Mar 11, 2016
Executives
Ida Yu - Senior Manager of Investor Relations Min Zhang - Chief Executive Officer Teo Nee Chuan - Deputy Chief Financial Officer Qi Ji - Founder and Executive Chairman
Analysts
Yaoxin Huang - China International Capital Corporation Limited Lin He - Morgan Stanley Jake Lynch - Macquarie Securities Nelson Wang - Goldman Sachs Sophie Chiu - Credit Suisse
Operator
Ladies and gentlemen, thank you for standing by, and welcome to the China Lodging Group’s Fourth Quarter and Full-Year 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode.
There will be a presentation, followed by question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today, Friday, March 11, 2016.
I would now like to hand the conference over to your first speaker today, Ms. Ida Yu, Senior Manager of Investor Relations for China Lodging Group.
Thank you. Please go ahead.
Ida Yu
Thank you, Vincent. Good morning, everyone.
Thanks to all of you for dialing in and welcome to our fourth quarter and full year of 2015 earnings conference call. Joining us today is Mr.
Qi Ji, our Founder and Executive Chairman; Ms. Jenny Zhang, our CEO; Ms.
Hui Chen, our CFO; and Mr. Teo Nee Chuan, our Deputy CFO.
Jenny and Qi will present the company overview and our results for 2015. Following their prepared remarks, management will be available to answer your questions.
Before we continue, please note that the discussion today will include forward-looking statements made under the Safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties.
As such, our results may be materially different from the view expressed today. A number of potential risks and uncertainties are outlined in our public filings with the SEC.
China Lodging Group does not undertake any obligation to update any forward-looking statements except as required under applicable law. On the call today, we will also mention adjusted financial measures during the discussion of our performance.
Reconciliations of those measures to comparable GAAP information can be found in earnings release that was distributed earlier today. As a reminder, this conference call is being recorded.
The webcast of this conference call as well as supplementary slides presentation is available on our Investor Relations section of China Lodging Group’s website at ir.huazhu.com. Now, I would like to turn the call over to Jenny.
Jenny, please.
Min Zhang
Good morning, everyone. Thank you for joining us today.
We concluded 2015 with very strong results. We made remarkable progress in hotel network expansion, brand building and profitability.
Before we go into the results review for 2015, I would like to briefly share with you our vision. As shown on Page 2, our vision is to build a world-class, great enterprise.
We envision that Huazhu will grow into a sizeable hotel group with more than 10,000 hotels in our network. We pursue quality with guaranteed functionality, absolute cleanliness and extreme convenience.
We also aim to achieve industry leading profitability through innovation and high efficiency. Our results in 2015 are strong proof that we are achieving good progress toward this vision.
Page 3 provides us a snapshot of where we are today. Founded in 2005, Huazhu has become the leader in China hotel industry.
Starting from only one hotel brand, HanTing, now we have a total of 12 brands, covering the full spectrum, from Economy, Midscale to Upscale segments. We built one of the most profitable and valuable hotel network with 2,763 hotels, 278,843 rooms in operations, covering 352 cities as of the end of 2016.
And for business, Huazhu is critically attractive in five aspects. As shown on Page 4, we are a market consolidator in a huge and fragmented market.
We have a superior performance track record. We have adopted mainly of manachised and franchised model.
We have proven capability in building new brands. Last, but not least, we have a visionary and experienced leadership team.
Please allow me to use the following 12 slides to illustrate those points. Next stop by taking a look at the domestic travel market on Page 5, from 2007 to 2014 the domestic travel expenditures grows to annual growth of 21%.
And I would like to highlight of the underlying growth drivers we see going forward. First of all, consumption upgrade stimulates more demand for travel in general.
Second, the increasing adoption of annual leave system in China is another driver. We see good progress of adoption in the past six years after regulatory support of annual leave system.
Nevertheless, a recent survey shows us only 41% of the respondents took all of their entitled annual leave. Increased adoption is expected.
Thirdly, short distance leisure trip improved as the life style change along with the increased income. And finally, Shanghai Disney and the other theme parks under construction will create sizeable new travel demand.
We are confident China’s domestic travel market will remain robust. Chinese hotel industry is not only riding our growing demand, but also significant room for consolidation.
As shown on Page 6, up more than a decade of consolidation, today, still only 20% of total economy hotels in China are branded, compared with 70% of economical hotels in U.S. are branded.
