Annual Report CONTENTS

Zhejiang New Century Hotel Management Co., Ltd. 浙江開元酒店管理股份有限公司 (A joint stock company incorporated in the People's Republic of China with limited liability) Stock code : 1158 2018 Annual Report CONTENTS 2 Corporate Information 3 Operating Data 7 Major Awards 8 Definitions and Glossary 11 Financial Highlights 12 Chairman’s Statement 15 Directors, Supervisors And Senior Management 23 Management Discussion and Analysis 38 Report of the Board of Directors 56 Report of the Supervisory Committee 57 Corporate Governance Report 76 Environmental, Social and Governance Report 87 Independent Auditor’s Report 91 Consolidated Statement of Comprehensive Income 92 Consolidated Balance Sheet 94 Consolidated Statements of Changes in Equity 96 Consolidated Statements of Cash Flows 98 Notes to the Consolidated Financial Statements 196 Four-Year Financial Summary 2 Zhejiang New Century Hotel Management Co., Ltd. CORPORATE INFORMATION FIRST BOARD OF DIRECTORS JOINT COMPANY SECRETARIES PRINCIPAL PLACE OF BUSINESS IN Mr. Li Donglin THE PRC Executive Directors Ms. Chan Suet Lam 18th Floor, Mr. Jin Wenjie (Chairman) No. 818 Shixinzhong Road, Mr. Chen Miaoqiang AUTHORIZED REPRESENTATIVE Beigan Subdistrict, Mr. Jin Wenjie Xiaoshan District, Non-executive Directors Ms. Chan Suet Lam Hangzhou, Mr. Chen Miaolin Zhejiang Province, Mr. Chen Canrong AUDITOR PRC Mr. Jiang Tianyi PricewaterhouseCoopers Mr. Zhang Chi PRINCIPAL PLACE OF BUSINESS LEGAL ADVISERS IN HONG KONG Independent non-executive As to Hong Kong law: Level 54, Hopewell Centre, Directors Dechert 183 Queen’s Road East, Mr. Zhang Rungang As to PRC law: Hong Kong Mr. Khoo Wun Fat William King & Wood Mallesons Ms. Qiu Yun LISTING EXCHANGE OF THE COMPANY NAME IN CHINESE COMPANy’S H SHARES FIRST SUPERVISORY COMMITTEE 浙江開元酒店管理股份有限公司 Main Board of The Stock Exchange Supervisors of Hong Kong Limited Ms. Zha Xianghong (Chairman) COMPANY NAME IN ENGLISH (“the Stock Exchange”) Mr. Guo Mingchuan Zhejiang New Century Hotel Ms. Liu Hong Management Co., Ltd. H SHARES ABBREVIATION NC HOTEL NOMINATION COMMITTEE H SHARE REGISTRAR Mr. Zhang Rungang (Chairman) Tricor Investor Services Limited STOCK CODE Mr. Chen Canrong Level 22, Hopewell Centre, 01158 Mr. Khoo Wun Fat William 183 Queen’s Road East, Hong Kong WEBSITE AUDIT COMMITTEE http://www.kaiyuanhotels.com Ms. Qiu Yun (Chairman) REGISTERED OFFICE Mr. Jiang Tianyi 18th Floor, Mr. Khoo Wun Fat William No. 818 Shixinzhong Road, Beigan Subdistrict, REMUNERATION COMMITTEE Xiaoshan District, Mr. Zhang Rungang (Chairman) Hangzhou, Mr. Chen Miaolin Zhejiang Province, Ms. Qiu Yun the People’s Republic of China (the “PRC”) Annual Report 2018 3 OPERATING DATA HOTEL OPERATION SEGMENT During the Reporting Period, the key performance indicators of our hotels in operation (including our owned hotels and leased hotels) are as follows: Accommodation: Average Average Rate RevPAR Occupancy Rate (RMB/per room) (RMB) Item 2018 2017 2018 2017 2018 2017 Upscale business hotels 65.4% 68.2% 500.5 501.8 327.3 342.5 Upscale resort hotels 52.4% 52.0% 697.5 695.9 365.2 361.8 Mid-scale full service hotels 64.2% 64.4% 357.8 355.1 229.9 228.5 Mid-scale select service hotels 64.3% 64.1% 349.6 347.6 224.8 222.7 Upscale business hotels were affected by the decline of market sentiment in some cities, and led to the decrease in occupancy rate. The occupancy rates and ADRs of other product lines maintained at similar level as compared with the previous year. F&B services 2018 2017 Average spending per customer (RMB) 125.7 125.9 Utilization rate of seats 73.0% 69.3% Revenue per sq.m. of banquet rooms (RMB) 13,518.8 11,891.1 During the Reporting Period, average spending per customer maintained of the same level as that of the previous year. The utilization rate of seats increased by 3.7 percentage points year-on-year due to the increase in the number of customers of our F&B services. The revenue per sq.m. of banquet rooms increased by 13.7% year-on-year due to the increase in the demand of the wedding banquet market. HOTEL MANAGEMENT SEGMENT During the Reporting Period, the Group recorded revenue of approximately RMB169.0 million from hotel management segment, representing a year-on-year increase of 23.5%, primarily due to the increased number of newly opened managed hotels. Compared with last year, the revenue growth rate of the hotel management segment further increased. The revenue generated from the hotel management segment as a percentage of the total revenue increased steadily to 9.4% from 8.2% in 2017, and its gross profit margin increased to 94.2%, which became a major driving force for the Group’s profit growth. 