A total of 9,817 hotels or 955,657 hotel rooms in operation as of March 31, 2024.Hotel turnover1 increased 21.1% year-over-year to RMB19.7 billion in the first quarter of 2024. Excluding Steigenberger Hotels GmbH and its subsidiaries ("DH", or "Legacy-DH"), hotel turnover increased 21.6% year-over-year in the first quarter of 2024. Hotel turnover from the Legacy-DH segment increased 15.5% in the first quarter of 2024.Revenue increased 17.8% year-over-year to RMB5.3 billion (US$731 million)2 in the first qua ...

A total of 9,817 hotels or 955,657 hotel rooms in operation as of March 31, 2024.Hotel turnover1 increased 21.1% year-over-year to RMB19.7 billion in the first quarter of 2024. Excluding Steigenberger Hotels GmbH and its subsidiaries (“DH”, or “Legacy-DH”), hotel turnover increased 21.6% year-over-year in the first quarter of 2024. Hotel turnover from the Legacy-DH segment increased 15.5% in the first quarter of 2024.Revenue increased 17.8% year-over-year to RMB5.3 billion (US$731 million)2 in the first qua ...

Hotel Operations - As of March 31, 2024, the company operated 9,817 hotels with a total of 955,657 rooms[3] - As of March 31, 2024, there were 3,172 hotels under development, including 3,138 from Legacy-Huazhu[4] - As of March 31, 2024, Legacy-DH operates 133 hotels with a total of 27,148 rooms, including 16,369 rooms under lease and 10,779 under management and franchise[6] - The company opened 569 hotels in Q1 2024 and closed 148 hotels during the same period[4] - The company temporarily closed 12 hotels in Q1 2024 for brand upgrades and business model changes[31] - The total number of operating hotels under the economy segment is 5,118, with 420,702 rooms available[37] Financial Performance - Total revenue for Q1 2024 grew by 17.8% year-over-year to RMB 5.3 billion (approximately $731 million), exceeding the previous guidance of 12% to 16% growth[3] - Hotel revenue for Q1 2024 increased by 21.1% year-over-year to RMB 19.7 billion, excluding Legacy-DH, the increase was 21.6%[3] - Net profit attributable to the company for Q1 2024 was RMB 659 million (approximately $91 million), compared to RMB 990 million in Q1 2023[3] - Adjusted EBITDA for Q1 2024 was RMB 1.4 billion (approximately $197 million), up from RMB 1.0 billion in Q1 2023[3] - Total revenue for Q1 2024 was RMB 5.278 billion (approximately $731 million), representing a year-over-year increase of 17.8% but a quarter-over-quarter decrease of 5.5%[7] - Revenue from the Legacy-Huazhu segment in Q1 2024 was RMB 4.2 billion, up 18.1% year-over-year, exceeding the previous guidance of 11% to 15%[7] - Revenue from the Legacy-DH segment in Q1 2024 was RMB 1 billion, a year-over-year increase of 16.6%[7] - Operating profit for Q1 2024 was RMB 1 billion (approximately USD 139 million), compared to RMB 664 million in Q1 2023 and RMB 757 million in the previous quarter[12] - The operating profit margin for Q1 2024 was 19.0%, up from 14.8% in Q1 2023 and 13.6% in the previous quarter, driven by increased revenue from management franchise and franchising businesses[12] Cost and Expenses - Operating costs for Q1 2024 were RMB 4.351 billion, compared to RMB 3.890 billion in Q1 2023, primarily due to network expansion and reduced rent waivers[9] - The hotel operating cost for Q1 2024 was RMB 3.6 billion, accounting for 61.6% of revenue, down from 66.3% in Q1 2023[10] - The management franchise and licensing hotel revenue for Q1 2024 was RMB 2.1 billion, a year-over-year increase of 32.8%[8] Cash Flow and Assets - Operating cash inflow for Q1 2024 was RMB 886 million (approximately USD 123 million)[14] - As of March 31, 2024, total cash and cash equivalents amounted to RMB 5.9 billion (approximately USD 818 million) with restricted cash of RMB 755 million (approximately USD 105 million)[14] - Total current assets decreased from RMB 12,056 million on December 31, 2023, to RMB 10,498 million as of March 31, 2024[21] - Cash and cash equivalents declined from RMB 6,946 million to RMB 5,909 million during the same period[21] - Total liabilities decreased from RMB 51,283 million to RMB 49,046 million from December 31, 2023, to March 31, 2024[22] - Total equity increased slightly from RMB 12,249 million to RMB 12,398 million in the same timeframe[22] Future Outlook - The company expects revenue for Q2 2024 to grow between 7% and 11% compared to Q2 2023[4] - The company expects revenue growth of 7% to 11% in Q2 2024 compared to Q2 2023, excluding the DH segment[14] - The