HTHT

Industry Outlook

• China's domestic travel maintained steady growth in H1 2026: domestic resident trips reached 3.5 billion, up 5.4% YoY; total domestic travel spending grew 2% YoY to RMB 3.2 trillion, with travelers trending toward more frequent, prudent spending.
• China's newly released 15th Five-Year Plan tourism development targets 8.3 billion annual domestic trips, RMB 7.7 trillion total domestic travel consumption, 190 million inbound tourist arrivals, and US$150 billion inbound spending by 2030, creating strong long-term growth potential for travel and accommodation industries.

Network Expansion Strategy

• The company pursues high-quality network expansion, prioritizing lower-tier city penetration while optimizing hotel footprint in prime locations of core cities, progressing toward the strategic goal of 20,000 hotels in 2,000 Chinese cities.
• 498 new hotels opened in Q2 2026, in line with internal plans. New signing momentum remains solid, with hotels in pipeline growing both QoQ and YoY as of end-Q2 2026.

Brand Strategy

• The company maintains a multi-brand strategy focused on the mass economy and mid-scale lodging segments, with core limited-service brands Hanting, Ji Hotel, and Orange serving as key growth engines.
• In the 2025 global single-brand room count ranking, Ji Hotel rose to 1st place, Hanting took 2nd place, and Orange climbed to 26th place, marking the first time Chinese hotel brands have taken the top two global spots, validating the company's brand strategy.
• The new Hanting 4.0 product has received strong market and franchisee recognition, with better RevPAR performance than older versions; over 200 Hanting 4.0 hotels are already in operation and pipeline, with development outpacing initial expectations.
• The upper mid-scale segment is a core strategic focus, with four flagship brands (Intercity, Renji, Crystal, Mercure) driving growth; new upper-upscale brand Grand G has over 20 hotels in pipeline, focused on prime city landmark locations with ongoing business model refinement.

Membership and Marketing

• The Huazhu Club (Age Reward) membership program is the company's core long-term competitive advantage; membership base and member-booked room nights grew steadily alongside network expansion.
• Key ongoing membership initiatives: upgrading member benefits, expanding cross-industry partnerships, diversifying loyalty point redemption scenarios, accelerating international expansion to capture inbound travel demand, and deepening global membership cooperation with Accor.

Corporate Social Responsibility

• As of end-Q2 2026, total group employees exceed 260,000, with refined internal talent development programs providing clear career growth paths.
• The company promotes green hotel operations, sharing proven energy-saving management solutions with franchisees to reduce utility costs and improve operating returns.
• The group runs multiple public welfare programs via its charity foundation, focused on educational assistance, post-disaster relief, and other social initiatives.

• The company maintains its full-year 2026 new hotel opening target of 2,200 to 2,300 hotels; lower first-half opening volume is attributed to normal base and supply chain volatility, with no change to the full-year plan.
• Management maintains a cautiously optimistic outlook for overall 2026 China travel demand, after July extreme weather impacted some regional performance, and August saw a broad recovery trend.
• Over the medium to long term, continued expansion of the asset-light MNF business is expected to drive steady expansion of the group's overall EBITDA margin.
• For full-year 2026, the company maintains its target of achieving positive net profit for the international business segment.
• Second-half 2026 profitability and costs are expected to remain stable, with reasonable strategic investments planned for talent development, technology/AI, membership, and brand building.
• The board has approved a new three-year shareholder return plan totaling US$2.5 billion, effective immediately, with an initial ordinary cash dividend of approximately US$275 million approved as the first distribution under the new plan.

1. China Domestic Hotel Segment: Revenue grew 14.9% YoY to RMB 5.9 billion, accounting for 83.1% of total group revenue. Hotel GMV grew 13.2% YoY to RMB 30.5 billion, driven by a 12.7% YoY increase in operating rooms. Management and Franchise (MNF) revenue grew 25.2% YoY to RMB 3.6 billion, contributing 50.7% of China segment revenue and 50.7% of total group revenue. MNF gross operating profit grew 18.5% YoY to RMB 2.2 billion. ADR increased 2.6% YoY (fourth consecutive quarter of growth), and RevPAR increased 1.1% YoY. As of end-Q2 2026, there are 13,417 hotels in operation, 3,054 hotels in pipeline, covering 1,468 Chinese cities. Upper mid-scale sub-segment has 1,738 hotels in operation and pipeline, up 13.4% YoY.
2. International Hotel Segment: Revenue decreased 5.8% YoY to RMB 1.3 billion, accounting for 18.3% of total group revenue. Blended RevPAR decreased 3.8% YoY: ADR rose 0.9% YoY, while occupancy fell 3.5 percentage points, pressured by the Middle East conflict and ongoing ramp-up of new Southeast Asia stores. The European sub-segment delivered solid performance, with RevPAR growing 1.1% YoY driven by improvements in both ADR and occupancy.
3. Group Total: Total group revenue grew 10.8% YoY to RMB 7.1 billion. Adjusted EBITDA grew 20% YoY to RMB 2.7 billion, with adjusted EBITDA margin expanding 3 percentage points YoY to 38.3%. Adjusted net income grew 26.9% YoY to RMB 1.7 billion, with adjusted net income margin improving 3.0 percentage points to 24.0%.

