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By Wang Lan (China Daily)
Updated: 2007-10-24 09:03

Home Inns, one of the major budget hotel chains in China, yesterday acquired its rival Top Star for 340 million yuan in a bid to consolidate its leading position in the domestic market.

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The acquisition will enable Home Inns to leverage Top Star's hotel network in 18 cities and help it to expand its hotel properties to 330 in more than 80 cities across the country.

Home Inns said it would take over Top Star's operations from November and the entire acquisition process was expected to be completed by the end of this year.

Sun Jian, CEO of Home Inns, told China Daily the acquisition will help increase his company's domestic market share and strengthen its competitive edge by incorporating Top Star's customer base.

Top Star was established in 2005, with a customer base that includes domestic business and leisure travelers. It operates a chain of 26 hotels in 18 cities.

Sun said Home Inns is looking to seek more acquisition opportunities in coming years. "We are demonstrating our ability to develop rapidly through acquisitions as well as organic growth."

Wang Binquan, deputy director of the executive management department of Motel168 hotel, another major budget hotel chain based in Shanghai, said: "It's quite natural to see more acquisitions among different brands as the budget hotel industry begins to mature."

Wang added that Home Inns' acquisition would not have a substantial impact on the business of Motel168 as the two rivals target different customer groups.

Wang expects a major acquisition trend in the budget hotel industry after the Shanghai World Expo as visitors and travelers to Shanghai begin to level off.

According to Wang, Motel168 so far has no plans for acquisitions in the near future.

Industry analysts said mergers and acquisitions among hotel groups help save expansion costs by sharing the operating capital and resources, which can quicken the pace of a brand's growth.

Since Home Inns commenced operations in 2002, the hotel brand, which listed on the NASDAQ last year, has been trying to provide clean, comfortable, convenient hotel services to the fast-growing number of business and leisure visitors to the country.