment holdings | ||||
Long-term investments | ¥ 9,066 | ¥ 6,087 |
LONG-TERM INVESTMENTS - Availab
LONG-TERM INVESTMENTS - Available-for-sale securities (Details) ¥ / shares in Units, ¥ in Thousands, $ in Thousands | 1 Months Ended | 12 Months Ended | |||||
Dec. 31, 2017CNY (¥)itemshares | Sep. 30, 2017CNY (¥) | Jun. 30, 2014CNY (¥)¥ / sharesshares | Dec. 31, 2017USD ($)item | Dec. 31, 2017CNY (¥)item | Dec. 31, 2016CNY (¥) | Dec. 31, 2015CNY (¥) | |
Available-for-sale securities | |||||||
Unrealized securities holding gains, net of tax | $ 133 | ¥ 868 | ¥ 16,449 | ¥ 68,069 | |||
Investment income (loss) | $ (1,811) | ¥ (11,783) | ¥ 6,157 | ¥ (2,896) | |||
Quanjude | |||||||
Available-for-sale securities | |||||||
Ordinary shares acquired in investment of available-for-sale (in shares) | shares | 7,241,131 | ||||||
Price of investment (in RMB per share) | ¥ / shares | ¥ 13.81 | ||||||
Consideration/purchase cost | ¥ 100,000 | ||||||
Percentage of equity interest acquired | 2.00% | ||||||
Hotel Group B | |||||||
Available-for-sale securities | |||||||
Ordinary shares acquired in investment of available-for-sale (in shares) | shares | 2,309,981 | ||||||
Consideration/purchase cost | ¥ 760,215 | ||||||
Cjia | |||||||
Available-for-sale securities | |||||||
Equity interest owned (as a percent) | 17.00% | 17.00% | 23.00% | ||||
Convertible notes term | 60 months | ||||||
Original value of three convertible notes invested | ¥ 251,500 | ¥ 251,500 | ¥ 51,200 | ||||
Original number of convertible notes sets | item | 3 | 3 | |||||
Convertible notes purchase | ¥ 200,300 | ||||||
Additional number of convertible notes sets | item | 2 | 2 | |||||
Gain recognized on deemed disposal | ¥ 40,148 | ||||||
Investment income (loss) | (32,711) | (24,615) | |||||
Cost of equity-method investment | ¥ 0 | 0 | |||||
Carrying amount of convertible note | ¥ 246,070 | 246,070 | ¥ 42,140 | ||||
Chengjia Hotel Management Co., Ltd. | Cjia | |||||||
Available-for-sale securities | |||||||
Investment income from deconsolidation | 49,630 | ||||||
CREATER | |||||||
Available-for-sale securities | |||||||
Percentage of equity interest acquired | 20.00% | ||||||
Convertible notes term | 2 years | ||||||
Convertible notes purchase | ¥ 100,000 | ||||||
Investment income (loss) | 2,709 | ¥ 0 | |||||
Interest rate | 1000.00% | ||||||
Available-for-sale securities | |||||||
Available-for-sale securities | |||||||
Unrealized securities holding gains, net of tax | ¥ 868 | ¥ (4,856) | |||||
Maximum | Hotel Group B | |||||||
Available-for-sale securities | |||||||
Percentage of equity interest acquired | 1.00% | 1.00% |
LONG-TERM INVESTMENTS - Cost-me
LONG-TERM INVESTMENTS - Cost-method investments (Details) ¥ in Thousands, $ in Millions | 1 Months Ended | |||||||
Nov. 30, 2017CNY (¥)shares | May 31, 2017shares | Jan. 31, 2017USD ($)shares | Sep. 30, 2015CNY (¥)shares | Dec. 31, 2017 | Sep. 30, 2017CNY (¥) | Dec. 31, 2016 | Nov. 30, 2014CNY (¥) | |
BJ GOOAGOO | ||||||||
Cost-method investments | ||||||||
Percentage of equity interest acquired | 8.00% | |||||||
Consideration for purchase of investments | ¥ 10,289 | |||||||
GOOAGOO | ||||||||
Cost-method investments | ||||||||
Percentage of equity interest hold in cost method investment | 19.00% | 19.00% | ||||||
GOOAGOO | Series A preferred shares | ||||||||
Cost-method investments | ||||||||
Shares purchased (in shares) | shares | 45,000,000 | |||||||
Consideration for purchase of investments | ¥ 45,000 | |||||||
GOOAGOO | Convertible notes | ||||||||
Cost-method investments | ||||||||
Consideration for purchase of investments | ¥ 4,650 | |||||||
Mobike | ||||||||
Cost-method investments | ||||||||
Recognized gain | ¥ 53 | |||||||
Number of shares sold | shares | 55,015 | |||||||
Mobike | Maximum | ||||||||
Cost-method investments | ||||||||
Percentage of equity interest hold in cost method investment | 1.00% | |||||||
Mobike | Preferred shares | ||||||||
Cost-method investments | ||||||||
Shares purchased (in shares) | shares | 1,316,205 | |||||||
Consideration for purchase of investments | $ | $ 5 | |||||||
Convertible notes converted (in shares) | shares | 648,559 | |||||||
Mobike | Convertible notes | ||||||||
Cost-method investments | ||||||||
Consideration for purchase of investments | $ | $ 5 | |||||||
Interest rate | 800.00% | |||||||
OYO | ||||||||
Cost-method investments | ||||||||
Percentage of equity interest acquired | 1.00% | |||||||
Consideration for purchase of investments | ¥ 66,467 |
LONG-TERM INVESTMENTS - Equity-
LONG-TERM INVESTMENTS - Equity-method investments (Details) ¥ in Thousands, $ in Thousands | 1 Months Ended | 12 Months Ended | |||||
Sep. 30, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Jan. 31, 2016CNY (¥) | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥)shares | Dec. 31, 2015CNY (¥) | |
Equity-method investments | |||||||
Investment income (loss) | $ (1,811) | ¥ (11,783) | ¥ 6,157 | ¥ (2,896) | |||
Maximum potential loss, in loss of value of interests in investments | ¥ 56,300 | ||||||
Distrii | |||||||
Equity-method investments | |||||||
Consideration paid for acquisition of equity method investments | ¥ 35,000 | ||||||
Equity-method investments ownership percentage | 39.00% | 18.00% | |||||
Percentage of equity interest sold | 6.00% | 6.00% | |||||
Consideration for transfer of investment | ¥ 18,000 | ||||||
Recognized gain on disposal of equity-method investment | 42,097 | ||||||
Investment income (loss) | ¥ (6,438) | (7,503) | |||||
AAPC LUB | |||||||
Equity-method investments | |||||||
Percentage of equity interest acquired | 28.00% | ||||||
Investment income (loss) | ¥ 28,496 | 31,459 | |||||
China Young | |||||||
Equity-method investments | |||||||
Percentage of equity interest acquired | 37.00% | 37.00% | |||||
Consideration paid for acquisition of equity method investments | ¥ 44,904 | ||||||
Investment income (loss) | (2,243) | ¥ (1,851) | |||||
China Young | Ordinary Shares | |||||||
Equity-method investments | |||||||
Shares acquired in investment of equity method investments (in shares) | shares | 982 | ||||||
China Young | Series B preferred shares | |||||||
Equity-method investments | |||||||
Shares acquired in investment of equity method investments (in shares) | shares | 5,610 | ||||||
CREATER | |||||||
Equity-method investments | |||||||
Percentage of equity interest acquired | 20.00% | 20.00% | |||||
Consideration paid for acquisition of equity method investments | ¥ 100,000 | ||||||
