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 China Lodging Group, Limited Reports Fourth Quarter and Full Year 2016 Financial Results
   Tuesday, March 14, 2017 5:00:15 PM ET

-- A total of 3,269 hotels or 331,347 hotel rooms in operation as of December 31, 2016.

-- Net revenues increased 10.9% year-over-year to RMB1,669.9 million (US$240.5 million) 1 for the fourth quarter and 13.2% to RMB6,538.6 million (US$941.8 million) for the full year of 2016, in line with the guidance previously announced.

-- Adjusted EBITDA (non-GAAP) increased 18.4% year-over-year to RMB379.3 million (US$54.6 million) for the fourth quarter and increased 34.9% to RMB1,785.8 million (US$257.2 million) for the full year of 2016.

-- Net income attributable to China Lodging Group, Limited was RMB125.9 million (US$18.1 million) for the fourth quarter and RMB804.6 million (US$115.9 million) for the full year of 2016, increasing 77.9% year-over-year for the fourth quarter and increasing 84.3% for the full year of 2016.

-- Basic earnings per ADS2 were RMB1.81 (US$0.26) for the fourth quarter of 2016 and RMB11.70 (US$1.68) for the full year of 2016. Diluted earnings per ADS were RMB1.76 (US$0.25) for the fourth quarter of 2016 and RMB11.38 (US$1.64) for the full year of 2016. Excluding share-based compensation expenses, adjusted basic earnings per ADS (non-GAAP) were RMB1.99 (US$0.29) for the fourth quarter of 2016 and RMB12.50 (US$1.80) for the full year of 2016 and adjusted diluted earnings per ADS (non-GAAP) were RMB1.94 (US$0.28) for the fourth quarter of 2016 and RMB12.16 (US$1.75) for the full year of 2016.

-- The Company provided guidance for Q1 2017 net revenues growth of 7.2% to 8.4% and full year 2017 net revenues growth of 8% to 12%.

China Lodging Group, Limited (HTHT ) ("China Lodging Group", "Huazhu" or the "Company"), a leading and fast-growing multi-brand hotel group in China, today announced its unaudited financial results for the fourth quarter and full year ended December 31, 2016.

Operational Highlights of Fourth Quarter 2016

-- During the fourth quarter of 2016, the Company opened 10 leased ("leased-and-owned") hotels and 138 manachised ("franchised-and-managed") and franchised hotels, and closed 11 leased hotels and 66 manachised and franchised hotels.

-- The ADR, which is defined as the average daily rate for all hotels in operation (excluding certain franchised Starway hotels), was RMB186 in the fourth quarter of 2016, compared with RMB177 in the fourth quarter of 2015 and RMB194 in the previous quarter. The year-over-year increase of 5.2% was mainly attributable to more favorable brand mix with an increased proportion of midscale and upscale hotels in operation. The sequential decrease resulted mainly from seasonality.

-- The occupancy rate for all hotels in operation (excluding certain franchised Starway hotels) was 84.7% in the fourth quarter of 2016, compared with 84.3% in the fourth quarter of 2015 and 88.9% in the previous quarter. The slight year-over-year increase was mainly due to improved occupancy in mature hotels. The sequential decrease resulted mainly from seasonality.

-- RevPAR, defined as revenue per available room for all hotels in operation (excluding certain franchised Starway hotels), was RMB158 in the fourth quarter of 2016, compared with RMB149 in the fourth quarter of 2015 and RMB173 in the previous quarter. The year-over-year increase was a result of higher ADR and higher occupancy rate. The sequential decrease resulted mainly from seasonality.

-- For all hotels which had been in operation for at least 18 months (excluding certain franchised Starway hotels), the same-hotel RevPAR was RMB157 for the fourth quarter of 2016, a 2.5% increase from RMB153 for the fourth quarter of 2015, with a 1.6% increase in ADR and a 0.7-percentage-point increase in occupancy rate. The midscale and upscale hotels registered an 8.9% same-hotel RevPAR improvement, with a 7.6% increase in ADR and 1-percentage-point increase in occupancy rate.

Operational Highlights of Full Year 2016

-- For the full year of 2016, the Company opened 33 leased hotels and 704 manachised and franchised hotels, and closed 25 leased hotels and 206 manachised and franchised hotels. As of December 31, 2016, the Company had 624 leased hotels, 2,471 manachised hotels, and 174 franchised hotels in operation in 367 cities. The number of hotel rooms in operation totaled 331,347, an increase of 18.8% from a year ago.

-- As of December 31, 2016, the Company had 15 leased hotels and 427 manachised and franchised hotels contracted or under construction.

-- For the full year of 2016, the ADR for all hotels in operation (excluding certain franchised Starway hotels) was RMB185, compared to RMB179 in 2015.

-- For the full year of 2016, the occupancy rate for all hotels in operation (excluding certain franchised Starway hotels) was 84.9%, compared with 85.3% in 2015. The slight decline in occupancy rate was due to lower occupancy of our new brands, and partially offset by improved occupancy in mature hotels.

-- For the full year of 2016, the RevPAR for all hotels in operation (excluding certain franchised Starway hotels), was RMB157, a 2.7% increase from RMB153 in 2015. The increase was a result of higher ADR.

-- For all the hotels which had been in operation for at least 18 months (excluding certain franchised Starway hotels), the same-hotel RevPAR was RMB158 in 2016, a 0.4% increase from RMB157 in 2015, with a 0.5% increase in ADR and a 0.1-percentage-point drop in occupancy rate. In 2016, the midscale and upscale hotels registered an 8.3% same-hotel RevPAR improvement, with a 5.4% increase in ADR and 2.3-percentage-point increase in occupancy rate.

-- As of December 31, 2016, the Company’s loyalty program had more than 78 million members, who contributed 80% of room nights sold during the full year of 2016. In 2016, more than 88% of room nights were sold through the Company’s own channels.

"We are encouraged by our accelerated blended RevPAR growth this quarter. The year-over-year growth of 5.7% was fueled by the improved blended RevPAR of HanTing hotels thanks to upgrade to HanTing 2.0, coupled with continuously-growing demand for our midscale hotels. In the fourth quarter, the blended RevPAR of HanTing hotels increased by 3% year-over-year, with 31% of rooms under HanTing 2.0 model. We will continue the upgrade program of economy hotels in the next three years, so as to revitalize our flagship brand to attract more customers and franchisees," said Ms. Jenny Zhang, Chief Executive Officer of China Lodging Group.

"In 2017, our focus remains on product quality. In addition to our economy hotels upgrade program, we have also strengthened the brand and operating standards for our existing hotels by removing a number of hotels that failed to comply with our standards. We have also increased the proportion of midscale and upscale hotels in the portfolio. For the full year 2016, midscale and upscale brands accounted for 29% of our net new openings, and 40% of our pipeline as of December 31, 2016. We believe our continued focus on quality and powerful brand portfolio will lead to better operational performance and financial results in the coming quarters," Jenny added.

