H World Group Limited (HTHT) 2025 Q4 法說會逐字稿

Good day, and thank you for standing by. Welcome to the H World Q4 and full year 2025 earnings conference call. (Operator Instructions) Please be advised today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Ivy. Please go ahead.

Thank you. Good morning, and good evening, everyone. Thanks for joining us today. Welcome to H World Group 2025 fourth quarter and full year earnings conference call. Joining us today is our Founder and Executive Chairman, Mr. Ji Qi; our CEO, Mr. Jin Hui; our CFO, Ms. Chen Hui; and our CSO, Ms. He Jihong. Following their prepared remarks, management will be available to answer your questions.

Before we continue, please note that the discussion today will include forward-looking statements made under the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the views expressed today. A number of potential risks and uncertainties are outlined in our public filings with the SEC.

H World Group does not undertake any obligation to update any forward-looking statements, except as required under applicable laws. On the call today, we will also mention adjusted financial measures during the discussion of our performance. Reconciliation of those measures to comparable GAAP information can be found in our earnings release that was distributed early today. As a reminder, this conference call is being recorded. The webcast of this conference call as well as supplementary slide presentation is available at ir.hworld.com.

With that, now I will hand over the call to our CEO, Mr. Jin Hui, to discuss our business performance in the fourth quarter and full year of 2025. Mr. Jin, please?

(spoken in foreign language)

Dear investors and analysts, good day. Thank you for joining H World's fourth quarter and full year 2025 Earnings Call. First, I'd like to share some observations on the overall travel market. Demand for travel is gradually shifting from discretionary demand to necessity for Chinese consumers. Data from railway, aviation and tourism all indicate a steadily growing travel demand in China.

The number of trips as well as consumer spending continues riding as people increasingly pursue a better life. As China's transportation network improved accommodation needs quickly expanded from major cities to country level markets, making the lower-tier city a new growth engine for tourism consumption.

Strong demand for cell pressure and experiential consumption together with booming tourism events, exhibitions and the sports competitions are driving the diversification and quality upgrades of accommodation needs.

However, China's hotel industry still faces oversupply of low-quality and homogeneous products. While high-quality value for money supply remains insufficient Therefore, supply side reform will remain the main theme of future industry development, and this will undoubtedly bring tremendous growth opportunities for the leading domestic branded hotel groups like H World.

(spoken in foreign language)

While focusing on our core business and driving high-quality growth, we also actively fulfill our social responsibilities to achieve a coordinated development of corporate value and social value. We focus on economy and mid-scale segments, which serve the mass market. We developed good value for money products to provide consumers with safe, cozy and affordable accommodation. Leveraging our brand value and supply chain capability, we revitalize idle assets, enhance urban supporting services and boost asset operation efficiency.

In addition, we keep expanding into the lower-tier cities and rural areas, fueling the gap in quality accommodation in those markets. We create stable employment opportunities, drive the development of the surrounding industries and boost local night economy.

Looking ahead, we will continue deepening our roots in the China market, pursuing high-quality growth and delivering service excellence with a brand-led approach to redo China's hotel industry.

(spoken in foreign language)

In 2025, H World remain committed to brand-led high-quality development, and we delivered solid business results across network expansion, profitability, brand building and membership ecosystem development. We are pleased to see that supported by refined revenue management enhanced sales and marketing capabilities and ongoing upgrades of our products and services, we kept occupancy rate stable, while driving ADR recovery quarter-by-quarter.

For the fourth quarter, we achieved positive year-over-year RevPAR growth for the first time since the second quarter 2024. Our full year 2025 ADR remained largely flat year-over-year.

(spoken in foreign language)

Diversing through in new cities and regions and further penetrating in the lower-tier cities, we achieved another year of high-quality net worth expansion driven by a 16.2% year-over-year increase in the number of rooms in operation, our group hotel GMV grew 16.4% year-over-year to RMB108.1 billion. Meanwhile, along with our network expansion and the continuous enhancement of H World Rewards membership program sold to members rose 21.5% year-over-year exceeding 245 million in 2025.

(spoken in foreign language)

More importantly, our asset-light manachised and franchise business delivered solid growth in hotel network revenue as well as profit. Our full year 2025 group M&S revenue rose 23.1% year-over-year to RMB11.7 billion, the group M&S gross operating profit increased by 20.8% year-over-year to RMB7.6 billion.

