H World Group Limited Announces the Third Quarter 2024 Financial Results

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Nov 26, 2024, 07:58 ET

Strong Brands Drive Growth, Balancing Scale and Quality, Global Expansion Reaches New Heights

HONG KONG, Nov. 26, 2024 /PRNewswire/ -- H World Group Limited ("H World" or "the Group", NASDAQ: HTHT and HKEX: 1179.HK) announced its unaudited financial results for the third quarter of 2024 ("Q3 2024"), with both revenue and hotel turnover showing growth. According to the announcement, H World's revenue increased 2.4% year-over-year to RMB6.4 billion in the third quarter of 2024. Among this, revenue from H World's business in China ("Legacy-Huazhu" or "Huazhu") increased 1.0% year-over-year; and revenue from H World International ("Legacy-DH" or "DH") increased 8.9% year-over-year. Meanwhile, the Group's hotel turnover increased 10.7% year-over-year to RMB26.0 billion. Hotel turnover from the Legacy-Huazhu segment increased 11.0% year-over-year; and hotel turnover from the Legacy-DH segment increased 7.8% year-over-year. The Group's business scale further expanded both domestically and internationally.

IntercityHotel located at Berlin Central Station, Germany & IntercityHotel Which Newly Opened Yantai Binhai Plaza Seaview in China

H World was founded in 2005 and has since grown into one of the world's leading hotel management groups. With outstanding product innovation and brand operations, H World has gradually established a leading position in the market and continues to drive the development of the hotel industry. As of the end of the third quarter, H World operated 10,845 hotels in 18 countries, with 2,925 unopened hotels in the pipeline.

Jin Hui, CEO of H World commented: "After reaching the milestone of 10,000 hotels in the second quarter, we continued our fast-paced, high-quality network growth and opened 774 new hotels in China in the third quarter of 2024. Our occupancy rate remained solid at 85% despite our ongoing rapid hotel network expansion. Going forward, we will continue to emphasize the importance of sustainable high-quality growth. We aim to expand our presence across all regions and continue penetrating into lower-tier cities in China, thereby reaching more of China's hotel market with our high-quality hotel products with excellent services. Regarding our business outside China, We continued focusing on cost reduction in our European business, while at the same time seeking growth opportunities in the Asia-Pacific (APAC) and in the Middle East areas."

Net Income Reaches RMB 1.3 Billion, Demonstrating Strong Market Competitiveness

In the third quarter of 2024, despite facing the challenge of an overall industry downturn, H World demonstrated its strong market competitiveness, with revenue reaching RMB6.4 billion, significantly exceeding the industry average (based on statistics from eight domestic and international peers that have released their Q3 2024 financial reports to date). Among this, Legacy-DH saw an 8.9% year-over-year growth, showing steady growth in the global market. Furthermore, amidst the general decline in industry net profits, H World achieved a net income attributable to H World of RMB1.3 billion, far surpassing the industry average, demonstrating strong profitability.

In terms of operating margin, H World's operating margin reached 26.7%, an increase of 1.1 percentage points compared to the previous quarter, indicating a steady recovery. Notably, Legacy-Huazhu achieved an operating margin of 34.2%, a 3.2 percentage point increase quarter-over-quarter, further consolidating the Group's leading position in the Chinese market.

Diverse Brand Portfolio Drives Robust Hotel Network Expansion

As a youthful group, H World, with its keen market insight into consumer trends and the hotel industry, as well as its product innovation capabilities, continuously nurtures outstanding proprietary brands. Products such as HanTing Hotel and JI Hotel are all self-developed by the group and occupy leading positions in their respective price segments, forming the core foundation of the group. At the same time, the Group has also continuously enriched its brand matrix through external partnerships and acquisitions. Currently, H World operates over 30 brands, covering all market segments, including Economy hotels, Midscale hotels, Upper midscale hotels, Upscale hotels, Luxury hotels and other market segments. This diverse brand portfolio not only expands the Group's user base but also enables it to more accurately capture the needs of different franchisees and consumers, further enhancing its market competitiveness.

With its strong brand appeal, H World has attracted increasing attention from franchisees. Combined with the Group's light-asset business model, it has been able to rapidly expand, focusing on both lower-tier markets and high-end growth. In the third quarter of 2024, Legacy-Huazhu successfully opened 774 new hotels in the Chinese market, a year-over-year increase of 42%, further accelerating the expansion of its hotel network. This pace of new openings is among the fastest in the hotel industry, fully demonstrating the Group's powerful market expansion capabilities and brand influence.

In the third quarter, the share of hotels in third-tier and lower cities reached 42% of Legacy-Huazhu's total operating hotels, an increase of 2 percentage points year-over-year. The Group continues to penetrate lower-tier markets, improving the long-standing lack of quality supply in these cities. Additionally, the Group has aligned with the mid-to-high-end development trend in the hotel industry, driven by an upgrade in consumer demand, and has seized the opportunity in the mid-to-high-end market with its expanding brand portfolio. Data shows that in the third quarter, the number of mid-to-high-end hotels operated by Legacy-Huazhu increased by 33% year-over-year to 803 hotels. By the end of the reporting period, the number of hotels under development increased by 36% year-over-year. Among them, H World's upper midscale hotels brand, IntercityHotel, acquired overseas, has performed exceptionally well in China. Within five years, the number of operating and unopened hotels has reached 125.