Investment income (loss) | 2,709 | ¥ 0 | |||||
Hitone | |||||||
Equity-method investments | |||||||
Percentage of equity interest acquired | 20.00% | ||||||
Consideration paid for acquisition of equity method investments | ¥ 30,300 | ||||||
Investment income (loss) | 0 | ||||||
Hanmo | |||||||
Equity-method investments | |||||||
Percentage of equity interest acquired | 60.00% | ||||||
Consideration paid for acquisition of equity method investments | ¥ 26,000 | ||||||
Investment income (loss) | ¥ 0 |
GOODWILL (Details)
GOODWILL (Details) ¥ in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015CNY (¥) | |
Changes in carrying amount of goodwill | ||||
Balance at the beginning of the period, Gross Amount | ¥ 175,945 | ¥ 112,785 | ¥ 66,650 | |
Balance at the beginning of the period, Accumulated Impairment Loss | (4,441) | (4,441) | (1,996) | |
Balance at the beginning of the period, Net Amount | 171,504 | 108,344 | 64,654 | |
Impairment losses recognized | 0 | 0 | (2,445) | |
Increase in goodwill related to acquisitions | 2,093,254 | 63,160 | 46,135 | |
Balance at the end of the period, Gross Amount | 2,269,199 | 175,945 | 112,785 | |
Balance at the end of the period, Accumulated Impairment Loss | (4,441) | (4,441) | (4,441) | |
Balance at the end of the period, Net Amount | $ 348,087 | ¥ 2,264,758 | ¥ 171,504 | ¥ 108,344 |
DEBT - Components (Details)
DEBT - Components (Details) ¥ in Thousands, $ in Thousands | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) |
Debt | |||
Short-term Debt | $ 20,106 | ¥ 130,815 | ¥ 298,291 |
Total | 130,815 | 298,291 | |
Long-term bank borrowings, non-current portion | $ 756,463 | 4,921,774 | |
Long-term debt | 4,921,774 | ||
Bank borrowings | |||
Debt | |||
Long-term bank borrowings, current portion | 131 | ||
Short-term Debt | 130,684 | ¥ 298,291 | |
Bank borrowings | |||
Debt | |||
Long-term bank borrowings, non-current portion | 1,894,722 | ||
Convertible senior notes | |||
Debt | |||
Long-term debt | ¥ 3,027,052 |
DEBT - Bank borrowings (Details
DEBT - Bank borrowings (Details) ¥ in Thousands, $ in Thousands | 1 Months Ended | 12 Months Ended | 36 Months Ended | |||||||||||||||||
Nov. 30, 2017USD ($) | Jun. 30, 2017USD ($) | May 31, 2017USD ($) | Apr. 30, 2017CNY (¥) | Feb. 28, 2017CNY (¥) | Sep. 30, 2016CNY (¥) | May 31, 2016CNY (¥) | Jan. 31, 2016USD ($) | Jul. 31, 2015USD ($) | Sep. 30, 2012CNY (¥) | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2013CNY (¥) | Dec. 31, 2015CNY (¥) | Sep. 30, 2017USD ($) | Jun. 30, 2017CNY (¥) | Jul. 31, 2015CNY (¥) | |
Revolving bank credit facility | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Term of debt instrument | 35 months | 3 years | ||||||||||||||||||
Maximum borrowing amount | $ 250,000 | ¥ 300,000 | ¥ 500,000 | |||||||||||||||||
Line of credit draw down amount | $ 250,000 | ¥ 204,540 | ||||||||||||||||||
Repayment of line of credit facility | $ 250,000 | ¥ 204,540 | ||||||||||||||||||
Weighted average interest rate (as a percent) | 3.04% | 3.04% | 5.61% | 6.00% | ||||||||||||||||
Revolving bank credit facility | Libor | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Percentage points added to the reference rate | 1.75% | |||||||||||||||||||
Term facility | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Term of debt instrument | 3 years | |||||||||||||||||||
Maximum borrowing amount | $ 250,000 | ¥ 500,000 | ||||||||||||||||||
Line of credit draw down amount | $ 250,000 | |||||||||||||||||||
Repayment of line of credit facility | 0 | |||||||||||||||||||
Three-year bank loan contract | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Term of debt instrument | 3 years | |||||||||||||||||||
Maximum borrowing amount | $ 40,000 | |||||||||||||||||||
Deposit pledged | ¥ | ¥ 307,000 | |||||||||||||||||||
Line of credit draw down amount | 40,000 | |||||||||||||||||||
Repayment of line of credit facility | 10 | |||||||||||||||||||
Loan to be repaid within one year | $ 20 | |||||||||||||||||||
Weighted average interest rate (as a percent) | 2.68% | 2.68% | ||||||||||||||||||
Three-year bank loan contract | Libor | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Percentage points added to the reference rate | 1.40% | |||||||||||||||||||
One-year bank loan due June 30, 2016 | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Term of debt instrument | 1 year | |||||||||||||||||||
Maximum borrowing amount | $ 50,000 | |||||||||||||||||||
Deposit pledged | ¥ | ¥ 360,000 | |||||||||||||||||||
Interest rate (as a percent) | 1.81% | 1.81% | 1.50% | 1.50% | ||||||||||||||||
Line of credit draw down amount | $ 50,000 | |||||||||||||||||||
Repayment of line of credit facility | $ 50,000 | |||||||||||||||||||
One-year bank loan due June 30, 2016 | Libor | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Percentage points added to the reference rate | 1.20% | |||||||||||||||||||
One-year bank loan due May 31, 2018 | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Term of debt instrument | 1 year | |||||||||||||||||||
Maximum borrowing amount | $ 20,000 | |||||||||||||||||||
Deposit pledged | ¥ | ¥ 160,000 | |||||||||||||||||||
Line of credit draw down amount | 20,000 | |||||||||||||||||||
Repayment of line of credit facility | $ 0 | |||||||||||||||||||
Weighted average interest rate (as a percent) | 3.22% | 3.22% | ||||||||||||||||||
One-year bank loan due May 31, 2018 | Libor | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Percentage points added to the reference rate | 1.50% | |||||||||||||||||||
One-year bank revolving loan | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Term of debt instrument | 1 year | |||||||||||||||||||
Maximum borrowing amount | $ 43,000 | |||||||||||||||||||
Interest rate (as a percent) | 2.88% | 2.70% | 2.70% | |||||||||||||||||
Line of credit draw down amount | $ 43,000 | |||||||||||||||||||
Repayment of line of credit facility | $ 43,000 | |||||||||||||||||||
One-year revolving corporation overdraft facility | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Term of debt instrument | 1 year | |||||||||||||||||||
Maximum borrowing amount | ¥ | ¥ 50,000 | |||||||||||||||||||
Line of credit draw down amount | ¥ | ¥ 0 | |||||||||||||||||||
One-year revolving general credit facility | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Term of debt instrument | 1 year | |||||||||||||||||||
Maximum borrowing amount | ¥ | ¥ 200,000 | |||||||||||||||||||
Interest rate (as a percent) | 4.40% | |||||||||||||||||||
