H World Group - Q2 2024
August 20, 2024
Transcript
Operator (participant)
Good day and thank you for standing by. Welcome to H World second quarter 2024 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 will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. It is now my pleasure to hand you over to the Senior IR Director of the company, Mr. Jason Chen. Please go ahead.
Jason Chen (Senior Director of Investor Relations)
Thank you, Amber. Good morning, and good evening everyone. Thanks for joining us today. Welcome to H World Group 2024 second quarter earnings conference call. Joining us today is our founder and chairman, Mr. Ji Qi, our CEO, Mr. Jin Hui, and our CFO, Mr. Zou Jun. 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 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 under applicable laws.
Dan Qi (Research Analyst)
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 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 CEO, Mr. Jin Hui, to discuss our business performance in the second quarter of 2024. Mr. Jin, please.
Jin Hui (CEO)
谢谢，各位投资者、分析师大家好，在向大家汇报第二季度经营表现之前，请允许我向大家宣布一个好消息。今年五月，华住集团在中国迎来了第一万家中国门店的开业。正如大家看到的那，这家汉庭位于西藏林芝墨脱县，是中国最后一个通公路的县城，这意味着华住集团自二零一九年底提出千城万店的目标，经历四年的努力，终于实现了千城万店一点零的阶段性里程碑。更重要的是，随着我们下沉战略的持续推进，我们看到中国市场依然存在巨大的机会和增长空间，同时也沉淀了大量的实践经验和组织能力。因此，我们将重新出发，继续坚持以客户为中心，围绕卓越服务的优质增长战略，朝千城万店二点零的目标攀登下一座新高峰。
Jason Chen (Senior Director of Investor Relations)
Hello, everyone.Before presenting our second quarter operating performance, please allow me to share a good news with you all. In May, we opened our 10,000 hotels in China. As you can see, this Hanting Hotel is located in Motuo County, Linzhi, Tibet, which is the last county in China to have access to highways. After more than four years of hard work since we proposed the goal of 10,000 hotels in 1,000 cities in the end of 2019, we have finally achieved this milestone. More importantly, as our lower tier cities penetration strategy continuously progresses, we not only recognize that there are still huge opportunities and growth potentials in the Chinese market, but also accumulated a large amount of practical expertise and organizational capabilities.
Dan Qi (Research Analyst)
Therefore, we will continue to focus on our service excellence-centric, sustainable quality growth strategy and move towards the next goal of 20,000 hotels in 2,000 cities.
Jin Hui (CEO)
Next, returning to our second quarter operating performance, please turn to page four. Huazhu China second quarter RevPAR CNY 244, down 2% year-over-year, of which ADR was CNY 296, down 2.9% year-over-year, OCC was 82.6%, up 0.7 percentage points year-over-year. Although the overall macro and consumption appear slightly weak, we see that China overall travel demand in the first half of the year still remained stable, whether from aviation, high-speed rail or the Ministry of Culture and Tourism data, all confirm this trend. For example, civil aviation passenger transport first half domestic routes completed passenger volume of 320 million person-times, up 16.4% year-over-year, 12.4% higher than the same period in 2019. At the same time, first half high-speed rail sent passengers reaching 2.096 billion person-times, up 18.4% year-over-year, a historical new high. Ministry of Culture and Tourism data shows, first half domestic travel person-times 2.725 billion, up 14.3% year-over-year, overall travel demand still relatively robust. From our own operating results, second quarter China business sold revenue up about 21% year-over-year. While stores rapidly expanding, occupancy rate year-over-year still had 0.7% increase, this aspect meets the company year-initial set occupancy rate increase target, at the same time more reflects the overall travel demand stability. Looking again at the ADR aspect, very obviously, last year after the epidemic opened, especially second quarter and third quarter, travel concentrated outbreak as well as short-term supply ......
Dan Qi (Research Analyst)
供应不足，导致去年ADR的基数非常高。从今年整体的行业发展情况来看，我们认为今年无论是出租率还是ADR，都应该逐步回归到一个相对健康和可持续发展的趋势。
Jason Chen (Senior Director of Investor Relations)
Next, let's go through our second quarter operating performance. Please turn to page four.
Dan Qi (Research Analyst)
Legacy Huazhu's RevPAR in the second quarter was CNY 244, down 2% year-over-year. ADR was CNY 296, down 2.9% year-over-year, while occupancy rate was 82.6%, up 0.7 percentage year-over-year. despite the relatively weak macro and consumption, the overall travel demand in China remained resilient in the first half of 2024. Data released from airlines, high speed railways and the Ministry of Culture and Tourism all confirmed this trend. For example, the domestic airlines transported 320 million passengers in the first half of this year, up 16.4% year-over-year, and 12.4% compared to the same period in 2019. The high speed railways transported 2.1 billion passengers in the first half, which was a record high and represented 18.4% year-over-year increase. In addition, based on the data from the Ministry of Culture and Tourism, the number of domestic tourists was 2.7 billion in the first half, up 14.3% year-over-year, showing a relatively strong leisure traveling demand. As for our own operating results in the quarter, the total number of room nights sold in China increased by approximately 21% year-over-year during the quarter. While our hotel network expanded rapidly, our occupancy rate still increased by 0.7% year-over-year. this was in line with the occupancy rate improvement target set by the company at the beginning of the year, and it also reflected the stability of the overall traveling demand. In terms of the ADR, the pent-up demand and the temporary supply shortage right after the reopening last year definitely led to a very high base of ADR, especially in the second and third quarter. We believe that both occupancy rates and ADR should gradually return to a relatively healthy and sustainable growth trend this year and onwards.