company plans to continue expanding its market presence and investing in new technologies and products in the upcoming quarters[23] - The company has made significant investments in lease renovations, which contribute to a substantial portion of its cost structure[17] Non-GAAP Measures - The company utilizes non-GAAP financial measures, including adjusted net profit and adjusted EBITDA, to provide meaningful supplemental information about its performance[16] - EBITDA is considered a useful financial metric for evaluating operational and financial performance before the impact of financing transactions and income taxes[17] - Adjusted EBITDA is believed to better reflect the financial performance capability of the company's hotels[18] - The company emphasizes that EBITDA and adjusted EBITDA should not be viewed as indicators of future performance unaffected by other expenses and income considered outside normal business operations[18] - The limitations of using EBITDA and adjusted EBITDA include the exclusion of depreciation, amortization, income taxes, interest expenses, and incentive compensation costs[18] - The company believes that the use of non-GAAP measures enhances transparency in financial and operational decision-making[16] - The company provides reconciliations of non-GAAP financial measures to GAAP measures in its financial statements for better assessment of performance[18] - The company asserts that adjusted EBITDA allows for year-over-year comparisons by excluding certain costs that may not reflect operational performance[17] Market Position - The company operates 11% of its hotel rooms under the lease and ownership model, while 89% are managed through franchise and management agreements[19] - Huazhu's business model includes leasing, management franchising, and licensing, ensuring standardized operations across all hotels[19] - The company has rights as a major franchisee for brands such as Mercure, Ibis, and Novotel in the Greater China region[19] - Huazhu Group emphasizes its growth strategies and ability to attract and retain guests as key factors for future performance[19]

Core Viewpoint - H World Group Limited (HTHT) is set to report its first-quarter 2024 results on May 17, with previous earnings exceeding the Zacks Consensus Estimate by 6.5% [1] Q1 Estimates - The Zacks Consensus Estimate for HTHT's earnings is 27 cents, reflecting a decline of 38.6% from the prior year [2] - Revenue estimates are pegged at $699 million, indicating a 7.2% increase from the year-ago figure [2] Factors to Note - HTHT's quarterly performance is expected to benefit from a sustained recovery in leisure and business travel demand, along with expansion efforts and strong growth in Average Daily Rate (ADR) and Revenue Per Available Room (RevPAR) [3] - The company has focused on building its brand reputation, which has attracted more customers and contributed to its expansion, particularly in lower-tier cities [3] - However, increased operating costs due to business recovery and higher selling and marketing expenses may negatively impact the bottom line [3] What Our Model Says - The current model does not predict an earnings beat for HTHT, as it has an Earnings ESP of 0.00% and a Zacks Rank of 1 (Strong Buy) [4]

Core Viewpoint - H World Group Limited, a significant player in the global hotel industry, is set to release its unaudited financial results for Q1 2024 on May 17, 2024, and will host a conference call on May 19, 2024, to discuss these results [1][2]. Company Overview - H World Group Limited operates 9,394 hotels with 912,444 rooms across 18 countries as of December 31, 2023 [3]. - The company's hotel brands include Hi Inn, Elan Hotel, HanTing Hotel, JI Hotel, Starway Hotel, Orange Hotel, Crystal Orange Hotel, Manxin Hotel, Madison Hotel, Joya Hotel, Blossom House, Ni Hao Hotel, CitiGO Hotel, Steigenberger Hotels & Resorts, MAXX, Jaz in the City, IntercityHotel, Zleep Hotels, Steigenberger Icon, and Song Hotels [3]. - H World holds master franchise rights for Mercure, Ibis, and Ibis Styles, along with co-development rights for Grand Mercure and Novotel in the pan-China region [3]. Business Model - H World employs a mix of leased and owned, manachised, and franchised hotel models [4]. - As of December 31, 2023, 11% of hotel rooms are operated under the lease and ownership model, while 89% are under manachise and franchise models [4]. - The company maintains a consistent standard and platform across all its hotels [4].