Line of credit draw down amount | ¥ | ¥ 1,000 | |||||||||||||||||||
Repayment of line of credit facility | ¥ | ¥ 1,000 | |||||||||||||||||||
Minimum | One-year bank revolving loan | Libor | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Percentage points added to the reference rate | 2.00% |
DEBT - Convertible Senior Notes
DEBT - Convertible Senior Notes due 2022 (Details) - Convertible senior notes - The Notes $ / shares in Units, ¥ in Thousands | Nov. 03, 2017USD ($)$ / shares | Nov. 03, 2017CNY (¥) | Nov. 03, 2017CNY (¥) |
Debt Instrument [Line Items] | |||
Aggregate principal amount | $ 475,000,000 | ||
Fixed interest rate (as a percent) | 0.375% | 0.375% | |
Initial conversion rate per ADS | 5.4869 | 5.4869 | |
Increment used for debt conversion | $ 1,000 | ||
Initial conversion price | $ / shares | $ 182.25 | ||
Repurchase price as a percentage of principal amount | 100.00% | 100.00% | |
Proceeds from issuance of debt | $ 466,866,463 | ¥ 3,092,850 | |
Debt issuance costs | $ 8,133,537 | ¥ 53,882 |
DEBT - ADS Lending Arrangement
DEBT - ADS Lending Arrangement (Details) - ADS Lending Arrangement $ / shares in Units, ¥ in Thousands | 12 Months Ended | |
Dec. 31, 2017USD ($)$ / sharesshares | Dec. 31, 2017CNY (¥)shares | |
Debt Instrument [Line Items] | ||
Number of Loaned ADS lent | 2,606,278 | |
ADS par value per share | $ / shares | $ 0.0004 | |
ADS outstanding | 2,606,278 | 2,606,278 |
Debt issuance costs | $ 4,000,000 | ¥ 26,499 |
DEBT - Capped Call Options (Det
DEBT - Capped Call Options (Details) - Call Option ¥ in Thousands | Oct. 26, 2017USD ($) | Dec. 31, 2017CNY (¥)$ / item |
Debt Instrument [Line Items] | ||
Cap price of the capped call transactions per ADS | 221.31 | |
Premium paid for capped call transactions | $ 26,790,000 | ¥ 177,476 |
ACCRUED EXPENSES AND OTHER CU81
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) ¥ in Thousands, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |||
Payable for business acquisitions | ¥ 117,617 | ¥ 171,484 | |
Accrual for customer loyalty program | 156,092 | 121,066 | |
Payable to noncontrolling interest holders | 86,896 | 34,791 | |
Payable to franchisees | 418,293 | 212,242 | |
Other payables | 262,086 | 170,944 | |
Accrued rental | 84,423 | 66,804 | |
Accrued utilities | 61,748 | 46,379 | |
Deferred rental, current | 49,857 | 37,648 | |
Other accrued expenses | 27,890 | 34,479 | |
Total | $ 194,412 | ¥ 1,264,902 | ¥ 895,837 |
Additional disclosures | |||
Payable to franchisees, term (in years) | 1 year |
HOTEL OPERATING COSTS (Details)
HOTEL OPERATING COSTS (Details) ¥ in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015CNY (¥) | |
HOTEL OPERATING COSTS | ||||
Rents | ¥ 2,058,954 | ¥ 1,870,879 | ¥ 1,804,532 | |
Utilities | 365,100 | 345,615 | 341,620 | |
Personnel costs | 1,388,284 | 1,088,380 | 919,555 | |
Depreciation and amortization | 773,202 | 676,996 | 645,058 | |
Consumable, food and beverage | 550,513 | 494,764 | 485,099 | |
Others | 538,098 | 455,539 | 316,283 | |
Total | $ 872,101 | ¥ 5,674,151 | ¥ 4,932,173 | ¥ 4,512,147 |
PRE-OPENING EXPENSES (Details)
PRE-OPENING EXPENSES (Details) ¥ in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015CNY (¥) | |
PRE-OPENING EXPENSES | ||||
Rents | ¥ 191,502 | ¥ 67,277 | ¥ 95,977 | |
Personnel costs | 6,221 | 1,560 | 5,903 | |
Others | 8,731 | 3,010 | 8,131 | |
Total | $ 31,731 | ¥ 206,454 | ¥ 71,847 | ¥ 110,011 |
SHARE-BASED COMPENSATION - Plan
SHARE-BASED COMPENSATION - Plan (Details) | 12 Months Ended | |||||||||
Dec. 31, 2017shares | Dec. 31, 2016shares | Dec. 31, 2015¥ / sharesshares | Dec. 31, 2015$ / sharesshares | Mar. 31, 2015shares | Aug. 31, 2010shares | Sep. 30, 2009shares | Oct. 31, 2008shares | Jun. 30, 2007shares | Feb. 28, 2007shares | |
Share options | ||||||||||
Share based compensation | ||||||||||
Weighted-average grant date fair value for options granted (in CNY or dollars per share) | (per share) | ¥ 11.73 | $ 1.88 | ||||||||
Share options | Performance Condition | ||||||||||
Share based compensation | ||||||||||
Vesting period | 2 years | 2 years | ||||||||
Number of options, granted (in shares) | 85,292 | 85,292 | ||||||||
Number of options granted based on the actual performance | 88,224 | |||||||||
Second anniversary of the stated vesting commencement date | Restricted stocks | Performance Condition | ||||||||||
Share based compensation | ||||||||||
Share-based payment award, vesting percentage | 50.00% | |||||||||
Vesting ratably over the following two years | Restricted stocks | Performance Condition | ||||||||||
Share based compensation | ||||||||||
Share-based payment award, vesting percentage | 50.00% | |||||||||
Vesting period | 2 years | |||||||||
Incentive Award Plans | ||||||||||
Share based compensation | ||||||||||
Vesting period | 10 years | |||||||||
Incentive Award Plans | Maximum | ||||||||||
Share based compensation | ||||||||||
Share-based payment award, contractual term | 10 years | |||||||||
Incentive Award Plans | Share options | ||||||||||
Share based compensation | ||||||||||
Share-based payment award, option granted (in shares) | 24,577,669 | |||||||||
Incentive Award Plans | Restricted stocks | ||||||||||
Share based compensation | ||||||||||
Share-based payment award, nonvested restricted stocks (in shares) | 22,256,782 | |||||||||
Incentive Award Plans | Second anniversary of the stated vesting commencement date | ||||||||||
Share based compensation | ||||||||||
Share-based payment award, vesting percentage | 50.00% | |||||||||
Incentive Award Plans | Vesting ratably over the following two years | ||||||||||
Share based compensation | ||||||||||
Share-based payment award, vesting percentage | 50.00% | |||||||||
Vesting period | 2 years | |||||||||
2007 Global Share Plan | ||||||||||
Share based compensation | ||||||||||
Share-based payment award, maximum number of incentive award available (in shares) | 10,000,000 | |||||||||
2008 Global Share Plan | ||||||||||
Share based compensation | ||||||||||
Share-based payment award, maximum number of incentive award available (in shares) | 7,000,000 | 3,000,000 | ||||||||
2009 Share Incentive Plan | ||||||||||
Share based compensation | ||||||||||
Share-based payment award, maximum number of incentive award available (in shares) | 43,000,000 | 15,000,000 | 3,000,000 |
SHARE-BASED COMPENSATION - Opti
SHARE-BASED COMPENSATION - Option assumptions and Activity (Details) $ / shares in Units, ¥ in Thousands, $ in Thousands | 12 Months Ended | ||||
