HTHT: After the reset and rebound, how long can the poster-child status last?---

Before the U.S. market open on Mar 18, 2026 (Beijing time), Huazhu (1179.HK/HTHT.O) reported Q4 2025 results. With the asset-light transition advancing and lodging demand recovering, Q4 extended the strong Q3 momentum, beating market expectations. Specifically: $HWORLD-S(01179.HK) $H World(HTHT.US)

1) RevPAR kept improving QoQ. Looking at the core KPI RevPAR, Q4 rose 1.8% YoY, sustaining the positive growth seen in Q3 and ticking up sequentially. On mix, ADR was the main driver (+4% YoY), helped by legacy hotel renovations and a higher mix of premium brands (Crystal Orange, Manxin, Intercity). OCC fell 1.6% YoY, a middling print.

In Europe, RevPAR rose 7.4% YoY. By mix, year-end trade fairs and the Christmas season lifted ADR by 4.3% YoY, while OCC growth moderated QoQ.

2) Slower new openings by design. Huazhu added a net 157 hotels in Q4, a clear slowdown, with mid-to-upscale brands as the growth engine. On one hand, Huazhu raised the bar for franchise projects; on the other, with longer payback periods, franchisees turned more cautious.

In addition, the company closed 226 hotels in Q4, a quarterly high. This indicates accelerated product iteration at Huazhu.

3) Self-operated outperformed. Total revenue grew 8.3% YoY, beating the prior 2%–6% guidance range, with a slight QoQ acceleration. Relative to expectations, the market was already bullish on franchise growth, so self-operated was the swing factor behind the Q4 revenue beat; Dolphin Research believes a rebound in Tier-1 city business activity boosted ADR and drove faster RevPAR.

4) Asset-light shift kept lifting margins. With a materially higher franchise revenue mix vs. last year (+4.8pct), GPM expanded by 950bps. On opex, Q4 saw higher selling ratio as Huazhu boosted mid-to-upscale brand exposure via social and ads, but a rising franchise mix drove a sharp drop in G&A ratio, taking adj. EBITDA to RMB 2.19bn (vs. street at RMB 1.78bn).

5) 2026 guide: +2%–6%. Management guides +2%–6% for 2026, with franchise up 12%–16%. That implies a moderation vs. 2025, yet store opening guidance of 2,200–2,300 remains brisk.

Dolphin Research view:

As a sector bellwether, Huazhu’s prints often capture lodging demand inflections. This quarter reinforces several points.

1) Supply-demand is shifting: After turning positive in Q3, ADR accelerated QoQ in Q4, signaling restored pricing power for leading chains like Huazhu and easing concerns that 'consumption downgrading' would force price cuts to chase occupancy.

Moreover, the industry’s supply is moving from a pyramid (dominated by low-end inns/economy hotels) to an olive shape, evidenced by Huazhu culling low-end capacity and adding higher-quality mid-to-upscale supply.

2) Consumers focus more on value-for-quality, not just low price: Recent prints from Atour and Huazhu show both franchisees and guests prefer mid and mid-to-upscale brands with better design and standardized service (e.g., All Seasons 5.0, Crystal Orange, Atour 4.0), the core RevPAR driver. Conversely, older economy hotels are seeing RevPAR declines even with lower prices.

The takeaway: lodging spend is undergoing a 'structural upshift'. Pricing power now stems more from product, service, and experience upgrades than location alone; for the same site, experience-led premiums outweigh footfall gains from discounting.

Finally, on valuation, after two strong quarters, Huazhu now trades at ~20x 2026E, which looks full against ~10% profit growth. For long-term believers in Huazhu’s competitiveness, Dolphin Research suggests waiting for a pullback to ~18x (below HKD 112.4bn) before adding.

Details follow:

I. RevPAR kept improving QoQ

Before the P&L, we start from operating metrics to gauge Q4 performance. This sets the foundation for the financials.

1.1 ADR recovery was solid

RevPAR rose 1.8% YoY in Q4, extending Q3’s positive growth with a slight QoQ pickup. The trend remained firm.

On supply-demand, Trip.com data show industry supply growth eased from high single digits in H1 to 5%–6% in Q4, easing incremental supply pressure. For Huazhu, new versions such as Hanting 3.5 and All Seasons 5.0 expanded into lower-tier markets, and their growing mix helped offset weaker macro pricing power; in many county-level cities, Huazhu is the only national chain. ADR thus rose 4% YoY.

OCC fell 1.6% YoY. According to management on the call, business demand is still slow to recover, but off-peak travel after Golden Week and year-end leisure held up; Dolphin Research believes the OCC drop mainly reflects dilution from new store openings.

1.2 Overseas: both price and volume up

European RevPAR rose 7.4% YoY to EUR 87/night in Q4. Christmas/New Year lifted domestic and cross-border travel, while Q4 is also a traditional trade-fair/business peak in markets like Germany; corporate travel remained resilient, supporting OCC at mid-to-upscale brands like Intercity, with OCC up 2.1% YoY. ADR rose 4.3% YoY on improved brand mix and pricing power.

Beyond Europe, Huazhu is expanding in ASEAN, signing Hanting and Orange projects in Vietnam, Cambodia, and Laos, exporting its digital capabilities.

1.3 Openings slowed notably

Huazhu added a net 157 hotels in Q4, a clear deceleration. Huazhu raised operational thresholds for new franchises, and with longer single-store payback, franchisees are more cautious.

By mix, mid-to-upscale brands such as Crystal Orange, Manxin, and Madison are growing well above the group average, acting as the core engine for mix upgrade and growth. Economy brands like Hanting focus on renovation and upgrade.

Also, per the call, over 50% of the pipeline is in lower-tier cities, showing Huazhu’s push to scale mid-to-upscale offerings in county markets to capture chain-penetration dividends by leveraging brand advantage.

In essence, amid fierce competition (ADR pressure and elevated costs), unbranded independents lacking membership and tech are being weeded out, while quality assets are concentrating in top chains with superior management like Huazhu.

II. Self-operated beat

2.1 Revenue topped guidance

Q4 revenue was RMB 6.53bn, +8.3% YoY, beating the prior 2%–6% guide, with a mild QoQ acceleration. This came in better than feared.

By segment, franchise revenue rose 21% YoY on stronger supply-chain integration and robust signings, though slightly slower than Q3 QoQ, lifting its share by 4.8pct YoY to 46.3%. Given the market already expected fast franchise growth, the actual print merely met expectations.

Self-operated revenue was RMB 3.27bn, -3.2% YoY, with declines narrowing QoQ and a slight beat. Dolphin Research believes higher-end self-operated brands like Joya and Blossom House were relative bright spots, stabilizing the segment.

2.2 Asset-light mix lifted margins

With the asset-light strategy advancing, a higher franchise mix vs. last year drove GPM up 950bps to 40%. The franchise model saves on rent and labor, supporting higher margins.

2.3 Profitability improved markedly

On costs, while Huazhu temporarily lifted brand exposure for mid-to-upscale hotels via social and ads in Q4, raising the selling ratio, the expanding franchise mix pulled the G&A ratio sharply lower. Adj. EBITDA was RMB 2.19bn, well ahead of the street (RMB 1.78bn).

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