H World Group - Q2 2023

Transcript

Operator (participant)

Good day, and thank you for standing by. Welcome to H World Quarter 2 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1, 1 on your telephone. You'll then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the call over to your host today, Mr. Jason Chen. Please go ahead.

Jason Chen (Head of Investor Relations)

Thank you. Good morning, and good evening, everyone. Thanks for joining us today. Welcome to H World Group 2023 second quarter earnings conference call. Joining us today is our chairman, Mr. Ji Qi, our CEO, Mr. Jin Hui, our CFO, Ms. He Jihong, and our president, Ms. Liu Xinxin. Following their prepared remarks, management will be available to answer your questions. Before we continue, please note that discussion today will include forward-looking statements made under the Safe Harbor provision 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 obligations to update any forward-looking statements except as required by applicable laws.

On the call today, we will also mention adjusted financial measures during the discussion of our performance. Reconciliations of those measures to comparable GAAP information can be found in our earnings release that was distributed yesterday. 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 CFO, Ms. He Jihong, for opening speech. Ms. He, please.

Jihong He (CFO)

Thank you, Jason. Good morning, and good evening, ladies and gentlemen. Welcome to H World Group's second quarter 2023 earnings call. We are very happy to report that with a strong recovery of domestic China travel activities and continuous global travel improvement, our overall financial performance in this quarter and the first half year 2023 exceeded the guidance we announced earlier this year. In today's presentation, Group CEO, Mr. Jin Hui, will first highlight our business performance and the key initiatives we undertook to further improve our operations. I will then discuss the financial performance in more detail. Now I will hand over to Mr. Jin Hui.

Jin Hui (CEO and Executive Director)

Thank you, Jihong. As usual, let's quickly review our RevPAR recovery in Q2 2023. Please turn to page 3. Let's look at the reasons. Thanks to robust travel demands in 2023 Q2, H World maintained sound business rebound since the economic reopening of last year, and the RevPAR for Q2 recorded 121% of that of Q2 2019. In April, May, and June, respectively, H World's blended RevPAR has reached to 127% of April, 115% of May, and 123% of June in 2019.

With the reopening of the Chinese economy, rebound of our economy, the coupled with the stimulus policies and travel activities resumption from everywhere, we have seen very strong rebound of the overall travel activities and willingness. We have also found that the consumers' travel willingness increased after the reopening. Therefore, in Q2, we have seen explosive and concentrated travels around major exhibitions and holidays. Entering the peak season in the beginning of this year, we have seen the RevPAR resumed to 132% of Q2 of 2019. It is a recovery much better than our forecast in the beginning of this year. Yet still, we have to be cautiously optimistic about the outlook. We must realize that it has been less than 1 year of opening. The macroeconomy is still in gradual recovery, during which period we will see turbulences and changes.

This means uncertainties for our hospitality industry. However, H World is still confident in the prospect of the Chinese economy in the longer term, and that's exactly why we are and will continue to enhance our core competitiveness and seek certainties out of the uncertainties in order to sustain our business development. Thank you.

Please turn to page 4. We would like to emphasize again that the driving force of Huazhu's long-term sustainable RevPAR growth comes from: one, obtaining higher customer yield through continuous product upgrades and service enhancements. Two, with the improvement of transportation infrastructure and the continuous increase in people's travel desire, China's lower-tier cities show strong resilience. Three, through organizational adjustment and optimization, the establishment of regional subsidiaries makes operations more precise and efficient, further enhancing regional penetration and speeding up market expansion in weak areas. Four, through the continuous development of mid-to-high-end brands, we have optimized and improved our hotel structure, enhancing our market share in the mid-to-high-end hotel market.

Page four, please. I must stress here the driving forces of our sustainable RevPAR. Firstly, higher premium through conscious product and services upgrade. Secondly, uncovering opportunities in lower-tier cities with high resilience as the travel infrastructure and travel willingness both improve. Thirdly, operate our business more intensively and effectively by setting up the regional offices and headquarters, increasing the regional penetration and organizational restructuring. Fourthly, improve our market share in the upper mid-scale market and further optimize our product mix.

