Revenue Growth, Enhanced Profitability, and Milestone Reached in Hotel Network
HONG KONG, Aug. 20, 2024 /PRNewswire/ -- H World Group Limited ("H World" or "the Group", NASDAQ: HTHT and HKEX: 1179.HK) announced its unaudited financial results for the second quarter ("Q2 2024") and interim period ended June 30, 2024.
In the first half of the year, revenue increased by 14.1% year-over-year, with second quarter revenue growth slightly exceeding the upper limit of guidance.
H World continues to prioritize customer-centricity, continuously improving the quality of its products and services, leading the industry toward high-quality development. In the first half of 2024, the Group achieved revenue of RMB 11.4 billion (approximately USD 1.6 billion), a 14.1% increase compared to the first half of 2023. Of this, revenue from H World's business in China("Legacy-Huazhu") was RMB 9.1 billion, a year-on-year increase of 14.3%, while revenue from Huazhu International ("Legacy-DH" or "DH") was RMB 2.4 billion, up 13.7% year-on-year, with growth in both domestic and international revenue. In the second quarter of 2024, the Group continued to expand its hotel network, achieving revenue of RMB 6.1 billion (approximately USD 846 million), a quarter-on-quarter increase of 16.5% and a year-on-year increase of 11.2%, reaching the upper limit of the previously announced guidance of 7% to 11% growth compared to Q2 2023.
On the profitability front, in the first half of 2024, the Group generated an income from operations of RMB 2.6 billion (approximately USD 354 million), representing a year-on-year increase from RMB 2 billion in the first half of 2023. In Q2 2024, income from operations was RMB 1.6 billion (approximately USD 216 million), compared to RMB 1.4 billion in the second quarter of 2023 and RMB 1 billion in the previous quarter. In addition to the growth in both revenue and income from operations, the Group has also improved its profitability through the asset-light expansion strategy. In the first half of 2024, the Group's operating margin (defined as income from operations as a percentage of revenue) was 22.5%, up 2 percentage points from 20.5% in the first half of 2023. In the second quarter of 2024, the operating margin was 25.6%, an increase from 25.0% in the second quarter of 2023 and 19.0% in the previous quarter, indicating continued optimization of profitability.
In the second quarter of 2024, the Group earned a net income attributable to H World Group Limited of RMB 1.1 billion (approximately USD 147 million), compared to RMB 1 billion in Q2 2023 and RMB 659 million in the previous quarter. In order to more effectively reflect the profitability of the Group's core business, adjusted EBITDA (non-GAAP) is used as a measure. In the second quarter of 2024, the Group recorded an adjusted EBITDA (non-GAAP) of RMB 2 billion (approximately USD 280 million), compared with RMB 1.8 billion in the second quarter of 2023 and RMB 1.4 billion in the previous quarter, with both year-over-year and quarter-over-quarter growth.
Operational Efficiency Improves Quarter-over-Quarter, Strong Brand Appeal
In the second quarter of 2024, Legacy-Huazhu's blended revenue per available room ("RevPAR") for leased, owned, manachised and franchised hotels was RMB 244, with an average daily room rate ("ADR") of RMB 296 and an occupancy rate ("OCC") of 82.6%. In the previous quarter, these figures were RMB 216, RMB 280, and 77.2%, respectively, while in the same period last year, they were RMB 250, RMB 305, and 81.8%. In the second quarter of 2024, all three key operational indicators for Legacy-Huazhu showed quarter-on-quarter increase. Compared to the same period last year, although RevPAR saw a slight decline of 2% due to a high base from the previous year, with 567 new hotels opened in China during the second quarter of 2024 , the Group has kept a steady pace of openings while achieving a year-over-year increase of 0.7 percentage points in occupancy rate, reflecting strong market recognition and the Group's robust brand appeal. The combination of new openings and rising occupancy rates will maintain the Group's advantageous position in market competition.
