Summary of Conference Call Notes Industry Overview - The conference call focuses on the hotel industry in the Asia Pacific region, specifically Chinese hotel stocks, H World Group Ltd (HTHT) and Atour Lifestyle Holdings Ltd (ATAT) [1][2][3] Key Points and Arguments H World Group Ltd (HTHT) - **Inaugural Capital Markets Day**: Scheduled for October 30, 2025, expected to provide a detailed growth roadmap aiming to operate 20,000 hotels domestically over the next five years [6] - **Brand Positioning**: The company plans to discuss existing and new initiatives to capture more market share domestically [6] - **International Developments**: Recent overseas developments, particularly in Southeast Asia, are anticipated to be highlighted [6] - **Financial Projections**: Expectations for asset-light business revenue and operating profit projections to be shared [6] - **RevPAR Trends**: Positive signs of business demand recovery, with expectations for RevPAR (Revenue per Available Room) to turn positive year-over-year in 4Q25, aided by an easy comparison base from November 2024 [6] - **3Q25 Results**: Anticipated to show a narrower RevPAR decline of -1% compared to -4% in 1H25, with positive guidance for 4Q25 expected [6] Atour Lifestyle Holdings Ltd (ATAT) - **Retail Performance**: Reported a 74% year-over-year growth in retail revenue in 1H25, with an 86% increase during the "618" sales promotion [6] - **Market Expectations**: The market anticipates a 65-70% year-over-year growth in "Double 11" sales promotion; any deviation from this could act as a catalyst for stock movement [6] Valuation Methodology and Risks - **HTHT Valuation**: Based on discounted cash flow (DCF) with a WACC of 10.5%, medium-term growth of 8% (2028-35e), and a terminal growth rate of 2% [8] - **ATAT Valuation**: Also based on DCF, with a forecasted 17.5% EBITDA CAGR from 2025-29 and an 8% CAGR thereafter, implying a 17x EV/EBITDA for 2025 [7] Risks Identified - **HTHT Risks**: - Upside: More hotel openings than expected, lower reinvestment costs, higher industry RevPAR [10] - Downside: Significant slowdown in retail sales growth, industry RevPAR declines over 3% YoY in 2026 [10] - **ATAT Risks**: - Upside: Stronger-than-expected RevPAR growth, quicker mix upgrade leading to higher blended RevPAR growth [11] - Downside: Industry RevPAR declines deeper than -5% YoY for 2025, rising supply and competition in the low/mid-scale segment [11] Additional Insights - The hotel industry is currently in a low season, but business demand trends in late October and November will be critical for assessing the necessity of business travel [1] - The conference call emphasizes the importance of upcoming events and financial results as potential catalysts for stock performance in the hotel sector [2][5]