The company is firmly committed to the implementation of the lean development strategy. Please turn to page 5. Huazhu continues to expand its hotel network based on a high-quality development strategy. In the second quarter of this year, we signed 1,054 new hotels, an 88% increase year-on-year, achieving a new quarterly high. This includes the low base effect of the second quarter last year due to the pandemic, as well as the backlog of signings from franchise agreements accumulated over the past three years because of the pandemic. However, it is undeniable that franchisor confidence has been further boosted by the strong recovery in hotel performance since the reopening. In terms of openings, the second quarter saw a gradual increase in the pace of new hotel openings, with a total of 374 hotels opened, an increase of 41% year-on-year.

In terms of store closure, there are 216 hotels closed, mostly the deferred and backlog COVID-related closure from last year. The closure aims to streamline the economic soft brands of lower quality and Hanting 1.0, and further optimize our network quality. There are a total of 130 Hanting 1.0 and economic soft branded hotels closure.

...第六页。随着我们持续推进对低质量门店的清理，提升集团整体酒店质量，汉庭1.0及经济型软品牌占比从2020年底的26%，逐步降低到了今年六月底的10%以下。与此同时，汉庭2.7以及以上版本的占比从2020年底的14%，稳步提升至今年六月底的26%。

Page 6, please. As we continue to streamline the lower quality hotels to enhance our overall performance and quality, the percentage of Hanting 1.0 and economic soft brands account now for less than 10% out of our overall hotels, down from the 26% at the end of 2020. Meanwhile, the percentage of the Hanting 2.7 and above accounts for 26% at the end of June this year, up from the 14% of the end of 2020.

So, the H World Group will continue to focus on the economy and the mid-scale hotels to serve the mass market. Page 7, please. At the end of June, we have a total of 8,622 hotels in operation, among which 56% economy hotels, 36% mid-scale hotels, and the percentage of mid-scale increased by 3% year-on-year. There are a total of 2,808 hotels in pipeline, among which 38% are economy, 48% are mid-scale, and the percentage of mid-scale up by 5% year-on-year. Of all the hotel openings in Q2 this year, among which 90% are economy and mid-scale hotels.

This is a proof that as we optimize our overall hotels quality, we continue to focus on economy and mid-scale segment to serve the mass market consumers.

H World continue to increase our penetration in the lower-tier cities and weaker regions. Page 8, please. Out of the hotels in operation, 39% is located in the lower-tier cities, up by 2% year-on-year. Out of the hotels in pipeline, 55% is located in lower-tier cities, and our city coverage now increase to 1,196.。

Page 9, please. We continue to grow our upper mid-scale hotels segment. By the end of June this year, we have a total of 562 upper mid-scale hotels in operation, up by 18% year-on-year. We have a total of 317 upper mid-scale hotels in the pipeline, up by 29% year-on-year. The faster growth of mid-scale hotels in our pipeline will support our future opening and market development in this segment.

Please turn to page 10. We value membership development. We have upgraded our H World brand image and market position. In terms of the H World members app, we have added more vacation-related element. We have increased our member offerings, such as vacation channel, content channel 2.0, and member exclusive services. We hope that the H World Group membership is more than just a hotel reservation platform, without transitioning it from a single business scenario-only reservation platform to a diverse business and travel activities scenario service platform.

That's all for Q2 earnings overview. Now I will hand over to our CFO, Madam He Jihong, to walk you through our operational and financial results. Thank you.

Jihong He (CFO)

Thank you, Jin Hui. I will now highlight the key financial metrics in this quarter. Please turn to page 12. Our hotel network continues to expand in this quarter. Our number of rooms in operations increased 9% to 844,417. According to the research published by HOTELS Magazine, we rank number 6 worldwide in terms of rooms in operation. Our hotel turnover increased 72% compared to the second quarter of 2022, totaling to more than CNY 20 billion. Please turn to page 13. Legacy Huazhu blended RevPAR in the second quarter stands at CNY 250, improved 21.4% compared to the same period in 2019, and 77% over 2022. This recovery is largely driven by ADR improvement.