Fourth Quarter and Full Year of 2016 Financial Results

(RMB in thousands)                                 Q4 2015                       Q3 2016                     Q4 2016                     2015 FY                       2016 FY
Revenues:
Leased and owned hotels                            1,287,714                     1,390,334                   1,290,575                   4,986,872                     5,212,405
Manachised and franchised hotels                   305,573                       373,239                     367,983                     1,123,979                     1,411,156
Others                                             -                             10,233                      11,365                      -                             31,219
Total revenues                                     1,593,287                     1,773,806                   1,669,923                   6,110,851                     6,654,780
Less: business tax and related surcharges          (86,972                    )  -                           -                           (336,227                   )  (116,149                                                                                                                                             )
Net revenues                                       1,506,315                     1,773,806                   1,669,923                   5,774,624                     6,538,631
Net revenues from leased and owned hotels          1,217,422                     1,390,334                   1,290,575                   4,712,488                     5,121,431
Net revenues from manachised and franchised hotels 288,893                       373,239                     367,983                     1,062,136                     1,386,526
Others                                             -                             10,233                      11,365                      -                             30,674
Note: Value-added tax ("VAT") has been implemented for hospitality industry to replace business tax in China effective May 1, 2016. For comparison purpose, the net revenue for each business in Q4 2015 and full year of 2015 and 2016 are calculated with proportional allocation of business tax and related surcharges.

Net revenues for the fourth quarter of 2016 were RMB1,669.9 million (US$240.5 million), representing a 10.9% year-over-year increase and a 5.9% sequential decrease. The year-over-year increase was primarily attributable to our hotel network expansion and improved blended RevPAR. The sequential decrease was due to seasonality.

Net revenues for the full year of 2016 were RMB6,538.6 million (US$941.8 million), representing an increase of 13.2% from the full year of 2015.

Net revenues from leased and owned hotels for the fourth quarter of 2016 were RMB1,290.6 million (US$185.9 million), representing a 6.0% year-over-year increase and a 7.2% sequential decrease.

For the full year of 2016, net revenues from leased and owned hotels were RMB5,121.4 million (US$737.6 million), representing a 8.7% year-over-year increase.

Net revenues from manachised and franchised hotels for the fourth quarter of 2016 were RMB368.0 million (US$53.0 million), representing a 27.4% year-over-year increase and a 1.4% sequential decrease.

For the full year of 2016, net revenues from manachised and franchised hotels were RMB 1,386.5 million (US$199.7 million), representing a 30.5% year-over-year increase. It accounts for 21.2% of net revenues, compared to 18.4% of net revenues for the year of 2015.

Other revenues represent revenues generated from 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, totaling RMB11.4 million (US$1.6 million) in the fourth quarter of 2016.

For the full year of 2016, net revenues from other businesses were RMB30.7 million (US$4.5 million).

(RMB in thousands)                  Q4 2015    Q3 2016    Q4 2016    2015 FY    2016 FY
Operating costs and expenses:
Hotel operating costs               1,198,604  1,249,701  1,264,602  4,512,147  4,932,173
Other operating costs               -          2,258      2,319      -          7,606
Selling and marketing expenses      46,791     31,264     46,142     179,568    146,525
General and administrative expenses 128,233    123,233    143,434    403,008    492,141
Pre-opening expenses                16,216     16,710     19,747     110,011    71,847
Total operating costs and expenses  1,389,844  1,423,166  1,476,244  5,204,734  5,650,292

Hotel operating costs for the fourth quarter of 2016 were RMB1,264.6 million (US$182.1 million), compared to RMB1,198.6 million in the fourth quarter of 2015 and RMB1,249.7 million in the previous quarter, representing a 5.5% year-over-year increase and a 1.2% sequential increase. Total hotel operating costs excluding share-based compensation expenses (non-GAAP) for the fourth quarter of 2016 were RMB1,260.9 million (US$181.6 million), representing 75.5% of net revenues, compared to 79.4% for the fourth quarter in 2015 and 70.3% for the previous quarter. The year-over-year decrease in the percentage was mainly attributable to the improved blended RevPAR and VAT deductions. The sequential increase in the percentage was mainly due to seasonality.

For the full year of 2016, hotel operating costs were RMB4,932.2 million (US$710.4 million), compared to RMB4,512.1 million in 2015. Excluding share-based compensation, hotel operating costs (non-GAAP) were RMB4,918.6 million (US$708.4 million), representing 75.2% of net revenues, compared to 77.9% in 2015.

Selling and marketing expenses for the fourth quarter of 2016 were RMB46.1 million (US$6.6 million), compared to RMB46.8 million in the fourth quarter of 2015 and RMB31.3 million in the previous quarter. Selling and marketing expenses excluding share-based compensation expenses (non-GAAP) for the fourth quarter of 2016 were RMB46.1 million (US$6.6 million), or 2.8% of net revenues, compared to 3.1% for the fourth quarter of 2015 and 1.8% for the previous quarter. The year-over-year decrease was mainly attributable to the adjustment related to membership point cost in the fourth quarter of 2016. The sequential increase in the percentage was mainly due to more marketing activities occurred at the year-end.

For the full year of 2016, selling and marketing expenses were RMB146.5 million (US$21.1 million), compared to RMB179.6 million in 2015. Selling and marketing expenses excluding share-based compensation expenses (non-GAAP) were RMB145.7 million (US$21.0 million), representing 2.2% of net revenues, compared to 3.1% in 2015. The year-over-year decrease was mainly attributable to the adjustment related to membership point cost in 2016.

General and administrative expenses for the fourth quarter of 2016 were RMB143.4 million (US$20.7 million), compared to RMB128.2 million in the fourth quarter of 2015 and RMB123.2 million in the previous quarter. General and administrative expenses excluding share-based compensation expenses (non-GAAP) for the fourth quarter of 2016 were RMB134.7 million (US$19.4 million), representing 8.1% of net revenues, compared with 7.7% of net revenues in the fourth quarter of 2015 and 6.5% in the previous quarter. The year-over-year and sequential increase in the percentage was mainly due to the increase of personnel costs and professional fees.

For the full year of 2016, general and administrative expenses were RMB492.1 million (US$70.9 million), compared to RMB403.0 million in 2015. General and administrative expenses excluding share-based compensation expenses (non-GAAP) were RMB451.1 million (US$65.0 million), representing 6.9% of net revenues, compared to 6.3% in 2015.

Pre-opening expenses for the fourth quarter of 2016 were RMB19.7 million (US$2.8 million), representing a 21.8% year-over-year increase and an 18.2% sequential increase. The increase was mainly due to more leased and owned hotels are under construction in the fourth quarter of 2016.

Pre-opening expenses for the full year of 2016 were RMB71.8 million (US$10.3 million), compared to RMB110.0 million in 2015, representing a year-over-year decrease of 34.7%. The decrease in pre-opening expenses was mainly attributable to fewer leased hotel opened or under construction in 2016 than in 2015. The pre-opening expenses as a percentage of net revenues decreased to 1.1% in 2016 from 1.9% in 2015.