• Ongoing Middle East conflict has negatively impacted customer traffic and operating costs for the company's 20+ hotels in the Middle East, though exposure is limited as all are managed/franchised assets, contributing little to overall international revenue and profit; management has implemented added cost controls to keep overall impact contained.
• July 2026 extreme weather in multiple Chinese regions negatively impacted summer holiday performance in affected markets, creating near-term demand volatility.
• Macroeconomic external uncertainty remains, creating downside risk for overall travel demand.
• Capturing customer share in new expansion markets (leisure travel, inbound travel, lower-tier cities) requires additional time and investment, creating near-term pressure on direct member acquisition.

Q: What is Q3 2026 RevPAR performance and full-year RevPAR outlook, given Q3 extreme weather and peak summer demand volatility? / A: China leisure travel demand remains steadily growing, with travel now a consumer post-pandemic necessity and government policy supporting cultural tourism. New travel formats including family trips, silver traveler trips, and self-drive trips are performing strongly, and inbound travel is boosting demand in core first- and second-tier cities. July saw negative extreme weather impacts that left some regional summer performance below expectations, but August demand has recovered broadly. Management maintains a cautiously optimistic outlook for full-year 2026 overall demand. (287 chars)

Q: First-half 2026 hotel openings were 20% lower than first-half 2025 despite being on track for the full-year target; is there a structural change to annual opening seasonality? Also, what is the progress of economy hotel product upgrades? / A: Q2 openings hit 498 hotels, in line with company plans, and new signing momentum remains solid with pipeline volume growing YoY and QoQ. The company prioritizes high-quality growth over pure quantity, with tighter requirements for new signings and openings, a strategy that will continue for the next several years. Full-year 2026 opening guidance is maintained, and lower first-half volume is normal volatility with no structural change. Hanting 4.0 has outperformed expectations, with over 200 hotels open/in pipeline and stronger RevPAR than older versions; the company will continue upgrading older stores and extending the Hanting brand to smaller lower-market properties. (463 chars)

Q: What is your view of upper mid-scale segment supply-demand balance, will you accelerate expansion, and can you share an update on Grand G performance and roadmap? / A: The upper mid-scale segment has strong growth opportunities from both consumption upgrade and shifting demand away from traditional high-end hotels. The company will continue expanding the segment via four core flagship brands to gain market share, and Intercity Hotel is already delivering strong growth. Grand G has over 20 hotels in pipeline, focused on prime city locations with ongoing business model refinement. Management is optimistic about Grand G's customer reputation and product model, and expects it to become a leading flagship brand in China's upper high-end segment, with cautious quantity expansion for now. (379 chars)

Q: What is the latest customer acquisition channel breakdown, and what is your membership system optimization strategy? / A: Membership growth and booking contribution are in line with expectations, and OTA contribution remains stable at 20-25%. OTA support is still needed to acquire customers in new expansion markets, especially inbound and lower-tier cities. The strategy has three core pillars: 1) prioritize best-in-class member benefits including guaranteed lowest prices and complimentary breakfast, with new innovations like family memberships that have received positive market feedback; 2) expand cross-industry partnerships with mobility, airline, and new energy vehicle brands; 3) deepen international membership cooperation with Accor to capture more inbound demand and enable Chinese travelers to access Huazhu/Accor hotels globally. (414 chars)

Q: What is the second-half and full-year EBITDA margin outlook, and what is the margin outlook for the international business? / A: The company's ongoing asset-light strategy will drive steady long-term EBITDA margin expansion, supported by a mature SG&A cost control system that has delivered consistent results. The company will make necessary strategic investments in talent, AI/technology, membership, and brand building, but second-half profitability is expected to remain stable. The Middle East conflict impacted the 20+ hotels in the region, but their contribution to overall international revenue and profit is very limited, and added cost controls have kept overall impact contained. The full-year target of positive profit for the international business remains unchanged. (376 chars)