The average ADR of RMB 305 is 28.9% over second quarter 2019, and a 39.8% over 2022. Occupancy of 82% in second quarter is slightly lower than second quarter 2019 of 87%, but it is a 17.2 percentage point improvement over 2022. Please turn to page 14. RevPAR of our international business, Deutsche Hospitality, also improved by 18.5% over the same period in 2022. Blended RevPAR stands at EUR 78 this quarter. This is driven both by ADR improvement, which is a 5.6% over 2022, as well as occupancy improvement, which is 7.3 percentage point over 2022. Please turn to page 15.

Our total group revenue in this quarter was CNY 5.53 billion, including CNY 4.35 billion from Legacy Huazhu and CNY 1.18 billion from DH. This is an improvement of 64% compared to 2022, higher than our guidance set up earlier this year. Our China business delivered a 76.6% revenue improvement. This strong performance is due to, first, strong recovery of travel demand, especially domestic Chinese market. Secondly, continued product upgrade and the product mix change. And thirdly, market penetration and synergies achieved through our regional offices. In first half year, 2023, we opened 368 hotels group wide. We expected the hotel opening to accelerate in the second half of this year due to a faster pickup of construction activities and supply chain recovery.

We stay with our guidance of 1,400 hotel opening this year. European market further recovered this year as well, and our DH business delivered 28.4% revenue improvement over 2022. Please turn to page 16. Hotel operating costs were 17.2% higher than the same quarter 2022, driven by business recovery. We continue to spend serious effort to improve operational efficiencies and the management and manage costs on the hotel level. SG&A cost was 45% higher than 2022 due to higher marketing and sales expense to drive the business... I would like to highlight that legacy Huazhu SG&A cost was 11.6% of revenue in this quarter. Operating income of legacy Huazhu in second quarter stands at RMB 1.35 billion, which represents a 31% operating profit margin.

This is a significant improvement over 2022, when China was under serious COVID control. Income from operations at DH also turned positive in this quarter compared to the loss situation both in second quarter last year and the previous quarter. Please turn to page 17. Adjusted EBITDA in second quarter stands at RMB 1.77 billion. Legacy Huazhu delivered RMB 1.66 billion adjusted EBITDA, which represents a 38% EBITDA margin. This quarter, we did not have special effect, like Accor shares divestment gains, as in the last quarter. Adjusted net income stands at RMB 1.07 billion. Legacy Huazhu delivered RMB 1.05 billion adjusted net income, which represents 24% net income profit margin. This improved EBITDA and net income margin is a result of business recovery as well as cost management.

As we continue to move towards asset-light business model and add hotels through our franchisees and partners, we expect our profit margin to continue to improve. The DH business turned positive in this quarter with CNY 112 million adjusted EBITDA and CNY 21 million adjusted net income. This is a result of conscious improvement of sales effort and continued cost management of our European team. Our operating cash flow at group level remains strong at CNY 2.2 billion in this quarter. Please turn to page 18. Our net cash at the second quarter, 2023, is CNY 2 billion. Our cash balance is CNY 7.8 billion, and we have CNY 2.8 billion unutilized bank facility. Please turn to page 19.

We expect our group revenue in the third quarter 2023 to grow 43%-47% over third quarter 2022. Excluding DH, legacy Huazhu is expected to grow 49%-53%. Based on a good recovery of travel demand and a better than expected performance compared to the estimation made at the beginning of this year, we raised our guidance for the full year 2023. We estimate the revenue in full year 2023 to grow 48%-52% over 2022. Excluding DH, we estimate legacy Huazhu revenue in 2023 to grow 54%-58% over 2022. This concludes our management presentation. We can now start with Q&A session.

Operator (participant)

Thank you. We will now begin the question and answer session. To ask a question, please press star 1, 1 on your telephone and wait for your name to be announced. To cancel your request, please press star 1, 1 again. Please stand by while we compile the Q&A roster. The first question comes from the line of Ronald Leung from Bank of America. Your line is open.

Ronald Leung (Vice President and Equity Research Analyst)

Hey,

I will ask my questions in English as well. My first question is about the RevPAR expectations. Management has raised the full year revenue guidance and also provided the third quarter revenue guidance. May I ask what is the implied RevPAR expectations in three Q and for full year? My second question is about the expectations for hotel signings. So we have seen very strong hotel signings in both first quarter and the second quarter. May I ask what are management expectations for the hotel signings for the rest of the year? Thank you very much.

