H World Group Limited Reports First Quarter of 2024 Unaudited Financial Results
· A total of 9,817 hotels or 955,657 hotel rooms in operation as of March 31, 2024.
· Hotel turnover^1 increased 21.1% year-over-year to RMB19.7 billion in the first quarter of 2024. Excluding Steigenberger Hotels GmbH and its subsidiaries (“*DH*”, or “*Legacy-DH*”), hotel turnover increased 21.6% year-over-year in the first quarter of 2024. Hotel turnover from the Legacy-DH segment increased 15.5% in the first quarter of 2024.
· Revenue increased 17.8% year-over-year to RMB5.3 billion (US$731 million)^2 in the first quarter of 2024, surpassing the revenue guidance previously announced of a 12% to 16% increase compared to the first quarter of 2023. Revenue from the Legacy-Huazhu segment in the first quarter of 2024 was RMB4.2 billion, which increased 18.1% year-over-year, exceeding the revenue guidance previously announced of an 11% to 15% increase. Revenue from the Legacy-DH segment in the first quarter of 2024 was RMB1.0 billion, which increased 16.6% year-over-year.
· Net income attributable to H World Group Limited was RMB659 million (US$91 million) in the first quarter of 2024, compared with RMB990 million in the first quarter of 2023 and RMB743 million in the previous quarter. Net income attributable to H World Group Limited from the Legacy-Huazhu segment was RMB833 million in the first quarter of 2024, compared with RMB1.2 billion in the first quarter of 2023 and RMB827 million in the previous quarter. Net loss attributable to H World Group Limited from the Legacy-DH segment was RMB174 million in the first quarter of 2024, compared with RMB165 million in the first quarter of 2023 and RMB84 million in the previous quarter.
· EBITDA (non-GAAP) in the first quarter of 2024 was RMB1.3 billion (US$181 million), compared with RMB1.6 billion in the first quarter of 2023 and RMB1.4 billion in the previous quarter.
· Adjusted EBITDA (non-GAAP), which excluded share-based compensation expenses, gain (loss) from fair value changes of equity securities, foreign exchange gain (loss), net and gain (loss) on disposal of investments from EBITDA (non-GAAP), was RMB1.4 billion (US$197 million) in the first quarter of 2024, compared with RMB1.0 billion in the first quarter of 2023 and RMB1.1 billion in the previous quarter.
· Adjusted EBITDA is our segment measure. Adjusted EBITDA from the Legacy-Huazhu segment was RMB1.5 billion in the first quarter of 2024, compared with RMB1.1 billion in the first quarter of 2023 and RMB1.1 billion in the previous quarter. Adjusted EBITDA from the Legacy-DH segment was a loss of RMB66 million in the first quarter of 2024, compared with a loss of RMB98 million in the first quarter of 2023 and a loss of RMB6 million in the previous quarter.
· For the second quarter of 2024, H World expects its revenue growth to be in the range of 7%-11% compared to the second quarter of 2023 or in the range of 7%-11% excluding DH.
SINGAPORE and SHANGHAI, China, May 17, 2024 (GLOBE NEWSWIRE) -- H World Group Limited (NASDAQ: HTHT and HKEX: 1179) (“*H World*”, the “*Company*”, “*we*” or “*our*”), a key player in the global hotel industry, today announced its unaudited financial results for the first quarter ended March 31, 2024.
As of March 31, 2024, H World’s worldwide hotel network in operation totaled 9,817 hotels and 955,657 rooms, including 9,684 hotels from Legacy-Huazhu and 133 hotels from DH. During the first quarter of 2024, our Legacy-Huazhu business opened 569 hotels, including 2 leased and owned hotels, and 567 manachised and franchised hotels, and closed a total of 148 hotels, including 11 leased and owned hotels, and 137 manachised and franchised hotels. As of March 31, 2024, H World had a total of 3,172 unopened hotels in the pipeline, including 3,138 hotels from the Legacy-Huazhu business and 34 hotels from the Legacy-DH business.
*Legacy-Huazhu **–** First Quarter of 2024 Operational Highlights *
As of March 31, 2024, Legacy-Huazhu had 9,684 hotels in operation, including 598 leased and owned hotels, and 9,086 manachised and franchised hotels. In addition, as of the same date, Legacy-Huazhu had 928,509 hotel rooms in operation, including 85,416 rooms under the lease and ownership model, and 843,093 rooms under the manachise and franchise models. Legacy-Huazhu also had 3,138 unopened hotels in its pipeline, including 10 leased and owned hotels, and 3,128 manachised and franchised hotels. The following discusses Legacy-Huazhu’s revenue per available room (“*RevPAR*”), average daily room rate (“*ADR*”) and occupancy rate for its leased and owned hotels, as well as manachised and franchised hotels for the periods indicated.
· The ADR was RMB280 in the first quarter of 2024, compared with RMB277 in the first quarter of 2023 and RMB284 in the previous quarter.
· The occupancy rate for all the Legacy-Huazhu hotels in operation was 77.2% in the first quarter of 2024, compared with 75.6% in the first quarter of 2023 and 80.5% in the previous quarter.
· Blended RevPAR was RMB216 in the first quarter of 2024, compared with RMB210 in the first quarter of 2023 and RMB229 in the previous quarter.
· For all the Legacy-Huazhu hotels which had been in operation for at least 18 months, the same-hotel RevPAR was RMB218 in the first quarter of 2024, representing a 0.9% increase from RMB216 in the first quarter of 2023, with a 0.6% decrease in same-hotel ADR and a 1.1 percentage-point increase in same-hotel occupancy rate.