Jin Hui (CEO)
当然，公司也在积极主动采取不同措施，提升RevPAR的水平，以保证华住能够实现持续领先行业的RevPAR的表现，以及带来长期增长的潜力。请大家翻到第五页。华住主要通过三个方面来主动提升RevPAR，首先是产品升级，华住持续有节奏地针对旗下主要品牌进行产品升级，满足不断变化的消费者需求，同时对老店、老产品也持续进行升级改造。其次是卓越服务，以客户为中心，为住客提供更好的住宿体验，为加盟商创造更高的价值，实现共赢的生态。最后是会员体系的建设。我们通过华住汇增加会员粘性和复购，并通过华住商旅补充商务客源，增强自有流量的来源。三管齐下，不断加强公司的核心竞争优势，从而推动公司长期可持续的发展。
Jason Chen (Senior Director of Investor Relations)
Of course, we also proactively taking various measures to improve our ADR and to ensure that we can continuously outperform the industry, as well as bringing long term RevPAR growth potential. Please turn to page five. We focus on three key areas to achieve RevPAR improvement. Firstly, product upgrade. We continuously upgrade our main brand with introduction of new versions to meet customers changing demands, at the same time upgrading and renovating old hotels and old products to improve hotel quality. Secondly, the service excellence with the principle of customer centric, we intend to provide best accommodation experiences for our guests and create best value and return for our franchisees, which could lead to a win-win ecosystem, and lastly, our membership program, we continuously focus on improvements of our member stickiness and repurchase through constant updating of our H Rewards app. At the same time, we further strengthen our capabilities on direct B2B booking and corporate client customers to capture more business traveling demand. We believe that these three aspects could continuously strengthen our core competitive advantages and drive our long term sustainable growth.
Jin Hui (CEO)
请大家翻到第六页。二季度公司网络持续扩张。二季度华住中国新开店五百六十七家，延续了一季度的强劲势头，而二季度关店数量为一百零一家。如果剔除低质量的软品牌和汉庭一点零影响，关店数量为五十八家，比去年同期减少二十八家。未来，我们仍将秉持高质量增长的理念，持续对存量门店进行梳理，淘汰低质量门店，确保整体在营酒店产品和服务质量的进一步提升。与此同时，在开店数量保持高增长的情况下，我们期末管道酒店数量再次突破新高，达三千两百六十六家。...
Dan Qi (Research Analyst)
持续彰显华住强大的品牌力和对加盟商的吸引力。请
Jason Chen (Senior Director of Investor Relations)
Turn to page 6. In the second quarter, we continued to expand our network. During the quarter, we maintained the strong hotel opening momentum since last quarter and opened 567 new hotels. The number of hotel closures in the second quarter was 101. If excluding low quality economic soft brands and Hanting 1.0 version, we closed only 58 hotels, 28 fewer than the same period last year. Going forward, we would stick to our high quality growth strategy and continuously remove low quality hotels from our network to ensure a better quality of our entire hotel portfolio. While we maintain a high speed of new hotel openings, the number of hotels in the pipeline at the end of second quarter reached a record high of 3,266 continuously demonstrating our strong brand power and attractiveness to our franchisees.
Jin Hui (CEO)
公司酒店网络的扩张，离不开我们以经济型和中档酒店为核心，深耕大众市场的战略布局。请大家翻到第七页。截止2024年二季度，华住中国经济型和中档品牌，在营酒店、管道酒店和新开酒店中占比分别为92%、82%和89%。
Jason Chen (Senior Director of Investor Relations)
Our strategic focus on economy and midscale hotels for serving the mass market continues to be the key driver of our hotel network expansion. Please turn to page seven. As of the second quarter, 2024, economy and mid-scale hotels accounted for 92%, 82%, and 89% of our hotels in operation, hotels in pipeline, and hotel openings, respectively.
Jin Hui (CEO)
正如我们前面提到的，持续的产品升级是公司未来保障RevPAR表现持续优于行业的重要驱动因素之一，也是公司引领行业实现高质量增长的重点。以公司有限服务的核心品牌为例，请大家翻到第八页。我们看到汉庭品牌在营门店中，汉庭3.5级以上产品的占比在持续提升，2024年二季度占比达到了36.3%，相较去年年底提升了6.5个百分点。
Jason Chen (Senior Director of Investor Relations)
As we mentioned earlier, consistent product upgrades is one of the important drivers of our continued outperformance compared to the industry.
