H World Group - Earnings Call - Q2 2025

Transcript

Speaker 3

Good day, and thank you for standing by. Welcome to the H World Group Limited Q2 2025 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 this session, you will need to press *1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jason Chen. Please go ahead.

Speaker 0

Thank you, Heidi. Good morning and good evening, everyone. Thanks for joining us today. Welcome to H World Group 2025 second quarter earnings conference call. Joining us today are our Founder and Chairman, Mr. Ji Qi, our CEO, Mr. Jinhui, our CFO, Ms. Chen Hui, and our CSO, Ms. Jihong He. 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.

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 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. Jinhui, to discuss our business performance in the second quarter of 2025. Mr. Jin, please.

Speaker 4

谢谢, 各位投资人分析师大家好, 感谢大家参加华族集团2025年第二季度业绩电话会。首先我想分享一下对于整体市场的观察, 市场需求方面, 从中国铁路、航空、出游人次等数据可以看到, 中国国内整体出行需求依然保持了相对稳定的增长, 但同时由于过去两年酒店市场整体供给过快增加, 叠加各种宏观因素对商务出行和消费者支付意愿的负面影响, 整体行业依然存在一些挑战。Dear investors and analysts, good day. Thank you for joining our second quarter 2025 earnings conference call. First, I'd like to share some observations on the overall market. On the demand side, the domestic number of travelers continues to grow steadily according to the data released from railways, airlines, and tourism statistics. However, due to the rapid increase in hotel supply over the past two years, coupled with the negative impacts of various macro factors on business traveling and consumer spending wellness, the hotel industry is still facing some challenges.

但是, 即便在当前的市场情况下, 华族始终坚持长期主义, 强化高质量发展, 快速抢占核心城市核心位置, 持续深耕下沉市场, 优化存量门店质量和布点。二季度, 华族通过各区域的不断突破以及低线城市的不断渗透, 实现了又一季度的高质量网络扩张。在营房量同比增加18.3%的驱动下, 集团酒店GMV同比增长15%至269亿元。同时, 随着网络布局的逐步完善以及华族会能力的进一步重构, 华族的会员规模及会员预订间夜量持续增长。二季度, 会员数量同比增加17.5%至2.9亿, 会员预订间夜量超6000万间夜, 同比提升28.8%。Despite the current challenging market conditions, we remain committed to focus on the long-term business development, emphasizing on high-quality growth, securing prime locations in the major cities, further deepening our presence in the lower-tier cities, and optimizing the location and quality of our existing hotels. In the second quarter, by breaking through into more new cities and regions and further penetrating into the lower-tier cities, we achieved another quarter of high-quality network expansion. Driven by an 18.3% year-over-year increase in the number of rooms in operation, our group hotel GMV grew by 15% year-over-year to RMB 26.9 billion.

Meanwhile, along with our hotel network expansion and continuous enhancements of our H Rewards membership program, our member base also grew by 17.5% year-over-year to nearly 290 million in the second quarter, while the number of room nights booked by members exceeded 60 million nights, representing a 28.8% year-over-year growth. 各位重要的是, 集团轻资产的加盟业务无论在规模、收入还是利润上均实现了强劲的增长。二季度, 加盟收入同比提升22.8%至29亿元, 经营毛利同比增长23.2%至19亿元, 贡献了近三分之二集团整体经营毛利。

Speaker 0

More importantly, our SLI's managed and franchised (M&F) business delivered robust growth in hotel network revenue and profit. M&F revenue rose 22.8% year-over-year to RMB 2.9 billion in the second quarter, while its gross operating profit increased by 23.2% year-over-year to RMB 1.9 billion, contributing nearly two-thirds of the group's total gross operating profit.

Speaker 4

World Group Limited始终保持以经济型和中档酒店为核心服务大众市场的战略并未不变。在消费者追求极致性价比的大背景下，H World Group Limited应当展现更强有力的竞争优势，通过品牌的建设、产品的优化和升级以及服务的提升进一步夯实核心竞争力，赢得客户的长期认可，实现穿越周期的能力。

Speaker 0

Macro uncertainties and weakened consumer spending wellness should have more pronounced impacts on the high-end consumption. H World remains steadfast in our strategic focus on the economy and the midscale segments to serve the mass market. Against the backdrop of consumers favoring value-for-money products and services, H World is well positioned to demonstrate even stronger competitive advantages. By enhancing our brands, optimizing and upgrading our products, and improving our services, we will further solidify our core competitiveness, earn long-term customers' loyalty, and achieve resilience while navigating through cycles.

