H World Group Limited Q3 FY2025 earnings call

• Long-term outlook: H World believes it has great long-term growth potential in China's hotel industry due to high-quality supply shortage, increasing travel demand shifting to necessity, and redefined consumption concepts. Supply side reform will bring opportunities for domestic branded hotels like H World.
• Third quarter performance: Early market improvement seen. RevPAR stayed stable due to refined revenue management. Network expanded with 17.3% y-o-y room growth. Membership base exceeded 300 million, up 17.3% y-o-y. Monetized and franchised business delivered strong growth. Launched new upper-midscale brand Ji Icons to enrich brand portfolio.

In the third quarter, H World Group's group revenue grew 8.1% year-over-year to RMB 7 billion, with Legacy-Huazhu revenue up 10.8% year-over-year to RMB 5.7 billion. Group adjusted EBITDA rose by 18.9% year-over-year to RMB 2.5 billion, with a margin of 36.1%. The manachised and franchised business revenue recorded a robust 27.2% year-over-year growth to RMB 3.3 billion. The manachised and franchised business gross operating profit rose by 28.6% year-over-year to RMB 2.2 billion, contributing over 70% of the group's total gross operating profit.

• Fourth quarter 2025: Group revenue expected to grow 2% to 6% y-o-y, 3% to 7% ex-DH. Manachised and franchised revenue expected to grow 17% to 21% y-o-y compared to the fourth quarter last year.

Q: About RevPAR and demand trend, including fourth quarter China revenue guidance implication and 2026 outlook.

A: Hui Jin mentioned third quarter RevPAR stabilized. Fourth quarter RevPAR implied is flattish to slightly positive. Business demand not strong yet, leisure demand continuously growing. Outlook for 2026 too early to tell.

Q: About RevPAR breakdown, ADR performance and sustainability, and gap between blended and same-hotel RevPAR.

A: Hui Jin said ADR improved due to revenue management efforts and product/service upgrades. Gap for mature hotels narrowed in third quarter, with ongoing efforts to improve RevPAR.

Q: About newly launched upper-midscale brand Ji Icons, store opening plan, store economics, advantage vs others, and franchisee feedback.

A: Hui Jin said Ji Icons is a core brand in upper-midscale segment, details on UE and CapEx to be shared after first hotels opened.

Q: About hotel opening, new signings, and upper-midscale targets.

A: Hui Jin said first 9 months opened over 2,000 hotels, likely to open more than 2,300 for full year. Focus on quality expansion. Upper-mid segment has 1,600 in pipeline and operations, aiming to be leading by 2030.

Q: About cost and margins outlook, and membership program strategy.

A: He Jihong said adjusted EBITDA margin improvement due to asset-light strategy. Cost control via supply chain for hotel operating costs, rental reduction for leased/owned hotels, and SG&A optimization. Membership strategy includes price guarantee, fulfilling diversified demand, enhancing corporate client exposure, and cross-industry cooperation.