Huazhu (Minutes): Experiential consumption shows significant growth
I. Review of Core Financial Report Information
The following is a summary by Dolphin Research regarding the 3Q25FY earnings call minutes of H World Group $HWORLD-S(01179.HK) $H World(HTHT.US). For a review of the financial report commentary, please refer to "H World: Deep Squat and Jump! H World Still Industry Top Stream"
II. Detailed Content of the Earnings Call
2.1 Key Information from Executive Statements
1) The Chinese hotel industry still has significant long-term growth potential. Although the current industry is well-supplied, there is a noticeable lack of quality supply, and the level of hotel chain development in China is far below that of mature markets. As transportation networks improve and travel shifts from optional to necessary, accommodation demand is rapidly penetrating from major cities to county-level markets, and supply-side reform will become a long-term trend driving industry upgrades.
2) Chinese consumers are redefining consumption concepts and Oriental aesthetics. Experiential consumption—including tourism, exhibitions, concerts, and sports events—shows significant growth, but existing hotel supply cannot meet the continuously upgrading demand, providing local brands with long-term and definite growth opportunities.
3) In the third quarter, the overall market showed signs of recovery, with railway, aviation, and tourist traffic continuously rebounding, and strong domestic tourism demand during the double holidays. Against this backdrop, the group enhanced pricing strategies and promotional systems for flagship hotels, newly opened hotels, and mature hotels through refined revenue management, achieving year-on-year growth in ADR while maintaining stable occupancy rates, driving RevPAR to remain roughly flat compared to the same period last year.
5) The franchise business maintained strong growth, significantly boosting the group's overall operating profit. H World will continue to focus on economy and mid-range brands to meet the mass market's demand for high-value accommodation products, continuously upgrading core products and services, optimizing brand portfolios, and strengthening market positioning.
6) The mid-to-high-end brand matrix achieved rapid expansion this quarter, with the number of Ramada Worldwide hotels exceeding 1,600, a year-on-year increase of 25.3%. The company launched a new mid-to-high-end brand, G Icons, on its twentieth anniversary, enhancing brand premium through leasing aesthetics and cultural elements, and leveraging the group's supply chain, modular construction system, and direct sales capabilities to achieve a low-cost, high-efficiency, and high-quality operating model.
7) H World continues to emphasize the importance of strengthening the membership system and direct sales capabilities, constantly optimizing member benefits, expanding points usage scenarios, and promoting cross-industry cooperation to further enhance member stickiness and direct sales ratio, supporting long-term growth.
2.2 Q&A Session
Q: The revenue guidance for the fourth quarter of the Chinese market this year indicates a year-on-year growth of 3%–4%. What RevPAR assumptions does this expectation correspond to? What are the main demands supporting the flattening decline in RevPAR in the third quarter? What is the outlook for RevPAR and demand trends in 2026?
A: RevPAR in the third quarter was roughly flat year-on-year, no longer declining compared to the previous two quarters, mainly driven by leisure travel demand—significant contributions from summer travel, September travel, and the National Day and Mid-Autumn holidays. Meanwhile, according to third-party data, the growth rate of industry supply has slowed, which is conducive to RevPAR stabilization; the company's optimization of pricing strategies and revenue management for flagship stores, new stores, and mature stores over the past six months also played an important role in stabilizing RevPAR. Looking ahead to the fourth quarter, due to entering the off-season and the macro environment still being uncertain, based on the current revenue guidance, the company expects RevPAR to be roughly flat or slightly increase: business travel demand has not yet strongly recovered, but leisure travel and new leisure consumption such as concerts, marathons, and sports events remain strong. As for 2026, management believes it is too early to judge, and whether RevPAR and supply-demand balance can remain stable still needs observation, with more detailed outlook to be provided in the fourth quarter financial report.