*Legacy-DH **–** First Quarter of 2024 Operational Highlights *
As of March 31, 2024, Legacy-DH had 133 hotels in operation, including 84 leased hotels, and 49 manachised and franchised hotels. In addition, as of the same date, Legacy-DH had 27,148 hotel rooms in operation, including 16,369 rooms under the lease model, and 10,779 rooms under the manachise and franchise models. Legacy-DH also had 34 unopened hotels in the pipeline, including 19 leased hotels and 15 manachised and franchised hotels. The following discusses Legacy-DH’s RevPAR, ADR and occupancy rate for its leased as well as manachised and franchised hotels (excluding hotels temporarily closed) for the periods indicated.
· The ADR was EUR104 in the first quarter of 2024, compared with EUR104 in the first quarter of 2023 and EUR115 in the previous quarter.
· The occupancy rate for all Legacy-DH hotels in operation was 55.8% in the first quarter of 2024, compared with 53.5% in the first quarter of 2023 and 63.8% in the previous quarter.
· Blended RevPAR was EUR58 in the first quarter of 2024, compared with EUR55 in the first quarter of 2023 and EUR73 in the previous quarter.
Jin Hui, CEO of H World commented: “We are pleased to report a strong first quarter result with revenue exceeding our expectation. In the first quarter of 2024, our Legacy-Huazhu’s blended RevPAR achieved a 3.1% growth year-over-year. In terms of network expansion, we continuously gain attractiveness, with both gross openings and pipeline reaching a record high in the first quarter of 2024. Looking ahead, the near-term RevPAR performance might see some fluctuations due to strong pent-up demand last year. However, our confidence in the long-term growth of China lodging marketplace remains unchanged. We believe that our ‘Service Excellence-Centric Sustainable Quality Growth Strategy’ will help us not only to further expand our network with high quality, but also to improve our customers’ satisfaction, and hence to gain a stronger competitive edge.”
“Regarding our business outside China, our Legacy-DH segment recorded a 4.5% year-over-year blended RevPAR increase in the first quarter of 2024, with a 0.2% increase in ADR and a 2.3 percentage-point increase in occupancy rate. We will continue to focus on cost reduction and efficiency improvement to achieve better profitability. Also, we aim to transform our Legacy-DH business to a more asset-light model, strengthen direct sales via our H Rewards global loyalty program, and seek growth opportunities in new regions outside of Europe.”
*First Quarter of 2024 Unaudited Financial Results*
(RMB in millions) *Q1 2023* *Q4 2023* *Q1 2024*
*Revenue:*
Leased and owned hotels 2,874 3,453 3,099
Manachised and franchised hotels 1,554 2,016 2,063
Others 52 116 116
Total revenue 4,480 5,585 5,278
*Revenue* in the first quarter of 2024 was RMB5.3 billion (US$731 million), representing a 17.8% year-over-year increase and a quarter-over-quarter decrease of 5.5% due to seasonality effects. Revenue from the Legacy-Huazhu segment in the first quarter of 2024 was RMB4.2 billion, representing an 18.1% year-over-year increase and a 3.2% quarter-over-quarter decline. The 18.1% year-over-year increase exceeds the previously announced revenue guidance of an 11% to 15% increase, which was mainly driven by higher-than-expected hotel openings. Revenue from the Legacy-DH segment in the first quarter of 2024 was RMB1.0 billion, representing a 16.6% year-over-year increase and a 14.0% quarter-over-quarter decline.
*Revenue from leased and owned hotels* in the first quarter of 2024 was RMB3.1 billion (US$429 million), representing a 7.8% year-over-year increase and a 10.3% quarter-over-quarter decrease. Revenue from leased and owned hotels from the Legacy-Huazhu segment in the first quarter of 2024 was RMB2.1 billion, representing a 4.6% year-over-year increase. Revenue from leased and owned hotels from the Legacy-DH segment in the first quarter of 2024 was RMB987 million, representing a 15.6% year-over-year increase.
*Revenue from manachised and franchised hotels* in the first quarter of 2024 was RMB2.1 billion (US$286 million), representing a 32.8% year-over-year increase and a 2.3% quarter-over-quarter increase. Revenue from our Legacy-Huazhu segment from manachised and franchised hotels in the first quarter of 2024 was RMB2.0 billion, representing a 32.9% year-over-year increase. Revenue from manachised and franchised hotels from the Legacy-DH segment in the first quarter of 2024 was RMB21 million, representing a 16.7% year-over-year increase.
*Other revenue* represents revenue generated from businesses other than our hotel operations, which mainly includes revenue from the provision of IT products, and services and Huazhu Mall™ and other revenue from the Legacy-DH segment, totaling RMB116 million (US$16 million) in the first quarter of 2024, compared to RMB52 million in the first quarter of 2023 and RMB116 million in the previous quarter.
(RMB in millions) *Q1 2023* *Q4 2023* *Q1 2024*
*Operating costs and expenses:*
Hotel operating costs (3,250 ) (3,996 ) (3,565 )
Other operating costs (11 ) (10 ) (9 )
Selling and marketing expenses (195 ) (326 ) (260 )
General and administrative expenses (425 ) (644 ) (509 )
Pre-opening expenses (9 ) (3 ) (8 )
Total operating costs and expenses (3,890 ) (4,979 ) (4,351 )
*Hotel operating costs* in the first quarter of 2024 were RMB3.6 billion (US$494 million), compared to RMB3.3 billion in the first quarter of 2023 and RMB4.0 billion in the previous quarter. The year-over-year cost increase was mainly due to our hotel network expansion as well as reduced rental reliefs with leased hotels. The quarter-over-quarter cost decrease was mainly attributable to an impairment loss of RMB362 million booked for property and equipment and right-of-use assets in the fourth quarter of 2023, compared to no impairment loss booked in the first quarter of 2024. Hotel operating costs from the Legacy-Huazhu segment in the first quarter of 2024 were RMB2.6 billion, which represented 61.6% of revenue, compared to RMB2.4 billion or 66.3% of the revenue in the first quarter of 2023, and RMB2.9 billion or 67.0% of revenue for the previous quarter. Hotel operating costs from the Legacy-DH segment in the first quarter of 2024 were RMB950 million, which represented 92.0% of revenue, compared to RMB867 million or 97.9% of revenue in the first quarter of 2023, and RMB1.1 billion or 88.2% of revenue for the previous quarter.
