Release Date: November 27, 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) achieved a record high of 774 hotel openings in the third quarter, demonstrating strong network expansion.
- The company maintained a healthy occupancy rate of 84.9% despite a decrease in RevPAR, indicating resilience in hotel operations.
- The number of room nights booked via the B2B platform increased by 41% year-over-year, showcasing growth in direct sales capabilities.
- H World Group Ltd (HTHT) reported a 20% year-over-year increase in the overall number of rooms, reaching close to 1.1 million.
- The company continues to focus on high-quality growth, closing low-quality hotels to enhance the overall service quality of its portfolio.
Negative Points
- RevPAR decreased by 8.1% year-over-year, impacted by high base ADR from the previous year and adverse weather conditions.
- The company incurred RMB81 million in one-off restructuring costs for its Deutsche Hospitality business, affecting financial performance.
- Adjusted EBITDA decreased by 9.5% year-over-year, reflecting challenges in maintaining profitability amidst restructuring efforts.
- Legacy-Huazhu's revenue from leased and owned hotels decreased by 10.4% due to hotel closures, impacting overall revenue growth.
- The macroeconomic environment led to stagnant recovery in China's business travel demand, affecting overall travel demand.
Q & A Highlights
Q: What are the RevPAR trends in October and November, and what is the expectation for RevPAR growth in Q4? Additionally, what is the strategy to enhance membership loyalty and increase direct sales ratio?
A: Hui Jin, CEO, explained that business travel activity remained weak, impacting ADR and RevPAR due to a high base from last year. However, demand for travel remains strong, maintaining high occupancy rates. For Q4, RevPAR is expected to decline by mid-single digits year-over-year. To enhance membership loyalty, the company is improving membership benefits, ensuring competitive pricing through direct sales, and collaborating with other industries like airlines and car-hailing services to boost membership growth.
Q: Given the high base on RevPAR this year, what is the expectation for next year and the longer-term RevPAR outlook for the industry? What are your thoughts on the supply situation in China?
A: Hui Jin, CEO, stated that RevPAR should stabilize and enter a growth cycle next year, supported by strong government support for leisure travel and favorable visa policies. The supply situation in China is expected to balance as low-quality hotels exit the market, and high-quality supply becomes more prevalent. The company remains focused on providing high-quality, value-for-money products.
Q: What are the targets for store openings and closures for this year and next year? How is the competition landscape in the midscale and upper-midscale segments?
A: Hui Jin, CEO, mentioned that the company expects to open around 2,400 new hotels this year, exceeding previous guidance. The focus remains on high-quality growth, with continued closures of low-quality hotels. In the midscale segment, the company has strong brand recognition with JI Hotel and Orange. In the upper-midscale segment, brands like Crystal Orange and Intercity are positioned to capture market share, benefiting from released property resources.
Q: Can you provide insights on the strategy for Legacy-Huazhu's leased and operated businesses? Is the closure of underperforming hotels a one-off or a long-term strategy?
A: Jihong He, CSO, explained that the company is transitioning to a more asset-light model. In Q3, 25 leased and owned hotels were closed, with some transferred to manachised hotels. The closures were due to lease expirations or performance issues. The company will continue to close more leased and owned hotels, but the quantity will be less than in Q3.
Q: What is the company's approach to managing the membership system to increase direct sales?
A: Hui Jin, CEO, emphasized the importance of enhancing the membership program by offering diverse products and improving membership benefits. The company is also focusing on direct sales channels and collaborating with other industries to boost membership conversion and retention rates.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