SINGAPORE and SHANGHAI, China, May 06, 2024 (GLOBE NEWSWIRE) -- H World Group Limited (NASDAQ: HTHT and HKEX: 1179) (“H World”, “we” or “our”) a key player in the global hotel industry, today announced that it will schedule to release its unaudited financial results for the first quarter of 2024 on Friday, May 17, 2024 (Hong Kong time), after the trading hours of The Stock Exchange of Hong Kong Limited and before the opening of the U.S. market. H World’s management will host a conference call at 9 p.m. (U.S ...

SHANGHAI, China, April 30, 2024 (GLOBE NEWSWIRE) -- H World Group Limited (NASDAQ:HTHT, the "Company" or "H World"))), a key player in the global hotel industry, today announced that it has completed its previously announced put right offer relating to its 3.00% Convertible Senior Notes due 2026 (CUSIP No. 44332NAB2) (the "Notes"). The put right offer expired at 5:00 p.m., New York City time, on Monday, April 29, 2024. Based on information from Wilmington Trust, National Association as the paying agent for ...

Hotel Network Expansion - The company expanded its hotel network from 7,830 hotels as of December 31, 2021, to 9,394 hotels as of December 31, 2023, with a compound annual growth rate of 9.5%[3] - As of December 31, 2023, the company operated 9,394 hotels, including 691 leased and owned hotels and 8,703 managed and franchised hotels, totaling 912,444 hotel rooms[3] - The company is developing an additional 3,098 new hotels, including 30 leased and owned hotels and 3,068 managed and franchised hotels as of December 31, 2023[3] - The company's hotel network covers 9,394 hotels across 31 provinces, autonomous regions, and municipalities in Greater China and 18 other countries, with 3,098 hotels under development as of December 31, 2023[33] - The company operates 47 managed and franchised hotels through Deutsche Hospitality and 8,656 managed and franchised hotels through other entities[35] - The company has 991 cities across 29 provinces and municipalities with operating hotels, and 889 cities across 30 provinces and municipalities (including Taiwan) with hotels under development[35] - The company has 30 leased and owned hotels under development, with 25 in the pre-conversion phase and 5 in the conversion phase, with a total budgeted development cost of RMB 147 million (USD 21 million)[36] - The company has 683 leased hotels and 8 owned hotels, accounting for approximately 7.4% of its operating hotels[38] - The company has 8,526 managed hotels and 177 franchised hotels, accounting for approximately 91% and 2% of its operating hotels, respectively[40] Membership and Direct Sales - The company's membership program, Huazhu Club, had over 228 million members as of December 31, 2023, with 73% of room nights sold to individual or corporate members in 2023[3] - In 2023, 78% of room nights were sold through the company's direct sales channels[3] - The company's loyalty program, Huazhu Club, had over 228 million members as of December 31, 2023, and 73% of Legacy Huazhu's room nights were sold to Huazhu Club members in 2023[58] - Legacy Huzahu had 78% of room nights sold through the company's own sales channels, with the remaining 22% sold through intermediaries in 2023[58] Financial Performance - The company's total revenue for 2021, 2022, and 2023 was RMB 12,785 million, RMB 13,862 million, and RMB 21,882 million (USD 3,082 million), respectively[4] - The company reported a net loss attributable to Huazhu Group Limited of RMB 465 million in 2021 and RMB 1,821 million in 2022, but achieved a net profit of RMB 4,085 million (USD 575 million) in 2023[4] - Adjusted EBITDA (non-GAAP) for 2021, 2022, and 2023 was RMB 1,571 million, RMB 610 million, and RMB 6,874 million (USD 966 million), respectively[4] - Net cash generated from operating activities for 2021, 2022, and 2023 was RMB 1,342 million, RMB 1,564 million, and RMB 7,674 million (USD 1,080 million), respectively[4] - Total revenue increased from RMB 12,785 million in 2021 to RMB 21,882 million (USD 3,082 million) in 2023, with net profit attributable to the company reaching RMB 4,085 million (USD 575 million) in 2023[118] - Adjusted EBITDA (non-GAAP) rose from RMB 1,571 million in 2021 to RMB 6,874 million (USD 966 million) in 2023, with net cash generated from operating activities increasing from RMB 1,342 million in 2021 to RMB 7,674 million (USD 1,080 million) in 2023[118] - Total revenue increased by 57.9% from RMB 13,862 million in 2022 to RMB 21,882 million (USD 3,082 million) in 2023, driven by recovery from COVID-19 and increased occupancy rates[154] - Revenue from leased and owned hotels grew