Income from operations for the fourth quarter of 2016 was RMB185.7 million (US$26.7 million), compared to RMB130.6 million in the fourth quarter of 2015 and RMB351.0 million in the previous quarter. Excluding share-based compensation expenses, adjusted income from operations (non-GAAP) for the fourth quarter of 2016 was RMB198.2 million (US$28.6 million), compared to adjusted income from operation (non-GAAP) of RMB144.5 million for the fourth quarter of 2015 and RMB362.9 million for the previous quarter. The adjusted operating margin??defined as adjusted operating income (non-GAAP) as percentage of net revenues, for the fourth quarter of 2016 was 11.8%, compared with 9.7% in the fourth quarter of 2015 and 20.4% in the previous quarter. The improved year-over-year adjusted operating margin was mainly attributable to improved blended RevPAR and VAT deductions. The sequential decrease in the margin was due to seasonality.

Income from operations for the full year of 2016 was RMB870.9 million (US$125.4 million), compared to RMB601.2 million in 2015. Excluding share-based compensation expenses, adjusted income from operations (non-GAAP) for the year of 2016 was RMB926.3 million (US$133.4 million), compared to RMB653.7 million for the year of 2015. The adjusted operating margin (non-GAAP) for the year of 2016 was 14.1%, compared with 11.4% for the year of 2015. The improvement of 2.7-percentage-points in the adjusted operating margin was mainly attributable to the higher blended RevPAR and VAT deductions in 2016.

Net income attributable to China Lodging Group, Limited for the fourth quarter of 2016 was RMB125.9 million (US$18.1 million), compared to RMB70.8 million in the fourth quarter of 2015 and RMB293.9 million in the previous quarter. Excluding share-based compensation expenses, adjusted net income attributable to China Lodging Group, Limited (non-GAAP) for the fourth quarter of 2016 was RMB138.4 million (US$19.9 million), representing a 63.4% year-over-year increase and a 54.7% sequential decrease.

Net income attributable to China Lodging Group, Limited for the full year of 2016 was RMB804.6 million (US$115.9 million), compared to RMB436.6 million in 2015. Excluding share-based compensation expenses, adjusted net income attributable to China Lodging Group (non-GAAP) for the full year of 2016 was RMB860.1 million (US$123.9 million), compared to RMB489.1 million in 2015. The year-over-year increase of 75.8% was mainly attributable to the expanded hotel network, improved blended RevPAR, and investment gain in 2016.

Basic and diluted earnings per share/ADS. For the fourth quarter of 2016, basic earnings per share were RMB0.45 (US$0.07) and diluted earnings per share were RMB0.44 (US$0.06); basic earnings per ADS were RMB1.81 (US$0.26) and diluted earnings per ADS were RMB1.76 (US$0.25). For the fourth quarter of 2016, excluding share-based compensation expenses, adjusted basic earnings per share (non-GAAP) were RMB0.50 (US$0.07) and adjusted diluted earnings per share (non-GAAP) were RMB0.48 (US$0.07); adjusted basic earnings per ADS (non-GAAP) were RMB1.99 (US$0.29) and adjusted diluted earnings per ADS (non-GAAP) were RMB1.94 (US$0.28).

For the full year of 2016, basic earnings per share were RMB2.92 (US$0.42) and diluted earnings per share were RMB2.84 (US$0.41); basic earnings per ADS were RMB11.70 (US$1.68), while diluted earnings per ADS were RMB11.38 (US$1.64). For the full year of 2016, excluding share-based compensation expenses, adjusted basic earnings per share (non-GAAP) were RMB3.13 (US$0.45), while adjusted diluted earnings per share (non-GAAP) were RMB3.04 (US$0.44), and adjusted basic earnings per ADS (non-GAAP) were RMB12.50 (US$1.80), while adjusted diluted earnings per ADS (non-GAAP) were RMB12.16 (US$1.75).

EBITDA (non-GAAP) for the fourth quarter of 2016 was RMB366.8 million (US$52.8 million), compared with RMB 306.5 million in the fourth quarter of 2015 and RMB546.7 million in the previous quarter. Excluding share-based compensation expenses, adjusted EBITDA (non-GAAP) for the fourth quarter of 2016 was RMB379.3 million (US$54.6 million), compared with RMB320.4 million for the fourth quarter of 2015 and RMB558.5 million for the previous quarter.

EBITDA (non-GAAP) for the full year of 2016 was RMB1,730.3 million (US$249.2 million), compared to RMB1,271.7 million in 2015. Excluding share-based compensation expenses, adjusted EBITDA (non-GAAP) for the full year of 2016 was RMB1,785.8 million (US$257.2 million), compared with RMB1,324.2 million in 2015, representing a 34.9% year-over-year increase. The year-over-year increase was mainly due to the expansion of the Company’s hotel network, the improved RevPAR and investment gain in 2016. The adjusted EBITDA margin (non-GAAP) for the year of 2016 was 27.3%, compared with 22.9% for the year of 2015.

Cash flow. Operating cash inflow for the fourth quarter of 2016 was RMB442.5 million (US$63.7 million). Investing cash outflow for the fourth quarter was RMB240.7 million (US$34.7 million).

Operating cash inflow for the full year of 2016 was RMB2,047.7 million (US$294.9 million), representing an increase of 17.0% from 2015. The significant growth was mainly due to the Company’s fast network expansion with manachise and franchise models. Investing cash inflow for the full year of 2016 was RMB183.8 million (US$26.5 million), compared to investing cash outflow of RMB 1,550.4 million in 2015. The fluctuation was mainly attributable to cash from business acquisition, the maturity and sale of short-term investment like Home Inn, and decrease in restricted cash.

Cash and cash equivalents and Restricted cash. As of December 31, 2016, the Company had a total balance of cash and cash equivalents, restricted cash of RMB3,235.5 million (US$466.0 million).

Debt financing. As of December 31, 2016, the Company had a short-term loan balance of RMB298.3 million (US$43.0 million) and the total credit facility available to the Company was RMB250.0 million.

Business Outlook and Guidance for 2016

"We remain positive about the long-term prospects about China travel industry. In 2017, we continue our consistent execution of asset-light and multiple-brand strategy. We plan to add about 450-500 hotels, with approximately 40% for midscale and upscale hotels. The manachised and franchised hotels continue to be the vast majority of our new openings in 2017, which is similar to 2016," commented Mr. Ji.

In the first quarter of 2017, the Company expects net revenues to grow 7.2% to 8.4% year-over-year. For the full year 2017, the Company expects net revenues to grow 8% to 12% from 2016.

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

Conference Call

China Lodging Group’s management will host a conference call at 9 p.m. ET, Tuesday, March 14, 2017 (or 9 a.m. on Wednesday, March 15, 2017 in the Shanghai/Hong Kong time zone) following the announcement. To participate in the event by telephone, please dial +1 (855) 500 8701 (for callers in the US), +86 400 120 0654 (for callers in China Mainland), +852 3018 6776 (for callers in Hong Kong) or +65 6713 5440 (for callers outside of the US, China Mainland, and Hong Kong) and enter pass code 7256 4976. Please dial in approximately 10 minutes before the scheduled time of the call.

A recording of the conference call will be available after the conclusion of the conference call through March 22, 2017. Please dial +1 (855) 452 5696 (for callers in the US) or +61 2 9003 4211 (for callers outside the US) and entering pass code 7256 4976.