Jin Hui (CEO and Executive Director)

Hi, there.

Thank you for your question. My name is Jin Hui. I will take over your question. Yes, as you said, given the overall economic development momentum, especially during the domestic circulation, consumption rebound and the recovery of the tourism and activities, we have seen very good growth, especially in Q3. We believe that the RevPAR will be growing 130%-128%. And all year round, the growth will reach 116%-121%.

第二个关于签约，确实我们很高兴看到二季度我们取得了非常好的这样的历史签约的进展。我想表达几个观点：第一，确实由于经济的复苏和整个特别是酒店业的，RevPAR的复苏啊，带来了整个加盟商的信心恢复。我们的二季度的签约确实达到了历史记录，当然其中一部分是因为我认为是过去三年的整个发展的积压的这样的因素。但是我更希望大家能理解，我们今天取得这样的发展，是来自于过去几年华住持续在两个领域的这样的一个坚守。第一个就是我们在整个下沉市场的整个组织能力部署和发展能力部署。第二个在于取决于过去几年，华住在中高端整个业务的持续的投入和发展。所以华住签约的未来，我们还是保持一个乐观的状态，啊，我们会继续在整个中国的有限服务市场和中高端经验服务市场，持续地保持稳健的长期的增长。

So, a little bit add on your first question. We're talking about the RevPAR recovery. So I gave you a number of 130% to 128% for Q3, and all year round, 160% to 121% recovery. Now, speaking of the new signings, yes, in Q2, we are very happy to see we have achieved such great accomplishment. I have a few points to make. Firstly, because of economic recovery and the overall hospitality recovery, we have seen strengthened confidence from the franchisees. Partly, of course, that achievement this quarter is because of the backlog delayed signings from the previous period. So I hope you to understand that, for H World Group, we have achieved such accomplishment because of several reasons.

Firstly, because in the last few years, we continue to develop the lower-tier cities. And, secondly, we continue to move towards the mid-scale and premium market.

Ronald Leung (Vice President and Equity Research Analyst)

好，谢谢管理层。Thank you management.

Operator (participant)

For the questions. One moment for the next question. Next question comes from the line of Simon Cheng from Goldman Sachs. Your line is now open.

Simon Cheung (Managing Director)

嘿，谢谢金总和何总的分享啊。我有两个问题，第一个就是你刚才说的全年那个RevPAR，大概回到CNY 120左右，然后，我没记错的话，第一季度CNY 118，第二季度CNY 125，然后现在，CNY 100 ...

121，然后现在第三季度125的话，那就基本上也推算出来是第四季度可能会有一点点慢下来。我想了解一下，你们是觉得第四季度有一个，什么高基数的原因，还是有什么其他的原 因，你觉得是可能会慢下来？这个是第一个问题。然后呢，第二个问题，就是你们，也看到刚才何总分享到现在已经是net cash了，CNY 200 million的net cash，那你们的想 法是，比如说有一个同行，有派息嘛，那我不知道你们有没有这个想法，以及，如果不是的话，那，可能，花钱就会花在哪里呢？ I would just, you know, ask the question again in English.

I've observed that, you know, the guidance haven't been revised up quite aggressively, with, I think first quarter 1.8%, second quarter 1%-1%, and third quarter 1%-5% 2019 level. But based on your full year guidance that would imply the deceleration into fourth quarter, are you seeing any sign of weaknesses or any reason why you are expecting there's gonna be a slowdown? And then the second one is in relation to potential use of the cash or cash flows, because, you know, your company already in a $2 billion net cash positions. How are you thinking about, you know, capital reallocation and whether you would consider paying dividends like one of your competitor does?