We foresee the consolidation in China to continue. Huazhou is a main consolidator in the market.
As shown on Page 7, from 2009 to 2014, our company saw an explosive 8 times growth of our market share in the economy segment, from 0.3% to 2.4%. We expect our market share continue to increase drastically.
We call ourselves consolidator because majority of our hotels are conversions from existing lodging facility, instead of new capacity added to the market. In 2015, about 63% of our newly opened hotels were converted from other hotels as shown on Page 8.
We believe this trend will continue as independent hotels need brand and other systematic support to better tackle today’s economic and competitive situations. The pickup data on Page 9 shows the significant progress we have achieved since our IPO.
Our hotel network expansion has achieved 44% annual growth by hotel count. What’s more important, the growth of EBITDA and net income offset the growth of net revenue, meaning we are enjoying the official leverage as a hotel group, as our site fills up and in the ways of manachised and franchised hotel further increases.
In particular, I’m very pleased with our financial results in 2015. As shown on Page 10, for the full year our total revenues grew by 16%, of which revenue from manachised and franchised hotels increased by 51%.
Net profits increased by 42% and net margin improved by 1.4 percentage points. We also saw a strong free cash flow totaling up RMB1.1 billion, a significant increase of 108% from the prior year.
Teo will provide more detailed financial analysis later. In the following 2 pages conclude that we outperformed our peers in both growth and the profitability in 2015.
I want to highlight the number of hotels newly added which demonstrates our strong growth momentum. As we can see, every quarter we have significantly exceeded our competitor in terms of expansion.
And if you compare the pipeline, we know we remain in a very strong position. Not only did we achieve significant growth in terms of network expansion, we also have achieved higher RevPAR quarter over quarter and also much more meaningful year on year revenue growth in the past few quarters.
The EBITDA margin we also had outperformed our competitor. Let’s move to the business model.
Today manachised and franchised are our dominant model. On Page 13, we added a total of 768 hotels in 2015.
About nearly all of them are under manachised and franchised models from the net increase perspective. At the end of 2015 about 78% of our hotels in operation are under this asset-light model.
To further illustrate the path we have taken, we have shown you the comparison of what we have done in our short history of 11 years with Marriott has achieved over the past 60 years. On Page 14, Marriott have continuously extended their portfolio and network through launch of new brands and acquisition.
Similarly starting from HanTing, an economy hotel brand in 2005, we launched Hi Inn brands in 2009, JI Hotel in 2010, Joya and Manxin in 2012 and 2013 respectively. On the front of acquisition, we bought Starway, Elan.
And in 2016 through a strategic alliance with AccorHotels, we became the master franchisee for Ibis, Ibis Styles, Mercure and the co-developer for Grand Mercure and Novotel in Greater China. We aspire to become a world-class hotel group.
On Page 15, we see more details for each brand growth in 2005 and the pipeline for next year. In 2005, we added 768 new hotels in total, about 46% contributed by our core brand HanTing Hotel.
The other relative younger brands saw very rapid development in 2015. By now we have five brands exceeding the total hotel count of 100.
Page 16 highlighted the key executives of Huazhu, as you are probably all familiar with Qi Ji and myself. Now, Qi Ji has founded the company and have served the company for more than eight years.
What I would like to highlight are the team are very experienced and coming from multinationals, hotel industries and we have attracted talents along the way in the 11 years of our history. This is the core [Technical Difficulty] oftheteam qualitywith other players in the market.
So those are the five highlights of the company. Let me also spend a few minutes with you to share with you our strategic focus in 2013.
We are going to focus on three things. Number one is to strengthen and differentiate HanTing, our flagship brand.
And secondly, we will continue our fast expansion. And thirdly, we will further boost our direct sales capability.
Page 19 shows a snapshot comparison between our HanTing version 1 versus version 2. As I mentioned earlier, consumption upgrade is a clear chance.
Our customers seek for higher quality for their accommodation. Our focus is to deliver products that generate value for money they experience and maintain our status as one of the China’s most innovative hotel groups.
This new version of HanTing includes an all-in-one bathroom module and a new high-quality bedding. The new bathroom module is designed for smart use of space and improvements on operational efficiency.
The new bedding is to guarantee our guests are sound at sleep that makes the big difference for frequent travelers. Secondly, we will maintain our fast expansion.