Dan Qi (Research Analyst)
And it is also the key factors for us to achieve industry-leading high-quality growth. Taking our core brands in limited-service segments as an example, please turn to page eight. The proportion of Hanting 3.5 and above version in operation continued increasing, reached 36.3% in the second quarter of 2024, representing an increase of 6.5 percentage points compared to the end of last year.
Jin Hui (CEO)
请大家翻到第九页。在全季品牌的在营门店中，全季4.0及以上产品占比从2020年的百分之三十，提升到2023年底的百分之六十五点七，并在2024年二季度进一步提升到百分之七十一点二。请
Jason Chen (Senior Director of Investor Relations)
Turn to page nine. For our Ji Hotels in operation, the proportion of Ji Hotel 4.0 and above increased from 30% in 2020 to 65.7% in the end of 2023, and further increased to 71.2% in the second quarter of this year。
Jin Hui (CEO)
请大家翻到第十页。桔子最新乐活产品，在桔子管道酒店中占比从2023年底的百分之五十八点四，迅速提升至2024年二季度的超过百分之九十。总而言之，公司旗下各个品牌通过不断的升级迭代，产品力、品牌力在持续加强。请
Jason Chen (Senior Director of Investor Relations)
turn to page 10.The proportion of our latest Lohas version rapidly increased from 58.4% of the Orange Hotel pipeline in 2023 to more than 90% in the second quarter of this year. In conclusion, the products and brand power of each of our key brands have been further strengthening through the continuous product upgrade.
Jin Hui (CEO)
区域扩展方面，我们低线城市的渗透在持续进行。请大家翻到第十一页。截止2024年的二季度，公司在营酒店在三线及以下城市占比为百分之四十一，同比提升两个百分点，管道酒店在三线及以下城市占比达百分之五十四，虽然占比较2023年同期略有下降，但是绝对数量同比仍有两位数的增长。在管道酒店中，一线城市占比的提升主要源于公司中高档酒店，以及我们南方战略推进的签约的加速，城市覆盖数量达1328个，比去年同期增加了132个城市。
Jason Chen (Senior Director of Investor Relations)
In terms of our regional expansion, we keep penetrating into lower tier cities. Please turn to page 11. At the end of second quarter, 2024, 41% of the hotel in operation were located in tier three and below cities, up two percentage points year-over-year.
Dan Qi (Research Analyst)
The proportion of pipeline hotels in third tier and below cities reached 54%. Although the proportion was slightly lower than the same period in 2023, the absolute number still recorded double digit growth year-over-year. The increase in the proportion of pipeline in first tier cities is mainly due to acceleration of new signings of our upper middle segment, as well as faster penetration in southern China. The number of cities coverage reached to 1,328 cities at the end of this quarter. About 132 cities added compared to the same period last year.
Jin Hui (CEO)
随着公司在下沉市场的不断渗透，以及在消费者追求性价比的消费趋势下，我们进一步深耕国民酒店市场。请大家翻到第十二页。二季度，我们对海友酒店进行品牌重新定位和产品的重新设计。新的海友6.0定位极致性价比，以睡得好，花得少为品牌宗旨，聚焦客户睡好觉、洗好澡的核心住宿需求，通过打造普适的酒店客房和高效便捷的自助服务，以极致性价比的价格，为大众出行者提供国际标准的住宿体验。为了实现酒店的高效运营，海友创新地打造了宾客自助、数字前台、员工移动三位一体的数字化运营体系，以实现极致性价比的品牌定位。总而言之，海友将作为汉庭和呢好的重要补充，进一步助力下沉战略的推进，夯实华住在国民市场的领导地位。
Jason Chen (Senior Director of Investor Relations)
With the company's continuous penetration into the lower tier cities and the consumption trends of the customers continuously seeking for more value for many products, we further explore and develop the economy and budget hotel market. Please turn to page 12. In the second quarter, we repositioned our Haiyin brand and redesigned its products. The new Haiyin 6.0 version is positioned as ultimate value for money, with brand core value of sleep well and spend less. It focus on customers' core accommodation needs of good sleeping and showering. It offers customers a global standard of accommodation experiences by providing standardized hotel rooms and convenient and high efficient self-service, with automatically good value for money pricing.
Dan Qi (Research Analyst)
In order to achieve high operational efficiency in the hotel, and achieve its brand positioning of ultimate value for money, Haiyou innovatively created a three-in-one digital operational system, which combines guest service, guest self-service, digital front desk, and mobile staff. All in all, Haiyou will become a strong supplement to our Hanting and Ni Hao brand, to further help our lower tier cities penetration strategy and strengthen and solidify our leading position in the economy and budget hotel market.