Financial Data and Key Metrics Changes - System-wide RevPAR decreased approximately 1% year over year, impacted by unfavorable holidays, softer international inbound travel, and portfolio renovations [5][15] - Adjusted EBITDA was $976 million in the third quarter, up 8% year over year, exceeding the high end of guidance [15] - Diluted earnings per share adjusted for special items was $2.11 [15] - For the full year 2025, RevPAR is expected to be flat to up 1% [6][18] Business Line Data and Key Metrics Changes - Leisure transient RevPAR was roughly flat, driven by strong demand in Europe and the Middle East, while business transient RevPAR decreased approximately 1% due to economic uncertainty [5] - Group RevPAR decreased approximately 4%, but group demand showed signs of strengthening for the fourth quarter and 2026 [5] - Management franchise fees grew 5.3% year over year [15] Market Data and Key Metrics Changes - In the Americas outside the U.S., RevPAR increased 4.3% year over year, driven by strong leisure and group demand [16] - In Europe, RevPAR grew 1% year over year, while in the Middle East and Africa, it increased 9.9% year over year [16] - Asia Pacific RevPAR was up 3.8% excluding China, but declined 3.1% in China due to government travel policies [17] Company Strategy and Development Direction - The company opened 199 hotels, totaling over 24,000 rooms, achieving net unit growth of 6.5% [6][10] - The launch of the Outset Collection by Hilton aims to capture the conversion opportunity in the upper mid-scale to upscale collection space [8] - The development pipeline increased to over 515,000 rooms, with nearly half under construction [10][11] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the next few years, citing lower interest rates, favorable regulatory environment, and significant investment cycles as drivers for increased travel demand [6][24] - The company expects RevPAR growth to improve in 2026, supported by easier year-over-year comparisons and event-driven benefits [27] - Management emphasized the importance of cost discipline and efficiency improvements through AI and technology [30][31] Other Important Information - The company plans to return approximately $3.3 billion to shareholders through buybacks and dividends for the full year [4][18] - A cash dividend of $0.15 per share was paid during the third quarter, totaling $108 million for the year to date [18] Q&A Session Summary Question: Thoughts on the timeline for improvement in the operating environment - Management believes there are positive structural factors in the U.S. that will support growth, including lower inflation and a favorable investment cycle [24][26] Question: Potential partnerships with AI companies - Management is exploring AI use cases to improve efficiencies and enhance customer experience, with 41 use cases currently being tested [36][38] Question: Expectations for net unit growth and conversions - Management expects nearly 40% of net unit growth to come from conversions, with new brands contributing as well [47] Question: Balancing luxury investments and returns - Management acknowledges the importance of luxury but emphasizes that the majority of key investments will continue to focus on core brands [52][56] Question: Impact of system-wide fee reductions for owners - The fee reduction program aims to support owners during challenging times and incentivize more conversions [60][62] Question: Fee revenue growth despite more economy rooms - Management believes fee per room will continue to grow due to a mix of higher fee-paying brands and ongoing growth in emerging markets [68][70]

Core Insights - Hilton Worldwide Holdings Inc. (HLT) is set to report its third-quarter 2025 results on October 22, with expectations of earnings per share (EPS) at $2.04, reflecting a year-over-year growth of 6.3% from $1.92 in the same quarter last year [1][2][9] Financial Performance Expectations - The Zacks Consensus Estimate for HLT's revenues is projected at $3.02 billion, indicating a 5.2% increase compared to the previous year's quarter [2] - Revenue from management and franchise hotels is anticipated to grow by 9.5% year over year to $932.9 million, while franchise and licensing fees are expected to rise by 8.7% year over year to $758.4 million [6] Factors Influencing Q3 Results - HLT's revenue growth is likely driven by net unit growth, strong hotel openings, and conversions, particularly in luxury and lifestyle brands like Waldorf Astoria and Conrad [3] - The Hilton Honors loyalty program, with over 226 million members, is expected to enhance repeat business and revenue resilience [4] - Increased corporate booking activity and improvements in group demand are anticipated to support revenue, despite some RevPAR pressures [5] Profitability Outlook - Hilton is expected to benefit from disciplined cost control, with franchise and management fee growth and operating leverage from a larger room base supporting profitability, despite a projected 0.6% decline in RevPAR [7][9] Earnings Prediction Model - The current model does not predict an earnings beat for Hilton, as the Earnings ESP stands at 0.00% [8]

New Franchise Offering - Wyndham Hotels and Resorts launches a new franchise offering for independent hotels in the economy lifestyle segment [1] - The offering targets the overlooked gap in the economy soft branded landscape, with over 30,000 economy hotels in the US, and over 50% of those not branded [2] - This allows small business owners to preserve their individuality while accessing Wyndham's sales, marketing, distribution, and technology [2] Hotel Benefits - Hotels gain access to Wyndham's distribution network, purchasing power, sourcing technology, and loyalty program [4] - Wyndham Rewards boasts high membership and recognition, lowering customer acquisition costs for hotels [5] - Hotels can attract guests directly, reducing reliance on online travel agencies and their higher commissions [6] Financial Performance & Market Sentiment - Year-to-date, Wyndham's stock is down approximately 18% [6] - RevPAR was down 3% in the second quarter, but earnings grew 5% and EPS grew 11% [7] - The company reported a record first half of openings and sees historic growth in its development pipeline [7][8] - There is optimism for the year ahead, with expectations for a positive turn in demand drivers [9] - One hotel ran 91% occupancy this weekend and is forecasted to run 90% occupancy this month [4]