Speaker 4

我们很高兴地看到, 在经历20年的发展, 我们的汉庭品牌在《Hotels》杂志最新公布的全球TOP50酒店品牌排行中荣登榜首, 成为全球房量最大的酒店品牌。我们认为这远远不够, 我们依旧不断地对产品进行升级和优化, 以提高产品质量, 满足消费者的需求。最近我们正式发布了汉庭4.0版本, 4.0版本的汉庭不仅仅是简单的产品升级, 更是革命性的供应链升级。我们通过造价、工程、维保及运营的全链路系统化优化, 成功打造出造价更低、品质更高、效率更优的标杆产品。汉庭将成为H World Group Limited进一步深耕中国、布局下沉市场的核心利器。

Speaker 0

We are delighted that after 20 years of development, our Hanting Hotel brand ranked number one on the latest Hotels Magazine's World's Top 50 Hotel Brands list, becoming the world's largest hotel brand by room count. However, we believe this is just the beginning, and we continue to refine and upgrade our product to improve product quality and to better meet customers' demands. Recently, we officially launched Hanting Hotel 4.0 version. This is not just a simple product upgrade, but a revolutionary supply chain reform. Through systematic optimization across CapEx, construction, maintenance, and operations, we have successfully developed a benchmark product with lower cost, higher quality, and greater efficiency. Hanting Hotel will serve as a key driver for our further penetration into the lower-tier cities.

Speaker 4

Thousand Hotels 2.0" strategic goal.

Speaker 0

HanTing Hotel has undoubtedly become the leading hotel brand in the economy segment, while JI Hotel has been leading the midscale segment. Nevertheless, we are more excited to see our Orange Hotel recently surpassing the 1,000 hotels milestone. With its industry-leading products, cost competitiveness, and operational capabilities, Orange Hotel is well positioned to become our second growth engine in the midscale segment. Together, HanTing, JI, and Orange form the golden triangle brands of our limited service segment, demonstrate a formidable competitiveness, and serve as the core driver to reach our 20,000 hotels in 2,000 cities' strategic target in the midterm.

Speaker 4

Limited在中高端赛道也实现了快速突破。截止二季度末，H World Group Limited在云及管道内的中高端门店数量已突破1,500家，同比增长23.3%。尤其是我们的Orange Hotel品牌，凭借清晰的品牌定位、卓越的产品品质和优秀的经营表现，正快速获得加盟商和消费者的双重信赖。可以看到，Orange Hotel在过去几个季度实现了非常快速的增长。二季度Orange Hotel品牌更是实现了成熟门店RevPAR的同比增长。

Speaker 0

At the same time, H World has made rapid breakthroughs in the upper-midscale segment. As of the second quarter, the number of upper-midscale hotels in operation and in pipeline exceeded 1,500, up 23.3% year-over-year. In particular, our IntercityHotel has been rapidly gaining traction among both franchisees and consumers, and achieving remarkable growth in the recent quarters, thanks to its clear brand positioning, exceptional product quality, and strong operational performance. In the second quarter, the IntercityHotel achieved a positive year-over-year growth in its same hotel RevPAR.

Speaker 4

strengthens the company's core competitiveness.

Speaker 0

Whether it's the limited service or the upper-midscale segment, continuous product optimization and upgrades relies on strong supply chain capabilities. We firmly believe that supply chain strength is a critical pillar of high-quality development. Therefore, we continue to innovate and optimize our supply chain through enlarging our supplier pool, strengthening modular applications, and optimizing product design to achieve higher product quality, lower OpEx and CapEx, and a shorter construction period, which is in turn further strengthening our core competitiveness.

Speaker 4

最后在营销方面，我们始终坚持以H Rewards为核心，会员体系及直销能力是支持公司业务长期可持续发展的重要核心能力。随着我们门店的扩张和更多城市的进入，我们的会员数量也在持续增长。截止二季度末，H Rewards会员数量稳步增长至2.9亿，同时H Rewards中央预订系统贡献的间夜量占比达65.1%，同比提升5.2个百分点。近期我们推出了贵鸡陪的会员价格保障功能，确保会员预订享有更低价。未来我们将进一步针对会员权益、积分使用场景、异业合作等方面进行优化和探索，以实现更强的会员粘性，持续强化直营直销能力的建设。

Speaker 0

Lastly, we remain focusing on our direct sales capability through H Rewards membership program. Our membership and direct sales are vital to our sustainable long-term business growth. As we expand our hotel network and enter more new cities, our membership base continues to grow. By the end of the second quarter, H Rewards membership reached nearly 290 million members, with direct bookings through CRS rose 5.2% year-over-year to 65.1%. Recently, we introduced the price guarantee features in our H Rewards app, ensuring our members get the best room rate. Going forward, we will further enhance membership benefits, expand loyalty points usage scenarios, and explore cross-industry partnerships to improve member engagement and stickiness and further boost our direct sales capability.

Speaker 4

Group Limited 2025年二季度业务情况的更新，下面请CFO陈慧为大家更新集团二季度的财务情况，有请。

Speaker 0

This concludes the business updates for H World Group Limited's second quarter 2025. Now I will hand over the call to our CFO, Ms. Chen Hui, to present the group's financial performance for the quarter.

