Inn Room Systems

It is our objective to continue to increase the number of minibars which we manage in hotels, using the various business models which we have developed, in accordance with each customer's needs, as well as to commence rental, sale and installation and outsource programs using the HOMI 336 and additional mini-bar models. HOMI intends to design and manufacture peripheral products and/or accessories for HOMI 336. HOMI also intends to offer new and additional mini-bar models. Proposed additional models may be referred to as the "New Range of Products."
We also intend, among other things, to expand our activities in those hotels in which a minibar system is already installed and operational. These opportunities can be particularly attractive, as a simplified business model can be implemented, without it being necessary to address matters such as the purchase and installation of the minibars themselves.
Our activities currently focus on North America, Europe, South Africa and the Asia Pacific regions. It is our intention to take our activities into additional territories and regions, as well as consolidating and increasing our business in the regions in which we are already active. We believe that there are growth opportunities in new markets, and that by implementing the same models that have been successful for us in our current markets, we will be able to replicate our success in these other regions also.

Our services have to date been directed primarily at upscale and luxury hotels. We believe that by adjusting our existing business models, it will be possible to broaden the base of our activities so as to include midscale hotels. An integral part of this strategy involves the sale, rental, and installation and outsource programs of the HOMI 336 and the New Range of Products. Features of HOMI 336 and the New Range of Products which will make it easier to enter the mid-scale range of hotels include:
· Mechanism against mistaken charges. This enables accurate billing.
· Substantially lower operating costs. This should improve profit margins and means that HOMI will be able to offer the New Range of Products to mid-market hotels, which is a very large sector which has not been open to HOMI in the past, as well as upscale hotels.
· No need for infrastructure at hotel. A standard electrical outlet is the only infrastructure required. Minibar data is transferred automatically via an integral, dedicated wireless system. This should make installation easier, and more attractive to hotels.
By opening the midscale range of hotels to our services, we will be able to substantially increase the potential size of our target market, which would enable us to further improve our revenues and profitability.
Similarly, up until now we have concentrated primarily on the management and operation of computerized minibars. Based on our past experiences in the hospitality industry, we think that our know-how is equally applicable to non-computerized minibars, and that we could be just as successful in improving the hotels' bottom line in non-computerized minibar departments. We therefore intend to develop marketing strategies aimed at boosting our activities in this sector, in addition to the services that we will continue to provide for computerized minibars.
We believe that significant growth opportunities exist by selectively pursuing strategic acquisitions and alliances, thereby enabling us to offer new products and services. By capitalizing on this strategy, we hope to continue to grow our business with our commitment to quality service to our customers. We intend to expand our operations by acquiring companies and/or seeking strategic alliances which complement our business objectives, as opportunities arise.
Operations
To date our activities have focused primarily on managing the minibar departments in upscale hotels. We offer our customers a number of solutions ranging from consultation and supervision services, all the way to full outsource installation and operation arrangements. We currently implement several general types of business model, further detailed below.