(spoken in foreign language)

In terms of hotel network expansion, we remain steadfast in focusing on economy and mid-scale hotel segment to serve the mass market and strengthening our core brand competitiveness by continuously upgrading our core products and enhancing our service excellence to a customer-centric.

We improved the operational quality of our hotel portfolio and strengthen our brand value, which helped the group to achieve long-term sustainable growth. By the end of 2025, the proportion of new versions of the three core limited service brands, namely HanTing, Ji, and Orange has raised further.

(spoken in foreign language)

To further expand our footprint in the lower-tier market, advantaging brand clarification and meet the diversified travel needs of consumers. We have launched the HanTing brand, HanTing in strikes a perfect balance between cost effectiveness and quality. We have rolled out innovative room types such as multi-bedrooms and family rooms, catering the growing scenarios such as family trips and group travel and filling in the missing piece in the economy hotel market.

In addition, we have integrated smart services such as self-checking and self-service laundry facility, balancing gas experience and operational efficiency. Also, HanTing plays a vital role in HanTing brand purification, helping accelerate brand and product upgrades to deliver better lodging experience for our guests, supported by our light, fast, economical, profitable renovation model, HanTing in offers franchisees who operate older HanTing hotels, another great option, which has live refurbishment, quick construction, low cost and certain profitability.

(spoken in foreign language)

Meanwhile, for our other midscale segment, we stick to our multi-brand approach backed by clear brand positioning and value propositions we are steadily pushing for the development of four key brands in this segment, which are Intercity, Brand Ji, Crystal and Makier. As of end 2025, the number of our upper mid scaled hotels in operation and in pipeline exceeded 1,639 up 17.6% year-over-year.

Among them, our core brand, Intercity hit a milestone of over 100 operating hotels with its clear brand positioning, exceptional product quality and strong operational performance, Intercity has become one of the core growth drivers for our upper midscale segment.

(spoken in foreign language)

We always focus on strengthening our direct sales capability through H Rewards membership program, which are vital to our sustainable long-term business growth. As we expand our hotel network to cover more cities, our membership base and the room line booked by members both achieved robust growth. Meanwhile, we are also proactively exploring cooperation with new sales and marketing channels such as self-media to boost our presence in the inbound travel market to further broaden customer acquisition scenarios and to enhance membership conversion efficiency.

(spoken in foreign language)

Lastly, looking ahead into 2026, H World will continue to pursue brand-led high-quality growth, keep strengthening our sales and marketing capabilities and embrace tech innovation with a more open and proactive mindset to leverage technology to power our underground hotel operations.

At the same time, we will continue to enhance customer experience and to improve operational efficiency and investment returns for franchisees steadily working our way to our strategic goal of 2,000 cities, 20,000 hotels.

(spoken in foreign language)

All of us concludes the 2025 operational updates for [Legacy Huazhu]. Now I will hand over the call to our CSO, Ms. He Jihong to give an update on [Legacy DH].

Thank you, Jin. We are very happy to report that in 2025, we've made a successful business turnaround for our Legacy-DH business. We achieved a record level of adjusted EBITDA of around RMB500 million. This is a significant improvement compared to the last situation last year. The strong performance confirms the successful execution of the business transformation plan. Hotel business cannot achieve profitability without revenue enhancement.

Our RevPAR continued to grow and achieved 8.2% increase year-on-year in 2025. Despite a challenging market environment, Legacy-DH succeeded in stabilizing like-for-like hotel revenues. We adjusted the revenue management strategy for different categories of a hotel and worked relentlessly on property level sales performance improvement.

Through disciplined efficiency programs, we significantly reduced the DH cost base and streamline the operations. Following a successful restructuring of headquarter and reduction of administrative costs at the end of 2024 and early 2025.

The management team continued to implement ongoing cost optimization measures across personnel, external services and supply chain throughout the organization. At the same time, with numerous restructuring efforts ongoing, we have been able to maintain the organizational and operational stability, ensuring a solid foundation for sustainable future performance. It is an important measure we successfully undertook in 2025 was the optimization of our hotel portfolio.