In 2016, we plan to open 750 to 800 new hotels with 80% as economy hotels and 20% midscale and upscale hotels. We expect some closures because of the lease expiration and the quality issues with our franchisees.
And after the deduction of the expected closure, we expect a net loss of about [Technical Difficulty] hotels in 2016. The significant majority of the new hotels added in 2016 we will continue to be with manachised and franchised hotels.
Thirdly, we will further boost our direct sales channels by adding more favorable programs to our members. In 2015, more than 90% of room nights were sold to our own channel.
More than 80% of room nights were contributed by our loyalty members. Being close to our customers through direct sales channel provides the best economics to both our customers and our franchisees.
With that, I will pass the call over to Teo, our Deputy CFO, who will walk you through our operational and financial results for Q4 and the full year of 2015. Teo, please.
Teo Nee Chuan
Thank you, Jenny. Hello, everyone.
I’m pleased to report our operational results for Q4 and full year 2015. As shown on Page 23, in Q4 we opened a total of 175 net new hotels.
This brings our total net new openings to 768 hotels in 2015. Among those net new openings, five are under the lease model, while 763 are under the manachised and franchised models.
At the end of 2015, we had 2,763 hotels in operation, 22% were leased hotels and 78% were manachised and franchised hotels. Meanwhile, we have a pipeline of 677 hotels with 21 leased hotels and 656 manachised and franchised hotels.
As shown on Page 24, in Q4 our group’s blended occupancy was 84%, a decrease of 2.2 percentage points year over year. The decrease was mainly due to soft macroeconomy and a dilutive impact from newly-opened hotels in the lower-tier cities.
The blended ADR was RMB177, an increase of 0.4% year-over-year, as a result of the more favorable brand mix. Midscale and upscale hotels accounted for 14.6% of the total number of hotel rooms in Q4 2015, up from 11.4% in Q4 2014.
Moreover, our midscale and upscale hotels, saw a 5% increase in same hotel ADR due to pricing opportunities in the higher tier cities. In summary, for Q4 the blended RevPAR was RMB149, a decrease of 2.3% year-over-year.
As shown on Page 25, for the full year of 2015, our group blended occupancy was 85%. A decline of 3.6 percentage points year over year.
The decline in occupancy rate was mainly due to soft macroeconomy and the higher percentage of new hotels in the lower tier cities. The blended ADR was RMB179, the same as 2014.
In 2015, the blended RevPAR was RMB153, a decrease of 4.1% from a year ago. Page 26 provides a detailed view of the growth trend of our same-hotel RevPAR on hotels in operation for at least 18 months.
In Q4, our same-hotel RevPAR decreased by 2.9%, mainly due to 2.6 percentage point decrease in occupancy. The decrease in same-hotel occupancy was mainly due to soft economic growth in China.
In Q4, the RevPAR for midscale and upscale hotels continue to grow on the like-for-like basis. The same-hotel RevPAR improved by 7.8%.
In the full year of 2015, our same-hotel RevPAR declined by 3.6% with 0.3% increase in ADR and a 3.5 percentage point decrease in occupancy. The midscale and upscale hotels achieved a 6.5% increase in same-hotel RevPAR.
Moving to our financial results on Page 27, our net revenue increased by 16.2% for the fourth quarter from a year ago, in line with our guidance. Revenue from leased hotels grew by 11%, while revenue from manachised and franchised hotels grew by 44% from the fourth quarter of 2014.
In Q4, revenue contribution from manachised and franchised hotels accounted for 19% of the total revenue, an increase of 4 percentage point from the prior year. For the full year of 2015, our net revenue increased from 16.3% with a 10% growth in our leased hotels and a 51% growth from our franchised and manachised hotels.
On Page 28, the adjusted operating margin came in at 9.7% for Q4, an increase of 5.7 percentage points from Q4 last year. The adjusted total operating cost as a percentage of net revenue decreased by 1.3 percentage points year over year.
This is mainly due to the increased proportion of revenues from manachised and franchised hotels, partially offset by the impairment loss provided on 7 of our leased hotels. The pre-opening expenses as a percentage of net revenue decreased by 2.2 percentage points from a year ago, this is mainly a result from fewer leased hotels in the pipeline.
The adjusted SG&A expenses and other operating income as percentage of net operating revenue decreased by 2.2 percentage points mainly due to lower marketing spending in Q4 of 2015. On page 29, the adjusted operating margin for full year 2015 was at 11.4%, an increase of 2.9 percentage points from a year ago.