Dec. 31, 2017USD ($)$ / sharesshares | Dec. 31, 2017CNY (¥)shares | Dec. 31, 2016CNY (¥)shares | Dec. 31, 2015CNY (¥)shares | Dec. 31, 2017CNY (¥)shares | |
Number of Options | |||||
Exercised (in shares) | (609,224) | ||||
Share options | |||||
Share based compensation | |||||
Suboptimal exercise factor | 4.16 | ||||
Risk-free interest rate, minimum (as a percent) | 1.49% | ||||
Risk-free interest rate, maximum (as a percent) | 1.74% | ||||
Volatility, minimum (as a percent) | 38.88% | ||||
Volatility, maximum (as a percent) | 39.25% | ||||
Life of option | 6 years | ||||
Number of Options | |||||
Share options outstanding at the beginning of the period (in shares) | 2,656,244 | ||||
Forfeited (in shares) | (2,296) | ||||
Exercised (in shares) | (609,224) | (684,632) | (1,528,104) | ||
Share options outstanding at the end of the period (in shares) | 2,044,724 | 2,656,244 | |||
Share options vested or expected to vest (in shares) | 2,026,971 | 2,026,971 | |||
Share options exercisable (in shares) | 1,969,391 | 1,969,391 | |||
Weighted Average Exercise Price | |||||
Share options outstanding at the beginning of the period (in dollars per shares) | $ / shares | $ 2.15 | ||||
Forfeited (in dollars per shares) | $ / shares | 1.82 | ||||
Exercised (in dollars per shares) | $ / shares | 2.25 | ||||
Share options outstanding at the end of the period (in dollars per shares) | $ / shares | 2.12 | ||||
Share options vested or expected to vest (in dollars per shares) | $ / shares | 2.09 | ||||
Share options exercisable (in dollars per shares) | $ / shares | $ 2.01 | ||||
Weighted Average Remaining Contractual Life and Aggregate Intrinsic Value | |||||
Share options outstanding, Weighted average remaining contractual life | 1 year 5 months 12 days | ||||
Share options vested or expected to vest, Weighted average remaining contractual life | 1 year 5 months 9 days | ||||
Share options exercisable, Weighted average remaining contractual life | 1 year 4 months 17 days | ||||
Share options outstanding, Aggregate intrinsic value | $ | $ 69,500 | ||||
Share options vested or expected to vest, Aggregate intrinsic value | $ | 68,950 | ||||
Share options exercisable, Aggregate intrinsic value | $ | $ 67,148 | ||||
Total unrecognized compensation expense | ¥ | ¥ 844 | ||||
Weighted-average period for recognition of unrecognized compensation costs | 1 year 26 days | ||||
Aggregate intrinsic value of options exercised | ¥ | ¥ 77,302 | ¥ 40,717 | ¥ 46,433 |
SHARE-BASED COMPENSATION - Nonv
SHARE-BASED COMPENSATION - Nonvested restricted stocks (Details) ¥ in Thousands | 12 Months Ended | |||
Dec. 31, 2017CNY (¥)$ / shares | Dec. 31, 2017CNY (¥)shares | Dec. 31, 2016CNY (¥)trancheshares | Dec. 31, 2015CNY (¥)trancheshares | |
Share based compensation | ||||
Number of tranche | tranche | 10 | 10 | ||
Restricted stocks | ||||
Number of Restricted Stocks | ||||
Nonvested restricted stocks outstanding at the beginning of the period (in shares) | 13,540,557 | |||
Granted (in shares) | 493,972 | |||
Forfeited (in shares) | (174,984) | |||
Vested (in shares) | (1,626,768) | |||
Adjusted (in shares) | 259,793 | |||
Nonvested restricted stocks outstanding at the end of the period (in shares) | 12,492,570 | 13,540,557 | ||
Weighted Average Grant Date Fair Value | ||||
Nonvested restricted stocks outstanding at the beginning of the period (in dollars per shares) | $ / shares | $ 5.20 | |||
Granted (in dollars per shares) | $ / shares | 21.78 | |||
Forfeited (in dollars per shares) | $ / shares | 6.43 | |||
Vested (in dollars per shares) | $ / shares | 4.99 | |||
Adjusted (in dollars per share) | $ / shares | 5.11 | |||
Nonvested restricted stocks outstanding at the end of the period (in dollars per shares) | $ / shares | $ 5.86 | |||
Total unrecognized compensation expense | ¥ | $ 433,474 | ¥ 433,474 | ||
Weighted-average period for recognition of unrecognized compensation costs | 4 years 5 months 5 days | |||
Total fair value of nonvested restricted stocks, vested | ¥ | ¥ 273,800 | ¥ 123,129 | ¥ 69,130 | |
Restricted stocks | Performance Condition | ||||
Number of Restricted Stocks | ||||
Granted (in shares) | 1,876,975 | 6,599,106 | ||
Restricted stocks | Performance Condition | Second anniversary of the stated vesting commencement date | ||||
Share based compensation | ||||
Share-based payment award, vesting percentage | 50.00% | |||
Restricted stocks | Performance Condition | Vesting ratably over the following two years | ||||
Share based compensation | ||||
Share-based payment award, vesting percentage | 50.00% | |||
Period for remaining percentage vested | 2 years |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) ¥ / shares in Units, ¥ in Thousands | 12 Months Ended | |||
Dec. 31, 2017$ / shares | Dec. 31, 2017CNY (¥)¥ / sharesshares | Dec. 31, 2016CNY (¥)¥ / sharesshares | Dec. 31, 2015CNY (¥)¥ / sharesshares | |
EARNINGS PER SHARE | ||||
Net income attributable to ordinary shareholders - basic | ¥ | ¥ 1,237,202 | ¥ 804,615 | ¥ 436,600 | |
Eliminate the dilutive effect of interest expense of convertible senior notes | ¥ | 4,549 | |||
Net income attributable to ordinary shareholders - diluted | ¥ | ¥ 1,241,751 | ¥ 804,615 | ¥ 436,600 | |
Weighted average ordinary shares outstanding - basic | 279,272,140 | 275,139,070 | 250,533,204 | |
Incremental weighted-average ordinary shares from assumed exercise of share options and nonvested restricted stocks using the treasury stock method | 12,202,369 | 7,750,424 | 5,570,963 | |
Dilutive effect of convertible senior notes | 1,599,469 | |||
Weighted average ordinary shares outstanding - diluted | 293,073,978 | 282,889,494 | 256,104,167 | |
Basic earnings per share (in RMB and USD per share) | (per share) | $ 0.68 | ¥ 4.43 | ¥ 2.92 | ¥ 1.74 |
Diluted earnings per share (in RMB and USD per share) | (per share) | $ 0.65 | ¥ 4.24 | ¥ 2.84 | ¥ 1.70 |
Cash Dividend (Details)
Cash Dividend (Details) ¥ in Thousands | Oct. 23, 2017$ / shares | Dec. 21, 2015$ / shares | Dec. 31, 2017CNY (¥) | Dec. 31, 2015CNY (¥) |
Cash Dividend | ||||
Cash dividends declared (Per share) | $ / shares | $ 0.16 | $ 0.17 | ||
Cash dividends recorded as a reduction against retained earnings | ¥ 295,661 | ¥ 276,261 | ||
Cash dividends recorded as a receivable in other current assets | ¥ 10,682 |
INCOME TAXES (Details)
INCOME TAXES (Details) ¥ in Thousands, $ in Thousands | 12 Months Ended | 24 Months Ended | 36 Months Ended | |||||||||||
Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015CNY (¥) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 | Dec. 31, 2009 | Dec. 31, 2008 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2015 | |
Income tax | ||||||||||||||
Effective tax rate (as a percent) | 25.00% | 25.00% | 25.00% | 25.00% | ||||||||||
Profit tax | $ 55,325 | ¥ 359,958 | ¥ 287,120 | ¥ 196,529 | ||||||||||
PRC | ||||||||||||||
Income tax | ||||||||||||||
Effective tax rate (as a percent) | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | |||
China Lodging Holdings (HK) Limited | Hong Kong | ||||||||||||||
Income tax | ||||||||||||||
Effective tax rate (as a percent) | 16.50% | 16.50% | ||||||||||||
Profit tax | ¥ 0 | |||||||||||||
Starway | Hong Kong | ||||||||||||||
Income tax | ||||||||||||||
Effective tax rate (as a percent) | 16.50% | 16.50% | ||||||||||||
IBIS China Investment Limited | Hong Kong | ||||||||||||||
Income tax | ||||||||||||||
Effective tax rate (as a percent) | 16.50% | 16.50% | ||||||||||||
ACL Greater China Limited | Hong Kong | ||||||||||||||
Income tax | ||||||||||||||
Effective tax rate (as a percent) | 16.50% | 16.50% | ||||||||||||
TAHM Investment Limited | Hong Kong | ||||||||||||||
Income tax | ||||||||||||||
Effective tax rate (as a percent) | 16.50% | 16.50% | ||||||||||||
City Home Investment Limited | Hong Kong | ||||||||||||||
Income tax | ||||||||||||||
Effective tax rate (as a percent) | 16.50% | 16.50% | ||||||||||||
Orange Hotel HongKong Limited | Hong Kong | ||||||||||||||
Income tax | ||||||||||||||
Effective tax rate (as a percent) | 16.50% | 16.50% | ||||||||||||
Huazhu Investment I Limited | Hong Kong | ||||||||||||||
Income tax | ||||||||||||||
Effective tax rate (as a percent) | 16.50% | 16.50% | ||||||||||||
Huazhu Investment II Limited | Hong Kong | ||||||||||||||
Income tax | ||||||||||||||
Effective tax rate (as a percent) | 16.50% | 16.50% | ||||||||||||
China Lodging Holdings Singapore Pte. Ltd. | Singapore | ||||||||||||||
Income tax | ||||||||||||||
Effective tax rate (as a percent) | 17.00% | 17.00% | 17.00% | 17.00% | ||||||||||
Profit tax | ¥ 0 | ¥ 0 | ¥ 0 | |||||||||||
Hanting Suzhou | PRC | ||||||||||||||
Income tax | ||||||||||||||
Effective tax rate (as a percent) | 25.00% | 25.00% | 15.00% | 12.50% | ||||||||||
Income tax exemption period | 2 years | 2 years | ||||||||||||
Period of income tax rate reduction | 3 years | 3 years | ||||||||||||
Percentage of tax reduction | 50.00% | 50.00% | ||||||||||||
Jizhu Shanghai | PRC | ||||||||||||||
Income tax | ||||||||||||||
Effective tax rate (as a percent) | 12.50% | |||||||||||||
Income tax exemption period | 2 years | 2 years | ||||||||||||
Period of income tax rate reduction | 3 years | 3 years | ||||||||||||
Percentage of tax reduction | 50.00% | 50.00% |
INCOME TAXES - Reconciliation (
INCOME TAXES - Reconciliation (Details) ¥ / shares in Units, ¥ in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥)¥ / shares | Dec. 31, 2016CNY (¥)¥ / shares | Dec. 31, 2015CNY (¥)¥ / shares | |
Tax expense (benefit) | ||||
Current Tax | ¥ | ¥ 436,195 | ¥ 253,674 | ¥ 246,678 | |
Deferred Tax | $ (11,717) | (76,237) | 33,446 | (50,149) |
Total | $ 55,325 | ¥ 359,958 | ¥ 287,120 | ¥ 196,529 |
Reconciliation between the effective income tax rate and the PRC statutory income tax rate | ||||
PRC statutory tax rate | 25.00% | 25.00% | 25.00% | 25.00% |
Tax effect of other expenses that are not deductible in determining taxable profit | 1.00% | 1.00% | 3.00% | 3.00% |
Effect of different tax rate of group entities operating in other jurisdictions | 1.00% | 1.00% | (1.00%) | |
Effect of change in valuation allowance | 1.00% | 5.00% | ||
Effect of tax holiday | (1.00%) | (1.00%) | (3.00%) | (7.00%) |
Effect of cash dividends | (1.00%) | (1.00%) | 3.00% | 5.00% |
Effect of disposal of subsidiary | (1.00%) | |||
Effect of excess tax benefit of rewards | (3.00%) | (3.00%) | ||
Effective tax rate | 22.00% | 22.00% | 27.00% | 31.00% |
Aggregate amount and per share effect of the tax holidays | ||||
Aggregate amount | ¥ | ¥ 24,424 | ¥ 27,224 | ¥ 41,288 | |
Per share effect - basic (in RMB per share) | ¥ / shares | ¥ 0.09 | ¥ 0.10 | ¥ 0.16 | |
Per share effect - diluted (in RMB per share) | ¥ / shares | ¥ 0.08 | ¥ 0.10 | ¥ 0.16 |
INCOME TAXES - Deferred income
INCOME TAXES - Deferred income tax assets and liabilities (Details) - CNY (¥) ¥ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Deferred tax assets: | ||
Net loss carryforward | ¥ 139,650 | ¥ 97,219 |
Deferred revenue | 78,788 | 71,517 |
Deferred rent | 8,763 | 2,968 |
Long-term assets | 130,112 | 51,579 |
Bad debt provision | 4,437 | 2,856 |
Accrual for customer loyalty program | 37,298 | 30,267 |
Accrued payroll | 14,155 | 3,588 |
Other accrued expenses | 20,706 | 17,688 |
Share-based compensation | 13,447 | 10,978 |
Others | 1,425 | 2,379 |
Valuation allowance | (123,138) | (114,625) |
Total deferred tax assets | 325,643 | 176,414 |
Deferred tax liabilities: | ||
Favorable lease, building and land use rights-fair value adjustment | 398,761 | 67,167 |
Capitalized interest | 2,929 | 3,519 |
Unrealized gain for investment | 6,861 | 14,826 |
Others | 13,539 | 10,817 |
Total deferred tax liabilities | ¥ 422,090 | ¥ 96,329 |
INCOME TAXES - Valuation allowa
INCOME TAXES - Valuation allowance (Details) - CNY (¥) ¥ in Thousands | 2 Months Ended | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Valuation allowance | ||||
Valuation allowance additions due to acquisition | ¥ 2,963 | ¥ 11,724 | ||
Loss carryforwards | ¥ 558,598 | 558,598 | ||
Uncertain tax benefits | ||||
Interest or penalty expense | 0 | 0 | ¥ 0 | |
Roll-forward of the unrecognized tax benefits | ||||
Beginning balance | 19,787 | 14,755 | 8,345 | |
Addition for tax positions | 6,623 | 5,032 | 6,410 | |
Ending balance | 26,410 | ¥ 26,410 | 19,787 | 14,755 |
Withholding income tax rate (as a percentage) | 10.00% | |||
Withholding income tax rate with Hong Kong as holding company (as a percentage) | 5.00% | |||
Cumulated undistributed earnings of the Group's PRC subsidiaries | 2,761,814 | ¥ 2,761,814 | ||
PRC dividend withholding tax accrued | 32,570 | 30,696 | ||
PRC dividend withholding tax liability | 8,552 | 8,552 | ||
Additional provision for PRC dividend withholding tax accrued | ¥ 0 | |||
Future annual dividend distribution | ¥ 300,000 | |||
Period of statute of limitations | 3 years | |||
Period of statute of limitations, if the underpayment is more than the specified amount | 5 years | |||
Minimum amount of underpayment of taxes for statute of limitations to be extended to five years | ¥ 100 | |||