谢谢。

Jin Hui (CEO and Executive Director)

Thank you, Simon, for the question. I will answer your question. For your first question about RevPAR, yes, we're very happy and very grateful to see the very good recovery of Chinese domestic travel. The first quarter was really a revenge after COVID, and the second quarter, we observed very high leisure travel demand in the summer holiday. And in the third quarter, we believe because the October Golden Week.

will also have some good effect from that. And in the fourth quarter, because of the lack of the summer holidays and those prolonged Golden Week effect, we expect the demand to come back to normal. We are still optimistic about the full year results. That's why we still have 116%-121% RevPAR improvement over 2019 for the full year. The second question as to your capital allocation. Yes, we are also very happy to see that with the business recovery, our cash position improved significantly over 2022. So we will continue to monitor the business recovery speed, and also the cash accumulation. In appropriate time, we will also decide on the dividend policy, as you mentioned.

Simon Cheung (Managing Director)

谢谢，管理层，谢谢。

Operator (participant)

Thank you for the questions. One moment for the next question. Next question comes from the line of Dan Chi from Morgan Stanley. Your line is now open.

Dan Chi (Executive Director and Senior Equity Analyst)

各位管理层，大家早上好，我是大摩的分析师，Dan Chi。那个正如刚才，金总还有何总所说，这个暑假也看到非常，那个出行需求也非常旺盛啊。啊，想询问一下，就是，关于商旅类的出行的需求的这个恢复情况。记得上季度，啊，管理层有提到这个商旅需求啊，特别是OCC这边没有完全恢复到2019年的水平。就想请教一下公司能不能分享近期或者这个二到三季度的这个商旅需求这边，比如说可能是一些周中的一些需求，或者是说展会上面的情况，好吗？谢谢。Thank you, management, for the opportunity to ask my question.

This is Dan from Morgan Stanley. My question is related to business travel demand and the pace of its, its recovery. In the last earnings call, management mentioned about occupancy not yet fully recovered in terms of business travel demand. So I'm wondering if the management can share some recent colors on business travel demand recovery, such as weekday and exhibition demand in Q2 and possibly Q3, please. Thank you.

Jin Hui (CEO and Executive Director)

的确，正如我前面分享的，中国的这个疫情开放，实质上到现在还没有满一年。从全球的商务的恢复来讲，也需要一个较为长期的时间。所以我们看到在今年，华住的RevPAR很大程度上受益于本地休闲市场和传统的这样的一个度假的旺季带来的很好的业绩增长，我们的商务需求确实还在持续地恢复当中。

Yes, as I said in the previous statements, if you look at China's economic reopening since then to now, it is less than one year's time. And usually, if you talk about the recovery of the global business travels, it takes a longer term. So I can say that the recovery of our RevPAR this year is really mostly attributable to the leisure travel market and the traditional summer holidays demands. And the business and business-related travel activities are still in gradual recovery.

Dan Chi (Executive Director and Senior Equity Analyst)

好，谢谢管理层，谢谢金总。 Thank you, management, for your answers. Thank you.

Operator (participant)

Thank you for the questions. Next question comes from the line of Sijie Lin from CICC. Please go ahead.

Sijie Lin (Equity Research Analyst)

好，谢谢管理层。呃，我有两个问题，就第一个呢，就是我们...

其实，看到现在在很多的投资回报都下行的大环境下，其实酒店加盟的热情是比较高的嘛，那这个会不会导致品牌酒店的供给增长很快，从而竞争格局恶化，然后不同品牌之间的加盟热情有没有出现更大的分化？这是第一个。然后第二个呢，就是关于华南地区，想再问一下，我们今年的新签约里面，大概有多少是在华南地区？以及我们预计什么时候在华南地区的渗透率会有一个更明显的提升。So, I have two questions.

The first one is that we observed strong interest in becoming a hotel franchisee, and will the supply of branded hotels grow fast, which leads to intensifying competition? And do we see the interest differentiate from different brands? So my second question is about the South China part. Among our new signings this year, how many of them are in South China? And when we expect our penetration rate in South China to see a significant increase? Thank you.

Jin Hui (CEO and Executive Director)

好的，我来回答这两个问题。第一个关于酒店投资收益啊，确实酒店一定程度上受到整个周期性的影响，目前一个RevPAR的恢复好，第二个，呃，房，这个房地产的租金啊，处于一个低位，它确实是个非常好的投资的周期。但是我们更注意看到，由于这一轮的头部连锁化的这样的一个趋势，使得华住和华住旗下的品牌啊，带来了对加盟商更好的回报，也展现了更强的品牌溢价和市场的这个覆盖率。关于华南的...