For Legacy-DH, the blended RevPAR for leased as well as manachised and franchised hotels (excluding hotels temporarily closed) was €82, with an ADR of €120 and an OCC of 68.3%. In the previous quarter, these figures were €58, €104, and 55.8%, while in the same period last year, they were €78, €117, and 67.1%. In Q2 2024, all three key operational indicators for Legacy-DH showed improvements both quarter-over-quarter and year-over-year, with continuous progress in the Group's overseas business and continuous enhancement of operational efficiency.
Accelerated Expansion of Hotel Network, Upgraded Full Year Hotel Opening Guidance for 2024
In terms of hotel openings, H World's hotel network is steadily expanding. As of June 30, 2024, the Group operates a total of 10,286 hotels worldwide, with Legacy-Huazhu having 10,150 operating hotels and Legacy-DH having 136 operating hotels. H World and Legacy-Huazhu reached the remarkable milestone of 10,000 hotels in the second quarter, opening a new chapter for the group. H World has now grown from over 10,000 hotels in more than 1,000 cities to over 20,000 hotels in more than 2,000 cities, achieving high-quality expansion of its hotel network, which signifies a new starting point for its "Thousand Cities, Ten Thousand Hotels 2.0" strategy.
At the same time, Legacy-Huazhu will continue to focus on product upgrades, excellent service, and membership programs to enhance the competitive advantage of the H World and promote sustainable growth in average revenue per available room. In terms of overseas business, the group is keen to expand its global footprint and transfer Legacy-DH into a more asset-light model.
As of June 30, 2024, the Company has 3,294 hotels under development, including 3,266 for Legacy-Huazhu and 28 for Legacy-DH. Additionally, the group announced an upward revision of its guidance for hotel openings in 2024, expecting to open over 2,200 hotels, up from the previous guidance of 1,800, further expanding its hotel network.
Dividends and Buybacks Reflect Corporate Confidence; Positive Outlook for the Hotel Industry
On July 23, 2024, the board of directors of H World announced a three-year shareholder return plan effective immediately, which may distribute up to a total of $2 billion to the group's shareholders. It also approved a five-year share repurchase plan for American Depositary Shares, effective from August 21, 2024, with a maximum total amount of $1 billion. Notably, this share repurchase plan replaces the previous plan approved and adopted on August 21, 2019, with a maximum total amount of $750 million. The increased dividend and share repurchase total reflect the group's confidence in its long-term development.
H World is a significant player in the global hospitality industry. The main reason is that Chinese hotels have a strong industry background due to the fact that they have the world's largest tourist population and diverse forms of tourism. According to official statistics, in the first half of 2024, the passenger volume of railway and domestic flights was 2.096 billion and 350 million, respectively, representing year-on-year growth of 18.4% and 23.5%; the Ministry of Culture and Tourism of China also reported that the number of tourists during the Labour Day Holiday has returned to a level 28% higher than that of 2019. With the follow-up publicity and promotion of cultural tourism across different regions, residents' willingness to travel has become stronger. In terms of cross-border travel, inbound tourism is gaining popularity under the "China Travel" trend. Statistics from the National Immigration Administration of China shows that in the first half of the year, 14.635 million foreign visitors entered the country from various ports, a year-on-year increase of 152.7%; the China Tourism Academy also predicts that the number of outbound tourists will reach 130 million in 2024. Overall, consumer enthusiasm for travel is expected to continue to rise in the second half of the year, and the recovery of the macroeconomy will bring more business travel demand, indicating a promising outlook for the hotel industry.
About H World Group Limited
Originated in China, H World Group Limited is a key player in the global hotel industry. As of June 30, 2024, H World operated 10,286 hotels with 1,001,865 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 June 30, 2024, H World operated 10 percent of its hotel rooms under the lease and ownership model, and 90 percent under the manachise and franchise model.
For more information, please visit H World's website: https://ir.hworld.com.