China Railway Guan Zhong Hotels Investment Limited
 
 

Brief Description of China Railway Chain Hotels Project

 
China Railway Guan Zhong Hotels Investment Limited was a professional company established by the then Ministry of Railway in China, its tasks are for marketing, corporately re-organization of China Railway 1000-odd hotels, guesthouses, hostels, training centers,sanatorium et cetera, through various manners such as assets acquisitions, shares acquisitions, lease contracting, brand chain franchise, so as to create China Railway Chain Hotels brand name for the operating of the 4 series namely, “China Railway Commercial Hotels”, “China Railway Efficient Hotels”, “China Railway Hotel Apartments, “China Railway (Golden Years) Elderly Apartments.
 
After the cessation of the Ministry of Railway in China, the China Railway Chief Company announced 《The Development Planning of the Non-transportation Industry Structural Adjustment Modification》for requiring the continuation on the progression of the China Railway Chain Hotels Operation Project.
 
In order to realize the China Railway Chain Hotels operation as soon as possible, our company initiate the “1245” operation model, that is : focus on creating one brand name—“China Railway Chain Hotels”; the first stage is to open 2 platforms-- China Railway Chain Hotels Booking Internet, China Railway Chain Hotels Membership Cards; in details sharing 4 markets—“Commerce, Conference, Tour, Elderly Services; effectively realize 5 Unifications –Unifying Developing Strategy, Unifying Targets, Unifying Operation, Unifying Quality Check; phase by phase implementation, stable progress, mutual development, with relevant circumstance as follows:
 
1.         Quantity of the Hotels: 1,000-odd.
2.         Locations of the Hotels: China Railway stations areas, busy city areas.
3.         Hotels Property Ownerships Unit: China Railway Chief Company.
4.         Hotels Operation Unit: China Railway Guan Zhong Hotels Investment Limited.
5.         Hotels Brand Name: China Railway Hotels (abbreviation: CRHS)
6.         Market Orientation: High, Middle, Low grade consumers group.
7.         Subdivision of the Brand Name:
 
i)                   China Railway Commercial Hotels (4, 5 Stars and exquisite 3 Stars)
ii)                China Railway Efficient Hotel (3 Stars level and exquisite 2 Stars)
iii)              China Railway Hotel Apartments (Small scale Hotels, Guesthouses, Hostels)
iv)              China Railway (Golden Years) Elderly Apartments (Sanatorium, Resorts, Rest Homes for retired cadres)
 
8.         Development Directions:
 
i)                   Major Integration of 1,000-odd hotels property of Railway;
ii)                In condition maturity, to develop infiltration of hotels in the vicinity along the railway tracks;
iii)  Forming gradually nationwide China Railway chain hotels brand name.
 
9.         Operation Manner:
 
i)            The daily operation is responsible byChina Railway Guan Zhong Hotels Investment Limited.
ii)                To add those hotels satisfied with the conditions to the scope of the China Railway Chain Hotels brand name and get franchise fees and management fees initially by way of Franchise as well as Brand Name Management.
iii)              To gradually obtain property or the operation rights of the 1,000-odd China Railway hotels through different way such as property acquisition, shares acquisitionand lease contracting.
iv)              To invest for constructing new hotels in vacant railway stations.
v)                To acquire new land for constructing new hotels in order to complement the railway development plans.
 
10.    Initial Investment and the Recovery Period of Investment
 
i)                   Initial Investment:  Renminbi 500 millions yuan
 
Use: Policy franchise investment. China Railway Guan Zhong Hotels Investment Limited shall invest funds to carry out reform of railway hotels system to attain the policy franchise; to make “China Railway Hotels” standard and reform.
 
1)                To change the hotels external walls, name, LOGO identification, counter/key card, promotion information as well as related equipments and facility together with the cultural elements.
2)                To construct “China Railway Hotels” electronic commerce system, including centralized booking system, membership management system, PMS system, CRS system as well as the complementary magazine advertisements/promotions.
3)                Total expenses details forecast:
(1)        Electronic Commerce System, Renminbi 59     million yuan;
(2)        Magazine promotion Renminbi 10 million yuan;
(3)        Public Relationship Renminbi 1 million yuan;
(4)        Renovation of hotels Renminbi 410 million yuan;
Overall Total: Renminbi 500 million yuan.
 
ii)    Annual Income Forecast:
 
1)                China Railway Hotels electronic commerce system advertisement and booking income, Renminbi 11.8 million yuan ( base on 20% of investment to calculate the income).
2)                《China Railway》Magazine Advertisement income, Renminbi 2 million yuan ( base on 20% of investment to calculate the income).
3)                        Income of Commercial Hotels, 100 Hotels x 30 million x 3% = Renminbi 90 million yuan.
4)                        Income of Economic Hotels, 300 Hotels x 15 million x 3% = Renminbi 150 million yuan.
5)                        Income of Hotel Apartments, 600 Apartmentsx 5 million x 3% = Renminbi 90 million yuan.
 
Overall Total: Renminbi 323.8 million yuan.
 
 
iii)  Annual Expensing Costs:
 
Base on 20% of operation income to calculate : Renminbi 97.14million yuan.
 
iv)  Recovery Period of Investment:
 
The annual net profit is Renminbi 226.66million yuan. The estimated Recovery Period of Investment is 2.5 years.
 
v)    Initial Investor’s Rights and Interest:
 
Initially the investor is to invest Renminbi 500million yuan as joint venture condition and hold 51% shares.
 
11.    Future Assets Acquisitions and Shares Acquisitions as well as Obtaining for Financing and Investment Funds for the 1000-odd China Railway Hotels Properties:
 
i)                   To establish China Railway Chain Hotels Funds, open to whole society, provide fixed returns and do not confine to one particular project.
ii)                Directly utilize some China Railway projects to cooperate with other investor for joint investment.
iii)              To issue debentures.
iv)              Listing in stock market.
v)                To develop the China Railway Chain Hotels membership.
vi)              To apply for business loan.
vii)           To apply supporting funds under the current Government policy.
viii)         To apply for the supplementary grant on capital funds under the current Government policy.
 
 
 
China Railway Guan Zhong Hotels Investment Limited
18^th May 2014