7 Days Group's Investor Presentation

7 Days Group Holdings Limited
Investor Presentation
September 2010

Agenda
Company Overview Investment Highlights Growth Strategies Financial and Operational Highlights Appendix
3
1

Safe Harbor
Statements in this presentation contain "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995, including, among others, those relating to 7 Days Group’s beliefs as to the growth of the Chinese economy and the hotel industry and the factors driving expected growth, the Company's growth strategy and strategic focus (including its hotel expansion, cost and marketing plan) and the competitive advantage and expected benefits of its membership base, cost structure and business model. These forward-looking statements are not historical facts but instead represent only the Company’s belief regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company’s control. The Company’s actual results and financial condition and other circumstances may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. In particular, the Company’s operating results for any period are impacted significantly by the mix of lease-and-operated hotels and managed hotels in its chain, causing the Company’s operating results to fluctuate and making them difficult to predict. In addition, the financial information for 2010 is unaudited, preliminary and subject to adjustments. Adjustments to the 2010 financial statements may be identified when audit work is performed for the year end audit, which could result in significant differences from this preliminary unaudited financial information.
Other factors that could cause forward-looking statements to differ materially from actual future events or results include risks and uncertainties related to: risks associated with the Company’s limited operating history and historical operating losses; uncertainties regarding the Company’s ability to continue its growth and achieve and maintain profitability; uncertainties regarding the Company’s ability to fund its working capital needs; uncertainties regarding the Company’s ability to expand its operations while maintaining consistent and high-quality accommodations and services; uncertainties regarding the Company’s ability to respond to competitive pressures; and uncertainties associated with factors typically affecting the lodging industry, including changes in economic conditions, adverse weather conditions, natural disasters or outbreaks of serious contagious diseases in markets where the Company has a presence. The financial information contained in this presentation should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Registration Statement on Form F-1 filed with the Securities and Exchange Commission dated November 19, 2009. For a discussion of other important factors that could adversely affect the Company’s business, financial condition, results of operations and prospects, see “Risk Factors” beginning on page 16 of the Company’s prospectus included in such Registration Statement. The Company’s historical results of operations for any period are not necessarily indicative of its operating results for any future periods. Any projections in this presentation are based on limited information currently available to the Company, which is subject to change. Although such projections and the factors influencing them will likely change, the Company will not necessarily update the information. Such information speaks only as of the date hereof.
2

Fast-growing and Emerging National Economy Hotel Market Leader
Heilongjiang
Jilin
largest national economy hotel chain* with 399 hotels (including 257 leased-and-operated hotels and 142 managed hotels) and 39,561 rooms in operation No. in growth: Fastest growing economy hotel chain in China **
2nd 1
Liaoning Inner Mongolia Hebei Beijing Tianjin Ningxia Qinghai Gansu Shaanxi Henan Jiangsu Shanxi Shandong
Shanghai
Hubei Chengdu Sichuan Chongqing Changsha Hunan Guizhou Yunnan Guangxi Wuhan
Hefei Anhui Nanchang Jiangxi Fujian Zhejiang
No. in member loyalty programs: Largest in China with approximately 13mm members; highest room night contribution from members (97%) No. in eCommerce platforms: Website has highest internet traffic ranking, highest online booking ratio Industry Honors:
1
1
GuangzhouDongguan Shenzhen Zhuhai Guangdong Hainan
“Hotels China Award 2009, Hotel Corporate Top 10 ” -- Hotels China Magazine “The Best Localized Hotel Management Group in China” -- The Centre of Asia Hotel Forum
Sources: China Economy Hotel Survey; CEIC Data; company website ; https://www.360docs.net/doc/b018479429.html,; * In terms of total number of hotels in China by June 30, 2010 ** Based on a four-year (2005~2009) CAGR of 226% in terms of number of hotels
Circle size is proportional to number of hotels in province
3