*Selling and marketing expenses* in the first quarter of 2024 were RMB260 million (US$36 million), compared to RMB195 million in the first quarter of 2023 and RMB326 million in the previous quarter. Selling and marketing expenses from the Legacy-Huazhu segment in the first quarter of 2024 were RMB159 million, which represented 3.7% of revenue, compared to RMB117 million or 3.3% of revenue in the first quarter of 2023, and RMB202 million or 4.6% of revenue in the previous quarter. The year-over-year expense increase was mainly due to continued business growth and a return to a more-normal level of selling and marketing expenses spending from the relatively low base of the same period of last year. Selling and marketing expenses from the Legacy-DH segment in the first quarter of 2024 were RMB101 million, which represented 9.8% of revenue, compared to RMB78 million or 8.8% of revenue in the first quarter of 2023, and RMB124 million or 10.3% of revenue in the previous quarter.
*General and administrative expenses* in the first quarter of 2024 were RMB509 million (US$70 million), compared to RMB425 million in the first quarter of 2023 and RMB644 million in the previous quarter. General and administrative expenses from the Legacy-Huazhu segment in the first quarter of 2024 were RMB395 million, which represented 9.3% of revenue, compared to RMB312 million or 8.7% in the first quarter of 2023 and RMB484 million or 11.0% for the previous quarter. The year-over-year expense increase was mainly due to a return to a more-normal level of headcount number and compensation increase from the relatively low base of the same period of 2023. General and administrative expenses from the Legacy-DH segment in the first quarter of 2024 were RMB114 million, which represented 11.0% of revenue, compared to RMB113 million or 12.8% in the first quarter of 2023 and RMB160 million or 13.3% for the previous quarter.
*Pre-opening expenses* in the first quarter of 2024 were primarily related to the Legacy-Huazhu segment and totaled RMB8 million, compared to RMB9 million in the first quarter of 2023 and RMB3 million in the previous quarter. The pre-opening expenses remained at a low level, which was attributable to more selective openings of leased and owned hotels.
*Other operating income, net *in the first quarter of 2024 was RMB76 million (US$10 million), compared to RMB74 million in the first quarter of 2023 and RMB155 million in the previous quarter.
*Income from operations* in the first quarter of 2024 was RMB1.0 billion (US$139 million), compared to RMB664 million in the first quarter of 2023 and RMB757 million in the previous quarter. Income from operations from the Legacy-Huazhu segment in the first quarter of 2024 was RMB1.1 billion, compared to RMB822 million in the first quarter of 2023 and RMB821 million in the previous quarter. The Legacy-DH segment had a loss from operations of RMB128 million in the first quarter of 2024, compared to RMB158 million in the first quarter of 2023 and RMB64 million in the previous quarter.
*Operating margin*, defined as income from operations as a percentage of revenue, was 19.0% in the first quarter of 2024, compared with 14.8% in the first quarter of 2023 and 13.6% for the previous quarter. The margin improvement was mainly due to higher revenue contribution from manachised and franchised business. This was in line with our asset-light expansion strategy. Operating margin from the Legacy-Huazhu segment in the first quarter of 2024 was 26.6%, compared with 22.9% in the first quarter of 2023 and 18.7% in the previous quarter. Operating margin from the Legacy-DH segment in the first quarter of 2024 was a negative 12.4%, compared with a negative 17.8% in the first quarter of 2023 and a negative 5.3% in the previous quarter.
*Other income, net* in the first quarter of 2024 was RMB40 million (US$6 million), compared to RMB514 million in the first quarter of 2023 and RMB2 million for the previous quarter. The year-over-year decrease was mainly due to the sale of the remainder of the Company’s holdings of Accor shares during the first quarter of 2023.
*Gain from fair value changes of equity securities* in the first quarter of 2024 were RMB38 million (US$5 million), compared to RMB13 million in the first quarter of 2023, and RMB124 million in the previous quarter. Gain (loss) from fair value changes of equity securities mainly represents the unrealized gain (loss) from our investment in equity securities with readily determinable fair values.
*Income tax expense* in the first quarter of 2024 was RMB279 million (US$39 million), compared to RMB194 million in the first quarter of 2023 and RMB281 million in the previous quarter.
*Net income attributable to H World Group Limited *in the first quarter of 2024 was RMB659 million (US$91 million), compared with RMB990 million in the first quarter of 2023 and RMB743 million in the previous quarter. Net income attributable to H World Group Limited from the Legacy-Huazhu segment was RMB833 million in the first quarter of 2024, compared with RMB1.2 billion in the first quarter of 2023 and RMB827 million in the previous quarter. Net loss attributable to H World Group Limited from the Legacy-DH segment was RMB174 million in the first quarter of 2024, compared with RMB165 million in the first quarter of 2023 and RMB84 million in the previous quarter.
*EBITDA (non-GAAP) *in the first quarter of 2024 was RMB1.3 billion (US$181 million), compared with RMB1.6 billion in the first quarter of 2023 and RMB1.4 billion in the previous quarter.