Q: From ADR and occupancy rate perspectives, ADR has performed more prominently recently. What are the reasons behind this and its sustainability? Additionally, is there hope for narrowing the gap between mixed RevPAR and same-store RevPAR in the future, and what measures will the company take?
A: Enhancing RevPAR (especially in terms of room rates) is the core management task for 2025, and the company has invested a lot of effort in revenue management and tiered pricing: On one hand, continuously optimizing pricing strategies for different levels of hotels and products, and providing incentives for frontline sales teams to drive front-end sales; On the other hand, the long-standing product upgrades, quality improvements, and excellent service have brought more customer recommendations, allowing the company to form a clear product and service leading advantage in some regions, thus having stronger pricing power, which is the key reason for ADR improvement in the third quarter. Regarding the gap between mixed RevPAR and same-store RevPAR, management explained that a large number of high-quality hotels have been opened in first- and second-tier cities over the past year and a half, causing a certain "cannibalization effect" on mature hotels in the short term, but through implementing differentiated, multi-tiered pricing systems and continuously promoting upgrades and renovations of existing hotels, the year-on-year decline of mature hotels has significantly narrowed, and performance is improving. The company hopes to further repair same-store RevPAR through continuous product upgrades and price system optimization, thereby gradually narrowing the gap with mixed RevPAR.
Q: Regarding the new high-end brand G Icon, how does the company plan its positioning and development? Are there any disclosed indicators for store expansion, capital expenditure, and investment recovery? What are the advantages compared to peers?
A: The launch of G Icon reflects H World's firm determination to achieve breakthrough development in the mid-to-high-end market through a multi-brand strategy. The brand will become one of the company's core brands in the mid-to-high-end segment, striving to become "the most favored top brand or hotel by Chinese customers." The birth of G Icon also aligns with the current rise in Chinese cultural confidence and the strengthening of consumer preferences for local culture, services, and lifestyles, providing strong support for brand development. As for the store expansion pace, capital expenditure, and investment recovery period economic indicators you mentioned, management stated that they will be disclosed after the first batch of hotels open, and no specific data has been provided yet, nor has there been more extended explanation on franchisee feedback.
Q: How is the progress of new hotel openings in the third quarter? Will the annual target of 2,300 openings be exceeded? Also, what is the company's long-term scale and positioning in the mid-to-high-end market?
A: Benefiting from accelerated signing and improved supply chain capabilities in the post-pandemic period of 2023–2024, the conversion rate from project reserves to opening projects has significantly increased, with new hotel openings slightly exceeding 2,000 in the first three quarters, and the annual number of new openings is expected to slightly exceed the previous guidance of 2,300. However, the company always adheres to "quality first rather than pure scale expansion" in signing and opening, emphasizing high-quality, sustainable growth. The high-end and mid-to-high-end segments currently have a reserve and operational scale of about 1,600 hotels, with strong growth; but in the longer term (such as 2030), the company will still focus on the mass customer base in the economy and mid-range markets, with these two product lines expected to continue occupying the main market share, while striving to keep the entry-level product line at the fastest growth rate in the industry and become the leader in the Chinese market by 2030.
Q: What are the latest outlooks on costs and profit margins? Additionally, how will the company enhance member loyalty and conversion rate for the membership system that has exceeded 300 million in scale?
A: Direct sales and membership business are one of the company's core strategies, with the current member base and room nights sold to members continuously growing, but the company believes "this is far from enough." The future will enhance member value through four directions: First, launching a price guarantee plan to ensure members enjoy the best prices, quality services, and differentiated hotel experiences; Second, expanding H Rewards from primarily serving business travelers to covering a broader range of leisure and emerging needs, including sports events and inbound tourism; Third, enhancing reception and service capabilities for business and corporate clients to expand business coverage; Fourth, actively promoting cross-industry cooperation, partnering with top vertical field enterprises to enhance member experience and engagement. Regarding costs and profit margins themselves, emphasizing strengthening long-term profitability through direct sales and membership systems.
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