Period of statute of limitations for transfer pricing issues | 10 years | |||
Valuation allowance for deferred tax assets | ||||
Valuation allowance | ||||
Charge to costs and expenses | ¥ 59,929 | 55,757 | 47,122 | |
Valuation allowance additions due to acquisition | 2,963 | 11,724 | ||
Charge taken against allowance | 46,903 | 17,064 | 15,508 | |
Write off | ¥ 7,476 | ¥ 28,319 | ¥ 1,955 |
MAINLAND CHINA CONTRIBUTION P93
MAINLAND CHINA CONTRIBUTION PLAN (Details) - CNY (¥) ¥ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
MAINLAND CHINA CONTRIBUTION PLAN | |||
Employee benefit contributions | ¥ 264,258 | ¥ 212,723 | ¥ 182,321 |
RESTRICTED NET ASSETS (Details)
RESTRICTED NET ASSETS (Details) - CNY (¥) ¥ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
RESTRICTED NET ASSETS | |||
Minimum required percentage of after tax profit appropriated to general reserve fund | 10.00% | ||
Threshold percentage of general reserve fund to registered capital | 50.00% | ||
Reserve funds not distributed as cash dividends | ¥ 378,591 | ¥ 277,342 | ¥ 209,782 |
Restricted share capital of PRC subsidiaries | 3,102,568 | ||
Restricted net assets not available for distribution to the Company in the form of dividends, loans or advances | ¥ 3,481,159 |
RELATED PARTY TRANSACTIONS AN95
RELATED PARTY TRANSACTIONS AND BALANCES (Details) ¥ in Thousands, $ in Thousands | 12 Months Ended | ||||
Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015CNY (¥) | Dec. 31, 2017CNY (¥) | |
Related party transaction | |||||
Amount due from related parties | $ 18,219 | ¥ 98,453 | ¥ 118,537 | ||
Due to related party | 11,058 | 36,890 | |||
Loan payment | 17,399 | ¥ 113,206 | 39,387 | ¥ 1,386 | |
Loan collection | $ 18,421 | 119,855 | 9,285 | 1,522 | |
Sheen Star | |||||
Related party transaction | |||||
Amount due from related parties | 37,060 | 39,172 | |||
Interest income from related party | 2,060 | ||||
Loan payment | 35,000 | ||||
Accor | |||||
Related party transaction | |||||
Amount due from related parties | 4,052 | 2,040 | |||
Due to related party | 6,019 | 6,684 | |||
Accor | Service fee | |||||
Related party transaction | |||||
Revenue from related parties | 7,729 | 4,052 | |||
Accor | Brand use fee, reservation fee and other related service fee | |||||
Related party transaction | |||||
Expenses with related parties | 10,786 | 6,019 | |||
Cjia | |||||
Related party transaction | |||||
Amount due from related parties | 50,365 | 15,460 | |||
Loan payment | 84,950 | ||||
Cjia | Goods sold and service provided | |||||
Related party transaction | |||||
Revenue from related parties | 8,486 | 353 | |||
Cjia | Chengjia Hotel Management Co., Ltd. | |||||
Related party transaction | |||||
Consideration from sale of subsidiary | 10,000 | ||||
Ctrip | |||||
Related party transaction | |||||
Amount due from related parties | 3,203 | 31,754 | |||
Due to related party | 3,291 | 28,651 | |||
Ctrip | Marketing and training fee | |||||
Related party transaction | |||||
Revenue from related parties | 23,659 | 12,667 | |||
Ctrip | Commission expenses | |||||
Related party transaction | |||||
Expenses with related parties | 76,792 | 44,119 | ¥ 17,740 | ||
CREATER | |||||
Related party transaction | |||||
Amount due from related parties | 26,979 | ||||
Loan payment | ¥ 26,979 | ||||
Others | |||||
Related party transaction | |||||
Amount due from related parties | 3,773 | 3,132 | |||
Due to related party | ¥ 1,748 | ¥ 1,555 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Operating lease and purchase commitments (Details) ¥ in Thousands | Dec. 31, 2017CNY (¥) |
Operating lease commitments | |
2,018 | ¥ 1,823,626 |
2,019 | 2,539,224 |
2,020 | 2,518,195 |
2,021 | 2,413,641 |
2,022 | 2,284,216 |
Thereafter | 13,508,772 |
Total | 25,087,674 |
Purchase commitments | |
Purchase commitments expected to be incurred within one year related to leasehold improvements and installation of equipment for hotel operations | ¥ 160,334 |
COMMITMENTS AND CONTINGENCIES97
COMMITMENTS AND CONTINGENCIES - Contingencies (Details) - CNY (¥) ¥ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Contingencies | ||
Accrued contingencies | ¥ 40,984 | |
Reversed contingencies | 35,969 | |
Further accrued contingencies | ¥ 10,719 | |
Other operating expense | ||
Contingencies | ||
Accrued contingencies | ¥ 66,234 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) ¥ in Thousands, € in Millions, $ in Millions | 1 Months Ended | 3 Months Ended | 36 Months Ended | |||||
Jan. 31, 2018USD ($) | Nov. 30, 2017USD ($) | May 31, 2017USD ($) | Sep. 30, 2012CNY (¥) | Mar. 31, 2018EUR (€)shares | Dec. 31, 2015CNY (¥) | Jan. 31, 2018EUR (€) | Dec. 31, 2013CNY (¥) | |
Revolving bank credit facility | ||||||||
SUBSEQUENT EVENTS | ||||||||
Line of credit draw down amount | $ 250 | ¥ 204,540 | ||||||
Debt term | 35 months | 3 years | ||||||
Maximum borrowing amount | $ 250 | ¥ 300,000 | ¥ 500,000 | |||||
Repayment of line of credit facility | $ 250 | ¥ 204,540 | ||||||
Subsequent Event | Revolving bank credit facility | ||||||||
SUBSEQUENT EVENTS | ||||||||
Line of credit draw down amount | $ | $ 250 | |||||||
Subsequent Event | Euro loan | ||||||||
SUBSEQUENT EVENTS | ||||||||
Line of credit draw down amount | € 241 | |||||||
Debt term | 3 years | |||||||
Maximum borrowing amount | € 260 | |||||||
Subsequent Event | Hotel Group B | ||||||||
SUBSEQUENT EVENTS | ||||||||
Ordinary shares acquired | shares | 10,782,131 | |||||||
Consideration for investments | € 489 | |||||||
Total shares held as investment | shares | 13,092,112 |
SCHEDULE I FINANCIAL INFORMAT99
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY - BALANCE SHEETS (Details) ¥ in Thousands, $ in Thousands | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015CNY (¥) | Dec. 31, 2014CNY (¥) |
Current assets: | ||||||
Cash and cash equivalents | $ 534,054 | ¥ 3,474,719 | ¥ 3,235,007 | |||
Other current assets | 50,588 | 329,140 | 208,929 | |||
Total current assets | 885,469 | 5,761,124 | 4,174,681 | |||
Other assets | 56,047 | 364,660 | 200,492 | |||
Long-term investments | 363,028 | 2,361,969 | 1,064,321 | |||
Total assets | 2,678,549 | 17,427,442 | 9,993,364 | |||
Current liabilities: | ||||||
Short-term debt | 20,106 | 130,815 | 298,291 | |||
Amount due to related parties | 5,670 | 36,890 | 11,058 | |||
Accrued expenses and other current liabilities | 194,412 | 1,264,902 | 895,837 | |||
Total current liabilities | 565,068 | 3,676,501 | 2,966,081 | |||