Jin Hui (CEO)
除此之外，第二季度我们的中高端品牌持续发力。请大家翻到第十三页。截至二零二四年第二季度，中高端在营酒店数量达七百三十。
Dan Qi (Research Analyst)
738家，同比增长31%，环比增长8%，而管线酒店数量则为509家，同比增长61%，环比增长18%。二季度无论是在营酒店数量还是管线酒店数量，其环比增速均较今年一季度有进一步的加速，体现出华住的中高端品牌正越来越受到消费者的认可和加盟商的青睐。
Jason Chen (Senior Director of Investor Relations)
Additionally, our upper midscale segment development continued progressing in the second quarter. Please turn to page 13. At the end of second quarter 2024, the number of upper midscale hotels in operation reached 738 hotels, up 31% year-over-year and 8% quarter-over-quarter, and the number of hotels in pipeline reached 509 hotels, up 61% year-over-year and 18% quarter-over-quarter. In the second quarter, the sequential growth rate of both the number of hotels in operation and hotels in pipeline accelerated compared to the previous quarter, demonstrating that our upper midscale brands are increasingly gaining recognition among customers and franchisees.
Jin Hui (CEO)
受到宏观经济的影响，整体商务市场仍处于相对缓慢恢复的过程中，但我们通过华住商旅的快速增长，很好地补足了一部分商务旅客的缺失，这也是华住能够实现出租率稳步提升的关键。请大家翻到第十四页。2024年第二季度，通过企业直连预订的营业数量超过600万间夜，同比增长31%，环比增长26%。活跃企业数量超过3600，同比增长47%，环比增长36%。
Jason Chen (Senior Director of Investor Relations)
Affected by the macroeconomy, the overall business travel market is still recovering relatively slowly. Nevertheless, we managed to offset some shortages from the individual business traveling demand by rapidly growing our direct B2B business. It is also the key factors for us to achieve resilient occupancy rate. Please turn to page fourteen. In the second quarter of 2024, the number of room nights booked directly via our B2B platform exceeded six million.
Dan Qi (Research Analyst)
up 31% year-over-year, and 26% quarter-over-quarter. The number of active corporate clients exceeded 3,600, up 47% year-over-year, and 36% quarter-over-quarter.
Jin Hui (CEO)
接下来是海外业务的部分，请大家翻到第十五页。DH 二季度 RevPAR 为 EUR 82，同比增长 4.5%，其中 ADR 为 EUR 120，同比增长 2.7%，OCC 为 68.3%，同比增长 1.2 个百分点。六月份受益于欧洲杯的举办，DH 在德国地区的酒店表现良好。
Jason Chen (Senior Director of Investor Relations)
Now, we are moving to our overseas business. Please turn to page 15.
Dan Qi (Research Analyst)
DH's RevPAR in the second quarter was EUR 82, up 4.5% year-over-year, driven by 2.7% increase in ADR to EUR 120, and 1.2 percentage points increase in occupancy rate to 68.3%. In June, our DH's hotel in Germany performed well, benefited from the Euro Cup.
Jin Hui (CEO)
请大家翻到第十六页。在国际化战略方面，截至2024年第二季度，DH在营门店中有53%的门店位于德国。在管道酒店中，仅39%的门店位于德国，其余门店分布于欧洲其他国家、亚洲和非洲三个区域，分别占比36%、18%和7%，其中在亚洲地区的管道酒店占比相较在营门店占比提升显著，取得了一些阶段性的成果，也符合公司年初制定的战略方向。请
Jason Chen (Senior Director of Investor Relations)
turn to page 16 for our globalization strategy.
Dan Qi (Research Analyst)
As of the second quarter, 2024, about 53% of the hotels in operation were located in Germany. In terms of the hotels in pipeline, only 39% of the hotels are in Germany, and the remaining are in other European countries, Asia, and Africa. Each accounted for 36%, 18%, and 7% respectively. Among them, the proportion of pipeline hotels in Asia has increased meaningfully compared to the proportion of hotels in operation, achieved some periodic results, and was in line with our strategy that was set at the year beginning.
Jin Hui (CEO)
以上就是华住二零二四年第二季度业务情况的更新。下面有请CFO邹钧为大家解读华住二零二四年第二季度经营和财务方面的相关内容。
Jason Chen (Senior Director of Investor Relations)
The above concludes our second quarter 2024 business update. Now, I will hand over the call to our CFO, Mr. Zou Jun, to discuss our operational and financial performance during the quarter.
Zou Jun (CFO)
Thank you, Jin Hui. Good morning, and good evening to everyone. Let's go through our operational and financial review for the second quarter of 2024. Now, please turn to page 18. As Mr. Jin Hui mentioned, we reached a remarkable milestone here in the second quarter of 2024. The number of hotels in operation for both the group and Legacy Huazhu surpassed 10,000, and the overall number of rooms increased 19% year-over-year to over 1 million as of the end of second quarter this year, compared with over 840,000 rooms a year ago. Hotel turnover for the second quarter of 2024 was CNY 23.4 billion, representing a 15% year-over-year increase, of which Legacy Huazhu's hotel turnover grew 16% year-over-year to CNY 21.3 billion. Now, please turn to page 19.
