- RevPAR (Legacy-Huazhu): RMB244, down 2% year-over-year.
- ADR (Legacy-Huazhu): RMB296, down 2.9% year-over-year.
- Occupancy Rate (Legacy-Huazhu): 82.6%, up 0.7 percentage points year-over-year.
- Room Nights Sold in China: Increased by approximately 21% year-over-year.
- New Hotels Opened: 567 new hotels in the second quarter.
- Hotel Closures: 101 closures, with only 58 excluding low-quality economic soft brand and HanTing 1.0 version.
- Hotels in Pipeline: Reached a record high of 3,266.
- Hotels in Operation: 10,000 hotels, with over 1 million rooms, up 19% year-over-year.
- Hotel Turnover: RMB23.4 billion, up 15% year-over-year.
- Total Revenue: RMB6.1 billion, up 11% year-over-year.
- Revenue from Legacy-Huazhu: RMB4.8 billion, up 11% year-over-year.
- Revenue from Legacy-DH: RMB1.3 billion, up 12% year-over-year.
- Hotel Operating Costs: RMB3.7 billion, up 7% year-over-year.
- SG&A Expenses: RMB919 million, up 24% year-over-year.
- Income from Operations: RMB1.6 billion, up 14% year-over-year.
- Adjusted EBITDA: RMB2 billion, up 15% year-over-year.
- Adjusted Net Income: RMB1.3 billion, up 17% year-over-year.
- Operating Cash Flow: RMB2.2 billion, flattish year-over-year.
- Cash and Equivalents: RMB9.9 billion as of end of June 2024.
- Net Cash Position: RMB4.3 billion as of end of June 2024.
- Shareholder Returns: USD200 million interim cash dividend for the first half of 2024 and USD143 million worth of shares repurchased as of July year-to-date.
- Guidance for Q3 2024 Revenue Growth: Expected between 2% to 5% year-over-year.
- Full Year Hotel Opening Target: Revised up to over 2,200 hotels.
Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- H World Group Ltd (HTHT, Financial) opened its 10,000th hotel in China, achieving a significant milestone.
- The company saw a 21% year-over-year increase in the total number of room nights sold in China during the second quarter.
- HTHT's occupancy rate increased by 0.7 percentage points year-over-year, reflecting stable travel demand.
- The company opened 567 new hotels in the second quarter, maintaining strong hotel opening momentum.
- HTHT's adjusted EBITDA increased by 15% year-over-year to RMB2 billion, indicating strong financial performance.
Negative Points
- Legacy-Huazhu's RevPAR in the second quarter was RMB244, down 2% year-over-year.
- ADR was RMB296, down 2.9% year-over-year, indicating a decline in average daily rates.
- SG&A expenses increased by 24% year-over-year, driven by headcount normalization and share-based compensation.
- The company expects a mid-single-digit year-over-year decline in RevPAR for the third quarter of 2024.
- HTHT's guidance for third-quarter revenue growth is relatively modest, between 2% to 5% year-over-year.
Q & A Highlights
Q: Could you comment about your RevPAR expectations for 3Q 2024 and also for the full year 2024? Additionally, what is the current investment appetite for franchisees?
A: (Hui Jin, CEO) For 3Q 2024, we expect RevPAR to decline around mid-single digits year-over-year due to a high base from last year and weak macro conditions. However, we anticipate a return to a healthier and sustainable growth trend. Regarding franchisees, our pipeline continues to grow, and we remain confident in maintaining healthy investment sentiment through our lower-tier cities and upper mid-segment penetration strategies.
Q: Can you update us on the progress regarding hotel openings, especially with the increased target from 1,800 to 2,200 hotels? Is there a limit to the number of hotels you can open annually?
A: (Hui Jin, CEO) We are pleased to see that we can open more than 2,200 hotels this year, supported by our localized strategy and improved supply chain capabilities. However, we emphasize that high quality is more important than scale. We will continue to focus on flagship hotels and high-quality sustainable growth, particularly in lower-tier cities.
Q: How do you see the hotel supply in the medium term, and how will it impact industry RevPAR?
A: (Hui Jin, CEO) The hotel market in China is mature and market-driven. While there is no lack of supply, there is a lack of high-quality supply. We focus on high-quality sustainable growth and service excellence to maintain our competitive edge. Long-term RevPAR trends are positively correlated with GDP growth and inflation, and we believe our strong brand and product offerings will keep us competitive.
Q: What is your long-term strategy for DH, especially in Asia where you have performed well?
A: (Hui Jin, CEO) Our DH strategy focuses on asset-light transformation, cost control, and efficiency improvement to maintain profitability and cash flow. We also aim to leverage DH's strong brand to expand in the Middle East and Asia Pacific.
Q: How will the softer RevPAR guidance for the second half of the year impact margins?
A: (Jun Zou, CFO) Despite short-term RevPAR fluctuations, we are confident in long-term growth through product upgrades, service excellence, and membership program enhancements. Our shift to an asset-light model will naturally improve margins. We also implement flexible budgeting and meticulous ROI measurement to respond to market changes and optimize spending.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