Speaker 1

Thank you, Jinhui. Good evening and good morning, everyone. Let me walk you through our second quarter financial overview. During the quarter, our group revenue grew 4.5% year-over-year to RMB 6.4 billion, near the high end of our previous guidance, of which H World Group Limited's revenue increased 5.7% year-over-year. We are glad to report that as we continue carrying out SLI strategy and the cost optimization efforts, we saw year-over-year margin improvements from both H World Group Limited and H World Group Limited. As a result, our group adjusted EBITDA rose by 11.3% year-over-year to RMB 2.3 billion. Adjusted net income increased 7.6% year-over-year to RMB 1.3 billion. More importantly, as you may notice, we started providing revenue and gross operating profit breakdown for our franchised (M&F) business and lease-and-operate business in our presentation.

We believe it could better demonstrate our future business development strategy, especially on the profit growth driver during our SLI transformation period. Looking into the numbers, in the second quarter, our franchised (M&F) business revenue reported a robust 22.8% year-over-year growth to RMB 2.9 billion, and the gross operating profit rose by 23.2% year-over-year to RMB 1.9 billion in the second quarter, respectively. The robust growth in both revenue and profit was mainly driven by hotel network expansion. More importantly, given the nature of SLI business model, franchised (M&F) margin profile is relatively stable and is less impacted by RevPAR movement compared to lease-and-operate. On the lease-and-operate business front, we continue reducing the exposure. In the second quarter, our lease-and-operate revenue and lease-and-operate gross operating profit decreased 7.6% year-over-year and 13.4% year-over-year, respectively. Our SLI transformation resulted in a further enlarged profit contribution from franchised (M&F) business.

In the second quarter, our franchised (M&F) business contributed to 64% of our total gross operating profit, up 7.5% year-over-year. Moving to the cash flow and the liquidity position, in the second quarter, we generated RMB 2.7 billion operating cash flow. As the quarter ends, the group had RMB 13.7 billion cash and cash equivalent and RMB 6.2 billion net cash on the balance sheet. We are committed to pay out dividends consistently and stick to our shareholder return plan. For the first half of 2025, we are glad to declare a $250 million interim cash dividend, which represents 74% of our first half net profit and together with roughly $62 million share buyback. Lastly, on our guidance for the third quarter of 2025, we expect our group revenue to grow 2% to 6% compared to the same quarter last year and 4% to 8% if excluding DH.

The franchised (M&F) revenue in the third quarter of 2025 is expected to grow in a range of 20% to 24% compared to the third quarter last year. With that, we are ready to take your questions. Operator, please open the line for Q&A.

Speaker 3

Thank you. As a reminder to ask a question, you will need to press *1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press *1 1 again. Please stand by while we compile the Q&A roster. We will take our first question, and the question comes from the line of Ronald Leng from Bank of America. Please go ahead, your line is open.

Speaker 4

喂, 管理层, 晚上好, 谢谢你给我一个提问的机会。我有两个问题。第一个问题是关于RevPAR的预期的, 请问管理层对三季度还有全年RevPAR的预期是什么? 还有就是, 全年的收入的指引, 有没有什么改变? 这个是第一个问题。第二个问题是关于新店对总体RevPAR的影响的一个问题, 就是管理层有没有看见在新店开还有爬坡的时候, 可能对旧店的RevPAR会有一些坏的影响? 如果有的话, 这个矛盾, 可以有没有什么方法可以解决? Good evening, management. Thank you for taking my question. I have two questions. My first question is about RevPAR. What is your expectation for the RevPAR in Q3 and also Q2? Is there any change to the full-year revenue guidance? This is my first question. My second question is about any potential impact on RevPAR from new hotel openings. Do you see any potential cannibalization when new hotels open and ramp up, and that could affect the old hotels? If yes, are there any initiatives that management can take to address this conflict? Thank you very much.

Speaker 2

好, 谢谢 Rondo, 感谢你的问题。首先, 大家还是很关心 RevPAR, 但我特别想跟大家分享, 我觉得其实可以各位更关注华族的长期在中国市场的市场占有率的稳步提升, 以及我们高品质品牌, 以及我们在很多核心能力的提升。那么关于 RevPAR, 我想结合近期的我们三季度的文旅市场和中国的情况, 我给大家做一个统一的回答。我们今年确实暑期看到了很多各地加大文旅的这个服务, 也发布了很多门票的减免, 半价的优惠, 限时的开放, 确实带来了中国市场的这样的进一步的繁荣。受到一些极端天气以及宏观的不确定, 一些因素, 确实我们目前三季度, 我们预测三季度 RevPAR 同比仍然会略有下滑, 但是同比降幅要将二季度进一步收窄。至于我们关于全年的 RevPAR 和收入的指引, 目前确实面对宏观的一些不确定性, 尤其过去两年中国酒店业同质化供应的迅速增加, 确实造成了一些经营的挑战, 对我们整个经营确实有 RevPAR 造成的一些影响。我们预计全年的 RevPAR 会略低于我们年初的预测, 同比呢, 下滑第一个位数, 第一个位数的这样的一个下滑。不管外面挑战怎么样, 我想我们还是努力实现我们我开头讲的, 我们在品牌, 我们在供应链, 我们在科技, 在会员, 在营销方面等等核心能力的构筑, 使得我们华族在经营压力下表现了非常强的经营的韧性。结合我们的整个的高质量的门店扩张以及轻资产化的这样的一个战略, 我们今年全年的收入预测, 我们将努力达到我们年初给到的市场的指引区间。

