HWORLD(HTHT) - 2024 Q1 - Quarterly Report

Hotel Operations - As of December 31, 2023, H World Group operated a total of 9,394 hotels and 912,444 hotel rooms[1] - The company operates 11% of its hotel rooms under the lease and ownership model, while 89% are under the manachise and franchise model[53] - As of December 31, 2023, the total number of operational hotels reached 9,263, with an additional 3,061 hotels in the pipeline[72] - The company temporarily closed 18 hotels in Q4 2023 for brand upgrades and business model changes[71] - The company added 2 hotels in Q4 2023, bringing the total number of hotels to 131 as of December 31, 2023[85] - The total number of rooms as of December 31, 2023, was 26,814, with 37 unopened hotels in the pipeline[85] - The company has 21 unopened hotels in the pipeline for leased hotels as of December 31, 2023[85] Financial Performance - Revenue for Q4 2023 was RMB5.6 billion (US $786 million), a 50.7% year-over-year increase, surpassing the guidance of 41%-45%[2] - For the full year 2023, revenue reached RMB21.9 billion (US$ 3.1 billion), a 57.9% increase from 2022[18] - Net income attributable to H World in Q4 2023 was RMB743 million (US $105 million), compared to a net loss of RMB124 million in Q4 2022[3] - For the full year 2023, net income attributable to H World Group Limited was RMB4.1 billion, a recovery from a net loss of RMB1.8 billion in 2022[37] - Operating cash inflow for the full year 2023 was RMB7.7 billion, significantly higher than RMB1.6 billion in 2022, demonstrating improved cash generation capabilities[41] - Net income attributable to H World Group Limited increased significantly from a loss of RMB 124 million in 2022 to a profit of RMB 1,337 million in 2023[67] - Adjusted EBITDA rose dramatically from RMB 398 million in 2022 to RMB 2,186 million in 2023, reflecting a substantial growth of 449%[67] Revenue and Growth Expectations - H World expects revenue growth of 12%-16% for Q1 2024 and 8%-12% for the full year 2024[6] - The company plans to open approximately 1,800 hotels and close around 650 hotels in 2024[6] - The company plans to continue expanding its hotel portfolio and enhancing operational efficiency to drive future growth[60] - The company plans to continue expanding its market presence and investing in new technologies to drive future growth[64] Operating Costs and Expenses - Hotel operating costs in Q4 2023 were RMB4.0 billion, an increase from RMB3.4 billion in Q4 2022 and RMB3.6 billion in Q3 2023, with a year-over-year increase of 17.6% attributed to business recovery and less rental reduction[25] - For the full year 2023, hotel operating costs totaled RMB14.3 billion, up from RMB12.3 billion in 2022, with costs from the Legacy-Huazhu segment representing 60.4% of revenue compared to 86.1% in 2022[26] - Selling and marketing expenses in Q4 2023 were RMB326 million, compared to RMB169 million in Q4 2022, reflecting a year-over-year increase of 92.3% due to higher commissions and promotional expenses[26] - General and administrative expenses in Q4 2023 were RMB644 million, up from RMB440 million in Q4 2022, with the increase mainly due to higher personnel costs[27] Key Performance Indicators - Legacy-Huazhu's RevPAR recovered to 122% of the 2019 level in 2023, driven by strong leisure and business travel demand[15] - Legacy-DH achieved a 14.5% year-over-year RevPAR increase in 2023, with a focus on transforming to a more asset-light model[15] - Average daily room rate for leased and owned hotels improved by 36.9% year-over-year, rising from RMB 272 to RMB 372[77] - The occupancy rate for leased and owned hotels increased by 18.9 percentage points, from 63.9% in 2022 to 82.8% in 2023[77] - RevPAR for leased and owned hotels surged by 77.4%, increasing from RMB 174 in 2022 to RMB 308 in 2023[77] - Same-hotel RevPAR for the quarter ended December 31, 2023, increased by 40.8% year-over-year to$ 230[82] - Same-hotel occupancy rate for the quarter ended December 31, 2023, improved to 81.2%, a year-over-year increase of 13.9 percentage points[82] - Same-hotel ADR for the quarter ended December 31, 2023, was $248, reflecting a year-over-year increase of 24.1%[82] - The company reported a same-hotel occupancy rate of 84.3% for the year ended December 31, 2023, up 15.2 percentage points year-over-year[84] - The RevPAR for leased hotels increased by 20.9% year-over-year to €74 for the full year ended December 31, 2023[88] Assets and Liabilities - Total current assets increased from RMB 9,178 million in 2022 to RMB 12,056 million in 2023, representing a growth of 31%[57] - Total assets rose from RMB 61,507 million in 2022 to RMB 63,532 million in 2023, an increase of 3%[57] - Total liabilities decreased from RMB 52,704 million in 2022 to RMB 51,283 million in 2023, a reduction of 3%[57] - H World reported cash and cash equivalents of RMB 6,946 million as of December 31, 2023, up from RMB 3,583 million in 2022, a growth of 94%[57] Non-GAAP Measures - Adjusted EBITDA (non-GAAP) for Q4 2023 was RMB1.3 billion (US$ 178 million), up from RMB398 million in Q4 2022[5] - Adjusted EBITDA is used to assess the operating results of hotels, excluding share-based compensation expenses and gains or losses from fair value changes of equity securities[48] - H World believes that adjusted EBITDA provides a clearer picture of financial performance, as it excludes significant volatility from fair value changes of equity securities[48] - H World emphasizes the importance of non-GAAP financial measures for internal comparisons and investor transparency[50]