H World Group Limited ((HTHT)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The latest earnings call from H World Group Limited revealed a mixed sentiment, highlighting robust growth in certain segments such as the upper midscale and asset-light models, while also acknowledging challenges like a decline in RevPAR and uncertainties stemming from tariff issues. This dual perspective underscores the company’s strategic advancements amidst a backdrop of market volatility.
Expansion in Upper Midscale Segment
The company reported a significant increase in the number of upper midscale hotels, which grew by 36% year-over-year, reaching a total of 933 hotels. The pipeline also expanded by 22% year-over-year to 523, indicating strong momentum in this segment.
Robust Membership Growth
H World Group’s membership base saw impressive growth, reaching nearly 280 million. Room nights generated through the central reservation system accounted for 65.1% of the total, marking an increase of 5.4 percentage points from the previous year.
Improvement in Asset-Light Model
The company’s asset-light strategy showed positive results, with the percentage of manachised and franchised hotels increasing to 46% from 38% in the previous year. Additionally, asset-light hotels in the pipeline rose to 57%.
Strong Growth in Manachised and Franchised Revenue
The manachised and franchised business segment experienced robust growth, achieving a 21.1% increase year-over-year. This was driven by a strong expansion of the network.
Legacy-DH RevPAR Improvement
Legacy-DH’s RevPAR improved by 12.7%, with the Average Daily Rate (ADR) up by 2.8% and occupancy increasing by 5.3 percentage points. The segment performed particularly well in North Africa and the Middle East.
RevPAR Decline for Legacy-Huazhu
Conversely, the Legacy-Huazhu segment faced challenges, with RevPAR declining by 3.9% year-over-year. This was accompanied by a 2.6% decrease in ADR and a slight drop in occupancy rate by one percentage point.
Challenges from Tariff Issues
Tariff issues that began in April introduced uncertainties to the market outlook, affecting business travel and contributing to market volatility.
Decrease in DH Revenue
DH revenue decreased by 11.3% year-over-year, primarily due to the transformation of 10 leased hotels into franchised hotels.
Like-for-Like RevPAR Decline
The company experienced an 8.3% year-over-year decline in like-for-like RevPAR, attributed to pressures from new supply and regional occupancy challenges.
Forward-Looking Guidance
Looking ahead, H World Group anticipates a challenging environment for RevPAR in the first quarter of 2025, with a 3.9% year-over-year decline. Despite these challenges, the company expects promising growth in leisure travel demand, with mid-to-high single-digit increases in traveler numbers and spending during key holidays. The company plans to focus on quality improvement, with a pipeline of 2,865 hotels by the quarter’s end. Revenue is expected to grow between 1% and 5% in Q2 2025, driven by an 18% to 22% increase in manachised and franchised revenue.
In summary, H World Group’s earnings call presented a nuanced picture of the company’s current standing. While there are significant growth opportunities in the upper midscale and asset-light segments, challenges such as RevPAR decline and tariff-related uncertainties remain. The forward-looking guidance suggests cautious optimism, with strategic focus areas poised to drive future growth.