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

Use of Non-GAAP Financial Measures

To supplement the Company’s unaudited consolidated financial results presented in accordance with U.S. GAAP, the Company uses the following non-GAAP measures defined as non-GAAP financial measures by the SEC: hotel operating costs excluding share-based compensation expenses; general and administrative expenses excluding share-based compensation expenses; selling expenses excluding share-based compensation expenses; adjusted income from operations excluding share-based compensation expenses; adjusted operating margin excluding share-based compensation expenses; adjusted net income attributable to China Lodging Group, Limited excluding share-based compensation expenses; adjusted basic and diluted earnings per share and per ADS excluding share-based compensation expenses; EBITDA; adjusted EBITDA excluding share-based compensation expenses; adjusted EBITDA margin excluding share-based compensation expenses. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliations of GAAP and non-GAAP results" set forth at the end of this release. The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding Company performance by excluding share-based compensation expenses that may not be indicative of Company operating performance. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing Company performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to the Company’s historical performance. The Company believes these non-GAAP financial measures are also useful to investors in allowing for greater transparency with respect to supplemental information used regularly by Company management in financial and operational decision-making. A limitation of using non-GAAP financial measures excluding share-based compensation expenses is that share-based compensation expenses have been - and will continue to be - a significant recurring expense in the Company’s business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.

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

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

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

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

About China Lodging Group, Limited

China Lodging Group, Limited is a leading hotel operator and franchisor in China under 12 brand names. As of December 31, 2016, the Company had 3,269 hotels or 331,347 rooms in operation in 367 cities. With a primary focus on economy and midscale hotel segments, China Lodging Group’s brands include Hi Inn, HanTing Hotel, Elan Hotel, JI Hotel, Starway Hotel, Joya Hotel, and Manxin Hotels & Resorts. The Company 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.

The Company’s business includes leased, manachised and franchised models. Under the lease model, the Company directly operates hotels typically located on leased properties. Under the manachise model, the Company manages manachised hotels through the on-site hotel managers it appoints and collects fees from franchisees. Under the franchise model, the Company provides training, reservation and support services to the franchised hotels and collects fees from franchisees but does not appoint on-site hotel managers. The Company applies a consistent standard and platform across all of its hotels. As of December 31, 2016, China Lodging Group operates 24 percent of its hotel rooms under lease model, 76 percent under manachise and franchise models.

For more information, please visit the Company’s website: http://ir.huazhu.com .

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

The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on the exchange rate of US$1.00=RMB6.9430 on December 31, 2016 as set forth in H.10 statistical release of the U.S. Federal Reserve Board and available at http://www.federalreserve.gov/releases/h10/hist/dat00_ch.htm .

Each ADS represents four of the Company’s ordinary shares.