The hotel operating cost as percentage of net revenues declined by 0.1% year over year, mainly due to increased proportion of revenues from manachised and franchised hotels, offset by increase in cost as percentage of our leased hotels. Our pre-opening expenses as percentage of net revenue saw a 1.9 percentage drop due to our enlarged revenue base and a fewer leased hotels in the pipeline.
The adjusted SG&A expenses and other operating income as a percentage of net revenues decreased by 0.9%, mainly due to lower marketing spending in 2015. Moving on to cash flow status as shown on Page 13, in 2015 our net cash from operation reached RMB1.75 billion while the CapEx for maintenance and new developments totaled RMB656 million.
As a result, the free cash flow in 2015 totaled RMB1.09 billion. The strong cash flow illustrates upon our future growth for hotel expansion and other strategic investments as well as our commitment to return to shareholders.
In 2015, we purchased our ADS with a total of US$17.5 million from the open market. We also declared a special dividend of a total amount of US$43 million.
The dividend was paid in February 2016. I also would like to provide you with a business update post the reporting period.
We closed the strategic alliance transaction with AccorHotels in January 2016. As shown on Page 31, we have an exclusive master franchisee rights for Mercure, Ibis and Ibis Styles, and co-development rights for Grand Mercure and Novotel from Midland China, Taiwan, Egypt and Mongolia.
We also have a non-controlling 29.3% stake in a joint venture with AccorHotels’ luxury and upscale brands in the region. The financial impact started in January 2016.
Finally, our guidance on Page 32, we expect to achieve Q1 net revenue flow of 14% to 15% year-over-year and a full year net revenue flow of 12% to 15%. With that, let’s open the floor for questions.
Operator
Thank you. [Operator Instructions] Your first question today comes from the line of Yaoxin Huang from CICC.
Your line is now open.
Yaoxin Huang
Hello. Thank you, management, for taking my question.
I have several questions. First question goes to Ms.
Jenny. Hi Jenny, could you give us more outlook or guidance for the Accor’s financial impact, since it’s already consolidating our financial statement in - from 2015.
Could you give us more guidance for the Accor’s revenue impact and margin impact? Thank you.
Min Zhang
Yeah. I will ask Teo to address that question.
Teo Nee Chuan
Hi. The financial impacts from Accor will contribute to Huazhu’s profit since beginning of January.
So we expect that the profit contribution to be ranging from RMB45 million to RMB50 million for 2016.
Yaoxin Huang
Okay. So you mean RMB35 million to RMB45 million?
Teo Nee Chuan
RMB45 million to RMB50 million.
Yaoxin Huang
RMB45 million to RMB60 [ph] million in 2016, right, okay.
Teo Nee Chuan
That’s right.
Yaoxin Huang
Okay. Perfect.
Thank you. My second and third question goes Mr.
Ji. Hi, Ji Zhang.
[Interpreted] Okay. This question has two-folds.
First of all, we see Huazhu has a very aggressive asset expansion plan of new start opening. It’s about - it’s over 715 to 800 hotels.
By contrast, your competitors only open 100 to 300 hotels. So my question is, how do you balance the faster expansion of hotels versus controlling the quality?
That’s the first question. Second question is that, Accor has accounted over 10% of stake of Huazhu, so how much influence does Accor have?
Qi Ji
[Interpreted] Okay. So, let me try the first - first question’s answer.
Well, if you compare with our hotel new opening in 2016 that is slightly below 2015. However, it’s still very high even in the global scale.
So in economy segment, HanTing is most franchisees’ favorable charter, well, which is proved in the past few years. HanTing is outstanding in terms of RevPAR and the absorption of the rental cost.
Therefore, we have very strong pipeline made strong by the franchisee. Second is, in the past few years we have already self-developed a few brands from midscale hotels.
And meanwhile, through our strategic alliance with Accor we have more brands coming in. So with this increased number of brands, we think it’s still reasonable to have more new hotel open.
The third point is that although we all know that macroeconomy is softening, however we think the economy segment is still more resilient especially in first-tier and second-tier cities. Of course, we also pay attention to the third-tier city and below.
Management, including myself, visited a few cities. We are very actively discussing how to adjust our progress and opening strategy, sales strategy to counter this situation.
So in summary, we are very confident that the market still has great demand for our products. Meanwhile, we are cautious into evaluate the number of hotels opening.