We renegotiated the lease terms of many hotels exited several loss-making properties and transformed a portfolio of leased hotels into asset-light structure. This portfolio restructuring significantly enhanced our profitability and improved resilience of our business.

As everyone remembers, H World acquired Deutsche Hospitality shortly before COVID breakout. Our business was strong into an unprecedented challenging environment. We did not give up instead, we started our transformation journey and brought our expertise globally. This shows the resilience of H World Group.

Going forward, in 2026, we will continue to build on the momentum and enhance our performance. Continuous improvement of commercial and operational effectiveness across brands is our first priority. We are undertaking concrete measures to improve our marketing and sales across different target markets and adjust our revenue management strategy for different segments.

At the same time, we will further leverage synergies from integration with H World Group. We're working on closer integration from different aspects such as supply chain, design and construction technology and loyalty program. In 2026, we're expected to see more benefit from these synergies and operational level.

Another strategic initiative will continue to undertake in 2026 is to sharpen our brand positioning. For example, we're developing Intracity next generation, make it more gas friendly and operational efficient. With the new brand proposition, we expect to roll out our business model to the market and accelerate growth of our network together with our partners across the region in the years to come.

With this, I conclude the discussion in Legacy-DH business, I will turn to our CFO, Ms. Chen Hui, for financial performance review.

Thank you, Jihong. Good evening, and good morning, everyone. Let me walk you through our full year 2025 financial overview. In 2025, our group revenue grew 5.9% year-over-year to RMB25.3 billion, at the high end of our guidance, of which Legacy-Huazhu revenue rose by 7.9% year-over-year to RMB20.5 billion. The top line growth was driven by our high-quality network expansion and stabilized RevPAR performance.

Group adjusted EBITDA increased 24.2% year-over-year to RMB8.5 billion with margin improved by 4.9 percentage points year-over-year to 33.5%.

The strong profit growth and profit margin expansion were mainly attributable to further enlarged profit contribution from our high-margin asset-light business as well as the operation improvement and the cost savings from Legacy-DH.

Adjusted net income increased by 32.9% year-over-year to RMB4.9 billion. Looking into our asset-light manachised and franchised business in 2025, powered by the network expansion of manachised hotels. Our manachised and franchised revenue increased by a robust 23.1% year-over-year to RMB11.7 billion. Manachised and franchised gross operating profit rose by 20.8% year-over-year to RMB7.6 billion.

Profit contribution from our manachised and franchised business rose steadily and reached 69% in 2025 representing a 5 percentage point year-over-year increase.

In the full year of 2025, we generated RMB8.4 billion operating cash flow. And the end of 2025, the group had RMB15.4 billion cash and cash equivalents and RMB9.6 billion net cash on the balance sheet with support of our strong cash flow and a healthy balance sheet.

We are glad to declare a USD400 million cash dividend for the second half of 2025. Together with USD250 million interim dividend and around USD110 million share repurchases. Our total shareholder return amounted to around USD760 million for the full year of 2025.

In 2024, we announced USD2 billion three-year total shareholder to Tampa. We have now completed over 75% of this three-year plan and we are committed to continuously returning to our shareholders.

Lastly, our guidance for the full year of 2026, we expect our group revenue to grow 2% to 6% year-over-year and 5% to 9% if excluding the edge. And we expect our manachised and franchised revenue to grow 12% to 16% year-over-year.

In terms of unit growth, we're expecting to open 2,200 to 2,300 hotels in 2026 and to close 600 to 700 hotels for the same year. This represents a 12% year-over-year hotel network growth.

With that, we conclude our financial review for the full year of 2025. Today, I will step down as CFO and Mr. Arthur Yu will take the CFO role of H World. I would like to take this opportunity to thank all the investors and the analysts for your continued support for H World. I will still be serving as the Chief Compliance Officer of the company and together with our team, we will ensure stable financial management and a smooth transition.

We are certain that Arthur with his expertise and efficient will help drive our financial strategy and support our growth trajectory. Together, the team we are -- it actually works to its next success. I will now turn the call to Mr. Arthur Yu. Arthur, please.

Thank you, Hui for the kind introduction. Hello, everyone, and thank you for joining the call today. It is a privilege to step into the role of CFO at such a pivotal moment for H World. I have long admired the company's resilience and its strong market position.