*Adjusted EBITDA*, which excluded share-based compensation expenses, gain (loss) from fair value changes of equity securities, foreign exchange gain (loss), net and gain (loss) on disposal of investments from EBITDA (non-GAAP), was RMB1.4 billion (US$197 million) in the first quarter of 2024, compared with RMB1.0 million in the first quarter of 2023 and RMB1.1 billion in the previous quarter. Adjusted EBITDA from the Legacy-Huazhu segment, which is a segment measure, was RMB1.5 billion in the first quarter of 2024, compared with RMB1.1 billion in the first quarter of 2023 and RMB1.1 billion in the previous quarter. Adjusted EBITDA from the Legacy-DH segment, which is a segment measure, was a loss of RMB66 million in the first quarter of 2024, compared with a loss of RMB98 million in the first quarter of 2023 and a loss of RMB6 million in the previous quarter. To better reflect the profitability of our core business, we have redefined the non-GAAP measure of adjusted EBITDA, and therefore the above adjusted EBITDA in the first and fourth quarter of 2023 has been restated.
*Cash flow. *Operating cash inflow in the first quarter of 2024 was RMB886 million (US$123 million). Investing cash inflow in the first quarter of 2024 was RMB348 million (US$48 million). Financing cash outflow in the first quarter of 2024 was RMB2.3 billion (US$313 million).
*Cash, cash equivalents and restricted cash.* As of March 31, 2024, the Company had a total balance of cash and cash equivalents of RMB5.9 billion (US$818 million) and restricted cash of RMB755 million (US$105 million).
*Debt financing. *As of March 31, 2024, the Company had a total debt and net cash balance of RMB5.7 billion (US$796 million) and RMB915 million (US$127 million), respectively; the unutilized credit facility available to the Company was RMB2.4 billion.
*Guidance *
For the second quarter of 2024, H World expects its revenue growth to be in the range of 7%-11% compared to the second quarter of 2023, or in the range of 7%-11% excluding DH.
The above forecast reflects the Company’s current and preliminary view, which is subject to change.
*Conference Call*
H World’s management will host a conference call at 9 p.m. U.S. Eastern time on Sunday, May 19, 2024 (9 a.m. Hong Kong time on Monday, May 20, 2024) following the announcement.
To join by phone, all participants must pre-register for this conference call using the Participant Registration link of https://register.vevent.com/register/BI09049d430bb54c5eb1c1a1b9e153b589. Upon registration, each participant will receive details for the conference call, including dial-in numbers, a conference call passcode and a unique access PIN.
A live webcast of the call can be accessed at https://edge.media-server.com/mmc/p/4qzbkdyj or the Company’s website at https://ir.hworld.com/news-and-events/events-calendar.
A replay of the conference call will be available for twelve months from the date of the conference call at the Company’s website, https://ir.hworld.com/news-and-events/events-calendar.
*Use of Non-GAAP Financial Measures*
To supplement the Company’s unaudited consolidated financial results presented in accordance with U.S. Generally-Accepted Accounting Principles (“*GAAP*”), the Company uses the following non-GAAP measures defined as non-GAAP financial measures by the U.S. Securities and Exchange Commission (“*SEC*”): adjusted net income (loss) attributable to H World Group Limited excluding share-based compensation expenses, gain (loss) from fair value changes of equity securities, foreign exchange gain (loss), net and gain (loss) on disposal of investments; adjusted basic and diluted earnings (losses) per share/ADS excluding share-based compensation expenses, gain (loss) from fair value changes of equity securities, foreign exchange gain (loss), net and gain (loss) on disposal of investments; EBITDA; adjusted EBITDA excluding share-based compensation expenses, gain (loss) from fair value changes of equity securities, foreign exchange gain (loss), net and gain (loss) on disposal of investments. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the table captioned “Unaudited Reconciliations of GAAP and non-GAAP Results” set forth at the end of this release. The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding Company performance by excluding share-based compensation expenses, gain (loss) from fair value changes of equity securities, foreign exchange gain (loss), net and gain (loss) on disposal of investments that may not be indicative of Company operating performance. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing Company performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to the Company’s historical performance. The Company believes these non-GAAP financial measures are also useful to investors in allowing for greater transparency with respect to supplemental information used regularly by Company management in financial and operational decision-making. A limitation of using non-GAAP financial measures excluding share-based compensation expenses, gain (loss) from fair value changes of equity securities, foreign exchange gain (loss), net and gain (loss) on disposal of investments is that share-based compensation expenses, gain (loss) from fair value changes of equity securities, foreign exchange gain (loss), net and gain (loss) on disposal of investments have been and may continue to be significant and recurring in the Company’s business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.
The Company believes that EBITDA is a useful financial metric to assess the operating and financial performance before the impact of investing and financing transactions and income taxes, given the significant investments that the Company has made in leasehold improvements, depreciation and amortization expense that comprise a significant portion of the Company’s cost structure. In addition, the Company believes that EBITDA is widely used by other companies in the lodging industry and may be used by investors as a measure of financial performance. The Company believes that EBITDA information provides investors with a useful tool for comparability between periods because it excludes depreciation and amortization expense attributable to capital expenditures. The Company also uses adjusted EBITDA to assess operating results of its hotels in operation. The Company believes that the exclusion of share-based compensation expenses, gain (loss) from fair value changes of equity securities, foreign exchange gain (loss), net and gain (loss) on disposal of investments helps facilitate year-over-year comparisons of the results of operations as the share-based compensation expenses, gain (loss) from fair value changes of equity securities, foreign exchange gain (loss), net and gain (loss) on disposal of investments may not be indicative of Company operating performance.