4 Zhejiang New Century Hotel Management Co., Ltd. OPERATING DATA The following table sets forth the number of hotels and hotel rooms in operation as at December 31, 2017 and 2018. As at December 31, 2018 As at December 31, 2017 No. of No. of No. of hotels hotel rooms No. of hotels hotel rooms Operated hotels 31 7,501 25 6,528 Managed hotels 119 26,785 91 20,928 Total 150 34,286 116 27,456 The following table sets forth the breakdown of hotels by hotel categories as at December 31, 2018. Total no. of No. of No. of No. of No. of hotels (No. of operated managed operated managed hotel rooms) hotels (No. of hotels (No. of hotels (No. of hotels (No. of in operation hotel rooms) hotel rooms) hotel rooms) hotel rooms) and under in operation in operation under pipeline under pipeline pipeline Upscale business hotels 7(2,840) 39(13,416) 1(306) 26(7,955) 73(24,517) Upscale resort hotels 4(830) 13(2,839) – 33(7,918) 50(11,587) Mid-scale full service hotels 8(2,199) 23(5,397) – 53(13,940) 84(21,536) Mid-scale select service hotels 12(1,632) 44(5,133) 3(518) 53(5,748) 112(13,031) Total 31(7,501) 119(26,785) 4(824) 165(35,561) 319(70,671) Annual Report 2018 5 OPERATING DATA The following table sets forth a breakdown of our hotels by first-, new first-, second-, third-tier and other cities as at December 31, 2018. Total no. of No. of No. of No. of No. of hotels (No. of operated managed operated managed hotel rooms) hotels (No. of hotels (No. of hotels (No. of hotels (No. of in operation hotel rooms) hotel rooms) hotel rooms) hotel rooms) and under in operation in operation under pipeline under pipeline pipeline First-tier cities 3(421) 7(1,899) 1(156) 3(544) 14(3,020) New first-tier cities 14(4,025) 33(6,237) 1(202) 44(8,300) 92(18,764) Second-tier cities 10(2,259) 32(7,723) – 36(7,663) 78(17,645) Third-tier cities 4(796) 26(5,714) 2(466) 51(11,125) 83(18,101) Others – 21(5,212) – 31(7,929) 52(13,141) Total 31(7,501) 119(26,785) 4(824) 165(35,561) 319(70,671) Note: Others include Xinyu, Fuzhou, Enshi, Heze, Shangqiu, Zunyi, Zhangjiajie, Wencang, Suzhou, Yichun, Bozhou, Xuancheng, Shiyan, Xishuangbanna, Shaoyang, Anshun, Lu’an, Kaifeng, Chizhou, Beihai, Huangshi, Yingtan, Zhumadian, Qiandongnanzhou, Dali, Fuzhou and Ya’an. 6 Zhejiang New Century Hotel Management Co., Ltd. OPERATING DATA The following table sets forth a breakdown of our hotels by geographic locations as at December 31, 2018. Total no. of No. of No. of No. of No. of hotels (No. of operated managed operated managed hotel rooms) hotels (No. of hotels (No. of hotels (No. of hotels (No. of in operation hotel rooms) hotel rooms) hotel rooms) hotel rooms) and under in operation in operation under pipeline under pipeline pipeline Zhejiang Province 20(5,211) 64(13,116) 2(466) 68(13,346) 154(32,139) Jiangsu Province 4(920) 12(2,280) – 23(4,913) 39(8,113) Anhui Province – 5(774) – 8(1,716) 13(2,490) Jiangxi Province – 5(1,518) – 8(1,987) 13(3,505) Henan Province – 2(733) – 7(2,032) 9(2,765) Shanghai Municipality 3(421) 5(1,137) 1(156) 2(378) 11(2,092) Shandong Province – 5(1,376) – 4(651) 9(2,027) Guizhou Province – 4(1,251) – 6(1,533) 10(2,784) Hainan Province – 2(867) – 3(880) 5(1,747) Hunan Province 1(153) 1(276) – 3(650) 5(1,079) Guangxi Province – 2(397) – 2(550) 4(947) Yunnan Province – 1(85) – 3(976) 4(1,061) Hubei Province – – – 5(1,356) 5(1,356) Others 3(796) 11(2,975) 1(202) 23(4,593) 38(8,566) Total 31(7,501) 119(26,785) 4(824) 165(35,561) 319(70,671) Heilongjiang Jilin:4 2/609 2/630 Xinjiang Beijing: 3 Liaoning:2 2/762 1/166 Gansu: 1 1/166 1/72 1/250 Inner Mongolia: 1 1/298 Tianjin:1 Hebei:7 1/302 1/284 6/1,279 Shandong:9 Shanxi Qinghai: 1 Ningxia 5/1,383 1/160 4/644 Henan: 9 Shaanxi: 7 2/733 Jiangsu: 39 Tibet 3/690 7/2,032 16/3,198 4/856 23/4,915 1-3 hotels Anhui:13 Shanghai:11 Hubei: 5 5/774 8/1,587 Sichuan: 4 5/1,356 8/1,716 3/505 1/263 Chongqing:1 4-8 hotels 3/352 Zhejiang:154 1/148 Jiangxi: 13 Hunan: 5 5/1,489 84/18,327 70/13,812 9-11 hotels Guizhou:10 2/429 8/2,016 3/650 4/1,251 Fujian:6 Over 12 hotels Yunnan:4 6/1,533 1/249 Taiwan 1/85 5/1030 Guangxi: 4 Guangdong 3/976 2/397 Over 50 hotels 2/550 Operated: Hotels/hotel rooms Hainan: 5 2/867 Pipeline: Hotels/hotel rooms 3/880 Annual Report 2018 7 MAJOR AWARDS In 2018, New Century Hotel Group ranked 23rd in terms of scale among global hotel groups, up by 4 places as compared with the previous year.

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