--Financial Tables and Operational Data Follow--

China Lodging Group, Limited
Unaudited Condensed Consolidated Balance Sheets
                                                        December 31, 2015  December 31, 2016
                                                        RMB                RMB          US$
                                                        (in thousands)
ASSETS
Current assets:
Cash and cash equivalents                               1,237,838          3,235,007    465,938
Restricted cash                                         360,500            500          72
Short-term investments                                  506,407            -            -
Accounts receivable, net                                93,956             141,649      20,402
Loan receivables                                        26,808             22,410       3,228
Amounts due from related parties                        16,157             98,453       14,180
Prepaid rent                                            429,588            446,127      64,256
Inventories                                             24,529             21,606       3,112
Other current assets                                    167,995            208,929      30,091
Total current assets                                    2,863,778          4,174,681    601,279
Property and equipment, net                             3,805,886          3,710,468    534,419
Intangible assets, net                                  144,812            342,694      49,358
Land use right                                          -                  145,521      20,959
Long-term investments                                   344,242            1,064,321    153,294
Goodwill                                                108,344            171,504      24,702
Loan receivables                                        12,336             7,269        1,047
Other assets                                            195,446            200,492      28,877
Deferred tax assets                                     218,677            176,414      25,409
Total assets                                            7,693,521          9,993,364    1,439,344
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt                                         324,680            298,291      42,963
Accounts payable                                        585,347            584,731      84,219
Amounts due to related parties                          7,653              11,058       1,593
Salary and welfare payable                              210,955            274,259      39,501
Deferred revenue                                        705,607            749,793      107,993
Accrued expenses and other current liabilities          576,160            895,837      129,027
Dividends payable                                       276,261            -            -
Income tax payable                                      102,810            152,112      21,909
Total current liabilities                               2,789,473          2,966,081    427,205
Deferred rent                                           945,192            1,023,843    147,464
Deferred revenue                                        180,861            166,963      24,048
Other long-term liabilities                             275,954            323,991      46,664
Deferred tax liabilities                                61,293             96,329       13,874
Total liabilities                                       4,252,773          4,577,207    659,255
Equity:
Ordinary shares                                         186                204          29
Treasury shares                                         (107,331  )        (107,331  )  (15,459   )
Additional paid-in capital                              2,470,099          3,699,056    532,776
Retained earnings                                       1,007,559          1,812,174    261,007
Accumulated other comprehensive income (loss)           59,596             (4,503    )  (649      )
Total China Lodging Group, Limited shareholders’ equity 3,430,109          5,399,600    777,704
Noncontrolling interest                                 10,639             16,557       2,385
Total equity                                            3,440,748          5,416,157    780,089
Total liabilities and equity                            7,693,521          9,993,364    1,439,344
China Lodging Group, Limited
Unaudited Condensed Consolidated Statements of Comprehensive Income
                                                                                                                Quarter Ended                                                        Year Ended
                                                                                                                December 31, 2015  September 30, 2016  December 31, 2016             December 31, 2015  December 31, 2016
                                                                                                                RMB                RMB                 RMB             US$           RMB                RMB             US$
                                                                                                                (in thousands, except per share and per ADS data)
Revenues:
Leased and owned hotels                                                                                         1,287,714          1,390,334           1,290,575       185,881       4,986,872          5,212,405       750,743
Manachised and franchised hotels                                                                                305,573            373,239             367,983         53,001        1,123,979          1,411,156       203,249
Others                                                                                                          -                  10,233              11,365          1,637         -                  31,219          4,496
Total revenues                                                                                                  1,593,287          1,773,806           1,669,923       240,519       6,110,851          6,654,780       958,488
Less: business tax and related surcharges                                                                       (86,972    )       -                   -               -             (336,227   )       (116,149   )    (16,729  )
Net revenues                                                                                                    1,506,315          1,773,806           1,669,923       240,519       5,774,624          6,538,631       941,759
Operating costs and expenses:
Hotel operating costs:
Rents                                                                                                           (470,567   )       (458,946   )        (461,112   )    (66,414  )    (1,804,532 )       (1,870,879 )    (269,463 )
Utilities                                                                                                       (85,288    )       (85,953    )        (78,451    )    (11,299  )    (341,620   )       (345,615   )    (49,779  )
Personnel costs                                                                                                 (232,662   )       (282,911   )        (272,706   )    (39,278  )    (919,555   )       (1,088,380 )    (156,759 )
Depreciation and amortization                                                                                   (164,890   )       (171,089   )        (169,350   )    (24,391  )    (645,058   )       (676,996   )    (97,508  )
Consumables, food and beverage                                                                                  (130,017   )       (122,071   )        (127,864   )    (18,416  )    (485,099   )       (494,764   )    (71,261  )
Others                                                                                                          (115,180   )       (128,731   )        (155,119   )    (22,342  )    (316,283   )       (455,539   )    (65,611  )
Total hotel operating costs                                                                                     (1,198,604 )       (1,249,701 )        (1,264,602 )    (182,140 )    (4,512,147 )       (4,932,173 )    (710,381 )
Other operating costs                                                                                           -                  (2,258     )        (2,319     )    (334     )    -                  (7,606     )    (1,095   )
Selling and marketing expenses                                                                                  (46,791    )       (31,264    )        (46,142    )    (6,646   )    (179,568   )       (146,525   )    (21,104  )
General and administrative expenses                                                                             (128,233   )       (123,233   )        (143,434   )    (20,659  )    (403,008   )       (492,141   )    (70,883  )
Pre-opening expenses                                                                                            (16,216    )       (16,710    )        (19,747    )    (2,844   )    (110,011   )       (71,847    )    (10,348  )
Total operating costs and expenses                                                                              (1,389,844 )       (1,423,166 )        (1,476,244 )    (212,623 )    (5,204,734 )       (5,650,292 )    (813,811 )
Other operating income (expense), net                                                                           14,111             399                 (7,961     )    (1,147   )    31,264             (17,440    )    (2,512   )
Income from operations                                                                                          130,582            351,039             185,718         26,749        601,154            870,899         125,436
Interest income                                                                                                 9,007              19,154              22,939          3,304         26,712             67,366          9,703
Interest expense                                                                                                (1,606     )       (2,158     )        (2,289     )    (329     )    (3,854     )       (11,056    )    (1,592   )
Other income                                                                                                    2,855              11,577              (3,207     )    (462     )    6,979              133,755         19,265
Foreign exchange gain                                                                                           4,533              1,800               10,341          1,489         7,814              16,481          2,373
Income before income taxes                                                                                      145,371            381,412             213,502         30,751        638,805            1,077,445       155,185
Income tax expense                                                                                              (73,742    )       (94,204    )        (87,745    )    (12,638  )    (196,529   )       (287,120   )    (41,354  )
Income (Loss) from equity method investments                                                                    (791       )       2,277               3,734           538           (2,896     )       6,157           886
Net income                                                                                                      70,838             289,485             129,491         18,651        439,380            796,482         114,717
Less: net  loss (income) attributable to noncontrolling interests                                               (78        )       4,384               (3,633     )    (524     )    (2,780     )       8,133           1,171
Net income attributable to China Lodging Group, Limited                                                         70,760             293,869             125,858         18,127        436,600            804,615         115,888
Other comprehensive income
Unrealized securities holding gains (losses), net of tax                                                        106,600            10,395              3,278           472           68,069             16,449          2,369
Reclassification adjustment of unrealized securities holding gains, net of tax, for gain included in net income -                  -                   -               -             -                  (67,921    )    (9,783   )
Foreign currency translation adjustments, net of tax                                                            3,342              (1,547     )        (6,911     )    (995     )    3,535              (12,627    )    (1,819   )
Comprehensive income                                                                                            180,780            298,333             125,858         18,128        510,984            732,383         105,484