Therefore, the Company believes adjusted EBITDA more closely reflects the financial performance capability of our hotels. The presentation of EBITDA and adjusted EBITDA should not be construed as an indication that the Company’s future results will be unaffected by other charges and gains considered to be outside the ordinary course of business.
The use of EBITDA and adjusted EBITDA has certain limitations. Depreciation and amortization expense for various long-term assets (including land use rights), income tax, interest expense and interest income have been and will be incurred and are not reflected in the presentation of EBITDA. Share-based compensation expenses, gain (loss) from fair value changes of equity securities, foreign exchange gain (loss), net and gain (loss) on disposal of investments have been and will be incurred and are not reflected in the presentation of adjusted EBITDA. Each of these items should also be considered in the overall evaluation of the results. The Company compensates for these limitations by providing the relevant disclosure of depreciation and amortization, interest income, interest expense, income tax expense, share-based compensation expenses, gain (loss) from fair value changes of equity securities, foreign exchange gain (loss), net and gain (loss) on disposal of investments all in the reconciliations to the U.S. GAAP financial measures and in the consolidated financial statements, all of which should be considered when evaluating the performance of the Company.
The terms EBITDA and adjusted EBITDA are not defined under U.S. GAAP, and neither EBITDA nor adjusted EBITDA is a measure of net income, operating income, operating performance or liquidity presented in accordance with U.S. GAAP. When assessing the operating and financial performance, investors should not consider these data in isolation or as a substitute for the Company’s net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP. In addition, the Company’s EBITDA or adjusted EBITDA may not be comparable to EBITDA or adjusted EBITDA or similarly titled measures utilized by other companies since such other companies may not calculate EBITDA or adjusted EBITDA in the same manner as the Company does.
Reconciliations of the Company’s non-GAAP financial measures, including EBITDA and adjusted EBITDA, to the consolidated statement of operations information are included at the end of this press release.
*About H World Group Limited*
Originated in China, H World Group Limited is a key player in the global hotel industry. As of March 31, 2024, H World operated 9,817 hotels with 955,657 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 March 31, 2024, H World operates 11 percent of its hotel rooms under the lease and ownership model, and 89 percent under the manachise and franchise model.
For more information, please visit H World’s website: https://ir.hworld.com.
Safe Harbor Statement Under the U.S. Private Securities Litigation Reform Act of 1995: The information in this release contains forward-looking statements which involve risks and uncertainties. Such factors and risks include our anticipated growth strategies; our future results of operations and financial condition; economic conditions; the regulatory environment; our ability to attract and retain customers and leverage our brands; trends and competition in the lodging industry; the expected growth of demand for lodging; and other factors and risks detailed in our filings with the U.S. Securities and Exchange Commission. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements, which may be identified by terminology such as “may,” “should,” “will,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “forecast,” “project” or “continue,” the negative of such terms or other comparable terminology. Readers should not rely on forward-looking statements as predictions of future events or results.
H World undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law.
—Financial Tables and Operational Data Follow—
*H World Group Limited *
*Unaudited Condensed Consolidated Balance Sheets* *December 31, 2023**
* *March 31, 2024**
* *RMB* *RMB* *US$*^*3* *(in millions)*
*ASSETS*
Current assets:
Cash and cash equivalents 6,946 5,909 818
Restricted cash 764 755 105
Short-term investments 2,189 1,657 229
Accounts receivable, net 755 812 112
Loan receivables - current, net 184 185 26
Amounts due from related parties, current 210 191 26
Inventories 59 56 8
Other current assets, net 949 933 129
Total current assets 12,056 10,498 1,453
Property and equipment, net 6,097 6,002 831
Intangible assets, net 5,280 5,188 719
Operating lease right-of-use assets 25,658 25,532 3,536
Finance lease right-of-use assets 2,171 2,071 287
Land use rights, net 181 179 25
Long-term investments 2,564 2,552 354
Goodwill 5,318 5,265 729
Amounts due from related parties, non-current 25 25 3