As we look ahead, my priorities will be to build a world-class finance function maintaining rigorous control and investment oversight and ensure a transparent and consistent communication with the capital markets. I look forward to getting to know many of you individually in the days ahead, and we are now ready to open the floor for questions.

(Operator Instructions)

Dan Chee, Morgan Stanley.

(spoken in foreign language)

Thank you management for the opportunity to ask the first question. I would like to congratulations to Arthur's on the new role and we have seen the list of credentials of Arthur's expertise. So for starters, can management share very briefly the direction of Arthur's new role and what kind of changes should we expect on our financial and growth strategy?

Thank you.

(spoken in foreign language)

Thank you, Dan, for your question. Firstly, I would like to take this opportunity to thank Mr. Hui for her dedication to the company in the past 20 years. We just had our 20-year anniversary Investor Day last year. We can see that over the 20 years with our founding team, we have built into a very successful company.

At the conference last year, while we concluded and summarize the achievements that we've made in the past 20 years, we also take the opportunity to look ahead we had a vision that we want to create H World into a global company into a world-class company and to work into the world and to become a leading company in China and globally.

So with this vision and as part were growing really into a hyperscale company, we really need world-class management, professional talent to bring those really diversified and international talent and skills to our management team.

So I welcome Arthur to joining H World and we are certain that Mr. Arthur Yu with his deep financial management expertise and together with the team, we will lead H World at the next stage and to achieve the next success.

Appreciate that.

Thank you Dan.

Ronald Leung, Bank of America.

(spoken in foreign language)

Let me ask my question in English. So regarding the 2026 revenue guidance, so what is the implied RevPAR expectations? And also, could management comment on the overall demand-supply outlook for 2026. How is the supply growth trend? And also how is the overall demand for the business and leisure travel.

Thank you very much.

(spoken in foreign language)

Thank you, Ronald. So in the past three months, we have observed that on the China's hotel industry trend is actually recovering. On the demand side, we have been observing that actually in the past one to two years, the leisure travel has been growing really steadily. And also, the inbound travel is recovering and coming back. So overall, demand is growing for leisure especially.

And for business travel demand, we have also seen that business activity as business travel has bottomed and also going on to upward trend, especially in the Tier 1 and Tier 2 cities. So for 2026, we are cautiously optimistic on the overall RevPAR performance. And for the management and for the company, we do have a target to deliver a flat to slightly year-over-year increase for the full year 2026 RevPAR. Thank you.

Simon Cheung, Goldman Sachs.

(spoken in foreign language)

The question is in relation to the hotel opening, the pace of hotel opening last year, the company has achieved a whole lot in terms of the growth exceeded the 2,400 store opening last year. Wondering whether they would have any change in the pace or our expectation for this year. In particular, we noticed that they have some new hotel brands, for example, the hunting in brand. I'm wondering whether they would have any target for these brands as well.

Thank you.

(spoken in foreign language)

Thank you, Simon, and I will answer your question on the development. So as you can see, in 2025, we achieved a record high in the hotel growth openings exceeding 2,400 hotels. Actually, in 2023, we already adjusted our overall growth and development strategies of high-quality, sustainable growth.

So what we are pursuing is not just the simple quantity, but also high quality of standard of the hotel network. So in 2026, well under this high-quality standard we still expect to expand our hotel network and maintain the overall openings at a high level and we guided to open 2,200 to 2,300 new hotels in 2026.

This actually reflects our strategy of high-quality sustainable growth. And we are still very confident that to achieve our 2,000 hotel target this strategic goal by 2023 -- 2030.

(spoken in foreign language)

So, and, on your question on HanTing, I would like to share some thoughts on the HanTing brand HanTing product. So we always think that the economic factor is the core China's consumer and this is also the core market for H World. What we want to achieve is that we want to achieve full coverage of high market share in this economy sector.

(spoken in foreign language)

We are seeing more and more high-quality properties that can be built in to our HanTing brand. So now you can see that for our HanTing branded hotels, the quality of it is much higher and the standard is also much higher compared to a couple of years ago.

So with this, we introduced HanTing, which can help us to cover and serve the overall mass market. We want to stress that Fantini and HanTing together they are one brand and HanTing will help us to cover on the smart market in China. And HanTing actually takes a very important role in upgrade and replace the older hunting product and to further clarify our HanTing brand.