Thank you. Yes.
The Chairman and CEO, Sébastien, from Accor group has one board seat in Huazhu Group. Of course, he will have influence in the company.
First of all he will bring us abundance of experience from European and U.S. markets, which is still new to us.
We it’s a valuable experience. Second is, through this strategic alliance our cooperation in China will particularly strengthen and deepen.
Of course, in China our experience is - we have more abundant experience than Accor. So we think in general we learn from each other.
Yaoxin Huang
Okay. Thank you.
Thank you so much.
Operator
Your next question today comes from the line of Lin He from Morgan Stanley. Your line is now open.
Lin He
Hi good morning, management. Thanks for taking my question.
I have a couple of questions. Firstly, Jenny, can you remind me what is the net opening target for this year?
I didn’t hear it very clearly. And my second question is, Jenny, you talk about the three strategic focus in 2016.
I think we have already touched on the fast expansion point. But can you share with us a bit more color on the number one and number three?
So basically, what are some of the plans you are thinking about to get, frankly, to further differentiate HanTing and what are the detailed plans that you may execute to boost direct sales? And my third question is for Ji Zhang [ph] basically to ask for his view on Jin Jiang’s acquisition, Jin Jiang parent company’s acquisition of Accor stake, what’s the potential impact on your strategic cooperation with Accor?
[Foreign Language]
Min Zhang
And could you repeat the first question? I didn’t quite get you.
Lin He
Oh, the net opening. So basically what is the - you talked about gross opening and then there would be some a closure, right?
What is the net opening target for this year? I didn’t [indiscernible].
Min Zhang
Sure. Our net opening is expected to be approximately [Technical Difficulty] hotels.
And we expect to close above 80 to 100 hotels, approximately half of that, because we raised the quality bar at end of last year. So this year we are going to proactively close some of the hotels that are below the new quality standards.
So with a gross opening of 750 to 800 and expected closure of 80 to 100 it will lead us to a net opening of approximately 700 new hotels net. And back to the strategic focus, for HanTing we are going to accelerate the reevaluation of the existing hotels.
Our new version of HanTing was very well received by the market. We have seen RevPAR improvement with the new product, compared with the older product in similar location.
We have already kicked off the reevaluation of the older version last year and we are going to accelerate that this year. We are also launching more services in HanTing Hotel and you are going to see them in the market in the second-half of the year.
As for the third initiative, of direct sales we are going to further enforce the policy of best price available in the Huazhu direct channel and most favorable treatments to our members. So we are planning a significant size of campaign internally and externally this year.
There are also further enhancements of the loyalty program in many aspects. I will pass along and I’ll ask Qi Ji to answer the third question.
Qi Ji
[Foreign Language]
Min Zhang
Okay. Yes.
So the question is - the first question is actually, given Jin Jiang has already have 11% in Accor Group, so what will be the impact to Huazhu indirectly? So, Mr.
Ji’s answer is that, first of all, Jin Jiang doesn’t have a board seat in Accor. Even so - this is the reality.
So even if Jin Jiang has one board seat the impact to Accor Group is still unknown, unsure at this moment. So even in extreme scenario, Jin Jiang acquire Accor totally, which means the company assume Accor’s board seat in Huazhu, my understanding is that Jin Jiang still, as only one board member Jin Jiang is incapable of controlling Huazhu at all.
Of course, if Jin Jiang becomes the shareholder of Huazhu, I’m sure Jin Jiang also wants Huazhu’s share increase further increasing its shareholder value. That’s the answer to the question.
And also Mr. Ji elaborates his view points about the current privatization and consolidation in hotel market.
When he started Huazhu, Jin Jiang, [Jixin, and Xinya Jixin] [ph] are the leading brand in the market. However, they are quickly surpassed by Huazhu.
When he started HanTing in 2005, similar thing happened. HanTing exceeded in other places in terms of the growth speed and operation.
So in his mind, of course, the cheap funding from banks is important, especially in M&A and consolidation of financial. But operation is more important, especially in this market-oriented fully competitive hotel market.
What is more important to a hotel operator, number one is doing really good business. Treat your customer well and treat your associates well.
And in order to achieve this, this requires good entrepreneurship, leading entrepreneur and a good team. So far, of course, we think Huazhu demonstrates this point.
Any short term financial budget in our mind is not going to lasting long. Marriott has already a very good example to us.