Long-term debt | 756,463 | 4,921,774 | ||||
Total liabilities | 1,683,470 | 10,953,162 | 4,577,207 | |||
Equity: | ||||||
Ordinary shares(US$0.0001 par value per share; 8,000,000,000 shares authorized; 281,379,130 and 294,040,234 shares issued as of December 31, 2016 and 2017, and 278,282,366 and 280,518,358 shares outstanding as of December 31, 2016 and 2017, respectively) | 33 | 212 | 204 | |||
Treasury shares (3,096,764 and 3,096,764 shares as of December 31 2016 and 2017, respectively) | (16,496) | (107,331) | (107,331) | |||
Additional paid-in capital | 557,019 | 3,624,135 | 3,699,056 | |||
Retained earnings | 423,238 | 2,753,715 | 1,812,174 | |||
Accumulated other comprehensive (loss) income | 25,816 | 167,965 | (4,503) | |||
Total equity | 989,610 | 6,438,696 | 5,399,600 | |||
Total liabilities and equity | 2,678,549 | 17,427,442 | 9,993,364 | |||
Parent Company | ||||||
Current assets: | ||||||
Cash and cash equivalents | 85,548 | 556,604 | $ 57,488 | 374,036 | ¥ 121,025 | ¥ 94,749 |
Short-term investments | 19,967 | 129,911 | ||||
Other current assets | 5,691 | 37,030 | 173 | |||
Total current assets | 111,206 | 723,545 | 374,209 | |||
Other assets | 5,059 | 32,916 | ||||
Investment in subsidiaries | 1,583,514 | 10,302,818 | 5,512,131 | |||
Long-term investments | 119,926 | 780,272 | 45,640 | |||
Total assets | 1,819,705 | 11,839,551 | 5,931,980 | |||
Current liabilities: | ||||||
Short-term debt | 20,106 | 130,815 | 298,291 | |||
Amount due to related parties | 48,087 | 312,871 | 222,402 | |||
Accrued expenses and other current liabilities | 5,439 | 35,395 | 11,687 | |||
Total current liabilities | 73,632 | 479,081 | 532,380 | |||
Long-term debt | 756,463 | 4,921,774 | ||||
Total liabilities | 830,095 | 5,400,855 | 532,380 | |||
Equity: | ||||||
Ordinary shares(US$0.0001 par value per share; 8,000,000,000 shares authorized; 281,379,130 and 294,040,234 shares issued as of December 31, 2016 and 2017, and 278,282,366 and 280,518,358 shares outstanding as of December 31, 2016 and 2017, respectively) | 33 | 212 | 204 | |||
Treasury shares (3,096,764 and 3,096,764 shares as of December 31 2016 and 2017, respectively) | (16,496) | (107,331) | (107,331) | |||
Additional paid-in capital | 557,019 | 3,624,135 | 3,699,056 | |||
Retained earnings | 423,238 | 2,753,715 | 1,812,174 | |||
Accumulated other comprehensive (loss) income | 25,816 | 167,965 | (4,503) | |||
Total equity | 989,610 | 6,438,696 | 5,399,600 | |||
Total liabilities and equity | $ 1,819,705 | ¥ 11,839,551 | ¥ 5,931,980 |
SCHEDULE I FINANCIAL INFORMA100
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY - BALANCE SHEETS (Parenthetical) (Details) - $ / shares | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
BALANCE SHEETS | ||||
Ordinary shares, par value (in dollars per share) | $ 0.0001 | $ 0.0001 | ||
Ordinary shares, shares authorized | 8,000,000,000 | 8,000,000,000 | ||
Ordinary shares, shares issued | 294,040,234 | 281,379,130 | ||
Ordinary shares, shares outstanding | 280,518,358 | 278,282,366 | 250,881,559 | 250,747,255 |
Treasury stock, shares | 3,096,764 | 3,096,764 | ||
Parent Company | ||||
BALANCE SHEETS | ||||
Ordinary shares, par value (in dollars per share) | $ 0.0001 | $ 0.0001 | ||
Ordinary shares, shares authorized | 8,000,000,000 | 8,000,000,000 | ||
Ordinary shares, shares issued | 294,040,234 | 281,379,130 | ||
Ordinary shares, shares outstanding | 280,518,358 | 278,282,366 | ||
Treasury stock, shares | 3,096,764 | (3,096,764) |
SCHEDULE I FINANCIAL INFORMA101
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY - STATEMENTS OF COMPREHENSIVE INCOME (Details) ¥ in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015CNY (¥) | |
Operating costs and expenses: | ||||
Selling and marketing expenses | $ 33,039 | ¥ 214,959 | ¥ 146,525 | ¥ 179,568 |
General and administrative expenses | 106,200 | 690,970 | 492,141 | 403,008 |
Total operating costs and expenses | 1,045,734 | 6,803,858 | 5,650,292 | 5,204,734 |
Loss from operations | 220,942 | 1,437,513 | 870,899 | 601,154 |
Interest income | 17,313 | 112,645 | 67,366 | 26,712 |
Interest expense | (13,421) | (87,320) | (11,056) | (3,854) |
Foreign exchange gain (loss) | (2,786) | (18,128) | 16,481 | 7,814 |
Other income, net | 25,157 | 163,678 | 133,755 | 6,979 |
Net income attributable to China Lodging Group, Limited | 190,155 | 1,237,202 | 804,615 | 436,600 |
Other comprehensive income | ||||
Unrealized securities holding gains, net of tax of 7,151, (1,810) and (7,965) for 2015, 2016 and 2017 | 133 | 868 | 16,449 | 68,069 |
Reclassification of realized gains to net income, net of tax | (812) | (5,282) | (67,921) | |
Foreign currency translation adjustments | 27,186 | 176,882 | (12,627) | 3,535 |
Comprehensive income attributable to China Lodging Group, Limited | 216,662 | 1,409,670 | 740,516 | 508,204 |
Parent Company | ||||
Operating costs and expenses: | ||||
Selling and marketing expenses | 157 | |||
General and administrative expenses | 10,561 | 68,720 | 60,075 | 59,236 |
Total operating costs and expenses | 10,561 | 68,720 | 60,075 | 59,393 |
Loss from operations | (10,561) | (68,720) | (60,075) | (59,393) |
Interest income | 247 | 1,606 | 273 | 30 |
Interest expense | 13,306 | 86,570 | 10,453 | 3,198 |
Foreign exchange gain (loss) | (2,210) | (14,382) | 14,750 | 7,477 |
Other income, net | 6,711 | 43,666 | 69,919 | 2,488 |
Income in investment in subsidiaries | 209,274 | 1,361,602 | 790,201 | 489,196 |
Net income attributable to China Lodging Group, Limited | 190,155 | 1,237,202 | 804,615 | 436,600 |
Other comprehensive income | ||||
Unrealized securities holding gains, net of tax of 7,151, (1,810) and (7,965) for 2015, 2016 and 2017 | 133 | 868 | 16,449 | 68,069 |
Reclassification of realized gains to net income, net of tax | (812) | (5,282) | (67,921) | |
Foreign currency translation adjustments | 27,186 | 176,882 | (12,627) | 3,535 |
Comprehensive income attributable to China Lodging Group, Limited | $ 216,662 | ¥ 1,409,670 | ¥ 740,516 | ¥ 508,204 |
SCHEDULE I FINANCIAL INFORMA102
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY - STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) (Details) - CNY (¥) ¥ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
STATEMENTS OF COMPREHENSIVE INCOME | |||
Unrealized securities holding gains, tax | ¥ (7,965) | ¥ (1,810) | ¥ 7,151 |
Foreign currency translation adjustments, tax | 0 | 0 | 0 |
Parent Company | |||
STATEMENTS OF COMPREHENSIVE INCOME | |||