Comprehensive loss (income) attributable to the noncontrolling interest                                         (78        )       4,384               (3,633     )    (524     )    (2,780     )       8,133           1,171
Comprehensive income attributable to China Lodging Group, Limited                                               180,702            302,717             122,225         17,604        508,204            740,516         106,655
Earnings per share:
Basic                                                                                                           0.28               1.06                0.45            0.07          1.74               2.92            0.42
Diluted                                                                                                         0.28               1.03                0.44            0.06          1.70               2.84            0.41
Earnings per ADS:
Basic                                                                                                           1.13               4.24                1.81            0.26          6.97               11.70           1.68
Diluted                                                                                                         1.10               4.12                1.76            0.25          6.82               11.38           1.64
Weighted average number of shares used in computation:
Basic                                                                                                           249,674            277,169             277,473         277,473       250,533            275,139         275,139
Diluted                                                                                                         256,546            285,426             285,887         285,887       256,104            282,889         282,889
China Lodging Group, Limited
Unaudited Condensed Consolidated Statements of Cash Flows
                                                                                  Quarter Ended                                                      Year Ended
                                                                                  December 31, 2015  September 30, 2016  December 31, 2016           December 31, 2015  December 31, 2016
                                                                                  RMB                RMB                 RMB            US$          RMB                RMB            US$
                                                                                  (in thousands)
Operating activities:
Net income                                                                        70,838             289,485             129,491        18,651       439,380            796,482        114,717
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation                                                          13,909             11,813              12,527         1,805        52,535             55,436         7,984
Depreciation and amortization                                                     169,355            175,637             173,826        25,036       661,404            694,894        100,086
Deferred taxes                                                                    (42,673   )        6,426               30,809         4,437        (50,149    )       33,446         4,817
Bad debt expenses                                                                 1,909              (964      )         1,200          173          1,997              1,082          156
Deferred rent                                                                     32,440             20,923              29,764         4,287        130,301            103,322        14,881
Loss (gain) from disposal of property and equipment                               (5,519    )        1,252               1,240          179          (5,519     )       9,333          1,344
Impairment loss                                                                   50,368             51,457              62,669         9,026        95,608             153,741        22,143
Loss (Income) from equity method investments                                      791                (2,277    )         (3,734    )    (538    )    2,896              (6,157    )    (887    )
Investment loss (gain)                                                            (2,766    )        1,989               -              -            (2,767     )       (116,763  )    (16,817 )
Excess tax benefit from share-based compensation                                  (7,833    )        (3,656    )         (11,470   )    (1,652  )    (12,838    )       (18,645   )    (2,685  )
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable                                                               (5,419    )        (4,114    )         922            133          (5,749     )       (46,211   )    (6,656  )
Prepaid rent                                                                      21,191             (22,304   )         (43,153   )    (6,215  )    (44,430    )       (25,380   )    (3,655  )
Inventories                                                                       1,888              (565      )         167            24           5,952              3,923          565
Amounts due from related parties                                                  -                  1                   (4,537    )    (653    )    -                  (9,314    )    (1,341  )
Other current assets                                                              (27,515   )        (21,681   )         (11,803   )    (1,700  )    (15,518    )       (40,813   )    (5,878  )
Other assets                                                                      6,544              (6,451    )         5,362          772          1,787              (5,046    )    (727    )
Accounts payable                                                                  8,187              (1,107    )         39,690         5,717        14,194             59,129         8,516
Amounts due to related parties                                                    1,332              1,764               1,796          259          1,250              7,489          1,079
Salary and welfare payables                                                       79,990             (27,150   )         111,005        15,988       24,532             60,669         8,738
Deferred revenue                                                                  80,235             (42,477   )         (89,742   )    (12,926 )    216,805            19,529         2,813
Accrued expenses and other current liabilities                                    58,797             126,971             3,665          528          121,502            202,351        29,145
Income tax payable and receivable                                                 58,255             54,895              (11,563   )    (1,665  )    56,019             64,087         9,230
Other long-term liabilities                                                       13,968             10,319              14,339         2,065        60,481             51,072         7,356
Net cash provided by operating activities                                         578,272            620,186             442,470        63,731       1,749,673          2,047,656      294,924
Investing activities:
Purchases of property and equipment                                               (119,380  )        (108,719  )         (109,231  )    (15,733 )    (640,222   )       (503,136  )    (72,467 )
Purchases of intangibles                                                          (1,182    )        (5,122    )         (3,517    )    (507    )    (8,818     )       (13,557   )    (1,953  )
Amount received as a result of government zoning                                  5,721              -                   -              -            6,721              2,099          302
Acquisitions, net of cash received                                                (3,633    )        (2,926    )         (1,683    )    (242    )    (19,153    )       131,501        18,940
Proceeds from disposal of subsidiary and branch, net of cash disposed             2,500              -                   -              -            5,000              (20,668   )    (2,977  )
Purchase of long-term investments                                                 (31,168   )        (17,130   )         (152,321  )    (21,939 )    (105,707   )       (293,125  )    (42,219 )
Proceeds from maturity/sale of long-term investments                              14,410             4,553               -              -            14,410             14,842         2,138
Payment for shareholder loan to joint venture                                     (134      )        (81       )         (1,214    )    (175    )    (1,386     )       (39,387   )    (5,673  )
Collection of shareholder loan from joint venture                                 -                  9,285               -              -            1,522              9,285          1,337
Purchase of short-term investments                                                -                  -                   -              -            (434,811   )       -              -
Proceeds from sale of short-term investment                                       -                  -                   -              -            -                  526,443        75,824
Payment for the origination of loan receivables                                   (5,000    )        (3,020    )         -              -            (53,000    )       (36,420   )    (5,246  )
Proceeds from collection of loan receivables                                      32,706             5,401               25,622         3,690        45,587             45,885         6,609
Decrease (increase) in restricted cash                                            219,500            358,343             1,657          239          (360,500   )       360,000        51,851
Net cash provided by (used in) investing activities                               114,340            240,584             (240,687  )    (34,667 )    (1,550,357 )       183,762        26,466
Financing activities:
Net proceeds from issuance of ordinary shares upon exercise of option             10,970             3,299               3,668          528          22,619             12,206         1,759
Payment of share repurchase                                                       -                  -                   -              -            (107,331   )       -              -
Proceeds from short-term debt                                                     -                  -                   -              -            589,376            281,719        40,576
Repayment of short-term debt                                                      (269,424  )        (332,555  )         -              -            (283,516   )       (332,555  )    (47,898 )
Funds advanced from noncontrolling interest holders                               5,432              -                   7,453          1,073        5,432              11,453         1,650
Repayment of funds advanced from noncontrolling interest holders                  (120      )        -                   (400      )    (58     )    (900       )       (600      )    (86     )
Acquisition of noncontrolling interest                                            (2,042    )        -                   (4,083    )    (588    )    (4,083     )       (4,083    )    (588    )
Contribution from noncontrolling interest holders                                 200                800                 10,500         1,512        2,450              45,604         6,568
Dividend paid to noncontrolling interest holders                                  (120      )        (1,935    )         (612      )    (88     )    (4,604     )       (3,677    )    (530    )
Dividend paid                                                                     -                  -                   -              -            -                  (276,261  )    (39,790 )
Excess tax benefit from share-based compensation                                  7,833              3,656               11,470         1,652        12,838             18,645         2,685
Net cash provided by (used in) financing activities                               (247,271  )        (326,735  )         27,996         4,031        232,281            (247,549  )    (35,654 )
Effect of exchange rate changes on cash and cash equivalents                      (6,731    )        1,444               3,397          489          (2,624     )       13,300         1,916
Net increase in cash and cash equivalents                                         438,610            535,479             233,176        33,584       428,973            1,997,169      287,652
Cash and cash equivalents at the beginning of the period                          799,228            2,466,352           3,001,831      432,354      808,865            1,237,838      178,286