This company has over like 60 years history. And Huazhu has 10 years history already.
So far we are pleased with what we have achieved and we are confident of our future. And adding in few words to this acquisitions by say on the company, we are still have question about how this still on the - how these hotels is going to perform in this stay owned system, given it is own limits.
Of course, we hope that companies can be integrated well and become more efficient and give us more comparable competitors in this market. Thank you.
Lin He
[Foreign Language]
Min Zhang
[Foreign Language]
Operator
Your next question today comes from the line of Jake Lynch from Macquarie. Your line is now open.
Jake Lynch
Yes, hello, Ji Zhang, Jenny and management, and congratulations on a good set of numbers. My question, I want to focus, come back to Accor.
Firstly, the guidance for this year in terms of revenue growth, should I take that as organic ex the Accor? Or is that including some of the effect of Accor?
And further on, Chuan, do you have any operational metrics around Accor in terms of just the number of hotels at this point relative RevPARs? And finally, in terms of the co-development, Novotel and Grand Mercure, can you give us a bit more understanding of exactly how that would play out?
Would that be a geographical split or some other type of arrangement? Thank you.
Teo Nee Chuan
Hi. My name is Teo.
I’ll be picking up your questions. The first question is on the revenue guidance.
The revenue guidance that you mentioned earlier, it includes the contributions from the Accor business. And secondly, is that, on the operational statistics is, right now we provide the - AccorHotels contribute approximately 91 hotels, will be added to our network.
And we will be providing more information on the statistics in the next call. And number three, is the co-operations on the - the cooperation on co-developments of the region is that, Accor and Huazhu will co-develop midscale brand, mainly the Grand Mercure and Novotel in the Mainland regions, in Taiwan and Mongolia.
And for the - and Huazhu will exclusive rights to develop the economic brands like Ibis and Ibis Styles and as well as Mercure in the Mainland region, Taiwan as well as Mongolia. Does that answer your questions?
Jake Lynch
Well, If I may just drill a bit more on the definition of co-development, does that mean that there is a company created and you share that company or does that mean that you each have a respective area that you would develop this brand?
Teo Nee Chuan
Okay. Now, Accor has been in this market and has been touch with number of the owners since all the while until like beginning of this year.
So they would have existing contact. They will be continue to work with.
On the other hand is that Huazhu would have additional - will scout for - will comb the area - other geographical areas and make into our contact. So both fields will continue to develop the hotel bit on our penetration to the market.
And so is - there is no specific reasons or that we set up a company to achieve that. So this is more of a - both of us has the opportunity to reach out to the market and get the owners to join the hotel networks.
Jake Lynch
Okay. Thank you.
And if I may just one last question, can you share with us the cost of the renovation to the HanTing 2.0 on a per hotel basis? Is that - just trying to get a sense of the CapEx burden there?
Teo Nee Chuan
Now, the CapEx that we plan to spend on each, it may defer from one hotel to the other, because it depends on the structures of the - I would say that the status of the hotel, the qualities of the hotels, and so as whether we want to renovate the entire property or certain spaces. So we have allocated approximately over RMB200 million in the major repairs as well as the operating.
So we have not, we assess the renovation cost on a hotel-by-hotel basis.
Jake Lynch
Okay. Thank you very much.
Operator
Your next question today comes from the line of Nelson Wang from Goldman Sachs. Your line is now open.
Nelson Wang
Hey, thank you, management. Thanks for taking my question.
My first question is regarding, going forward is there any share buyback and given dividend policy, and if not, just where are you going to spend the free cash flow?
Teo Nee Chuan
In 2015, we generate around RMB1 billion of operating cash flow from our business. And we consider that - we think that it is a good idea to actually return some of them to our shareholders.
We had some verification with this on each year. But in such a dynamic market like China, we have lot of areas of investments.
We will continue to access the cash flow needs, the CapEx requirement as well as investment opportunities. So, right now, we do not have a fixed dividend policy to distribute a dividend to shareholders on the quarterly or annual basis.
So it all depends on our cash flow needs in the coming years. And if there is any excess, we will distribute.
Nelson Wang
Thank you. My second question is, for the gross opening of 750 to 800 new openings, how many of them are from Accor?
Teo Nee Chuan
Okay. We expect to open up approximately 40 to 50 hotels on Accor brand.
Nelson Wang
Okay. Thank you.