Revenue Management - RevPAR (Revenue Per Available Room) 可以通过平均每日房价 (Average Daily Rate) 乘以入住率 (Occupancy) 来计算 [1]

Core Insights - The company reported a global RevPAR (Revenue Per Available Room) increase of 1.8% for the first half of the year, with a breakdown of 3.5% in Q1 and 0.3% in Q2, indicating a steady demand trend across key markets [1] Group 1: Demand Trends - Demand around the world is described as "pretty steady," suggesting stability in the market [1] - The Easter holiday's timing positively impacted Q1 results, particularly in the United States for group bookings [1]

Core Viewpoint - Hilton Worldwide Holdings Inc. reported strong second-quarter earnings and revenues that surpassed estimates, indicating resilience in its business model despite facing some temporary headwinds [2][3]. Financial Performance - Adjusted earnings per share (EPS) for Q2 2025 were $2.20, exceeding the Zacks Consensus Estimate of $2.04, and up from $1.91 in the same quarter last year [4]. - Total revenues reached $3.14 billion, beating the consensus mark of $3.08 billion, and reflecting a year-over-year increase of 6.3% [4]. - System-wide comparable Revenue Per Available Room (RevPAR) declined by 0.5% year over year on a currency-neutral basis due to occupancy declines [6]. - Adjusted EBITDA was $1 billion, representing a 9.9% increase year over year, surpassing the estimate of $958.7 million [6]. Balance Sheet and Cash Flow - As of June 30, 2025, total cash and cash equivalents were $448 million, down from $807 million as of March 31, 2025 [7]. - Long-term debt outstanding was $10.9 billion, a decrease from $11.15 billion as of December 31, 2024 [7]. - The company repurchased 3.2 million shares at $235.36 per share and paid dividends totaling $36 million during the quarter [7][8]. Business Expansion - Hilton added 221 hotels, comprising 26,100 rooms, achieving a net room growth of 22,600 in Q2 2025 [9]. - The company expanded its luxury and lifestyle brand portfolio with key openings and new signings, including the debut of LXR Hotels & Resorts in central Paris [9][10]. - As of June 30, 2025, Hilton's development pipeline included 3,636 hotels representing 510,600 rooms across 128 countries, with an expected net unit growth of 6-7% for 2025 [11]. Future Outlook - For Q3 2025, Hilton anticipates net income between $453 million and $467 million, with adjusted EBITDA expected to be between $935 million and $955 million [12]. - The company predicts adjusted EPS for Q3 to be between $1.98 and $2.04, and expects system-wide RevPAR to remain flat year over year [12]. - For the full year 2025, net income is estimated to be in the range of $1.64 billion to $1.68 billion, with adjusted EBITDA expected between $3.65 billion and $3.71 billion [13].