Loan receivables, net 163 176 24
Other assets, net 663 664 92
Deferred tax assets 1,043 1,036 144
Assets held for sale 2,313 2,256 312
Total assets 63,532 61,444 8,509
*LIABILITIES AND EQUITY*
Current liabilities:
Short-term debt 4,049 4,104 568
Accounts payable 1,019 900 125
Amounts due to related parties 77 81 11
Salary and welfare payables 1,067 756 105
Deferred revenue 1,637 1,674 232
Operating lease liabilities, current 3,609 3,588 497
Finance lease liabilities, current 45 45 6
Accrued expenses and other current liabilities 3,261 3,345 463
Dividends payable 2,085 - -
Income tax payable 562 553 77
Total current liabilities 17,411 15,046 2,084
Long-term debt 1,265 1,645 228
Operating lease liabilities, non-current 24,215 24,117 3,340
Finance lease liabilities, non-current 2,697 2,594 359
Deferred revenue 1,072 1,126 156
Other long-term liabilities 1,118 1,145 159
Deferred tax liabilities 845 838 116
Retirement benefit obligations 124 121 17
Liabilities held for sale 2,536 2,414 334
Total liabilities 51,283 49,046 6,793
Equity:
Ordinary shares
Treasury shares (906 ) (1,441 ) (200 )
Additional paid-in capital 11,861 11,909 1,649
Retained earnings 794 1,453 201
Accumulated other comprehensive income 386 355 49
Total H World Group Limited shareholders' equity 12,135 12,276 1,699
Noncontrolling interest 114 122 17
Total equity 12,249 12,398 1,716
Total liabilities and equity 63,532 61,444 8,509
*H World Group Limited*
*Unaudited Condensed Consolidated Statements of Comprehensive Income* *Quarter Ended* *March 31, 2023**
* *December 31, 2023**
* *March 31, 2024* *RMB**
* *RMB**
* *RMB* *US$* *(in millions, except shares, per share and per ADS data)*
*Revenue:*
Leased and owned hotels 2,874 3,453 3,099 429
Manachised and franchised hotels 1,554 2,016 2,063 286
Others 52 116 116 16
Total revenue 4,480 5,585 5,278 731
Operating costs and expenses:
Hotel operating costs:
Rents (1,051 ) (1,033 ) (1,086 ) (150 )
Utilities (204 ) (160 ) (192 ) (27 )
Personnel costs (1,036 ) (1,331 ) (1,225 ) (170 )
Depreciation and amortization (346 ) (320 ) (319 ) (44 )
Consumables, food and beverage (278 ) (361 ) (293 ) (41 )
Others (335 ) (791 ) (450 ) (62 )
Total hotel operating costs (3,250 ) (3,996 ) (3,565 ) (494 )
Other operating costs (11 ) (10 ) (9 ) (1 )
Selling and marketing expenses (195 ) (326 ) (260 ) (36 )
General and administrative expenses (425 ) (644 ) (509 ) (70 )
Pre-opening expenses (9 ) (3 ) (8 ) (1 )
Total operating costs and expenses (3,890 ) (4,979 ) (4,351 ) (602 )
Goodwill impairment loss - (4 ) - -
Other operating income (expense), net 74 155 76 10
Income (loss) from operations 664 757 1,003 139
Interest income 44 85 51 7
Interest expense (130 ) (76 ) (83 ) (11 )
Other income (expense), net 514 2 40 6
Gain (loss) from fair value changes of equity securities 13 124 38 5
Foreign exchange gain (loss) 104 140 (92 ) (13 )
Income (loss) before income taxes 1,209 1,032 957 133
Income tax (expense) benefit (194 ) (281 ) (279 ) (39 )
Income (Loss) from equity method investments (15 ) (8 ) (11 ) (2 )
Net income (loss) 1,000 743 667 92
Net (income) loss attributable to noncontrolling interest (10 ) (0 ) (8 ) (1 )
Net income (loss) attributable to H World Group Limited 990 743 659 91
Gain (loss) arising from defined benefit plan, net of tax - (9 ) - -
Gain (loss) from fair value changes of debt securities, net of tax - (31 ) - -
Foreign currency translation adjustments, net of tax 39 (23 ) (31 ) (4 )
Comprehensive income (loss) 1,039 680 636 88
Comprehensive (income) loss attributable to noncontrolling interest (10 ) (0 ) (8 ) (1 )
Comprehensive income (loss) attributable to H World Group Limited 1,029 680 628 87
Earnings (Losses) per share:
Basic 0.31 0.23 0.21 0.03
Diluted 0.30 0.23 0.21 0.03
Earnings (Losses) per ADS:
Basic 3.12 2.33 2.10 0.29
Diluted 3.05 2.31 2.08 0.29
Weighted average number of shares used in computation:
Basic 3,174,229,716 3,182,802,226 3,139,466,152 3,139,466,152
Diluted 3,343,723,364 3,217,737,686 3,172,770,493 3,172,770,493
*H World Group Limited*
*Unaudited Condensed Consolidated Statements of Cash Flows* *Quarter Ended* *March 31, 2023**
* *December 31, 2023**
* *March 31, 2024* *RMB**
* *RMB**
* *RMB* *US$* *(in millions)*
Operating activities:
Net income (loss) 1,000 743 667 92
Share-based compensation 27 38 58 8
Depreciation and amortization,
and other 385 346 345 48
Impairment loss - 430 - -
Loss (income) from equity method investments, net of dividends 15 8 11 2
Investment (income) loss and foreign exchange (gain) loss (544 ) (452 ) 29 4
Changes in operating assets and liabilities 1,020 1,359 (230 ) (32 )
Other (59 ) (61 ) 6 1
Net cash provided by (used in) operating activities 1,844 2,411 886 123
Investing activities:
Capital expenditures (222 ) (313 ) (281 ) (39 )
Acquisitions, net of cash received - (0 ) - -
Purchase of investments (1 ) (700 ) (254 ) (35 )