In addition, with the increase in business activities, the demand for hotel services by business travelers is gradually recovering, and H World's performance is expected to see new growth drivers. According to the 2023 Global Business Travel Index Annual Outlook Report published by the Global Business Travel Association (GBTA), global business travel spending is projected to reach $1.5 trillion in 2024, with China's business travel expenditure expected to reach $370 billion, an 8.8% increase compared to 2023. Against this backdrop, H World is actively responding to changes in market demand. In September this year, the group's upper midscale hotel brand, Crystal Orange Hotel, underwent an in-depth iteration and launched its latest version 2.5. This version introduces the concept of "pure sleep," returning to the essence of business travel hotels and focusing on enhancing the core experience of "high-quality sleep" for business travelers.

Balancing "Quantity" and "Quality": Significant Results from the High-Quality Development Strategy

As the consumer market returns to rationality, consumers have become more discerning, seeking better value for money while also raising their expectations for quality consumption. As a result, while H World continues to pursue store expansion and scale, it also strictly implements its high-quality development strategy.

According to the latest financial report, H World currently operates 10,845 hotels, with 10,707 of them located in China, placing it among the leaders in the industry in terms of the number of operating hotels. Despite such a high base of hotels, the group's occupancy rates ("OCC") remains at a relatively high level. In particular, Legacy-Huazhu's OCC steadily increased in the first three quarters, with the third-quarter OCC reaching approximately 85%, which also exceeds the industry average. H World has maintained a high occupancy rate during its ongoing store expansion. This is attributed to the targeted optimization of its sales channels. Legacy-Huazhu has effectively strengthened the customer acquisition and sales capabilities of its stores, further emphasizing the importance of direct sales and membership for the company's long-term sustainable development. Data shows that in the third quarter, the contribution of central reservations to Legacy-Huazhu's room nights reached 64.2%, marking a year-on-year increase of 2.2 percentage points and a quarter-on-quarter increase of 4.3 percentage points. The number of members has approached 260 million.

Accelerating Global Expansion: Exciting Prospects Ahead

In 2019, H World announced the opening of the first overseas direct-operated hotel of its brand, "JI Hotel" in Singapore, marking the official launch of the Group's overseas development strategy. In 2020, the Group expanded its international presence through the full acquisition of Deutsche Hospitality, using it as a "springboard" to explore additional market opportunities in other overseas regions. Going forward, H World will continue to actively explore international development and seek growth opportunities in the Asia-Pacific and Middle East regions, gradually advancing its globalization process. As of September 30, 2024, Legacy-DH operates 138 hotels, with 26 more in the pipeline. In the third quarter, Legacy-DH reported an average daily room rate ("ADR") of €117, a 2.5% year-on-year increase; an OCC of 69.8%, up 0.8 percentage points year-on-year; and a revenue per available room ("RevPAR") of €82, which increased by 3.7% year-on-year, demonstrating an overall improvement in operational efficiency.

In early November 2024, the Group made its debut at the China International Import Expo ("CIIE"), showcasing the innovative model of China's hotel industry to the world. This also conveyed Huazhu's confidence in the Chinese market, reflecting its commitment to the development strategy of "rooted in China, reaching the world." H World's CEO, Jin Hui, stated: "A world-class hotel group must ensure that its brand and management meet world-class standards. Today, China's hotel industry has already developed some core competitive advantages, such as leading integration efficiency and technology application. H World is confident that through high-quality development, we will bring China's hotel industry to world-class heights."

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About H World Group Limited

Originated in China, H World Group Limited is a key player in the global hotel industry. As of September 30, 2024, H World operated 10,845 hotels with 1,062,546 rooms in operation in 18 countries. H World's brands include Hi Inn, Elan Hotel, HanTing Hotel, JI Hotel, Starway Hotel, Orange Hotel, Crystal Orange Hotel, Manxin Hotel, Madison Hotel, Joya Hotel, Blossom House, Ni Hao Hotel, CitiGO Hotel, Steigenberger Hotels & Resorts, MAXX, Jaz in the City, IntercityHotel, Zleep Hotels, Steigenberger Icon and Song Hotels. In addition, H World also has the rights as master franchisee for Mercure, Ibis and Ibis Styles, and co-development rights for Grand Mercure and Novotel, in the pan-China region.

H World's business includes leased and owned, manachised and franchised models. Under the lease and ownership model, H World directly operates hotels typically located on leased or owned properties. Under the manachise model, H World manages manachised hotels through the on-site hotel managers that H World appoints, and H World collects fees from franchisees. Under the franchise model, H World provides training, reservations and support services to the franchised hotels, and collects fees from franchisees but does not appoint on-site hotel managers. H World applies a consistent standard and platform across all of its hotels. As of September 30, 2024, H World operated 9 percent of its hotel rooms under the lease and ownership model, and 91 percent under the manachise and franchise model.

For more information, please visit H World's website: https://ir.hworld.com.

SOURCE H World