对不起，第一个问题，先翻译一下。

I will take the two questions. Yes. First, on the ROI in the hospitality sector. Yes, because of the macroeconomic impacts, we can see that in the hospitality, the RevPAR recovery is now very good. Secondly, we can see that the real estate rental expenses are now in a very low position, so right now it makes it a very good window to invest in the hospitality sector. But, I must say that for us, to have such very good signing, it is because the franchisers have seen the value of the H World brand has bring to them, which also of course underscores the brand premium, as well as our very strong market coverage.

第二问题关于南方，大家都很关心，因为作为大湾区，是中国经济和未来这个人最多的大区之一，华住对南方非常的重视。应该讲，在通过两年的组织的优化和这个下层的这样的一个战略的部署下，我们很高兴看到了整个南方的渗透速度比2019年应该是翻倍还多。所以我们对南方和大湾区未来的整个发展，市场率的持续提升是充满了充足的信心。谢谢。

Second question, South China. I know that many of you are interested in our further penetration in South China region, because this part of the regions are place with, very large population base and strong economic power. So yes, H World Group attaches great importance to South China, and in the last two years, with our organizational optimization, with our lower-tier city strategy, I'm very happy to report that our penetration in South China is more than doubled than the level of 2019. So that means we are very, very confident in the development of South China market, and we will further to improve our penetration in this region. Thank you. Thank you, Jin Hui.

我想补充一点，不，我想补充一点，不仅是我们的发展不错，而且华住的旗下的品牌得到了本地消费者的认可，并且我们的经营业绩也保持了区域的领先。谢谢。

I also would love to add that not only do we see very good development for our own business, we also receive increasing recognition from the local consumers for our brand, and that has been shown by our operational results in this region. Our operational results in this region is leading. Thank you.

Operator (participant)

Thank you for the questions. One moment for the next question. Next from the line of Lydia Li from Citi. Please ask your question.

Lydia Ling (Director and Stock Analyst)

Hello, management. Mr. Jin, Ms. He, hello. This is Lydia from Wall Street. I have two questions to ask. My first question is, first of all, thank you very much for sharing the full-year RevPAR guidance with us. So we would like to understand how management currently views the RevPAR trend for next year, especially based on the relatively high base this year.

Then especially in the room rate aspect, we saw a very strong performance this year, so can the ADR part continue next year? That is the first question. Then the second question is to ask about the opening and closing stores aspect, because we saw that in Q2, closures were relatively many due to the previous epidemic relationship. So can you share, that is, the net opening situation in July and August now, roughly what kind of situation is it? Is that closure part basically already completed in the first half? I translate.

My second question is on expansion, so closure, store closure small in the second quarter, and, so, because of the COVID impact previously, so, could you share with the updates on your July and also August net opening trend? Yes, the like the closure almost done in the first half? Thank you.

Jin Hui (CEO and Executive Director)

好，我来先回答一下，然后，如果季洪需要补充呢，到时候再来补充一下。我觉得华住始终坚持的有一点就是在，华住在中始终要塑造自己的核心竞争力，并且在不确定的环境保持一个长期的、可持续的、具有竞争力的这样的一个市场的这样的一个地位。所以，面对未来的不确定，我认为整个对营销和无论是ADR和出租率的提升，都是华住管理层对长期最为重要的关注的内容。我们在，未来在本地化的营销，华住会面临多场景业务的覆盖，以及我们科技的持续使用，都是华住在整个的营销和提升我们业绩方面......

我认为 是长期的努力的方向，所以，这个大概是第一个问题的回复，关于是否可持续的这个问题。

Let me first respond to your question regarding whether we are going to sustain such good performance for ADR and RevPAR. And then I think CFO can make some additions if necessary. I believe that H World always stay true to one point. That is, we must always shape our own core competitive edge in the China market, and giving the uncertainties, we need to keep long-term, sustainable, competitive market position. So facing the future uncertainties as the backdrop, I think for the overall improvement and sustainable development of ADR and OCC, the management attach great importance to these issues. In the future, we are going to have more localized marketing covering multi scenarios. We will continue to leverage technologies to improve our overall conversion and our performance. This definitely is going to be something we stay true to in the long term.