Complete Outsource Solution. This is currently the most prominent of the business models that we employ. Many hotels do not want to pay upfront for their minibars, and many do not want to allocate resources to operate the minibars either.
Accordingly, we purchase new minibars and install them at the customer's premises, at no immediate cost to the customer. In the case of computerized minibars, the installation also includes software designed to interface between the minibars and the customer's existing management software, so that various actions relating to usage of the minibars such as, consumption of products from the minibars, and the locking/unlocking of the minibars, can be logged or controlled by the customer and by us. We then manage and operate the minibar department for the customer. We also supply full maintenance services for the minibars. We carry the operating expenses of the minibar department, and net revenues (after rebates and other discounts, if any) from the minibar department are shared, with us receiving the majority of the revenue and the hotel retaining the balance of the revenues. Generally, we offer incentives to the hotel such as implementing a sliding scale on the division of net revenues, so that the customer's relative share increases as the net revenue per minibar rises.
In this model, the term of our agreement with the customer is generally 8-9 years, and the customer typically has an option to purchase the turnkey system from us at various points in time spread throughout the term of the agreement, at a gradually decreasing (sliding scale) purchase price. Our objective is to provide our services to the customer for the full term of the agreement, but this business model remains profitable even if the customer decides, at any stage, to exercise its option to purchase the system from us.
We believe that this model offers the customer many advantages in relation to its minibar department, including the following:
§ No capital expenditure on the minibars
§ A new revenue stream, if no minibars were previously installed and operational
§ No labor expenses and no operating costs
§ No purchase of goods and no inventory management
§ Added service to guests, thereby improving the customer's competitive edge
§ No downside: hotel is minimizing its risks, both financial and other
§ Added flexibility, via the customer's option to purchase the system
§ Outsourcing allows the hotel to focus on major revenue sources
§ Quality of service: we specialize in the field
§ Increased control and management, extensive reporting
§ No maintenance by customer
§ Periodic technical and technological upgrades
Outsource Solution for Leased Base. In this model, the customer leases the minibars from the manufacturer, and we do not own the minibars. As a result, we provide partial, but not full, maintenance services, and all provisions relating to the purchase of the minibars by the customer are governed by the terms of the agreement between the customer and the manufacturer. In all other respects, the model works in the same way as the Complete Outsource Solution and we manage and operate the minibar department, under a revenue sharing arrangement with the customer. Because we do not finance the purchase of the minibars, the net revenue share is different, and the customer's share is larger than it is in the Complete Outsource Solution, although we still receive most of the revenue.
Management & Operation of Installed Base. For customers who already have an installed, operational minibar system, we provide partial maintenance services, and full operation and management services. Essentially, the services which we provide in this case are the same as in the Outsource Solution for Leased Base model.
Management of Installed Base. This is the model that is preferred by customers who wish to receive the benefit of our know-how and our procedures, but would like to continue to manage the minibar department themselves, using their own staff. Typically, the customer receives a limited license to utilize our know-how, and is then taught how to manage the minibar department in a more efficient and profitable manner. We provide part-time supervision and support, and the customer carries the cost of operation of the department.
Other. The models discussed above are the primary types of arrangement that we offer our customers, but we approach each case with a flexible approach, which enables us to adjust a particular model so that it is tailor-made for the customer, but is still in line with the principles outlined above. Also, each model may be sub-divided into arrangements whereby we receive a fixed service charge, or a fixed percentage of gross revenues, instead of net revenues, and other similar adjustments. The models will also vary depending on the nature of the customer: upscale hotel, airport hotel or other hotel; and whether the minibars are computerized or manual. Sometimes, the existence of specific union rules in certain territories also require us to be flexible and adapt an arrangement so that it is workable for the customer, while still enabling us to manage and/or operate the minibar department in a way which is designed to be profitable for us, as well as for the customer. We may also be prepared to lease / rent minibars to customers, or enter into other financing arrangements, where circumstances so require.
Competition
We have a decade of hands-on experience in providing services to the hotel industry. Whether we are consulting to a hotel, or managing the entire minibar department, we focus on hands-on, expert and dedicated management, on-site supervision, and disciplined implementation of specialized procedures which we have developed, in order to achieve our goals and improve the department's performance.
Many of our competitors have experience in revenue-sharing business models, while others provide systems that are supposed to improve the efficiency of a hotel's minibar department.
We believe that our ability to provide a range of services, up to a Complete Outsource Solution, including a comprehensive financing solution as well as the full management and operation of the minibar department, places us in a favorable position, compared with some of our competitors.
Our hands-on management strategy, combined with on-site supervision, allows us to assume responsibility for the following matters, thereby enabling our customers to concentrate their efforts in other areas:
§ implementation of our exclusive operating procedures
§ procurement of the consumables that are offered in the minibars
§ management of inventory control and monitoring of expiry dates of consumables
§ implementation of procedures to handle and reduce rebates
§ daily reconciliation of accounts
§ training of minibar attendants and front office employees
§ maintenance and support
Our objective, is to enable our customers to increase the net revenues that are generated by their minibar departments, including by the following means:
§ taking active involvement in the selection and pricing of consumables
§ implementing innovative and attractive product mixes for different room categories
§ producing attractive, creative and novel menus
§ improving minibar visibility
§ proposing and implementing effective promotional activities
§ reducing rebates & manual emptying of minibars by guests
§ in-depth and real-time data logging and reporting, thereby creating extensive sales statistics and enabling effective data-mining, designed to adapt the system to improve performance