Proceeds from maturity/sale and return of investments 2,200 771 842 117
Loan advances (34 ) (140 ) (52 ) (7 )
Loan collections 34 36 38 5
Other 4 69 55 7
Net cash provided by (used in) investing activities 1,981 (277 ) 348 48
Financing activities:
Net proceeds from issuance of ordinary shares 1,973 - - -
Payment of share repurchase - (848 ) (544 ) (75 )
Proceeds from debt 428 370 536 74
Repayment of debt (889 ) (204 ) (137 ) (19 )
Dividend paid - - (2,091 ) (290 )
Other (50 ) (62 ) (22 ) (3 )
Net cash provided by (used in) financing activities 1,462 (744 ) (2,258 ) (313 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash (21 ) 41 (17 ) (2 )
Net increase (decrease) in cash, cash equivalents and restricted cash, including cash classified within assets held for sale 5,266 1,431 (1,041 ) (144 )
Less: net increase (decrease) in cash and cash equivalents classified within assets held for sale - 17 5 1
Cash, cash equivalents and restricted cash at the beginning of the period 5,086 6,296 7,710 1,068
Cash, cash equivalents and restricted cash at the end of the period 10,352 7,710 6,664 923
*H World Group Limited*
*Unaudited Reconciliation of GAAP and Non-GAAP Results* *Quarter Ended* *March 31, 2023**
* *December 31, 2023**
* *March 31, 2024* *RMB**
* *RMB**
* *RMB* *US$* *(in millions, except shares, per share and per ADS data)*
Net income (loss) attributable to H World Group Limited (GAAP) 990 743 659 91
Share-based compensation expenses 27 38 58 8
(Gain) loss from fair value changes of equity securities (13 ) (124 ) (38 ) (5 )
Foreign exchange (gain) loss, net (104 ) (140 ) 92 13
(Gain) loss on disposal of investments (516 ) - - -
Adjusted net income (loss) attributable to H World Group Limited (non-GAAP) 384 517 771 107
Adjusted earnings (losses) per share (non-GAAP)
Basic 0.12 0.16 0.25 0.03
Diluted 0.12 0.16 0.24 0.03
Adjusted earnings (losses) per ADS (non-GAAP)
Basic 1.21 1.62 2.46 0.34
Diluted 1.19 1.61 2.43 0.34
Weighted average number of shares used in computation
Basic 3,174,229,716 3,182,802,226 3,139,466,152 3,139,466,152
Diluted 3,223,122,364 3,217,737,686 3,172,770,493 3,172,770,493 *Quarter Ended* *March 31, 2023**
* *December 31, 2023**
* *March 31, 2024* *RMB**
* *RMB**
* *RMB* *US$* *(in millions, except per share and per ADS data)*
*Net income (loss) attributable to H World Group Limited (GAAP)* 990 743 659 91
Interest income (44 ) (85 ) (51 ) (7 )
Interest expense 130 76 83 11
Income tax expense 194 281 279 39
Depreciation and amortization 367 341 339 47
*EBITDA (non-GAAP)* 1,637 1,356 1,309 181
Share-based compensation 27 38 58 8
(Gain) loss from fair value changes of equity securities (13 ) (124 ) (38 ) (5 )
Foreign exchange (gain) loss, net (104 ) (140 ) 92 13
(Gain) loss on disposal of investments (516 ) - - -
*Adjusted EBITDA (non-GAAP)* 1,031 1,130 1,421 197
*H World Group Limited*
*Segment Financial Summary* *Quarter Ended March 31, 2023**
* *Quarter Ended December 31, 2023**
* *Quarter Ended March 31, 2024**
* *Legacy- Huazhu* *Legacy- DH* *Legacy- Huazhu* *Legacy- DH* *Legacy- Huazhu* *Legacy- DH* *RMB* *RMB* *RMB* *RMB* *RMB* *RMB* *(in millions)* *(in millions)* *(in millions)*
Leased and owned hotels 2,020 854 2,288 1,165 2,112 987
Manachised and franchised hotels 1,536 18 1,992 24 2,042 21
Others 38 14 104 12 91 25
* Revenue * 3,594 886 4,384 1,201 4,245 1,033
Depreciation and amortization 304 63 282 59 280 59
* Adjusted EBITDA* 1,129 (98 ) 1,136 (6 ) 1,487 (66 )
*
Operating Results: Legacy-Huazhu*^*(*^*1)*
*Number of hotels * * * *Number of rooms*
*Opened *
*in Q1 2024*
*Closed *^*(2)*
*in Q1 2024*
*Net added *
*in Q1 2024*
*As of *
*March 31, 2024*
* * *As of *
*March 31, 2024*
Leased and owned hotels 2 (11 ) (9 ) 598 85,416
Manachised and franchised hotels 567 (137 ) 430 9,086 843,093
*Total* *569* *(148* *)* *421* *9,684* *928,509*
(1) Legacy-Huazhu refers to H World and its subsidiaries, excluding DH.
(2) The reasons for hotel closures mainly included non-compliance with our brand standards, operating losses, and property-related issues. In Q1 2024, we temporarily closed 12 hotels for brand upgrade and business model change purposes.
*As of March 31, 2024*
*Number of hotels* *Unopened hotels in pipeline*
*Economy hotels* *5,102* *1,171*
Leased and owned hotels 321 1
Manachised and franchised hotels 4,781 1,170
*Midscale, upper-midscale hotels and others* *4,582* *1,967*
Leased and owned hotels 277 9
Manachised and franchised hotels 4,305 1,958
*Total* *9,684* *3,138*
*For the quarter ended*
*March 31,* *December 31,* *March 31,* *yoy*
*2023* *2023* *2024* *change*
Average daily room rate (in RMB)
Leased and owned hotels 337 356 346 2.5%
Manachised and franchised hotels 269 276 272 1.3%
Blended 277 284 280 1.0%
Occupancy rate (as a percentage)
Leased and owned hotels 76.3% 83.7% 81.0% +4.7 p.p.
Manachised and franchised hotels 75.5% 80.1% 76.8% +1.3 p.p.
Blended 75.6% 80.5% 77.2% +1.6 p.p.