That's for your first question regarding whether it is sustainable development in the future.

关于第二个问题，我手上没有七、八月精准的数字，但是我可以随着我们整个华住的管道数字，高质量的管道的这个签约量持续的提升，华住在今年的下半年和明年肯定会迎来相对的开业的一个周期。因为大家都知道，我们的筹开时间大概差不多有一个半年以上 的这个周期，所以随着管道数量的增加，必然会增加我们季度的开业的数量。同时，对于低质量门店的清理，华住在过去几年，哪怕在疫情下最艰难的时刻，我们都坚定不移，因为，提供高质量的这样的一个产品和服务，是华住战略转型非常重要的一个方面，所以我们，也一定程度上的会对于低质量和一点零的这个产品的转型升级，包括新的换新，都是华住未来的工作的重点。谢谢。

Now, on your second question, I don't have any specific net opening numbers for July and August, but I must say, if you pay attention to our hotels in the pipeline, you see that the improvement of the signings for the higher quality premium hotels in the pipeline, which definitely will take place of more openings in the second half this year and next year. Because usually, you know, it takes us about half a year's time to prepare the pipeline hotels into official opening. So as we have more hotels in our pipeline with the specific high quality segment, it will definitely increase our next quarter openings. Speaking of the closure of the lower quality hotels over the last few years, even if we were stricken the hardest during the pandemic, we stay true to this operation strategy.

That is to improve our quality and to improve our products and services. This is a very important part of H World's strategic transformation. So we will continue to either transform or upgrade or repackage the, lower quality 1.0 version and some other lower brands. This will continue to be our strategy. Thank you.

Sijie Lin (Equity Research Analyst)

Thank you. I just wanted to, to summarize here. We stay with our forecast this year or our guidance this year. We will open 1,400 hotels, and close, plan to close 650 hotels.

Operator (participant)

Thank you for the questions. Our next question comes from the line of Lina Yan from HSBC. Please go ahead.

Lina Yan (Senior Consumer Analyst)

管理层，谢谢接受我的问题。我有两个问题，第一个问题我还是想请教一下RevPAR的一个问题，这回在路演材料里面，非常感谢，分享了很多关于这个酒店portfolio升级的一些信息，那我们可不可以重新考虑一下我们的稳态的这个RevPAR？其实，即使我们对行业的RevPAR有一个就是会逐渐normalize的这个预期，但是因为我们的升级的动力，就比如说我们觉得行业它是会稳态的RevPAR，就是疫情后，大概对比疫情前是101，这华住的话，因为升级的动力应该是远远高于这个的，比如说102或者102以上。就不知道这个问题可不可以帮我们这个再理解一下。这个第一个问题。

So I will translate my first question. So first question is to ask, like, management to help us to reconsider the, steady state, RevPAR for Huazhu. We got a lot of new information on the upgrade of, Huazhu hotel portfolio, over the COVID period. So if, we think the overall hotel industry, the RevPAR probably will stabilize at 110% above 2019 level, does that mean Huazhu's hotel, RevPAR will, stabilize at a much higher level versus, 2019, say, 120 or even above? Yeah, 第 一 个 问 题 是 这 个 ， 谢 谢 。

Jin Hui (CEO and Executive Director)

Thank you for your question. I will take your question about RevPAR. Yes, we are very happy to see that Huazhu's RevPAR recovery was higher than the average industry, because really our continued product upgrade, product mix change, and our effective sales effort. For the full year, we gave our guidance of 116%-121%, and we remain confident that we can continue-- we can deliver this number. For the future, how RevPAR will develop in the near future beyond this year, RevPAR is always a result of the economic activity.

I can only give you the confidence that Huazhu's Hotel is really very well positioned, independent of economic cycle, in the short term, because our, a very large portfolio of our hotels are really affordable hotels. And we have observed that a lot of, a lot of guests coming from different segments, really enjoying our hotels as well.