Thank you.

Xin Chen, UBS.

(spoken in foreign language) Let me translate it to English. My question is regarding Deutsche. Could management share further details on the asset-light transformation strategy and the roadmap for it as well as the targets for future hotel network expansion and financial performance. Thanks.

Xin Chen, I will take your questions. Yes, we achieved a turnaround of the H World business in 2025. However, our efforts to improve business does not stop here, right? The reorganization, efficiency improvement, cost control will still remain as part of the ongoing management. And we are also looking to our portfolio restructuring as well.

We continue our effort in rental reductions, lease renegotiations, look into possibilities exit loss-making properties and also possibility to negotiate a much, much better portfolio the asset portfolio, right?

So now that our business is stabilized, we are also indeed starting to look at development to expand our hotel network. We have much more confidence now in managing international hotels. And we believe limited service and the select service hotels have really a lot of potential in overseas markets.

So now that we are developing different business models, so we will have efficient, for example, next-generation intercity and sleep for the basis of our growth. Of course, we also look into possibilities to expand shaping back our tariff as well.

Europe will remain our core international markets. But at the same time, we'll also explore, for example, Middle East, North Africa, where we already have a good basis. So the Legacy-DH business in nutshell is expected to remain profitable in the years to come.

Sijie Lin, CICC.

(spoken in foreign language) Our shareholder return in 2025 achieved USD760 million, exceeding 100% of adjusted net profit and has completed over 75% of USD2 billion three-year shareholder return plan. So what's our plan for the shareholder return in the upcoming years?

Thank you.

(spoken in foreign language)

Thank you. Yeah. This is Jihong He. I'll answer your question on the shareholder return. So benefiting from our asset-light strategy and our high-quality growth. H World, we have generated very strong and stable cash flow as well as we have a high quality and very healthy balance sheet. So going forward, we are committed to continue to return to shareholders through either dividend or share repurchase. Thank you.

Lydia Ling, Citi.

(spoken in foreign language) And thanks management and thanks for, taking my questions and I have questions on the upper midscale hotel segment in which we saw like a further step of the development in 2025. So what's your plan for this year or the longer term? And do you plan to have more aggressive or accelerated expansion in this segment?

Thank you.

(spoken in foreign language)

Thank you, Lydia. I will take your question on the upper midscale segment. So the upper midscale sector is one of H World's strategic focus. So we have been focusing on this upper mid-scale market in the past two years, and we will continue to do so going into the future. So our strategy in the upper midscale segment is to focus on the Tier 1 And tier 2 cities, and we were developing this segment using a multi-brand strategy, which I think is different from the other companies.

So we have four key brands in this segment, which are [Grand G], Intercity, Crystal and Macure -- as you can see that these 4 brands, they actually -- they all have a different target market, and they have different specialties so which covers the Grandee which really presents the oriental asthenic and we also have the more western design like the Intercity and the French style Macure.

So for the -- using this multi-brand strategy, we really want to chasing a hat into -- in this segment. We will continue to upgrade and enhance our product and services. Our goal and our target is to in the optimal sector, we also want to become a leading brand by 2030. So upper midscale sector will be one of our core strategic focus going to the future.

(spoken in foreign language)

And also to add on, as you can already see that for the Intercity over the past two years, it is becoming a very attractive and compounding brand in the upper midscale sector whether it's in terms of its brand value, its product, its service excellence or it's RevPAR.

And we have also introduced the Grand G Hotel and we really welcome you to looking to Grand G, which is going to have its grand opening in April 1. It has a piloting phase already, but it hasn't really officially launched, and we officially opened Grand G in April 1.

We are confident that with our four core brands in the upper midscale sector, which all have is differentiate and target market we can become a leading company in the upper midscale sector. And we are also confident that each of our four key brands, they will become the leader in their own niche market. Thank you.

Thank you. I will now hand the conference back to the speakers for any closing remarks. Thank you.

Thank you everyone for taking your time with us today. And this will conclude today's call, and we look forward to seeing you in the upcoming quarters. Bye.

Thank you. This concludes today's conference call. Thank you for participating and you may now disconnect.