Dan Qi (Research Analyst)
In the second quarter of 2024, our total revenue for the group increased 11% year-over-year to RMB 6.1 billion, at the high end of our previously announced guidance of 7%-11% year-over-year growth. Revenue from Legacy Huazhu grew 11% year-over-year to RMB 4.8 billion, also reaching a high end of our guidance for the segment. The growth was driven primarily by our strong new hotel openings. Legacy DH's revenue rose 20% year-over-year to RMB 1.3 billion, attributable to both business recovery and hotel network expansion. Next page, please. We are committed to grow under the asset-light model, expanding our hotel network using managed and franchise hotels. As a result, revenue from our managed and franchise hotels continued rising.
In the second quarter of 2024, managed and the franchise hotels contributed to 48% or nearly half of our Legacy Huazhu revenue, up from 42% a year ago. We expect this trend to continue as we become more and more asset-light. This should lead to a gradual margin expansion for the business, as well as to help us to become more resilient when facing economy and industry headwinds. Now, please turn to page 21. Hotel operating costs was RMB 3.7 billion in the second quarter of 2024, up 7% year-over-year. The increase was primarily driven by a rising staff costs from our continued network expansion. The year-over-year increase in hotel operating costs was meaningfully lower than our revenue growth, thanks to our asset-light strategy.
Pre-opening costs maintained at a low level as we continue moving toward asset-light model and stay selective on opening, lease, and own hotels. SG&A expenses were RMB 919 billion in the second quarter of 2024, up 24% year-over-year. The year-over-year increase was attributable to headcount normalization, as well as a rise in share-based compensation to secure and reward our core employees for sustainable long-term business growth. Income from operation in the quarter reached RMB 1.6 billion, representing a 14% year-over-year increase, driven primarily by the strong network expansion of our managed and franchise hotels, as well as further business recovery of DH. Now, please turn to page 22 for our profitability and cash flow during the quarter. In the second quarter of 2024, our Adjusted EBITDA increased 15% year-over-year to RMB 2 billion.
By segment, Legacy Huazhu's adjusted EBITDA grew 14% year-over-year to CNY 1.9 billion, with the adjusted EBITDA margin expanded by 1% to 39.5%. Thanks to our continued business growth at asset-light strategy, as well as our cost saving initiatives on non-personnel related expenses. Our DH business generated RMB 131 million adjusted EBITDA, turning profitable from a loss position in the previous quarter, and representing a year-over-year growth of 35%. Our group's adjusted net income was CNY 1.3 billion in the second quarter of 2024, up 17% year-over-year. Operating cash flow for the quarter was flattish year-over-year at CNY 2.2 billion. Now turn to page 23 for our liquidity position.
As of end of June 2024, the group had RMB 9.9 billion cash, cash equivalents, restricted cash, and time deposits, and was in a solid net cash position of RMB 4.3 billion. Including time deposits, we also had RMB 3.1 billion unutilized bank facility as of end of second quarter. Please turn to page 24 now for a shareholder return. As we become more asset-light and cash-rich, we are committed to reward our shareholders through dividend and buybacks. Last month, we announced a three-year shareholder return plan with an aggregate amount of up to $2 billion. This includes semi-annual ordinary dividends of no less than 60% of the net income each year, as well as special dividend and the share buybacks.
Concurrently, the board approved a five-year share repurchase program with an aggregate amount of up to $1 billion, effective from August 21st, which is today. Next page, please. Under the new shareholder return plan, the board declared a $200 million interim cash dividend for the first half of 2024. We also continued to buy back shares and have bought back roughly $143 million worth of shares from the market as of July year-to-date. Lastly, page 26, on guidance. For the third quarter of 2024, we expect our revenue to grow between 2%-5% compared to third quarter of last year, or 1%-4%, excluding DH.
To reflect our strong hotel opening momentum, we revise up our full-year growth hotel opening target to over 2,200 hotels, up from the previous guidance of around 1,800 hotels. With that, we're ready to take your questions. Operator, please open the line for Q&A.
Operator (participant)
Thank you. We will now begin the question and answer session. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our first question comes from the line of Ronald Leung from Bank of America. Please go ahead, Ronald.
Ronald Leung (VP)
Ronald Leung from Bank of America. I have two questions, so my first question is about the RevPAR expectations. Could you comment about your RevPAR expectations for 3Q 2024, and also for full year 2024? Yeah, okay, this is my first question. My second question is about the investment appetite for franchisees. Could management comment on the current investment appetite for the franchisees? Do you see any signs that the franchisee sentiment may slow down because of the RevPAR decline? Okay, so let me translate my questions. Uh,...