Fastest Growing Economy Hotel Chain With Robust Pipeline
RMB mm
2006–09 Revenue CAGR of 175.0%
Robust Pipeline
Leased-and-operated Managed
99 66
6
58
2009 Q4
35
2010 Q1
48
2010 Q2
2006
2007
4th
2008
3rd
2009
2nd
2010Q2
2nd
Ranking* # of hotels in operation
7th
24
106
223
337
399
Cities covered Members
7 ~0.2m
20 ~2m
33 ~6m
54 ~10m
62 ~13m
* by number of hotels in operation
4

Agenda
Company Overview Investment Highlights Growth Strategies Financial and Operational Highlights Appendix 6
5

Largest Membership Base Provides Competitive Advantages
Largest and most effective membership base: ~13 Million* Largest and most effective membership base: ~13 Million*
Lower customer acquisition cost 1% business from 3rd parties^ Established industry leader 7 Days club far exceeds competitors’ loyalty programs in terms of size and benefits Provides built-in customer base Helps improve operating performance One of the highest overnight occupancy rates in the industry Members account for 97% of occupancy* Enhances customer loyalty Lowers operating costs
Additional revenue streams Rental car and air ticket service on our website
Receive >100K surveys back from members every month
Allowing faster expansion Shorter ramp up period
86% of total room nights by repeat customers*
*as of 2010 Q2 ^ in last twelve months (LTM)
6

Leading eCommerce Platform and Best-in-Class IT Infrastructure
Most
convenient
eCommerce platform
■ The only company offering 3 electronic reservation channels ■ Best in class online payment experiences
High online traffic:
No. 1 in industry
Most effective eCommerce platform
■ Highest online booking ratio ■ Dynamic interactions among members
Most active platform:
Provide SNS, air ticket, rental car, and many other features
Most innovative eCommerce platform
First to provide real timetime room statistics First to provide real room statistics
Customized items available for sales First to introduce forum/SNS online First First budget hotel chain to introduce SNS on company to provide online map website
Provides further opportunity to:
Control cost; business expansion; generate other revenue stream
Proprietary Integrated IT System: Considered Best-in-Class Proprietary Integrated IT System: Considered Best-in-Class
7

Higher Operational Efficiency
Our distinguished competencies in membership program, eCommerce and IT, as well as our unique ability to interact directly with our customers ensure high level of efficiency in both hotel operations and headquarter operations. For example：
LOWER conversion costs LOWER conversion costs LOWER rent per room LOWER rent per room LOWER staff costs LOWER staff costs
Streamlined product design Modular fixtures and furnishings Lower Cap-ex per room
Unique site selection strategy Largest membership base allows the flexibility to select slightly off-mainstreet buildings Efficient use of real estate
Lean operations while maintaining high customer satisfaction Performance-oriented incentive program
Conversion Cost Per Room* Conversion Cost Per Room*
RMB, '000 RMB /day/sq
Rent Cost* Rent Cost*
Staff #
Staff-to-Room* Staff-to-Room*
Industry Average Industry Average
80 60 40
Industry Average
3.00 2.00 1.00 0.00
0.50 0.25 0.00
20
*source: 2009 China economy hotel survey
8

Dynamic Corporate Culture
1
Happy, simple and innovative
Higher efficiency and lower operating costs Encourage entrepreneurial spirit
2
Unique corporate culture drives long-term competitiveness and creativity
4
Transparent, democratic
More motivated employees
3
Flat management structure
9

7 Days Unique Competitive Edge Leads to Long Term Success
Deliver a Great Customer Experience, Focus on Guests’ Core Needs, Bring More Value to Members
Clean/comfortable Clean/comfortable
Frequent customer surveys to gauge feedback, select and prioritize customer’s key needs Best-in-class bed & showers 99% of customers satisfied with cleanliness
Direct sales and valueDirect sales and valueoriented pricing oriented pricing
97% of room nights sold to members Cultivates customer loyalty Stable operating performance & reduced risk of expanding at high speed
Offer happy and DIY Offer happy and DIY service for customers service for customers
Friendly environment Leading ecommerce platform allows more self service choice Enhances member stickiness
10