Cash and cash equivalents at the end of the period                                1,237,838          3,001,831           3,235,007      465,938      1,237,838          3,235,007      465,938
China Lodging Group, Limited
Unaudited Reconciliation of GAAP and Non-GAAP Results
                                    Quarter Ended December 31, 2016
                                    GAAP Result  % of Net Revenues  Share-based Compensation  % of Net Revenues  Non-GAAP Result  % of Net Revenues
                                    RMB                             RMB                                          RMB
                                    (in thousands)
Hotel operating costs               1,264,602    75.7     %         3,738                     0.2      %         1,260,864        75.5     %
Other operating costs               2,319        0.1      %         -                         0.0      %         2,319            0.1      %
Selling and marketing expenses      46,142       2.8      %         52                        0.0      %         46,090           2.8      %
General and administrative expenses 143,434      8.6      %         8,737                     0.5      %         134,697          8.1      %
Pre-opening expenses                19,747       1.2      %         -                         0.0      %         19,747           1.2      %
Total operating costs and expenses  1,476,244    88.4     %         12,527                    0.7      %         1,463,717        87.7     %
Income from operations              185,718      11.1     %         12,527                    0.7      %         198,245          11.8     %
                                    Quarter Ended December 31, 2016
                                    GAAP Result  % of Net Revenues  Share-based Compensation  % of Net Revenues  Non-GAAP Result  % of Net Revenues
                                    US$                             US$                                          US$
                                    (in thousands)
Hotel operating costs               182,140      75.7     %         538                       0.2      %         181,602          75.5     %
Other operating costs               334          0.1      %         -                         0.0      %         334              0.1      %
Selling and marketing expenses      6,646        2.8      %         8                         0.0      %         6,638            2.8      %
General and administrative expenses 20,659       8.6      %         1,259                     0.5      %         19,400           8.1      %
Pre-opening expenses                2,844        1.2      %         -                         0.0      %         2,844            1.2      %
Total operating costs and expenses  212,623      88.4     %         1,805                     0.7      %         210,818          87.7     %
Income from operations              26,749       11.1     %         1,805                     0.7      %         28,554           11.8     %
                                    Quarter Ended September 30, 2016
                                    GAAP Result  % of Net Revenues  Share-based Compensation  % of Net Revenues  Non-GAAP Result  % of Net Revenues
                                    RMB                             RMB                                          RMB
                                    (in thousands)
Hotel operating costs               1,249,701    70.5     %         3,866                     0.2      %         1,245,835        70.3     %
Other operating costs               2,258        0.1      %         -                         0.0      %         2,258            0.1      %
Selling and marketing expenses      31,264       1.8      %         244                       0.0      %         31,020           1.8      %
General and administrative expenses 123,233      6.9      %         7,703                     0.4      %         115,530          6.5      %
Pre-opening expenses                16,710       0.9      %         -                         0.0      %         16,710           0.9      %
Total operating costs and expenses  1,423,166    80.2     %         11,813                    0.6      %         1,411,353        79.6     %
Income from operations              351,039      19.8     %         11,813                    0.6      %         362,852          20.4     %
                                    Quarter Ended December 31, 2015
                                    GAAP Result  % of Net Revenues  Share-based Compensation  % of Net Revenues  Non-GAAP Result  % of Net Revenues
                                    RMB                             RMB                                          RMB
                                    (in thousands)
Hotel operating costs               1,198,604    79.6     %         2,352                     0.2      %         1,196,252        79.4     %
Other operating costs               -            0.0      %         -                         0.0      %         -                0.0      %
Selling and marketing expenses      46,791       3.1      %         100                       0.0      %         46,691           3.1      %
General and administrative expenses 128,233      8.5      %         11,457                    0.8      %         116,776          7.7      %
Pre-opening expenses                16,216       1.1      %         -                         0.0      %         16,216           1.1      %
Total operating costs and expenses  1,389,844    92.3     %         13,909                    1.0      %         1,375,935        91.3     %
Income from operations              130,582      8.7      %         13,909                    1.0      %         144,491          9.7      %
                                    Year Ended December 31, 2016
                                    GAAP Result  % of Net Revenues  Share-based Compensation  % of Net Revenues  Non-GAAP Result  % of Net Revenues
                                    RMB                             RMB                                          RMB
                                    (in thousands)
Hotel operating costs               4,932,173    75.4     %         13,603                    0.2      %         4,918,570        75.2     %
Other operating costs               7,606        0.1      %         -                         0.0      %         7,606            0.1      %
Selling and marketing expenses      146,525      2.2      %         811                       0.0      %         145,714          2.2      %
General and administrative expenses 492,141      7.5      %         41,022                    0.6      %         451,119          6.9      %
Pre-opening expenses                71,847       1.1      %         -                         0.0      %         71,847           1.1      %
Total operating costs and expenses  5,650,292    86.3     %         55,436                    0.8      %         5,594,856        85.5     %
Income from operations              870,899      13.3     %         55,436                    0.8      %         926,335          14.1     %
                                    Year Ended December 31, 2016
                                    GAAP Result  % of Net Revenues  Share-based Compensation  % of Net Revenues  Non-GAAP Result  % of Net Revenues
                                    US$                             US$                                          US$
                                    (in thousands)
Hotel operating costs               710,381      75.4     %         1,959                     0.2      %         708,422          75.2     %
Other operating costs               1,095        0.1      %         -                         0.0      %         1,095            0.1      %
Selling and marketing expenses      21,104       2.2      %         117                       0.0      %         20,987           2.2      %
General and administrative expenses 70,883       7.5      %         5,908                     0.6      %         64,975           6.9      %
Pre-opening expenses                10,348       1.1      %         -                         0.0      %         10,348           1.1      %
Total operating costs and expenses  813,811      86.3     %         7,984                     0.8      %         805,827          85.5     %
Income from operations              125,436      13.3     %         7,984                     0.8      %         133,420          14.1     %
                                    Year Ended December 31, 2015
                                    GAAP Result  % of Net Revenues  Share-based Compensation  % of Net Revenues  Non-GAAP Result  % of Net Revenues
                                    RMB                             RMB                                          RMB
                                    (in thousands)
Hotel operating costs               4,512,147    78.1     %         8,835                     0.2      %         4,503,312        77.9     %
Other operating costs               -            0.0      %         -                         0.0      %         -                0.0      %
Selling and marketing expenses      179,568      3.1      %         907                       0.0      %         178,661          3.1      %
General and administrative expenses 403,008      7.0      %         42,793                    0.7      %         360,215          6.3      %
Pre-opening expenses                110,011      1.9      %         -                         0.0      %         110,011          1.9      %
Total operating costs and expenses  5,204,734    90.1     %         52,535                    0.9      %         5,152,199        89.2     %
Income from operations              601,154      10.5     %         52,535                    0.9      %         653,689          11.4     %
China Lodging Group, Limited
Unaudited Reconciliation of GAAP and Non-GAAP Results
                                                                            Quarter Ended                                                      Year Ended
                                                                            December 31, 2015  September 30, 2016  December 31, 2016           December 31, 2015  December 31, 2016
                                                                            RMB                RMB                 RMB           US$           RMB                RMB            US$
                                                                            (in thousands, except per share and per ADS data)
Net income attributable to China Lodging Group, Limited (GAAP)              70,760             293,869             125,858       18,127        436,600            804,615        115,888
Share-based compensation expenses                                           13,909             11,813              12,527        1,805         52,535             55,436         7,984
Adjusted net income attributable to China Lodging Group, Limited (non-GAAP) 84,669             305,682             138,385       19,932        489,135            860,051        123,872
Earnings per share (GAAP)
Basic                                                                       0.28               1.06                0.45          0.07          1.74               2.92           0.42
Diluted                                                                     0.28               1.03                0.44          0.06          1.70               2.84           0.41
Earnings per ADS (GAAP)
Basic                                                                       1.13               4.24                1.81          0.26          6.97               11.70          1.68
Diluted                                                                     1.10               4.12                1.76          0.25          6.82               11.38          1.64
Adjusted earnings per share (non-GAAP)
Basic                                                                       0.34               1.10                0.50          0.07          1.95               3.13           0.45
Diluted                                                                     0.33               1.07                0.48          0.07          1.91               3.04           0.44
Adjusted earnings per ADS (non-GAAP)
Basic                                                                       1.36               4.41                1.99          0.29          7.81               12.50          1.80
Diluted                                                                     1.32               4.28                1.94          0.28          7.64               12.16          1.75
Weighted average number of shares used in computation
Basic                                                                       249,674            277,169             277,473       277,473       250,533            275,139        275,139
Diluted                                                                     256,546            285,426             285,887       285,887       256,104            282,889        282,889