Unrealized securities holding gains, tax | (7,965) | (1,810) | 7,151 |
Foreign currency translation adjustments, tax | ¥ 0 | ¥ 0 | ¥ 0 |
SCHEDULE I FINANCIAL INFORMA103
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY - STATEMENTS OF CASH FLOWS (Details) ¥ in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015CNY (¥) | |
Operating activities: | ||||
Net income | $ 190,069 | ¥ 1,236,647 | ¥ 796,482 | ¥ 439,380 |
Adjustments to reconcile net income to net cash used in operating activities: | ||||
Share-based compensation | 10,200 | 66,367 | 55,436 | 52,535 |
Investment income | (24,588) | (159,974) | (116,763) | (2,767) |
Amortization of issuance cost of convertible senior notes | 399 | 2,598 | ||
Changes in operating assets and liabilities: | ||||
Deferred revenue | 617 | 4,016 | 19,529 | 216,805 |
Other current assets | (11,730) | (76,320) | (40,813) | (15,518) |
Other assets | (8,363) | (54,411) | (5,046) | 1,787 |
Salary and welfare payable | 20,464 | 133,142 | 60,669 | 24,532 |
Accrued expenses and other current liabilities | 44,293 | 288,185 | 202,351 | 121,502 |
Net cash provided by (used in) operating activities | 376,955 | 2,452,596 | 2,066,301 | 1,762,511 |
Investing activities: | ||||
Purchase of long-term investments | (204,034) | (1,327,508) | (293,125) | (105,707) |
Purchase of short-term investments | (14,724) | (95,802) | (434,811) | |
Net cash (used in) provided by investing activities | (1,032,268) | (6,716,254) | 183,762 | (1,550,357) |
Financing activities: | ||||
Net proceeds from issuance of ordinary shares upon exercise of option | 1,394 | 9,073 | 12,206 | 22,619 |
Payment of share repurchase | (107,331) | |||
Proceeds from short-term bank borrowings | 20,978 | 136,488 | 281,719 | 589,376 |
Repayment of short-term bank borrowings | (45,291) | (294,677) | (332,555) | (283,516) |
Proceeds from long-term bank borrowings | 558,409 | 3,633,174 | ||
Repayment of long-term bank borrowings | (253,741) | (1,650,917) | ||
Proceeds from issuance of convertible senior notes, net of issuance cost and capped call option | 449,595 | 2,925,203 | ||
Debt financing costs paid | (1,501) | (9,763) | ||
Proceeds from ADS lending | 1 | 7 | ||
Dividends paid | (47,084) | (306,343) | (276,261) | |
Net cash provided by (used in) financing activities | 697,186 | 4,536,103 | (266,194) | 219,443 |
Effect of exchange rate changes on cash and cash equivalents | (5,031) | (32,733) | 13,300 | (2,624) |
Net (decrease) increase in cash and cash equivalents | 36,842 | 239,712 | 1,997,169 | 428,973 |
Cash and cash equivalents at the beginning of the period | 3,235,007 | |||
Cash and cash equivalents at the end of the period | 534,054 | 3,474,719 | 3,235,007 | |
Parent Company | ||||
Operating activities: | ||||
Net income | 190,155 | 1,237,202 | 804,615 | 436,600 |
Adjustments to reconcile net income to net cash used in operating activities: | ||||
Share-based compensation | 10,200 | 66,367 | 55,436 | 52,535 |
Income in investment in subsidiaries | (209,274) | (1,361,602) | (790,201) | (489,196) |
Investment income | (6,274) | (40,822) | (51,123) | |
Amortization of issuance cost of convertible senior notes | 399 | 2,598 | ||
Changes in operating assets and liabilities: | ||||
Deferred revenue | (364) | |||
Other current assets | (3,988) | (25,946) | 776 | 2,312 |
Other assets | (5,059) | (32,916) | ||
Salary and welfare payable | (25) | (86) | ||
Accrued expenses and other current liabilities | 3,644 | 23,710 | (16,618) | 15,463 |
Net cash provided by (used in) operating activities | (20,197) | (131,409) | 2,860 | 17,264 |
Investing activities: | ||||
Investment in subsidiaries | (499,723) | (3,251,346) | (168,709) | |
Receipt of investment in subsidiaries | 236,238 | |||
Purchase of long-term investments | (116,843) | (760,215) | (47,859) | |
Proceeds from sale of long-term investments | 8,955 | 58,264 | 3,845 | |
Purchase of short-term investments | (14,724) | (95,802) | (271,630) | |
Proceeds from sale of short-term investment | 337,189 | |||
Net cash (used in) provided by investing activities | (622,335) | (4,049,099) | 529,413 | (440,339) |
Financing activities: | ||||
Net proceeds from issuance of ordinary shares upon exercise of option | 1,394 | 9,073 | 12,206 | 22,619 |
Payment of share repurchase | (107,331) | |||
Proceeds of advances from subsidiaries | 13,905 | 90,468 | 222,403 | |
Proceeds from short-term bank borrowings | 20,824 | 135,488 | 281,719 | 489,376 |
Repayment of short-term bank borrowings | (45,137) | (293,677) | (332,555) | (183,516) |
Proceeds from long-term bank borrowings | 558,409 | 3,633,174 | ||
Repayment of long-term bank borrowings | (253,741) | (1,650,917) | ||
Proceeds from issuance of convertible senior notes, net of issuance cost and capped call option | 449,595 | 2,925,203 | ||
Debt financing costs paid | (1,501) | (9,763) | ||
Proceeds from ADS lending | 1 | 7 | ||
Dividends paid | (47,084) | (306,343) | (276,261) | |
Net cash provided by (used in) financing activities | 696,665 | 4,532,713 | (314,891) | 443,551 |
Effect of exchange rate changes on cash and cash equivalents | (26,073) | (169,637) | 35,629 | 5,800 |
Net (decrease) increase in cash and cash equivalents | 28,060 | 182,568 | 253,011 | 26,276 |
Cash and cash equivalents at the beginning of the period | 57,488 | 374,036 | 121,025 | 94,749 |
Cash and cash equivalents at the end of the period | $ 85,548 | ¥ 556,604 | ¥ 374,036 | ¥ 121,025 |
SCHEDULE II VALUATION AND QU104
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (Details) - CNY (¥) ¥ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Valuation And Qualifying Accounts | |||
Addition Due to Acquisition | ¥ 2,963 | ¥ 11,724 | |
Allowance for doubtful accounts of accounts receivables and other receivables: | |||
Valuation And Qualifying Accounts | |||
Balance at Beginning of Year | 11,924 | 6,059 | ¥ 6,477 |
Charge to Costs and Expenses | 2,446 | 1,082 | 1,997 |
Addition Due to Acquisition | 7,151 | ||
Write off | (3,593) | (2,368) | (2,415) |
Balance at End of Year | 10,777 | 11,924 | 6,059 |
Valuation allowance for deferred tax assets | |||
Valuation And Qualifying Accounts | |||
Balance at Beginning of Year | 114,625 | 92,527 | 62,868 |
Charge to Costs and Expenses | 59,929 | 55,757 | 47,122 |
Addition Due to Acquisition | 2,963 | 11,724 | |
Charge Taken Against Allowance | (46,903) | (17,064) | (15,508) |
Write off | (7,476) | (28,319) | (1,955) |
Balance at End of Year | ¥ 123,138 | ¥ 114,625 | ¥ 92,527 |