Speaker 4

Okay, let me translate. So, I understand, you guys are still very much looking at the RevPAR movements. First of all, we hope you can focus more on a long-term H Rewards performance in terms of the market share gaining, our improvements in terms of the products and the brands, as well as a lot of improvements from different fronts to create our core competency. In terms of the RevPAR guidance for the third quarter and the full year, for the third quarter, especially during the summer holiday, we observed that a lot of local governments are promoting the tourism industry, for example, by providing deep discounts in terms of the tickets, even free tickets, just trying to boost the demands for the leisure traveling.

However, in some regions and areas, it was affected by some extreme weather conditions, plus some of the macro uncertainties, some of the weakened consumer spending wellness. The overall performance till now for the summer holiday is slightly below our previous expectation. Therefore, we think the third quarter's RevPAR will still have a very slight year-over-year decline. However, it's going to be quite significantly narrowed on a sequential basis. In terms of the full-year RevPAR, again, because of some of the macro uncertainties, especially, as I mentioned previously, there was quite a lot of supply increased over the last two years, it's still creating some of the challenges currently. Combining the performance for the first half as well as the current summer holiday performance, we are currently expecting the RevPAR for the full-year performance will be slightly below our previous guidance.

However, as I mentioned, we have been putting a lot of efforts in terms of improving our products, our sales capability, our supply chain capability, just to make sure that we can be much more resilient even under this kind of challenging market conditions. Therefore, in terms of the revenue, we will strive to achieve our previous guidance. 关于我关于同店的这个RevPAR, 我也很愿意跟你探讨, 因为的确华族经过了20年的发展, 在一些市占率比较高的这个一二线城市, 确实我们存在比较多的老旧产品。呃, 不可否认这些老旧产品呢, 在目前的经营环境下承压压力会更大一些。呃, 由于华族在过去几年, 比如我们全季从3.0、4.0到目前的5.0, 橘子经历了2.0到3.0, 汉庭从最早的3.0、3.5到目前的4.0, 我们的产品力出现了非常大的提升, 啊, 根本性的品质的提升。同时在这些核心城市, 由于房地产的一些周期的缘故, 出现了不少优质的物业, 更为优质的物业。在这种情况下, 华族布局了一些应该讲物业更好, 品质更佳的新产品, 对于我们老的同店的这些门店的确造成了RevPAR的一定的影响。在这个情况下, 我认为是一个阵痛期, 也是我们华族必须得这个迈过的这样一个门槛, 因为我们希望以更高的品质去实现我们未来的市场占有率, 不仅仅是我们的规模, 我觉得我们的市占率的质量也是我们非常关注的一个核心要素。呃, 因而当然对存量门店遇到这个问题以后, 我们怎么解决, 我认为毫无疑问第一个就是对存量门店的做出升级, 这个帮助改进是我们非常重要的一个方法。同时进一步合理规划我们未来的高质量的布局, 也是我们正在展开的工作。所以, 呃, 大概是这样情况。第一, 这个问题确实是目前我们遇到的同店在核心城市高质量替换阶段的一个阵痛。谢谢你们的问题。

Speaker 0

In terms of the impacts from the new hotels to the old hotels, we have to admit, over the past 20 years of development, especially in those tier one to tier two, where we have higher market share, we have a much higher basis, there are a lot of old versions of the products which have been running for many, many years. Of course, in the current environment, this kind of products' competitiveness is quite low. As you may notice, we have been constantly introducing new products. For example, we upgraded Ji Hotel from previous 3.5 or 3.0 to currently 5.0, the Orange Hotel from 1.0 to the current 3.0, and Hanting Hotel from previous maybe 2.0 to the latest 4.0. All the products itself, the quality has been improved massively. Of course, we are adding some of the pressures to the old products.

In addition to this, in the tier one, tier two cities, because of the real estate market weakness, there's a lot of high-quality properties coming out to the market, which we can have much better property to open new hotels with much higher quality products. We have to admit that kind of creating some of the negative impacts to the existing old hotels. We do believe it is a short-term plan, and we have to go through this because our target is not only gaining market share, but we want to gain market share with high-quality products. That tactic has never been changed. We are looking for some of the solutions to solve this kind of problem. Firstly, we are actively looking for upgrades for the existing hotels. Secondly, we will be more rational, in terms of the positioning for the new hotel openings. Thank you.