Dan Qi (Research Analyst)
第二个问题呢，就是关于，现在，加盟商的这个投资酒店的总体情绪怎么样？会不会因为，最近两个季度 RevPAR 是有点下来的话，看见，投资者的情绪有放缓的迹象。好，谢谢王逸成。
Jin Hui (CEO)
好，我是金辉，我来回答这个问题。各位投资人分析师都看到了STR的这个中国的下滑的这个酒店数据，主要受到宏观的消费不振和尤其是高端消费的萎靡，我们也关注到了这个趋势。另外一方面呢，确实是中国去年第三季度的基数。大家知道，去年是疫情恢复后的第一个消费旺季，暑期，所以去年的确也存在特别高基数的影响。所以这两因素影响下，我们看到STR七月、八月的下滑大概在10%左右，但华住因为自身的品力、运营力，我们的大概在个位数吧，影响。当然我认为这还是一个健康长期的回归。去年的高基数显然是不可持续的，加上今年在局部区域的供应量增加，我们也看到了，其实今年经营数据的分化，有些区域仍然表现得非常强劲的，比如像中国的中西部地区，保持非常强劲的旅游的增长，在华东可能受到供应链增加的影响，可能会出现一些分化。所以我们对整个，无论是今年还是长期，我们仍然保持对中国，尤其是国民市场，无论商务还是休闲市场的可持续的长期增长，我们仍然保持非常强的信心，这是第一个问题。关于第二个问题，加盟商。加盟商我们目前中国整个的管道仍然在保持一个非常健康的增长，由于华住开展了非常全面的市场，这个拓展的这个准备，我们在下沉市场，我们在中高端市场，我们在中档的，尤其以全季、橘子这样的市场，我们不断地在推进我们这个发展的策略。当然，我们也会进一步采用高质量发展的这样的一个，发展策略，我们进一步夯实我们的产品和旗舰店的这个发展。所以，目前还处于一个比较健康的一个状态里面，明年我们也会采取进一步的下沉中高端的这个发展策略，来保持我们在中国健康的高质量发展。谢谢！
Jason Chen (Senior Director of Investor Relations)
Okay, let me answer your questions. Firstly, in regards to the RevPAR, so, as you may see from the industry number released from the STR, that in the July and the several weeks of the August, actually on a year-over-year basis, the RevPAR was around 10% decline on a year-over-year basis. Clearly that we also observed that, you know, the macro condition and the entire consumption, especially the high-end consumption, was relatively weak. But also, last year, the third quarter was a very high base, because that was a peak season right after the reopening post the COVID. But, as you may know, or, from the data itself, you can see that our RevPAR performance is always outpaces the industry number.
Dan Qi (Research Analyst)
So for the third quarter, we accept, we expect that the RevPAR could may decline around mid single digit year-over-year. But I think this year the RevPAR should gradually return to a more healthier and sustainable development trend, as we mentioned previously. And also another factor is, amid the supply was increased year-over-year for this year, especially for certain regions, for example, the eastern part of China. But some of the performance, we also see a different performance in different regions like for example, the west part, the central part of China were still quite performing well.
We still see a very strong leisure traveling demand in the particular regions, but in eastern part of China, maybe some of the temporary oversupply or some of the weak business traveling demand, which could be a bit underperforming. But for us, in a longer term perspective, we remain focused on the mass market, and we think, through our strategy, you know, high quality growth, we remain confident in the longer term perspectives. For the second question, in terms of the franchisees, as you can see, our pipeline continuously grow despite our high speed new hotel opening, because we insist on our key strategy on lower tier cities penetrations and also the upper mid segment, you know, penetration as well. For next year, we will remain focused on these two areas, and also through the better products and better branding, that we are confident that the internal franchisees' confidence should remain at the healthier and sustainable level. Thank you.
Jin Hui (CEO)
我想补充一个观点，华住自2022年开始，经营的高质量发展，结合今年的卓越服务的转型，都是希望在面对大量的同质化竞争的前提下，华住能进一步夯实我们独有的这样的一个竞争优势。...所以也希望各位投资者和分析师理解，华住的进一步围绕高质量发展的战略。
Jason Chen (Senior Director of Investor Relations)
I want to add one more point, since 2022, we started our high quality growth, and this year we started the service excellence. So, for both parts, we want to further strengthening our core competitiveness and to maintain a strong competitive advantage in the industry. So hopefully that, you know, our shareholders or analysts could understand our strategy and our planning. Thank you.
Ronald Leung (VP)
谢谢管理层，啊。
Operator (participant)
Thank you. Our next question comes from the line of Dan Qi from Morgan Stanley. Please ask your question, Dan.
Dan Qi (Research Analyst)
感谢管理层给我这个提问的机会，我是摩根士丹利的分析师Dan Qi。首先恭喜公司到第一个万店的这个里程碑。我的问题是围绕供应链服务，还有这个场地属地化的整个的提升。因为刚才金总也多次提到了，就是公司在持续酒店数量扩展的情况下，管线的数量也持续增加，所以想请管理层可以帮我们更新一下方面，在供应链跟开店这方面的进展，比如说年开店，今年我们看到可以达到两千两百家，而过去十二个月签约量应该，可以超过这样的一个数量。如果供应链的生态化这样继续提升的话，其实年，开店的整个的数量，我们还会有多少的提升空间，最终有没有说，有一个目标，或者是说有一个，绝对值的这样的一个峰值。请 allow me to translate my question.