RevPAR (in RMB)
Leased and owned hotels 257 298 280 8.8%
Manachised and franchised hotels 203 221 209 3.0%
Blended 210 229 216 3.1%
*Same-hotel operational data by class*
*Mature hotels in operation for more than 18 months* Number of hotels Same-hotel RevPAR Same-hotel ADR Same-hotel Occupancy *As of*
*March 31,*
*For the quarter * *yoy* *For the quarter * *yoy* *For the quarter * *yoy* *ended *
*March 31,* *change* *ended *
*March 31,* *change* *ended *
*March 31,* *change* *2023* *2024* *2023* *2024* *2023* *2024* *2023* *2024* *(p.p.)*
*Economy hotels* 3,732 3,732 166 167 0.7% 211 210 -0.6% 78.6% 79.6% +1.0
Leased and owned hotels 309 309 192 203 6.0% 242 245 1.0% 79.0% 82.9% +3.9
Manachised and franchised hotels 3,423 3,423 162 162 -0.2% 207 205 -0.9% 78.5% 79.1% +0.6
*Midscale, upper-midscale hotels and others* 3,067 3,067 261 264 1.0% 345 343 -0.7% 75.6% 76.9% +1.3
Leased and owned hotels 255 255 322 342 6.3% 427 428 0.2% 75.3% 79.8% +4.6
Manachised and franchised hotels 2,812 2,812 253 253 0.1% 334 331 -1.0% 75.7% 76.5% +0.9
*Total* 6,799 6,799 216 218 0.9% 280 279 -0.6% 77.0% 78.2% +1.1
*
Operating Results: Legacy-DH*^*(*^*3*^*)*
*Number of hotels* * * *Number of
rooms* *Unopened hotels
in pipeline* *Opened *
*in Q1 2024*
*Closed*
*in Q1 2024*
*Net added *
*in Q1 2024*
*As of *
*March 31,
2024* ^*(*^*4*^*)*
*As of *
*March 31,
2024*
*As of*
*March 31,
2024*
Leased hotels 2 (2 ) - 84 16,369 19
Manachised and franchised hotels 3 (1 ) 2 49 10,779 15
*Total* *5* *(3* *)* *2* *133* *27,148* *34*
(3) Legacy-DH refers to DH.
(4) As of March 31, 2024, a total of 3 hotels were temporarily closed due to repair work.
*For the quarter ended* *March 31,* *December 31,* *March 31,* *yoy*
*2023* *2023* *2024* *change*
Average daily room rate (in EUR)
Leased hotels 108 118 110 1.6%
Manachised and franchised hotels 97 111 95 -2.3%
Blended 104 115 104 0.2%
Occupancy rate (as a percentage)
Leased hotels 53.0% 64.7% 55.4% +2.4 p.p.
Manachised and franchised hotels 54.1% 62.6% 56.4% +2.3 p.p.
Blended 53.5% 63.8% 55.8% +2.3 p.p.
RevPAR (in EUR)
Leased hotels 57 76 61 6.1%
Manachised and franchised hotels 53 69 54 1.8%
Blended 55 73 58 4.5%
*
Hotel Portfolio by Brand*
*As of **March 31, 2024*
*Hotels* *Rooms* *Unopened hotels*
*in operation* *in pipeline*
*Economy hotels* *5,118* *420,702* *1,185*
HanTing Hotel 3,744 329,477 785
Hi Inn 482 25,014 198
Ni Hao Hotel 310 23,115 177
Elan Hotel 339 18,193 -
Ibis Hotel 227 22,992 11
Zleep Hotels 16 1,911 14
*Midscale hotels* *3,787* *404,544* *1,466*
Ibis Styles Hotel 106 10,611 23
Starway Hotel 686 56,525 200
JI Hotel 2,310 264,944 926
Orange Hotel 685 72,464 317
*Upper midscale hotels* *747* *103,786* *439*
Crystal Orange Hotel 191 24,478 137
CitiGO Hotel 35 5,308 5
Manxin Hotel 142 12,962 82
Madison Hotel 100 12,283 71
Mercure Hotel 175 28,032 55
Novotel Hotel 27 6,181 10
IntercityHotel^(^5^) 68 12,984 77
MAXX^(^6^) 9 1,558 2
*Upscale hotels* *139* *21,001* *75*
Jaz in the City 3 587 1
Joya Hotel 7 1,234 -
Blossom House 66 2,955 63
Grand Mercure Hotel 9 1,806 1
Steigenberger Hotels & Resorts^(^7^) 54 14,419 10
*Luxury hotels* *16* *2,360* *2*
Steigenberger Icon^(^8^) 9 1,847 2
Song Hotels 7 513 -
*Others* *10* *3,264* *5*
Other hotels^(^9^) 10 3,264 5
*Total* *9,817* *955,657* *3,172*
(5) As of March 31, 2024, 12 operational hotels and 69 pipeline hotels of IntercityHotel were in China.
(6) As of March 31, 2024, 4 operational hotels and 1 pipeline hotel of MAXX were in China.
(7) As of March 31, 2024, 11 operational hotels and 3 pipeline hotels of Steigenberger Hotels & Resorts were in China.
(8) As of March 31, 2024, 3 operational hotels and 1 pipeline hotel of Steigenberger Icon were in China.
(9) Other hotels include other partner hotels and other hotel brands in Yongle Huazhu Hotel & Resort Group (excluding Steigenberger Hotels & Resorts and Blossom House).Contact Information
Investor Relations
Tel: +86 (21) 6195 9561
Email: ir@hworld.com
https://ir.hworld.com
_______________________
^1 Hotel turnover refers to total transaction value of room and non-room revenue from H World hotels (i.e., leased and operated, manachised and franchised hotels).
^2 The conversion of Renminbi (“*RMB*”) into United States dollars (“*US$*”) is based on the exchange rate of US$1.00=RMB7.2203 on March 29, 2024, as set forth in H.10 statistical release of the U.S. Federal Reserve Board and available at http://www.federalreserve.gov/releases/h10/hist/dat00_ch.htm.
^3 The conversion of Renminbi (“*RMB*”) into United States dollars (“*US$*”) is based on the exchange rate of US$1.00=RMB7.2203 on March 29, 2024, as set forth in H.10 statistical release of the U.S. Federal Reserve Board and available at http://www.federalreserve.gov/releases/h10/hist/dat00_ch.htm.