And just a follow up on the Accor’s revenue contribution, so how many of the revenue contribution in 2016 comes from Accor?
Teo Nee Chuan
We estimate that is approximately RMB250 million to RMB300 million of revenue from Accor’s.
Nelson Wang
Okay. Thank you.
Just one last question, regarding the Home Inns share, do you guys still own Home Inns’ share?
Teo Nee Chuan
We do. In fact, we see the price from Home Inns share since we acquired has been climbing up and is coming near to the XI [ph].
So we still hold on to it. And whether we would dispose it, it all depends on the timing of the closure or the Home Inns deals, which we expect in mid-2016, and as well as our cash flow needs before that.
Nelson Wang
Okay. Thank you so much.
Operator
Your next question today comes from the line of Sophie Chiu from Credit Suisse. Your line is now open.
Sophie Chiu
Hi, thanks for taking my questions. I have couple of questions.
First one is about the rental. Can you talk about the rental situation, because I notice that it seems in the fourth quarter rental seems to be slightly lower?
I’m talking about like per hotel basis. And can you also talk about the rental situation for the first quarter now as well?
And the second would be for your revenue guidance, because the full year is like 12% to 15% growth. It seems to have embedded slightly better RevPAR expectations.
So can you talk about the RevPAR situation for the first two months and the overall situation would be fine as well? And then my third question will be about Accor as well.
So can you tell us like how much asset that from Accor that will be consolidated into your balance sheet and also will there be any earnings impact from your investment in the luxury joint venture as well? Thank you.
Teo Nee Chuan
Excuse me. Do you mind to repeat your question, the first one?
Sophie Chiu
It’s rental. So the rental of your hotel on a per hotel basis, it seems that the rental is lower slightly in the fourth quarter.
So I want to know whether maybe you have seen the rentals coming down also in this year as well.
Teo Nee Chuan
Okay. To answer that question, the rental expenses are approximately the same.
Probably, the rental amount, it increased over compared to the Q4 last year, because of additional hotels that we added on to the network. However, the percentage point has declined mainly because of the revenue expansion in Q4 2015 compared to the, what is that, to Q4 2014.
Min Zhang
As to your second point on RevPAR churn, we are seeing the same hotel RevPAR or decrease has been actually slowed down. And we still saw our same hotel RevPAR decrease in January, but we come to a flattish situation in February.
So the general trend has been quite of positive.
Teo Nee Chuan
Okay. And for the third question…
Sophie Chiu
Also the February was - sorry, can you repeat about the February?
Min Zhang
Flattish, so you’re stabilized in February.
Teo Nee Chuan
And so the third question is that the cost will act on the 91 hotels to China Lodging network, but the impact of the balance sheet from those perspectives that we are still assessing it, because we are working - the asset and liabilities will be after they consolidate into China Lodging’s book in 2016. And both of our auditors are working on the numbers right now.
Sophie Chiu
All right, again, I have a follow-up question.
Min Zhang
And the earnings that…
Sophie Chiu
Okay. Sorry, Jenny, please go ahead.
Min Zhang
Yes, the earnings, Qi has quoted in expectation after consolidation of the Accor part, has already included the profit we expect from the luxury and upscale business.
Sophie Chiu
Got it. Okay.
I want to follow-up a question about the dividend. Maybe can I ask Ji Zhang.
[Foreign Language]
Min Zhang
Let me take off the question for Qi Ji. I think we are facing a market which is very dynamic, yes.
We have a quite stable cash flow as you can saw from 2014 to 2015, the free cash flow doubled. And we expect our cash flow remain very strong in 2016.
What we cannot predict is in this dynamic market, will there be any good opportunity for us getting to future investment opportunities. So that’s why we haven’t committed to a fixed policy.
But we do have a plan to have a more flexible share purchase program running through the year.
Sophie Chiu
[Foreign Language]
Min Zhang
As I said, we see this market being quite dynamic and we are also at the early stage of distributing dividend. We will like to have more experience before we really fix the dividend policy.
Sophie Chiu
[Foreign Language]
Operator
Ladies and gentlemen, that concludes the question-and-answer session for today. I would now like to hand the conference back to management for closing remarks.
Min Zhang
Thank you for joining our call today. And we will report to you in May for our Q1 results.
Thank you. Bye-bye.
Operator
Ladies and gentlemen, that concludes our conference for today. We thank you all for your participation.
You may now disconnect.