H World Group Limited ((HTHT)) has held its Q2 earnings call. Read on for the main highlights of the call.
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In the recent earnings call, H World Group Limited showcased a mixed sentiment, highlighting strong growth in its asset-light segment, network expansion, and membership growth. However, these positive developments were tempered by challenges related to increased supply and macroeconomic factors. The company’s robust performance in the asset-light business and brand recognition efforts were somewhat offset by pressures in the leased and owned segment and RevPAR challenges.
Strong Network Expansion and Membership Growth
H World achieved an impressive 18.3% year-over-year increase in the number of rooms in operation. The H Rewards membership program also saw significant growth, expanding by 17.5% year-over-year to nearly 290 million members. Notably, room nights booked by members increased by 28.8% year-over-year, underscoring the program’s success.
Robust Growth in Asset-Light Business
The company’s managed and franchised (M&F) revenue rose by 22.8% year-over-year to RMB 2.9 billion. This growth was accompanied by a 23.2% increase in gross operating profit, reaching RMB 1.9 billion. The asset-light segment contributed nearly two-thirds of the group’s total gross operating profit, highlighting its significance to H World’s overall financial health.
Launch of HanTing 4.0 and Brand Recognition
The HanTing brand achieved the top spot on the World’s Top 50 hotel brands list. The launch of the new HanTing 4.0 version promises lower costs, higher quality, and greater efficiency, reinforcing the brand’s market position and appeal.
Intercity Hotel and Orange Hotel Milestones
Intercity Hotel reported positive year-over-year growth in same hotel RevPAR, while Orange Hotel surpassed the milestone of 1,000 hotels. These developments mark Orange Hotel as a key growth engine in the middle-scale segment.
Strong Financial Performance
H World reported an 11.3% year-over-year increase in group adjusted EBITDA, reaching RMB 2.3 billion. Additionally, the adjusted net income rose by 7.6% year-over-year to RMB 1.3 billion, reflecting the company’s solid financial footing.
Challenges in the Hotel Industry
The hotel industry is facing challenges due to increased hotel supply and macroeconomic factors that are affecting business travel and consumer spending. These issues present ongoing hurdles for H World.
Decline in Leased and Owned Business
The leased and owned segment experienced a decline, with revenue and gross operating profit decreasing by 7.6% and 13.4% year-over-year, respectively. This decline is attributed to reduced exposure in this segment.
Impact of Old Products on RevPAR
Older versions of HanTing hotels (2.0 and 2.5) are facing competitive pressure, which is affecting their RevPAR performance. This highlights the need for continued innovation and upgrades.
Macro Uncertainties Affect Summer Performance
Extreme weather conditions and weakened consumer spending negatively impacted the summer holiday performance, affecting third-quarter RevPAR expectations. These macro uncertainties pose a challenge to achieving optimal performance.
Forward-Looking Guidance
Looking ahead, H World provided guidance for the future, expecting group revenue growth between 2% to 6% for the third quarter of 2025 compared to the previous year. The company anticipates 20% to 24% growth in manachised and franchised revenue. H World remains focused on expanding its hotel network, particularly in lower-tier cities, and enhancing its supply chain capabilities to support high-quality development.
In summary, H World Group Limited’s earnings call presented a balanced view of strong growth in certain segments alongside challenges in others. The company’s asset-light strategy and brand recognition efforts are driving positive outcomes, while macroeconomic factors and increased supply pose ongoing challenges. Looking forward, H World is committed to strategic expansion and operational enhancements to sustain its growth trajectory.