Speaker 3

Thank you. We will take our next question. Your next question comes from the line of Dan Qi from Morgan Stanley. Please go ahead, your line is open.

Speaker 4

各位管理层, 晚上好。我们看到这一次这个财报, 首次公司就分拆披露了整个直营还有加盟管理的两个业务, 各自的直接经营的毛利。那么想请问公司这一次这样拆分的整个背后的考量是一个什么样的情况, 还有经营策略上着重点有没有在未来会有一些变化, 就是在这两个业务之间。进一步我想请教公司, 就是对于这一次的拆分, 就是想请教加盟管理业务现在占总体, 刚才陈慧总讲到毛利润是64%, 那么收入的增速是23%。我们看到利润率是增长的, 就是轻资产的这一块, 但是重资产的直营业务呢, 这个毛利率是毛利是下降13%的。那么中国区的毛利下降20%, 利润率是下降的。所以想请教, 对于中国区直营这一边的这个业务的整个利润率呢, 有没有什么方式呢, 公司可以帮助到这个直营利润未来的一个表现? 那我翻译一下。 Thank you, management, for this opportunity. We saw the company break down the gross operating profit between the asset-heavy lease-and-operate and asset-light franchised (M&F) business segments. What's the key message behind the new disclosure in terms of strategic focus between these two business segments? Is there any change we should expect in the future? Another follow-up question on this topic is asset-light franchised (M&F) segment is now 64% of total gross operating profit, with this segment revenue growing 23% this quarter. So gross operating profit margin increased slightly, but the gross operating profit for asset-heavy lease-and-operate declined by 13%. Legacy China H World business lease-and-operate gross operating profit down by 20%. Gross operating profit margin also declined. Going forward, what's the outlook for the margin of this segment?

Is there any operation adjustment we can expect to support the margin of this lease-and-operate business? Thank you.

Speaker 1

H World Group Limited 的加盟业务在高质量规模扩张的驱动下, 收入始终保持着强劲的增长。直营业务呢, 随着我们直营店的逐步退出, 收入在逐步减少。显然, 利润率相对稳定的加盟业务已经成为了我们公司未来发展的核心。加盟业务的增长是公司未来收益增长的关键。在公司逐步从直营向加盟过渡的转型期, 为了可以更加清晰直观地展现公司的核心业务的表现, 我们是从这个季度开始向市场披露加盟与直营分别的 gross operating profit。另外一点, 请教, 您先翻译一下。

Speaker 4

Okay, thanks again for the questions. As you may notice, over the past several years, we have been quite actively doing the SLI transformation for the group. As over the last few quarters, you know, our managed franchise business has been growing quite rapidly, driven by the high-quality network expansion, and also drives the revenue growth as well. In terms of the lease-and-operate business, you have been seeing that, you know, the exposure for the lease-and-operate business has been gradually reducing. Of course, the stable, you know, the SLI business has a much stable gross margin, and also it shows a real, you know, business development and the strategy for the group going forward. That's why since starting from this quarter, we started to giving, you know, a breakdown between our SLI business and the asset-heavy business.

Speaker 1

these hotels, for the remaining lease-and-operate hotels, we still hope the profit can remain stable.

Speaker 4

For the margin performance for our lease-and-operate business, as you said, the margins declined on a year-over-year basis. This was mainly because we are gradually exceeding the exposure or reducing the exposure for the lease-and-operate. Therefore, no matter from the volume or from the margin or from the absolute dollar amount in terms of the profits, it's in a declining trend. However, in order to maintain a relatively healthier and stable margin performance for the lease-and-operate business, we are doing several key measures. One is we are actively seeking for the rental reduction with the landlord. For example, in the first half of this year, we actually signed up around ¥390 million in total for the contract value for the rental reduction.

Secondly, in terms of the revenue management as well as the sales and marketing and the cost optimization, we are doing a lot of works for our lease-and-operate business as well. Even though we are gradually reducing the exposure for our lease-and-operate business, we are still putting a lot of efforts for the existing properties, trying to improve their performance, not only the top line but also the bottom line as well. Thank you. 谢谢, 谢谢, 谢谢, 谢谢, 谢谢, 谢谢, 谢谢, thank you.

Speaker 3

Thank you. We will take our next question. Your next question comes from the line of Lydia Ling from CitiGo. Please go ahead, your line is open.