This is Dan from Morgan Stanley. My question is regarding hotel opening and pipeline, and also supply chain building. The management continues to mention about the pipeline increase on top of the rapid network expansion. So my question is about the company's annual opening capacity. Can the management update us on the progress you have made regarding hotel opening? Especially we increase the growth opening target from 1,800 hotels -2,200 hotels. I assume we are signing more than that number in a year, and the pipeline right now is over 3,200 hotels. So with more progress made on the supply chain, can we assume this annual opening number to continue to go up? And is there a limit to the number per year? Thank you.
Jin Hui (CEO)
好，我来回答这个问题。大家注意到了供应链的建设，华住在今年，重启了供应链的整个升级和底盘的再造，供应链对华住实现中国的高质量发展和千城万店非常重要。供应链的建设围绕着三个核心的关键词，即成本、质量和效率。华住的供应链围绕着成本、质量、效率，我们做了大量的供应商的重新替换和升级。现在今年下半年，在成本领先和供应的效率上面，我相信都会有一个巨大的改善，因为中国原本的制造业的供应的能力是非常强大的，所以我认为通过我们的整个的提升和改造，不仅不会成为我们开店的影响，更会成为我们下一阶段高质量发展的重要的保障，这第一个。
Jason Chen (Senior Director of Investor Relations)
OK, let me translate in terms of the supply chain. So, supply chain is very important factors for us to maintain our high quality growth and achieve the 10,000 hotels in 1,000 city. There are three key areas that the supply chain needs to look at. One is the cost leadership, two is the high quality, third is the efficiency. In the second half, we will continuously to improve our supply chain capability by replacing higher quality suppliers, and further improve our efficiency and lower the cost. So supply chain could help us to further, you know, accelerate the hotel network expansion and with relatively lower cost and high efficiency.
Jin Hui (CEO)
我们随着供应链的能力属地化的组织能力提升，我们很高兴看到今年我们的开业数量将超过两千两百家以上。我们也非常高兴这样的规模增长，但是华住依然会坚持质量大于规模的这个发展理念。所以，从去年开始，我们围绕着旗舰店的高质量发展，成为华住非常重要的一个核心战略，尤其在下沉市场。因此大家也可以关注到我们隐含的房量，以及旗舰店比例的增加，我们其实单体的房量也会有所增加。所以，简单来讲，就是我们在下一个阶段保持高速发展的前提下，依然会坚持高质量的这样一个原则。
Jason Chen (Senior Director of Investor Relations)
So we are very happy to see that we can open more than 2,200 hotels in this year. This is to supported our, you know, localized strategy in our regional offices and the further improvements on the supply chain capability. However, I want to emphasize one more time that we in the future, in terms of the hotel network expansion, we will remain insisting on that the higher quality is more important than the scale. OK, that's we will further develop the flagship hotels, and
Dan Qi (Research Analyst)
continuously implementing our high quality, sustainable growth strategy, especially in the lower tier cities. As you may see that, you know, given that we are doing a lot of, you know, flagship hotels, that, you know, number of rooms per hotel actually increased. And in other words, the total number of hotel rooms growth is higher than number of hotel growth itself. So overall, all in all, that we will remain focused on more quality than scale and implement our high quality sustainable growth strategy. Thank you.
谢谢管理层。
Operator (participant)
Thank you. Our next question comes from the line of Simon Cheung from Goldman Sachs. Please ask your question, Simon.
Simon Cheung (Managing Director)
谢谢管理层的分享，周总跟金总。我有三个问题，第一个问题是还是围绕供给的问题，因为，我们可能看到，整个市场，过去一年左右，那个供给已经回到2019年的水平，以及跳过2019年的水平了，这个，整个industry。我想请教一下，你们在你们看来呢，长期来讲的话，在整个国内的行业，酒店的行业的话呢，供给大概每年大概增长是多少，以及这个对整个industry的RevPAR的影响会，会多大？然后华住来讲的话呢，你们有没有一个比较长期看到，RevPAR增长的一个target？这个是第一个问题。Let me translate the question.
Dan Qi (Research Analyst)
I think there are a lot of concern about hotel supply in the industry. Particularly, we have seen, you know, the hotel supply has fully recovered to 2019 level, actually exceeded year to date. Wondering, you know, how you are seeing, you know, the hotel supply in the medium term and how that will impact the industry RevPAR, and correspondingly, you know, how HL will think about your RevPAR development.
And then the second question I have. 第二个问题是，也看到第三季度以及第四季度，你们对RevPAR的展望有一点点，比较down，也一点点下降吧。那我想请教一下，这个对margin，整个公司的margin有什么，多大的影响呢？ So the second question is related to, you know, the impact of the RevPAR, now that, you know, the guidance seemingly is a bit softer in the second half of the year. How would that impact the margins?