Unique Business Model Leads to Faster Growth
Largest membership base Industry leading eCommerce system Best-in-class IT infrastructure Highly standardized and efficient hotel operations Well-designed and executed hiring and in-house training program + incentive scheme Managed hotel model provides the best alignment in interest and most attractive terms Improved brand recognition and presence in new market
Strong Pipeline Strong Pipeline
Leased-and-operated Managed
Larger customer base, more convenient process, more stable operating performance, thus reduce the risk of roll-out Easily replicated business
Sufficient high-quality hotel managers trained More managed hotels + more managed hotel partners Consistent service and good financial performance offered by new hotels
Robust Growth of Managed Hotels Robust Growth of Managed Hotels
Revenue from Managed Hotels(RMB, mm) Number of Managed Hotels in Operation 12.99
Total Coverage: 62 cities * Total Coverage: 62 cities *
19% 10%
? City with1 hotel: 40% of total cities
40%
? City with 2-5 hotels: 31% ? City with 6-9 hotels: 10%
99
8.09 101
142
6
66 58
2009 Q4
31%
? City with more than 10 hotels: 19%
35
2010 Q1
48
2010 Q2
1.36 17 2008 2009 2010 Q2
* 62 cities have hotels in operation as of 2010 Q2
11

Agenda
Company Overview Investment Highlights Growth Strategies Financial and Operational Highlights Appendix 13
12

7 Days Inn’s Long Term Growth Strategies
FY10 target
Strengthen position in target cities through expansion of leased-and-operated hotels Expand portfolio of managed hotels in wider geographic coverage Continue to take market share from 1-3 star hotels, economy hotels and private guesthouses
FY 11/12
70-80
leased-and-operated hotels
accelerated growth expected targeted cities in China: around 200 cities in China
100-120
managed hotels
13

Agenda
Company Overview Industry Overview Investment Highlights Growth Strategies Financial and Operational Highlights Appendix 15
14

Strong Growth
Total Net Revenue (RMB mm) Total Net Revenue (RMB mm)
%
1141.3
Operating Cash Flow (RMB mm) Operating Cash Flow (RMB mm)
-0 06 20
A 9C
75 :1 GR
248.6
721.4
.4% : 26 YoY
239.0 302.2
.9% : 24 YoY
282.1 352.2
91.6 4.4 29.8
2009
252.8 54.9 2006 2007 2008 2009
48.9
46.1
Q1 2009
Q1 2010
Q2 2009
Q2 2010
2006
2007
2008
Q1 2009 Q1 2010 Q2 2009 Q2 2010
-11.9
-43.6
2010Q3 Revenue Guidance: RMB 395 – 405 million; 2010Q3 Revenue Guidance: RMB 395 – 405 million; FY2010 Revenue Guidance: 29% - 35% YoY growth (RMB 1472 – 1540 million) FY2010 Revenue Guidance: 29% - 35% YoY growth (RMB 1472 – 1540 million)
Re-accelerating Hotel Opening Schedule
Leased-and-operated Managed
Robust Pipeline
Leased-and-operated Managed
35 53 6 3 2010 Q1 18 2010 Q2
14
99 66
6
58
2009 Q4
1 2009 Q4
35
2010 Q1
48
2010 Q2
15

Improving Profitability
Adjusted EBITDA (RMB mm) Adjusted EBITDA (RMB mm)
229.7 20.1%
2009
2010
24.6% * 19.6% *
54.9 86.5
18.4% * 13.3% * 55.7
2006 -13.2 2007 -46.5 -18.4% -24.1%
Q1
Adjusted EBITDA Adjusted EBITDA Margin
2008 -22.3 -3.1%
2009
31.7
Q2
Net Income (RMB mm) Net Income (RMB mm)
2009
2007 2008 2009
5,715
2010
8.6%
*
30,162
-122.73 -48.5% Net Income
-29.2% -210.53 Net Margin
-9.1% -103.95
*
1.9%
-6,234
-7,780
*
Q1
-3.3%
-2.2%
* Q2
Note: Adjusted EBITDA excluding share-based compensation expense and change in fair value of ordinary share purchase warrants
14
16