                                                                            Quarter Ended                                                      Year Ended
                                                                            December 31, 2015  September 30, 2016  December 31, 2016           December 31, 2015  December 31, 2016
                                                                            RMB                RMB                 RMB           US$           RMB                RMB            US$
                                                                            (in thousands)
Net income attributable to China Lodging Group, Limited (GAAP)              70,760             293,869             125,858       18,127        436,600            804,615        115,888
Interest income                                                             (9,007   )         (19,154   )         (22,939 )     (3,304  )     (26,712   )        (67,366   )    (9,703  )
Interest expenses                                                           1,606              2,158               2,289         329           3,854              11,056         1,592
Income tax expense                                                          73,742             94,204              87,745        12,638        196,529            287,120        41,354
Depreciation and amortization                                               169,355            175,637             173,826       25,036        661,404            694,894        100,086
EBITDA (non-GAAP)                                                           306,456            546,714             366,779       52,826        1,271,675          1,730,319      249,217
Share-based Compensation                                                    13,909             11,813              12,527        1,805         52,535             55,436         7,984
Adjusted EBITDA (non-GAAP)                                                  320,365            558,527             379,306       54,631        1,324,210          1,785,755      257,201
China Lodging Group, Limited
Operational Data
                                 As of
                                 December 31, September 30, December 31,
                                 2015         2016          2016
Total hotels in operation:       2,763        3,198         3,269
Leased hotels                    616          625           624
Manachised hotels                2,067        2,399         2,471
Franchised hotels                80           174           174
Total hotel rooms in operation   278,843      322,785       331,347
Leased hotels                    75,436       77,158        78,160
Manachised hotels                196,737      229,565       237,094
Franchised hotels                6,670        16,062        16,093
Number of cities                 352          365           367
                                 For the quarter ended
                                 December 31, September 30, December 31,
                                 2015         2016          2016
Occupancy rate (as a percentage)
Leased hotels                    85.8    %    90.0    %     85.5    %
Manachised hotels                84.2    %    89.3    %     85.4    %
Franchised hotels                67.4    %    74.1    %     68.1    %
Blended                          84.3    %    88.9    %     84.7    %
Average daily room rate (in RMB)
Leased hotels                    201          217           211
Manachised hotels                167          186           178
Franchised hotels                172          194           180
Blended                          177          194           186
RevPAR (in RMB)
Leased hotels                    172          195           181
Manachised hotels                141          166           152
Franchised hotels                116          144           123
Blended                          149          173           158
                                 For the full year ended
                                 December 31, December 31,
                                 2015         2016
Occupancy rate (as a percentage)
Leased hotels                    86.6    %    86.1    %
Manachised hotels                85.0    %    85.3    %
Franchised hotels                70.1    %    68.9    %
Blended                          85.3    %    84.9    %
Average daily room rate (in RMB)
Leased hotels                    198          208
Manachised hotels                170          177
Franchised hotels                177          182
Blended                          179          185
RevPAR (in RMB)
Leased hotels                    172          179
Manachised hotels                145          151
Franchised hotels                124          125
Blended                          153          157
Same-hotel Operational Data: like-for-like performance for leased and manachised hotels opened for at least 18 months during the current quarter and full year
                                 As of and for the quarter ended
                                 December 31,
                                 2015                              2016
Total                            2,205                             2,205
Leased hotels                    583                               583
Manachised hotels                1,622                             1,622
Occupancy rate (as a percentage) 86.4                            % 87.1  %
Average daily room rate (in RMB) 177                               180
RevPAR (in RMB)                  153                               157
                                 As of and for full year ended
                                 December 31,
                                 2015                              2016
Total                            2,205                             2,205
Leased hotels                    583                               583
Manachised hotels                1,622                             1,622
Occupancy rate (as a percentage) 87.4                            % 87.4  %
Average daily room rate (in RMB) 180                               181
RevPAR (in RMB)                  157                               158
Hotel breakdown by segment
                            Number of hotels in operation Number of Rooms
                            As of                         As of
                            December 31, 2016             December 31, 2016
Economy hotels              2,813                         270,808
HanTing Hotel               2,181                         221,157
Leased hotels               486                           56,491
Manachised hotels           1,694                         164,602
Franchised hotels           1                             64
Hi Inn                      375                           25,600
Leased hotels               36                            3,411
Manachised hotels           294                           19,361
Franchised hotels           45                            2,828
Elan Hotel                  185                           13,800
Manachised hotels           149                           11,121
Franchised hotels           36                            2,679
ibis Hotel                  72                            10,251
Leased hotels               14                            2,572
Manachised hotels           12                            1,753
Franchised hotels           46                            5,926
Midscale and upscale hotels 456                           60,539
JI Hotel                    284                           39,664
Leased hotels               81                            14,314
Manachised hotels           201                           25,201
Franchised hotels           2                             149
Starway Hotel               136                           13,206
Leased hotels               2                             386
Manachised hotels           96                            9,577
Franchised hotels           38                            3,243
Joya Hotel                  6                             1,131
Leased hotels               3                             523
Manachised hotels           3                             608
Manxin Hotels & Resorts     2                             78
Leased hotels
Manachised hotels           2                             78
ibis Styles Hotel           10                            1,614
Manachised hotels           7                             1,202
Franchised hotels           3                             412
Mercure Hotel               15                            4,026
Leased hotels               2                             463
Manachised hotels           12                            3,285
Franchised hotels           1                             278
Novotel Hotel               2                             629
Manachised hotels           1                             306
Franchised hotels           1                             323
Grand Mercure               1                             191
Franchised hotels           1                             191
Total                       3,269                         331,347
Same-hotel operational data by segment
                                 Number of hotels in operation      Same-hotel RevPAR              Same-hotel ADR                 Same-hotel Occupancy
                                 As of                              For the quarter ended          For the quarter ended          For the quarter ended
                                 December 31,                       December 31,          yoy      December 31,          yoy      December 31,         yoy
                                                                                          change                         change                        change
                                 2015                2016           2015       2016                2015       2016                2015    2016
Economy hotels                   1,999               1,999          143        144        1.0  %   165        165        0.2  %   87    % 87    %      0.7  %
Leased hotels                    511                 511            149        151        0.9  %   175        175        0.3  %   86    % 86    %      0.5  %
Manachised and franchised hotels 1,488               1,488          140        141        1.1  %   160        161        0.2  %   87    % 88    %      0.8  %
Midscale and upscale hotels      206                 206            231        251        8.9  %   274        295        7.6  %   84    % 85    %      1.0  %
Leased hotels                    72                  72             276        301        9.3  %   307        336        9.4  %   90    % 90    %      -0.1 %
Manachised and franchised hotels 134                 134            195        211        8.2  %   245        259        5.8  %   79    % 81    %      1.9  %
Total                            2,205               2,205          153        157        2.5  %   177        180        1.6  %   86    % 87    %      0.7  %
                                 Number of hotels in operation      Same-hotel RevPAR              Same-hotel ADR                 Same-hotel Occupancy
                                 As of                              For the year ended             For the year ended             For the year ended
                                 December 31,                       December 31,          yoy      December 31,          yoy      December 31,         yoy
                                                                                          change                         change                        change
                                 2015                2016           2015       2016                2015       2016                2015    2016
Economy hotels                   1,999               1,999          148        147        -1.2 %   169        167        -0.7 %   88    % 88    %      -0.4 %
Leased hotels                    511                 511            154        151        -1.6 %   176        175        -0.5 %   87    % 86    %      -1.0 %
Manachised and franchised hotels 1,488               1,488          146        145        -0.9 %   165        164        -0.8 %   88    % 88    %      -0.1 %
Midscale and upscale hotels      206                 206            229        248        8.3  %   275        290        5.4  %   83    % 86    %      2.3  %
Leased hotels                    72                  72             264        291        10.0 %   304        324        6.5  %   87    % 90    %      2.8  %
Manachised and franchised hotels 134                 134            195        207        5.9  %   245        253        3.5  %   80    % 82    %      1.8  %
Total                            2,205               2,205          157        158        0.4  %   180        181        0.5  %   87    % 87    %      -0.1 %
Contact Information
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Email: ir@huazhu.com
http://ir.huazhu.com 

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