Group 1 - The company achieved revenue of 6.4 billion yuan in Q2 2025, a year-on-year increase of 4.5%, reaching the upper limit of the guidance growth rate of 1%-5% [1] - Net profit attributable to shareholders was 1.54 billion yuan, up 44.7%, driven by asset-light transformation, a 2.3 percentage point increase in gross margin, and foreign exchange gains of 435 million yuan, leading to a 6.6 percentage point increase in net profit margin [1] - Management franchise and licensing revenue reached 2.9 billion yuan, a year-on-year increase of 22.8%, exceeding the guidance growth rate of 18%-22% [1] Group 2 - The company opened 595 new stores in mainland China in Q2 2025, a year-on-year increase of 4.9%, with a net increase of 452 stores [1] - As of the end of Q2 2025, the total number of stores in mainland China reached 12,016, a year-on-year increase of 18.4%, with franchise stores accounting for 95.4% [1] - The company has a store reserve of 2,925, a quarter-on-quarter increase of 2.3%, actively working towards the annual guidance of opening 2,300 new stores and a net increase of 1,700 stores [1] Group 3 - The mainland RevPAR decreased by 3.8% to 235 yuan in Q2 2025, with occupancy rate down 1.6 percentage points to 81.0% and ADR down 1.9% to 290 yuan [2] - The company expects Q3 2025 revenue growth rate of 2%-6%, with a 4%-8% growth rate excluding the DH segment, and a franchise business revenue growth rate of 20%-24%, accelerating compared to Q2 2025 [2] - The company has issued a total of 550 million USD in dividends this year, corresponding to a dividend yield of 5.3% [2]

Financial Data and Key Metrics Changes - For the second quarter, total revenue was approximately $48.8 million, representing a decrease of 3.7% compared to the same quarter in 2024 [15] - Year-to-date total revenue was approximately $97.1 million, reflecting a decrease of 0.1% from the same period last year [16] - Hotel EBITDA for the quarter was approximately $13.9 million, a decrease of 11.5% from the same quarter in 2024 [16] - Year-to-date hotel EBITDA was approximately $26.8 million, representing a decrease of 4.4% over the same period last year [16] - Adjusted FFO for the quarter was approximately $4.8 million, a decrease of approximately $2.7 million from the same quarter in 2024 [16] - Year-to-date adjusted FFO was approximately $9.3 million, a decrease of $3.4 million from the same period last year [16] Business Line Data and Key Metrics Changes - Composite portfolio RevPAR decreased by 5.4% driven by a 3.5% decrease in occupancy and a 1.9% decrease in ADR [6] - Stripping out Tampa, the composite portfolio RevPAR decreased by 5% compared to the prior year, driven by a 2.3% decrease in occupancy and a 2.8% decrease in ADR [6] - Hotel Ballast in Wilmington posted a RevPAR increase of 1.3% year over year, driven by a 2.7% gain in average rate [10] - The Hyde Beach House delivered a RevPAR increase of 12.7%, driven by an 18.5% gain in occupancy [12] Market Data and Key Metrics Changes - Savannah saw an outsized impact during the quarter with RevPAR down nearly 10% year over year [23] - Group booking pace for the remainder of the year remains intact with only minor reductions compared to 2024 [21] - In Arlington, second quarter group revenue increased by 42% over the prior year [24] Company Strategy and Development Direction - The company remains focused on disciplined cost management and targeted revenue strategies to navigate the challenging operating environment [9] - The company is proactively managing upcoming debt maturities and is confident in its ability to work constructively with lending partners [14] - The company anticipates full year 2025 RevPAR for the actual portfolio to be approximately flat compared to last year [28] Management's Comments on Operating Environment and Future Outlook - Management noted that the portfolio underperformed expectations due to growing economic uncertainty and softening demand [7] - There is confidence in the long-term fundamentals of the Savannah market, expecting performance to recover as macro pressures ease [23] - Management expressed cautious optimism about the overall trajectory of the lodging industry despite elevated interest rates and persistent inflationary pressures [27] Other Important Information - The company had total cash of approximately $26.5 million as of June 30, 2025, with $10.5 million in unrestricted cash [18] - The company anticipates routine capital expenditures for the replacement and refurbishment of furniture fixtures and equipment to amount to approximately $7.1 million for calendar year 2025 [19] Q&A Session Summary Question: Why was Savannah the hardest hit hotel in the quarter? - Management clarified that Savannah had significant negative impacts due to a decline in transient travel and a surprising amount of government business affected by funding cuts [34][36] Question: What percentage of the portfolio is government-related business? - Management indicated that government-related business is likely in the high single digits, with some group bookings indirectly tied to government funding [38][40] Question: Does the guidance reduction reflect further government-related pullback? - Management stated that the guidance reflects the most recent forecast for the entire year based on current trends [42] Question: Are there plans for other asset sales? - Management confirmed that they are always looking at options for asset sales, including parking lots or other tangential assets [48] Question: Why is the mortgage market for hotels still challenged? - Management explained that lenders are cautious due to high debt yields and tougher debt service coverage ratios compared to pre-pandemic levels [50][52]