Sustainable Operational Performance
Leased-and-operated Hotels
Average Daily Rate (RMB) Average Daily Rate (RMB) Occupancy Rate Occupancy Rate
95.5%
RevPAR (RMB) RevPAR (RMB)
157.6 140.2 141.8 142.7
91.8%
159.0
160.4
160.0
154.6
159.1
160.3
165.0
88.2%
88.4%
89.2% 83.9%
89.6%
86.0%
89.3%
142.5 143.2 129.7
2007
2008
2009
1Q 09
1Q 10
2Q 09
2Q 10
2007
2008
2009
1Q 09
1Q 10
2Q 09
2Q 10
2007
2008
2009
1Q 09 1Q 010 2Q 09 2Q 10
Managed Hotels
Average Daily Rate (RMB) Average Daily Rate (RMB)
Overnight Occupancy Rate 53 and 6 managed hotels opened in 4Q09 and 1Q10
^ Limited impact from Shanghai EXPO (5.4% of total L&O hotels and 8.5% of total Managed hotels in Shanghai as of June 30, 2010).
Occupancy Rate Occupancy Rate
RevPAR (RMB) RevPAR (RMB)
151.2 156.2 152.6 133.0
149.0 152.7 155.3
88.8% 83.8% 83.3% 82.8% 78.2% 77.7%
74.7%
84.7%
85.3%
137.9 126.0 129.3 111.5 129.4 119.4 115.7
2007
2008
2009
1Q 09 1Q 010 2Q 09
2Q 10
2007
2008
2009
1Q 09
1Q 10
2Q 09
2Q 10
2007
2008
2009
1Q 09
1Q 010
2Q 09
2Q 10
* 53 and 6 managed hotels opened in 4Q09 and 1Q10
17

Sustainable Operational Performance
Leased-and-operated Hotels
Average Daily Rate (RMB) Average Daily Rate (RMB) Occupancy Rate Occupancy Rate
95.5%
RevPAR (RMB) RevPAR (RMB)
157.6 140.2 141.8 142.7 129.7 142.5 143.2
159.0
160.4
160.0
154.6
159.1
160.3
165.0
88.2%
88.4%
89.2% 83.9%
89.6%
86.0%
89.3%
91.8%
*
*
2007
2008
2009
1Q 09
1Q 10
2Q 09
2Q 10
2007
2008
2009
1Q 09 1Q 010
2Q 09
2Q 10
2007
2008
2009
1Q 09 1Q 010 2Q 09 2Q 10
* Overnight Occupancy Rate
Managed Hotels
Average Daily Rate (RMB) Average Daily Rate (RMB)
53 and 6 managed hotels opened in 4Q09 and 1Q10
^ 14 L&O hotels (5.4% of total L&O hotels) and 12 Managed hotels (8.5% of total Managed hotels) in Shanghai as of June 30, 2010.
Occupancy Rate Occupancy Rate
RevPAR (RMB) RevPAR (RMB)
151.2 156.2 152.6 133.0
149.0 152.7 155.3
88.8% 83.8% 83.3% 82.8% 78.2% 77.7%
74.7%
84.7%
137.9 126.0 129.3 111.5 129.4 119.4 115.7
85.3%
*
*
2007
2008
2009
1Q 09 1Q 010 2Q 09
2Q 10
2007
2008
2009
1Q 09 1Q 010 2Q 09
2Q 10
2007
2008
2009
1Q 09
1Q 010
2Q 09
2Q 10
* 53 and 6 managed hotels opened in 4Q09 and 1Q10
18

Agenda
Appendix Management team Industry Overview Hotel business model and economics Income statement & balance sheet Reconciliation of GAAP and non-GAAP results
19