然后第三个问题是，DH的，也看到这个季度你们DH做得挺不错的，也看到你们开店的速度有一点点加快，想请教一下你们有什么长期的发展计划，特别是你刚才也说了，在亚洲地区你做得挺不错的。So my third question is related to DH. You know, we have seen quite a healthy performance in the second quarter, and I've seen, you know, the hotel additions are actually accelerated a bit.
You know, wondering, you know, what is some sort of whether you have some sort of a long-term target, in particular, particularly in Asia, where you have been, you have done quite well. 谢谢管理层。
Jin Hui (CEO)
好，Simon，我来回答第一和第三问题。酒店业在中国已经是非常市场化的一个行业，受到市场的调节因素。所以从长期的观点来讲，它的供应我们认为会随着供需的需求会有个市场调节。所以，当然我们看到了一些过去有一点手滑的红利，以及这个客源增长的红利，我们增加的这个供应，所以，供应会增加，但是我认为会充分受到市场的调节因素。但是我认为高质量的供应永远是市场稀缺。所以为什么华住始终坚持以高质量和卓越服务作为我们的指引，就是希望在这个充分竞争的市场环境保持独有的竞争力。酒店从来不是一个稀缺的行业，也不是一个高科技，所以我认为对于供应的这个观点始终是我们保持一致的。关于RevPAR的长期性，其实跟刚才的观点一样，我们研究过美国整个过去四十年的酒店业的这个RevPAR的趋势。RevPAR其实和一个经济体的GDP和通胀率保持高度的正相关，当然它的敏感性会更大，但是从长期角度而言，和一个国家的GDP增长和通胀保持一个高度的正相关，所以我们依然，华住是坚持一个长期主义这样的一个视角和观点去经营我们的业务。所以对于供应和RevPAR，长期我们都是非常有信心的，尤其华住在中已经建立了品牌、产品、组织、科技、流量等等一些优势前提下，我们对中国市场依然保持一个长期的乐观的一个观点。Let me translate the first answer.
So in terms of the market supply, basically, the hotel market in China is quite, you know, relatively mature and it is also a market-driven business. So basically, we believe the supply and demand will always come back to a equilibrium, and also the supply will also, you know, affected by the demand movement. You know, historically, you know, the entire industry has benefited from the China RevPAR improvements, you know, the economic development and the demand, rapid demand increasing. Therefore, there is a lot of, you know, new supplies coming into the market. But again, for us, our observation is very clear that there is no lack of the supply, but there is a lack of the-
Dan Qi (Research Analyst)
high quality supply. So that's the reason why we continuously emphasize on high quality, sustainable growth together with the service excellence. So by doing so, we want to maintain our core competitiveness and provide good supplies and high quality supplies to the market to gain, you know, competitive edge. So this is our views on the demand supply dynamic for the hotel lodging market in China. And in terms of the long-term RevPAR development trend, we refer to what has been developing in the U.S. market for the last forty years. It shows a clear trend that, you know, the RevPAR in the U.S. is very positively correlated to the GDP growth and inflation.
But it’s very positively correlated, so it’s affected by the, you know, macro indications and the macro performance. So for us, we are positive, and given we have established a very strong brand, we have established a very good product and organizational capability, as well as our, you know, traffic sources, membership programs. Basically, we believe, so we could be very competitive in the market in a longer term perspective.
Jason Chen (Senior Director of Investor Relations)
Okay. In terms of our DH strategy, there are three aspects. Firstly, it's very clear that there's the asset light transformation. As you may know, that historically, we had a lot of, you know, leased and owned hotels. Now we are doing the asset light transformation. And secondly, it's continuously on the cost control and efficiency improvements to maintain a healthier and sustainable profitability and cash flow. And certainly is we want to leverage on DH's good brand and product to develop in Middle East and Asia Pacific.
Zou Jun (CFO)
So, yeah, about margin, you know, I think firstly, of course, you know, you see that there are some short-term, you know, RevPAR fluctuation in the market and in our business as well. But in long term, we are confident that we'll have, you know, a very good RevPAR growth trend. And through, let's say, product upgrade, service excellence, and membership program upgrade, as Jin Hui mentioned in his presentation, and we will continue to outperform the market. And secondly, you know, with our business, you know, continuously transfer to an asset-light model, the revenue structure, as I mentioned in my presentation, has changed. And that will bring a natural, let's say, margin improvement in the long term.
Dan Qi (Research Analyst)
Certainly, you know, we started to implement flexible budget and rolling forecast, which will allow us to nimbly respond to market condition change and adjust our spending levels. And, firstly, you know, we are also meticulously measuring our ROI for each big spending. And with all those efforts, we believe in the long term we will have a better margin profile. Thank you.
Simon Cheung (Managing Director)
Thank you.
Operator (participant)
Thank you. We have now reached the end of the question and answer session. Thank you all very much for your questions. I'll now turn the conference back to the management team for closing comments.
Jason Chen (Senior Director of Investor Relations)
Thank you, everyone, for taking your time with us today, and we look forward to see you in upcoming quarter. Thank you and bye-bye.
Operator (participant)
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.