by 50.8% from RMB 9,148 million in 2022 to RMB 13,796 million (USD 1,943 million) in 2023[154] - Revenue from managed and franchised hotels surged by 74.7% from RMB 4,405 million in 2022 to RMB 7,694 million (USD 1,084 million) in 2023[154] - Other income increased by 26.9% from RMB 309 million in 2022 to RMB 392 million (USD 55 million) in 2023[154] - Total operating costs and expenses rose by 19.5% from RMB 14,705 million in 2022 to RMB 17,568 million (USD 2,476 million) in 2023[154] - Hotel operating costs increased by 17.0% from RMB 12,260 million in 2022 to RMB 14,341 million (USD 2,021 million) in 2023, primarily due to higher employee costs and consumables[154] - Adjusted EBITDA for Legacy Huazhu increased significantly from RMB 725 million in 2022 to RMB 6,772 million in 2023, while Legacy DH improved from a loss of RMB 112 million to a profit of RMB 103 million[153] - Net loss attributable to Huazhu Group Limited was RMB 1,821 million in 2022, improving to a net profit of RMB 4,085 million (USD 575 million) in 2023[150] - Sales and marketing expenses increased by 74.9% from RMB 613 million in 2022 to RMB 1,072 million (USD 151 million) in 2023, primarily due to higher commissions and promotional fees related to business recovery[155] - General and administrative expenses increased by 24.5% from RMB 1,675 million in 2022 to RMB 2,086 million (USD 294 million) in 2023, mainly due to rising employee costs as business recovered[155] - Pre-opening expenses decreased by 63.2% from RMB 95 million in 2022 to RMB 35 million (USD 5 million) in 2023, due to more selective opening of leased and owned hotels[155] - Operating profit in 2023 was RMB 4,714 million (USD 662 million), compared to an operating loss of RMB 294 million in 2022[155] - Net interest expense in 2023 was RMB 137 million (USD 19 million), with interest income of RMB 248 million (USD 35 million) and interest expense of RMB 385 million (USD 54 million)[155] - Other net profit in 2023 was RMB 573 million (USD 81 million), compared to RMB 10 million in 2022, mainly due to gains from the sale of Accor shares[156] - Legacy Huazhu's total revenue in 2023 increased by 63.6% to RMB 17,444 million, driven by the recovery of the Chinese business from COVID-19[157] - Legacy DH's total revenue in 2023 increased by 39.0% to RMB 4,465 million, driven by the continued recovery of the European business[157] - Legacy Huazhu's adjusted EBITDA in 2023 was RMB 6,772 million, a significant increase from RMB 725 million in 2022, due to the recovery of the Chinese business[158] - Legacy DH's adjusted EBITDA in 2023 improved to RMB 103 million from a negative RMB 112 million in 2022, due to the recovery of the European business[158] - Sales and marketing expenses decreased by 4.4% from RMB 641 million in 2021 to RMB 613 million in 2022, with the expense ratio dropping from 5.0% to 4.4% of total revenue[160] - General and administrative expenses increased by 8.4% from RMB 1,545 million in 2021 to RMB 1,675 million in 2022, maintaining a stable ratio of 12.1% of total revenue[160] - Pre-opening expenses increased by 17.3% from RMB 81 million in 2021 to RMB 95 million in 2022, with the expense ratio rising from 0.6% to 0.7% of total revenue[160] - Operating loss of RMB 294 million in 2022, compared to an operating profit of RMB 164 million in 2021[160] - Net interest expense of RMB 322 million in 2022, with interest income of RMB 87 million and interest expense of RMB 409 million[160] - Other net profit decreased significantly from RMB 157 million in 2021 to RMB 10 million in 2022, primarily due to the sale of Accor shares in 2021[161] - Foreign exchange loss increased from RMB 317 million in 2021 to RMB 641 million in 2022, mainly due to the depreciation of the euro[162] - Legacy Huazhu's total revenue decreased by 5.2% from RMB 11,247 million in 2021 to RMB 10,661 million in 2022, while Legacy DH's revenue surged due to the recovery of European business[162] - Adjusted EBITDA for Legacy Huazhu decreased by 64.3% from RMB 2,032 million in 2021 to RMB 725 million in 2022, while Legacy DH's adjusted EBITDA improved significantly[162] Hotel Brands and Development - The company operates over 20 distinctive hotel brands, targeting various market segments from economy to luxury[5] - HanTing Hotel has 3,598 operating hotels and 731 under development as of December 31, 2023[7] - Hello Inn has 269 operating hotels and 177 under development as of December 31, 2023[8] - Hanting Express has 471 operating hotels and 180 under development as of December 31, 2023[9] - Elan Hotel has 404 operating hotels and 1 under development as of