Speaker 1

我是H World Group Limited的Lydia, 那我这边有两个问题想请教一下。首先第一个是关于那个开店方面的, 我们也看到二季度这个开店开始有点放缓, 所以想了解一下在目前的一个宏观情况下的话, 一方面加盟商现在目前的开店情绪是怎么样子的, 我们接下来的这个开店节奏是否会有所调整? 如果可以的话, 能否跟我们分享一下最新的一些签约情况? 那我第二个问题呢, 是想也在那个成本和利润率方面想进一步跟进。那如果在集团层面的话, 其实我们看到就是说二季度整体的整个费用管控还是不错, 那想了解一下成本是否还有进一步优化的空间, 在整个集团层面, 是否也可以展望一下今年全年的一个利润率? 谢谢。

Speaker 2

Hi management, I have two questions. The first one is on the store expansion. We saw some deceleration in the second quarter. Given the current macro background, how about the franchise sentiment over the openings? Is there any adjustment in your planning for the new openings for this year? If possible, could you share with us some color on the new signing momentum? My second question is on the margin side. At group level, do you have any further optimization in terms of the cost? Could you actually give some items on the full-year margin trend? Thank you.

Speaker 4

关于开店节奏我来回答一下，其实H World Group Limited在过去几年我们一直在始终坚持H World Group Limited不仅仅是大规模的发展，更是强调一个高质量的可持续发展，我们所谓叫经营增长的战略，确实在指引着H World Group Limited从去年到今年以及未来的整个的发展的这个规划。其实我们未来呢，会更加严格的把握开店的成功率，签约的质量，围绕着旗舰店的战略，对于酒店的位置、物业这个质量都会进行全面的把关来确保我们高质量的成功开店。我们会在保证产品品质、服务品质和加盟商回报的前提下，这个集团会保持一个相对健康稳定的开店速度，这是对于开店的整个预测。

Speaker 0

Okay. As you may notice, over the past several years, we have been implementing a high-quality sustainable growth strategy. We are not only looking for scale growth. I mean, the quality is much more important than the scale itself. We are going to continuously do this, implementing this strategy. Going forward, we will be even more strict on new signings in terms of the property, in terms of the location, as well as making sure that our franchisees can make a profit and the hotel product itself has a high quality. Under these kinds of standards, we think we still can maintain a relatively healthier pace of new openings in the near future. Thank you.

Speaker 1

你好, 我来回答您的第二个问题。对于H World Group Limited的轻资产战略以及我们成本的持续管控和优化, 主要表现在我们CS比例的提升, 带来我们营销成本的下降, 以及我们供应链能力的加强, 带来我们运营成本的一些下降, 以及我们现在对那个业主方的一些减租的一些影响。我们很高兴地看到集团第二季度的经调整的EBITDA在中国RevPAR承压的情况下依然实现了11.3%的同比增长。在成本端, 二季度剔除SBC后的集团SG&A同比下降1%。在下半年我们会在考虑ROI回报的前提之下, 在营销销售上还是要做一些必要的投入, 但是我们坚信随着轻资产化战略的不断推进, H World Group Limited在长期可以实现利润率水平稳步提升。

Speaker 4

In terms of the margin performance, in the second quarter, benefiting from our asset-light transformation, we have more revenue and profit contributing from the asset-light business, as well as our cost optimization leveraging on our supply chain capability, as well as our CRS contribution increase, and also a little bit part from the rental reduction. Putting them together helped us to achieve 11.3% adjusted EBITDA growth for the group despite the RevPAR decline. In terms of the SG&A, if you're excluding the SBC, actually, the SG&A declined by roughly 1%. For the second half, of course, we could make some of the investment, but definitely we cannot consider a rational ROI when we do some of the investment. In the longer-term perspective, we believe along with more asset-light contribution, we could achieve stable or gradual margin improvements in the future. Thank you.

Speaker 3

Thank you. We will take our next question. Your next question comes from the line of Simon Chang from Goldman Sachs. Please go ahead, your line is open.

Speaker 4

谢谢金总跟陈总的分享。我有两个问题。第一个问题，刚才金总有说过那个汉庭有一些比较旧的店，可能在比如说高线城市那边受到有一点点影响，以及你看到同店那个RevPAR跌了可能跟上个季度一样，跌了大概8%左右。我想问一下大概这个问题你觉得要多长时间才可以解决到呢？这个是第一个问题。然后第二个问题也是我记得上一个季度我也问过一次，就是尤其是从可能上一年年底开始感觉上你们在中高端这个市场的发展比之前轻商域乐观，尤其是可能橘子水晶以及橙子这两个品牌，尤其是成绩做得很不错。我想请教一下你们对长期来讲的话的发展的空间，以及你们对市场的份额有什么看法？Let me translate that into English. So I have two questions. The first question is in relation to the same store RevPAR performance of the company that has been somewhat affected by some of the old store under the Hanting brand that management mentioned about, wondering how long would it take them to kind of resolve the issue in such a way that we would start to see stabilization on the same store RevPAR. Then secondly, just on the mid-upscale segments, particularly the upscale segments for the Crystal Orange as well as the IntercityHotel brand has done very well in the last, I think, a couple of quarters. Just wondering, you know, how management think about the long-term growth potential as well as the market share expectation. Thank you.