Lina Yan (Senior Consumer Analyst)

谢谢，回答我的问题。我有第二个问题，其实还是行业的问题，我自己不太理解的。就是我们看到我们的竞对嘛，就是比较那个高端的这个有限服务酒店，它其实在RevPAR的这个恢复趋势，还有扩张趋势都比较强劲，当然基数也比较低一点。那同时我们也有，评论到，就是商务出行这块，其实是恢复是比较，缓慢的，但竞争对手其实是以商务出行，这个为主嘛。所以就是为什么我们会有这样的，不同的结果呀？这个可以帮助理解一下吗？ My second question is on the peer comparison.

So we see some like peers who focus on upper-end limited service hotel delivered a very strong RevPAR growth and expansion growth, likely from a low base. But meanwhile, we have commented the business-related travel has a more moderate and gradual recovery. So, can management help me reconcile the discrepancy, and the comments, and the results from the two perspectives? Xie xie.

Jin Hui (CEO and Executive Director)

我来试图回答，理解这个问题和回答这个问题。事实上，我们提的商务和整个商旅，它是一个定义的不一样。我认为从大的，你们可以看到携程和整个其他的同类行业的这个分享，我们都注意到了这样的一个趋势，因为今年的2季度和暑假都是传统的中国的旅游和休闲旺季，这个大势我想谁都不会免，对吧？所以我觉得在旅游和传统的旺季带来更好的业绩的展现，肯定是更大的原因是来自于我们整个旅游本地休闲市场的这样的一个激发。特别可以看到中国政府在持续刺激内需服务业，展开文旅，对吧？包括什么淄博的烧烤，这个村超的比赛等等一些中国政府在文旅产业的持续的投入，在大的环境上必然展现了我们行业在休闲旅游市场的这样，在传统旺季的增长。在商务，纯商务市场受到中国经济宏观的影响，且恢复周期尚晚，尚短。因为现在整个疫情开放至今，也就差不多8个月时间，整个经济的恢复的伤疤效应，它还需要一些时间去恢复，我认为也是客观的事实。所以我不认为我们的整个行业会有太大的差异。其实整个趋势里面，华住受益于整个头部和市场覆盖的这样的一个完整度，使得我们更得到国民市场的需要，或者喜爱。我们也看到一些局部区域确实展现了价格的过高，或者是这样的趋势，我们也注意到，如何提供更多产品去覆盖这样的市场。所以我不认为有太大的差异在恢复当中。谢谢。

Well, for your question, I think that, we have different definitions on business-related travels with our, some of our competitors. But if you look at the statistics issued by Ctrip and other industrial players, you notice such a common trend that is usually Q2 and summer holiday, vacation, are the peak seasons for China's travel and leisure market, and that's always true. And speaking of the good performance in this period, larger reason comes from the stimulus package the government has taken to, stimulate the overall leisure and tourism travel market, on the overall macro culture and tourism market, right? For example, the, barbecue festival in Zibo, in the Guizhou village, basketball, activities. The Chinese government has constantly been, investing on promoting the culture and tourism sector.

So overall, in the mega trend, you definitely sense that, on basis of such a peak season growth, we have seen very good performance with the demand. But in the pure commercial and travel-related trips and travels, I think, partially it is impacted by Chinese macroeconomic prospect, and partly it is because it usually delivers a longer-term recovery. Because if you look at the reopening since now, it is just eight months. Eight months' time is not long enough for the full recovery of this market. Yes, in the last several years, we have experienced some setbacks, and it takes time to cure these and heal these setbacks. I think it's very easy to understand. So I don't think there will be too much of a discrepancy for all the players in the industry.

If you look at H World Group, we are a top player in the hospitality market. We have very wide covering market coverage. We are much favored by the mass market. Yes, in some regional markets, there are some overpriced issues, and we will continue to provide more products and services to cover these markets. So all in all, I don't think there will be too much of a discrepancy among all players. Thank you.

Operator (participant)

Thank you for the questions. With that, I would like to hand the call back to management for closing remarks.

Jason Chen (Head of Investor Relations)

Thanks, everyone, for taking your time with us today, and we look forward to see you in upcoming quarter. Thank you. Bye-bye.

Operator (participant)

That concludes today's conference call. Thank you for your participation. You may now disconnect.