December 31, 2023[10] - Ibis Hotel has 226 operating hotels and 17 under development as of December 31, 2023[11] - Zleep Hotels has 16 operating hotels and 15 under development as of December 31, 2023[12] - Ji Hotel has 2,116 operating hotels and 936 under development as of December 31, 2023[13] - Orange Hotel has 652 operating hotels and 315 under development as of December 31, 2023[14] - Starway Hotel has 670 operating hotels and 228 under development as of December 31, 2023[15] - IntercityHotel has 63 operating hotels and 64 under development as of December 31, 2023[18] - CitiGO hotels have 35 operating hotels and 4 under development as of December 31, 2023[23] - Meilun Meihuan hotels have 9 operating hotels (including 4 in China) and 2 under development in China as of December 31, 2023[24] - Xiyue hotels have 7 operating hotels as of December 31, 2023[25] - Huajiantang hotels have 63 operating hotels and 56 under development as of December 31, 2023[26] - Steigenberger hotels have 54 operating hotels (including 11 in China) and 10 under development (including 3 in China) as of December 31, 2023[27] - Jaz in the City hotels have 3 operating hotels and 1 under development as of December 31, 2023[28] - Mercure hotels have 10 operating hotels and 2 under development as of December 31, 2023[29] - Steigenberger Grand hotels have 9 operating hotels (including 3 in China) and 2 under development (including 1 in China) as of December 31, 2023[30] - Songpin hotels have 7 operating hotels as of December 31, 2023[31] Franchise and Management Fees - The company charges franchisees an initial franchise fee ranging from RMB 80,000 to RMB 1,000,000 per hotel and a monthly franchise fee of approximately 3% to 6.5% of total revenue generated by each managed hotel[41] - Deutsche Hospitality's management fees for franchised hotels range from 0.5% to 3.5% of hotel revenue and 6% to 10% of adjusted total operating profit[42] - Deutsche Hospitality charges a licensing fee of 0.5% to 2% of revenue for certain overseas franchised hotels[42] - Legacy Huazhu's franchise agreements typically have an initial term of 8 to 10 years, extendable upon mutual agreement[43] - Deutsche Hospitality's franchise fees for franchised hotels range from 0.5% to 4.0% of total room revenue or turnover, with fixed fees of €40,000 to €150,000 annually for some overseas hotels[44] - For Legacy Huazhu managed hotels, franchisees typically pay an upfront franchise fee ranging from RMB 80,000 to RMB 1,000,000 per hotel[138] - Monthly franchise fees for Legacy Huazhu managed hotels range from 3% to 6.5% of total revenue generated by each hotel[138] - For Deutsche Hospitality managed hotels, franchisees pay a base fee of 0.5% to 3.5% of hotel turnover and an incentive fee of 6% to 10% of adjusted total operating profit[138] - Franchise fees for Deutsche Hospitality franchised hotels range from 0.5% to 4.0% of total room revenue or turnover and total operating income[139] - Initial terms for franchise agreements are typically 8-10 years for Legacy Huazhu hotels and 15-20 years for Deutsche Hospitality hotels[137] Technology and Digital Systems - The company's cloud-based property management system enables real-time monitoring of occupancy rates, average daily rates (ADR), and revenue per available room (RevPAR) for each hotel[50] - The company's global unified digital core platform integrates 20+ distribution platforms, including OTAs, GDS, and TMCs, achieving 100% direct connectivity across all countries, brands, and hotels[51] - The company's central revenue management system (RMS) uses AI and algorithms to automatically adjust room rates across the network within minutes, optimizing occupancy and revenue[52] - The company's central procurement system (CPS) is one of the largest IoT-based procurement platforms in China's hospitality industry, enabling bulk purchasing for all hotels in the network[53] - The company's integrated CRM system tracks member data, including booking history, points accumulation, and prepaid balances, to enhance customer loyalty and targeted promotions[52] - The company's hotel operation system platform (H-HOS) integrates PMS, POS, and EMS, covering brands in China and expanding to markets like Singapore, Germany, and Denmark[51] - The company's global unified collaboration platform (H-TONE) supports real-time multilingual communication, deployed across multiple countries in Asia-Pacific and Europe[51] - Cloud-PMS system enables real-time management of room inventory, reservations, and pricing, optimizing occupancy rates, ADR, and RevPAR[54] - "Easy" series digital systems, including "Easy Room" and "Easy Invoice," streamline hotel operations and reduce check-out to check-in time[54] - Self-service check-in/out terminals replace traditional manual processes with advanced automation[54] - Digital payment options include online credit card payments, Alipay, WeChat Pay, and Apple Pay[54] - Smart robots deployed across hotels improve operational efficiency and guest experience[54] - AI-powered voice assistant enhances guest interaction and experience through mobile app integration[55] - Smart room features like "Hello Huazhu" enable voice control of lights, TV, AC, and curtains[55] - Free Wi-Fi offered to all hotel guests since 2013, significantly boosting customer growth[55] - Data security measures include ISO27001 and ISO27701 certifications, PCI-DSS compliance, and a dedicated data security committee[56] - Annual vulnerability scans and 7*24 emergency response strategies ensure continuous data security compliance[57] Environmental and Sustainability Initiatives - Over 30% of the company's leased and owned hotel properties are equipped with air source heat pumps, and nearly 10% have adopted solar hot water systems[63] - Approximately 70 Legacy DH properties have obtained ISO50001 energy management system certification, and around 90 properties have achieved ISO14001 environmental management system certification[63] - The company launched the "Stay Longer, Skip Laundry" initiative in November 2023, offering additional membership points to guests who opt out of changing bed linens during extended stays[63] - The "Smart Linen Project" was initiated in 2023 to establish a digital management solution for linen processing, aiming to improve efficiency and extend linen lifespan[64] - The company has integrated environmental standards into supplier selection processes, particularly for laundry suppliers, emphasizing water and energy-saving capabilities[64] - The company's "Easy Energy Consumption" system monitors electricity and water usage, providing real-time alerts for anomalies to prevent resource waste[63] - The company introduced eco-friendly products in 2023, including straw-based toothbrushes, cornstarch shower caps, and bamboo paper[63] - The company encourages customers to opt for electronic invoices to enhance operational efficiency and reduce paper usage[63] - The company is actively exploring rainwater and greywater reuse methods to conserve water resources[63] - The company is working to expand the use of renewable energy equipment across its hotel network through collaboration with franchisees[63] Legal and Regulatory Compliance - Special construction projects (e.g., hotels with a total construction area exceeding 10,000 square meters) must pass fire safety inspections and approvals before operation, with penalties ranging from RMB 30,000 to RMB 300,000 for non-compliance[68] - Hotels providing entertainment facilities (e.g., discos, karaoke, or dance halls) must obtain an entertainment business license[68] - Hotels eligible for star ratings must apply for assessments, with ratings valid for three years[69] - Single-purpose commercial prepaid cards issued by hotels must not exceed 40% of the previous fiscal year's main business revenue[69] - Online tourism platforms must verify the identity, licenses, and credit ratings of registered tourism operators and protect tourists' personal data privacy[70] - Foreign-invested travel agencies in Shanghai and Chongqing are temporarily allowed to provide outbound travel services for mainland

Financial Regulations and Compliance - As of December 31, 2023, a total of RMB1,029 million (US$145 million) was not distributable in the form of dividends due to PRC regulations[193] - The share capital of PRC subsidiaries amounted to RMB2,809 million (US$396 million) as of December 31, 2023, which is considered restricted[193] - Current PRC laws permit subsidiaries to pay dividends only out of accumulated profits, which are determined according to PRC accounting standards[193] - PRC regulations may limit the ability to inject capital into PRC subsidiaries and restrict profit distribution[189] - The company is subject to PRC withholding tax on dividends if treated as a PRC resident enterprise, which could be 10% for non-PRC resident enterprises[202] - If classified as a PRC resident enterprise, the company may be subject to a 25% PRC income tax on worldwide income[205] - The company must comply with foreign exchange regulations for any offshore funds used to finance PRC entities[197] - The ability to make loans or additional capital contributions to PRC subsidiaries is subject to PRC regulatory