Speaker 0

我谈到汉庭的这样的一个全局的情况，的确我们汉庭进化到现在的4.0的产品，我认为是一个过去几年产品持续迭代的一个相对成熟的一个状态。汉庭的产品设计我认为不仅在中国，在全世界都能引领经济型酒店的设计的最前沿，尤其在我们华族供应链的整个能力的加持下，成本更低，造价工期更短，质量更稳定，应该讲是一个非常强的对于整个中国国民市场的一个发展的这个核心的品牌。那么刚才我也提到新的产品的确对于老的一些汉庭，尤其是我们清单里看到的2.5以下的早期产品，的确形成了代替差的这样的一个产品力的这个差距。那么这个呢，是目前汉庭在未来一两年之内的核心工作，我们要迅速实现对于老产品的升级改造以及退换，这个时间我们预计会在未来一两年是整个汉庭事业部的核心工作。当然，同时汉庭在全国的签约和发展速度还是非常的强劲的，尤其今年其实汉庭的整个签约，应该讲比我们预期的要更来得更好。一方面，汉庭的任务一方面是保持一个非常高速的签约和增长，同时还实现在一二线老产品的替换。我认为在未来一两年这是一个核心工作。谢谢。

Speaker 4

In terms of your question regarding the Hanting Hotel brand, currently, as we discussed previously, we launched the Hanting 4.0 version. Over the last several years, we have been consistently upgrading the Hanting Hotel brand. We believe the 4.0 should be a relatively mature product. The product itself, probably not only in China but also globally, in terms of its design and hotel quality, should be at the leading position. It is definitely leveraging our strong capability from the supply chain because it is creating a much lower CapEx, lower OpEx, a shorter construction period, and also better performance. Regarding the pressures from the new hotels to the older hotels, as I said previously, we noticed that, and especially our observation internally, those Hanting 2.0, 2.5 version and below are facing the biggest pressure in terms of the RevPAR performance.

It is probably going to take one or two years to solve this problem because of the large basis over the past 20 years. However, we are very glad to see the new signings for the Hanting Hotel brand actually this year have been very strong. There are two major things that we are going to do. One is we keep signing new contracts and opening new hotels in different areas. Also, we have to do some major substitutions by using the new products to replace the old products, or continuously upgrading the existing hotel to improve the competitiveness. Thank you.

Speaker 0

关于橘子和橙子, 我也很高兴跟大家谈谈我们这两个非常强势的品牌。橘子在经历了这个3.0产品的发布之后, 应该讲整个市场表现越来越好。橘子我们是希望能成为和全季背靠背的中档酒店的这个主力的市场品牌。我们希望全季和橘子能成为中国酒店业的数一数二的这个价目上的选择。目前橘子刚刚突破1,000家门店, 我们很高兴看到全季品牌连管道签约管道, 我们在中国已经有超过4,000家门店。我想橘子的这背靠背的含义就是我们希望能成为第二个全季品牌, 成为整个市场的毫无争议的第二选择。橘子正在往这个方向努力。关于橙记, 我也想很高兴跟大家分享一下橙记的这个目前的发展。橙记的确通过这两年的产品研发和运营的提升, 我们今年上半年橙记的同店RevPAR是中国应该讲唯一的增长的品牌。对, 我们实现了不仅仅是规模的增长, 在快速规模签约增长和开店增长的前提下, 我们的同店RevPAR还实现了增长。因而毫无疑问, 我们橙记希望通过未来三年、五年也能成为中国在中高端酒店的这个领导者品牌, 领导者品牌, 这是我们的目标。为此我们正在展开全面的努力, 尤其在一些核心城市的标杆物业, 我们希望通过橙记来迅速树立中国全新一代中高端的旗舰产品。因为正好中国的房地产也给我们这种机会, 市场供应出很多优质的原来的假期写字楼和优质的原来四五星酒店的存量的资产, 给到我们橙记这样的一个品牌来实现新的发展。因而我认为橙记代表的中高端的产品线在中国引领了未来中高端的新高者, 所以我们对橙记发展也充满了信心。

Speaker 4

Okay. In terms of our Orange Hotel brand and the IntercityHotel brand, I'm very happy to share something with you. In terms of the Orange Hotel brand, you know, after launching the 3.0 version, we have been getting a lot of, you know, traction from the franchisee and its customers. We want the Orange Hotel brand to become a back-to-back brand for Ji Hotel. We just achieved, you know, a thousand milestones for the Orange Hotel brand recently. In terms of the Ji Hotel, currently, you know, the hotel in operation and in pipeline, putting them together, has already exceeded around 4,000 hotels. We definitely hope, you know, the Orange Hotel could be the second, you know, growth driver in our midscale segment. Together with Ji Hotel, we want them to become the number one and number two, you know, hotel brands in the midscale segment for the overall market.