Financial Data and Key Metrics Changes - The company reported a RevPAR decline of 2.1% in Q2 2025, with occupancy at 75.5% and an average daily rate (ADR) of $205, translating to a 1.6% decline in occupancy and a 0.5% drop in ADR [18][19][21] - Adjusted EBITDA for the quarter was $104 million, with adjusted FFO per diluted share at $0.48 [21][24] - The company achieved hotel EBITDA of $113 million and hotel EBITDA margins of 31.1% [21] Business Line Data and Key Metrics Changes - Urban hotels outperformed the overall portfolio, with RevPAR growth of 20% in San Francisco and 10% growth in completed conversions [6][11][19] - Non-room revenues grew by 1.5%, indicating success in ROI initiatives despite lower occupancy [10][19] - Leisure revenues increased by 5%, driven by events and holiday shifts, while urban leisure segments achieved 7% revenue growth [7][9] Market Data and Key Metrics Changes - The company gained 140 basis points of market share, outperforming the industry despite RevPAR constraints [6] - Northern California showed ongoing recovery, supported by a positive local business climate and citywide events [6][15] - The company anticipates challenges in the third quarter due to tough comparisons and ongoing renovations, with preliminary July RevPAR tracking down by mid-single digits year-over-year [14][25] Company Strategy and Development Direction - The company is focused on driving earnings growth through disciplined expense management and capital allocation initiatives [5][12] - Key initiatives include repositioning assets, addressing near-term maturities, and opportunistically recycling capital into share repurchases [5][12] - The company expects to benefit from an improving economic backdrop in 2026, with a favorable geographic exposure and urban footprint [15][17] Management's Comments on Operating Environment and Future Outlook - Management expressed mixed outlook for the second half of the year, citing uncertainty in the macro environment and shorter booking windows [13][25] - The company anticipates a soft third quarter but expects tailwinds in the fourth quarter from favorable holiday shifts and improved group travel [14][25] - Management remains confident in the portfolio's ability to create long-term value despite near-term volatility [18] Other Important Information - The company executed $6 million in share repurchases during the quarter, maintaining a disciplined approach to capital allocation [12][24] - The balance sheet remains strong, with $600 million available under the undrawn corporate revolver and nearly $1 billion in total liquidity [22][23] Q&A Session Summary Question: Booking pace tracking into August and September - Management noted that the third quarter is expected to be the weakest due to a layering effect of demand and holiday shifts impacting bookings [28][30] Question: Differences between urban leisure and resort leisure - Urban leisure outperformed with a 7% increase, while international leisure showed softness [34][35] Question: Share repurchases strategy - Management indicated a programmatic approach to share repurchases, influenced by fundamentals and leverage considerations [37][38] Question: Update on Nashville asset performance - Nashville asset reported a 14% increase in Q2, benefiting from its location and recent conversion [42][45] Question: Transactions environment outlook - Management observed low transaction volume but noted improved sentiment and potential for more deals in the coming months [46][48] Question: Leisure discounting trends - Demand remains stable, but rate sensitivity is leading to increased use of discount booking channels [52] Question: Expense outlook for the second half of the year - Management expects about 2% growth in expenses, with ongoing cost control measures in place [57][60] Question: Expectations for flat margins from RevPAR perspective - Management indicated a normalized relationship between revenue and expenses, with a focus on maintaining margins [64] Question: Changes in booking channels - Direct bookings through brand.com are growing, while OTAs are slightly up due to leisure softness [66][68]