requirements, which may delay or prevent such actions[196] Audit and Regulatory Risks - The SEC identified the company as a "Commission-Identified Issuer" on May 26, 2022, which may lead to trading prohibitions if audit reports are not compliant for two consecutive years[208] - The PCAOB announced on December 15, 2022, that it can inspect and investigate audit firms in mainland China and Hong Kong, which affects the company's status under the HFCA Act for fiscal years 2022 and 2023[209] - The PCAOB's ability to inspect audit firms is contingent on the cooperation of PRC authorities, and any obstruction could lead to new determinations affecting the company's trading status[209] Operational Structure and Control - The company operates primarily through subsidiaries in China and Europe, and its financial results are consolidated under U.S. GAAP despite not holding direct equity interests in its operating entities[221] - The contractual arrangements with the Consolidated Affiliated Entities may not provide as effective control as direct ownership, potentially impacting operational control[218] - The company relies on nominee shareholders for the Consolidated Affiliated Entities, which may lead to conflicts of interest that could adversely affect business operations and financial condition[225] - The company may face substantial costs and limitations if it exercises the option to acquire equity ownership of the Consolidated Affiliated Entities, including potential tax liabilities[223] - The current industry entry clearance requirements for foreign investment in the PRC include a Negative List where foreign stakes in certain sectors are restricted, impacting the company's operations[213] - The company’s ability to enforce contractual arrangements in China may be limited due to uncertainties in the legal framework, which could affect control over the Consolidated Affiliated Entities[222] Market and Trading Dynamics - The company’s listing in Hong Kong may not provide sufficient liquidity, and trading prohibitions could impair the ability to sell or purchase ADSs[208] - The market price for the company's ADSs has been volatile, ranging from a low of US$33.03 to a high of US$52.49 on the NASDAQ in 2023[233] - The ordinary shares on the Hong Kong Stock Exchange experienced a high of HK$41.45 and a low of HK$25.9 in 2023[233] - The trading market for the company's ordinary shares on the Hong Kong Stock Exchange may not be sustained, affecting liquidity and market price[237] Financial Performance and Projections - In 2023, the company recorded operating income of RMB4,714 million and net income attributable to H World Group Limited of RMB4,085 million (US$575 million) after experiencing significant operating losses in 2021 (RMB465 million) and 2022 (RMB1,821 million) due to COVID-19[245] - The company anticipates that its current cash and cash equivalents, along with expected cash flow from operations, will be sufficient to meet working capital needs for at least the next 12 months[243] - The company may require additional cash resources for strategic acquisitions or expansions, which could lead to the sale of additional equity or debt securities[243] - The volatility in market prices may be influenced by factors such as quarterly operating results, changes in financial estimates, and conditions in the travel and lodging industries[234] Shareholder and Corporate Governance - The founder and co-founders collectively owned approximately 31.3% of the outstanding ordinary shares as of March 31, 2024, which may lead to conflicts of interest and influence over significant corporate actions[250] - The company's articles of association contain anti-takeover provisions that could limit opportunities for shareholders to sell their shares at a premium[268] - The board of directors has the authority to issue preferred shares, which could adversely affect the rights of ordinary shareholders and the market price of ADSs[269] Business Expansion and Development - The hotel network expanded from 7,830 hotels as of December 31, 2021, to 9,394 hotels as of December 31, 2023, representing a CAGR of 9.5%[293] - As of December 31, 2023, the company had 912,444 hotel rooms across its 9,394 hotels, with an additional 3,098 hotels under development[293] - The company completed the acquisition of CitiGO in May 2021, expanding its hotel brand portfolio[291] - The company operates a multi-brand strategy with over 20 distinct hotel brands targeting various market segments[294] - The company has a pipeline of 3,098 hotels under development, which includes leased, owned, manachised, and franchised