In terms of the IntercityHotel, because of, you know, the high quality and the very accurate, you know, brand and product positioning, you know, we have been achieving quite rapid, you know, development of this IntercityHotel over the past several quarters. More importantly, you know, IntercityHotel achieved a positive growth, you know, in terms of the like-for-like or same hotel RevPAR in the second quarter, which is probably something quite few other brands can achieve, the positive RevPAR growth. Therefore, in the next probably three to five years, we definitely want our IntercityHotel brand to become a leading brand in the upper midscale segment.

Because we are also taking the benefits, you know, from the weakness of the real estate market, we do see a lot of, you know, A-grade office buildings have been out in the market, especially in the tier one to tier two cities in some of the prime locations. That definitely creates or gives us a lot of, you know, opportunity to build a very nice and high-quality hotel product. It's going to be a new standard or a new generation. IntercityHotel is going to be a new standard and new generation, you know, or new definition of the upcoming, you know, upper midscale segment hotel in the near future. Thank you.

Speaker 3

Thank you. We will take our next question. Your next question comes from the line of Shi Ling from CICC. Please go ahead, your line is open.

Speaker 1

谢谢关注。我有两个问题，一个呢，就是我们的这个供应链能力，因为这一块确实是咱们H World Group Limited很引领这个行业的。那可不可以为我们深入讲一下，就是这块是实现了哪些提升，然后对未来的运营成本下降有多大的帮助？然后第二个呢，是关于DH，就是DH一直在做这个轻资产化嘛，那未来的这个轻资产化的这个结构是怎么样的？我再翻译成英文。

Speaker 2

Thank you, management. I have two questions. The first is on the supply chain. How do we strengthen our supply chain capability in detail? Could you explain more about this? To what extent will this contribute to future decrease of operating costs? The second question is about DH. What will be the pace of the future shift towards asset-light model for DH? Thank you.

Speaker 4

好的, 我是金辉, 我回答一下关于供应链, 很高兴大家关注到华住供应链。华住供应链已经成为华住实现可持续高质量发展的核心能力之一。我们不断的其实在2024年开始, 华住就规划整个华住供应链的整体升级。我们通过了扩大中国最头部制造业企业最头部企业的合作, 加深这个中国头部企业的合作, 增加了很多优化的产品设计、升级质量标准、审核体系等等方面, 来实现了更高质量的产品、更低的营建和运营成本、更短的营建工期。我给出几个具体的数据, 目前在家具、软装、运营物资、基础建材等采购成本上, 我们同比已经实现了10%-20%的区间的降幅。在营建周期上, 以汉庭为例, 汉庭4.0的模组化生产可以帮助营建周期缩短30天。显而易见, 整个强大的供应链使得华住在未来在总成本和效率, 成本领先上面能助力华住在整个酒店业处于一个领先的这样的竞争优势。

Speaker 0

In terms of our supply chain capability, obviously, as we always said, the supply chain capability becomes a very core competency for us to maintain or to achieve a high-quality long-term sustainable growth. Since 2024, we have been comprehensively upgrading our supply chain capability, mainly through enlarging and attracting a lot of top-tier suppliers and cooperations with them closely, as well as increasing more modularization application and optimizing some of the product design and increase the quality standard and the reviewing system as well in order to achieve a higher quality product and a lower CapEx and OpEx, as well as shorter construction periods. I can share with you some of the data. As of now, in terms of, for example, furniture and furnishing, the consumables, some basic material, we have achieved around 10% to 20% cost of decline on a year-over-year basis.

Also in terms of the construction periods, taking Hanting 4.0 as an example, because we are applying a more modularization that actually helped the construction period for Hanting 4.0 products by 30 days. Therefore, the strong and the strengthening, the supply chain capability could definitely help us to grow in a longer term with definitely a cost of leadership and as well as the high efficiency. Thank you.

Speaker 2

This is Jihong He. I can address the DH asset-light business model and the development. In Europe, especially in Germany or Central Europe, the legal requirement is not as easy to dissolve any lease contract. We are working hard on discussing and negotiating with the landlord. Not everything would turn out exactly as we expected. We continue to try this out. We are continuously screening the profitability of our lease hotels, especially for low-performing or non-performing hotels. We are constantly engaged in a discussion. We cannot disclose anything yet, but some of the lease negotiation and some of the change of the lease are in the works. We will report as soon as we have any information about that. In the future, we are also trying very hard to go on asset-light model. We are very, very careful in signing any potential lease contracts.

We really need to look at the commitment and also the return in the longer term as well.

Speaker 3

Thank you. This concludes today's question and answer session. I will now hand back to Jason Chen for closing remarks.

Speaker 0

Thank you, everyone, for taking your time with us today. We look forward to seeing you in the upcoming quarter. Thank you and bye-bye.

Speaker 3

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