hotels[328] Technology and Innovation - The proprietary technology infrastructure supports operational efficiency and enhances customer experience, contributing to the company's growth[296] - The company has developed the first in-house large-scale fully automated revenue management system in China's hotel industry, which adjusts room rates based on real-time demand forecasts[363] - The centralized procurement system has enabled the company to efficiently manage operating costs and facilitate bulk purchases across its hotel network[364] - The company has implemented a cloud-based property management system that optimizes hotel occupancy rates and revenues generated per available room[365] - The company has deployed smart robots across its hotels to enhance operational efficiency and guest experience[368] Sustainability and Compliance - The company promotes sustainability through modular construction, reducing construction waste and improving quality control[385] - By the end of 2023, over 30% of the company's leased and owned hotel properties were equipped with air source heat pumps, and nearly 10% had adopted solar water heating systems[385] Legal and Administrative Matters - As of December 31, 2023, the company had several pending legal and administrative proceedings, including lease contract disputes and labor disputes, with no accrued contingencies remaining[383] - There are significant legal obstacles in China that may hinder the pursuit of shareholder claims or regulatory investigations common in the U.S.[278] - The time required for the exchange between ordinary shares and ADSs may be longer than expected, affecting investors' ability to settle or effect sales[282] Customer Engagement and Loyalty - The H Rewards loyalty program surpassed 228 million members as of December 31, 2023, with approximately 73% of room nights sold to H Rewards members in 2023[295] - In 2023, approximately 78% of room nights were sold through the company's own sales channels, while 22% were sold through intermediaries[375] Insurance and Risk Management - The company has adequate property and liability insurance policies, but cannot guarantee franchisee compliance, which may expose it to significant financial risks[382]

Investment Rating - Maintain "Recommend" rating [1][2] Core Views - The company achieved a significant turnaround in 2023, with revenue reaching 21.9 billion yuan, a 57.9% YoY increase, and net profit attributable to the parent company of 4.085 billion yuan, compared to a loss of 1.8 billion yuan in 2022 [1] - RevPAR exceeded 2019 levels, driven by ADR growth, with Huazhu-branded hotels achieving a 229 yuan RevPAR in Q4 2023, up 43.8% YoY and 20.0% compared to 2019 [1] - Steady expansion with 460 new openings in Q4 2023, bringing the total number of operating hotels to 9,394 globally, with a strong pipeline of 3,061 hotels [1] - The company is leveraging its competitive advantages in product structure, brand effectiveness, and membership systems, with operational cost reductions and efficiency improvements driving high performance elasticity [1] - Expected net profit attributable to the parent company for 2024-2026 is 4.389 billion, 4.955 billion, and 5.399 billion yuan, respectively, with corresponding P/E ratios of 24x, 21x, and 19x [1][2] Financial Performance - 2023 revenue: 21.882 billion yuan, +57.9% YoY [2] - 2023 net profit attributable to parent: 4.085 billion yuan, +324.3% YoY [2] - 2023 EPS: 1.25 yuan, with a P/E ratio of 25x [2] - 2024E revenue: 23.396 billion yuan, +6.9% YoY [2] - 2024E net profit attributable to parent: 4.389 billion yuan, +7.5% YoY [2] - 2024E EPS: 1.34 yuan, with a P/E ratio of 24x [2] Operational Metrics - Huazhu-branded hotels: Q4 2023 RevPAR of 229 yuan, +43.8% YoY, +20.0% vs 2019; ADR of 284 yuan, +18.3% YoY, +22.5% vs 2019; OCC of 80.5%, +14.3pct YoY, -1.7pct vs 2019 [1] - Deutsche Hospitality: Q4 2023 RevPAR of 73 euros, +1.3% YoY, +10.6% vs 2019; ADR of 115 euros, -5.9% YoY, +18.6% vs 2019; OCC of 63.8%, +4.5pct YoY, -4.2pct vs 2019 [1] - Total operating hotels: 9,394 globally, with 9,263 Huazhu-branded hotels and 131 Deutsche Hospitality hotels [1] - Pipeline: 3,061 hotels, including 1,121 economy, 1,503 mid-scale, 397 upper mid-scale, and 69 upscale hotels [1] Strategic Focus - Continued focus on mid-to-high-end brand expansion, with Han Ting and Quan Ji hotels growing by 10.5% and 24.9% YoY, respectively [1] - Emphasis on high-quality lean growth, with ongoing optimization of hotel quality and development [1] - Integration of membership and supply chain platforms to further enhance operational efficiency and performance [1]