H World Group Limited Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Overall, domestic travel demand showed steady growth in 2024 with leisure travel outperforming business travel. Legacy-Huazhu achieved a key milestone of 10,000 hotels in 1,000 cities and counties in May 2024.
• Opened a record high of 2,442 new hotels in 2024, with 2,430 from Legacy-Huazhu, leveraging lower-tier cities penetration. Upper-mid segment grew 35% year-over-year. Asset-light revenue contribution exceeded 50% for certain business.
• 2025 focus: Continue high-quality growth, penetrate lower-tier cities and white spaces in limited service segment, enhance upper-mid brand, focus on brand building and service excellence, improve product quality, pursue asset-light strategy, and focus on H Reward membership program to enhance member engagement.

Segment Performance

• Legacy-Huazhu: In 2024, blended RevPAR decreased slightly by 3% to RMB235; occupancy rate improved to 81.2%; room count grew 20%; ADR down 3.2% to RMB289. Full-year hotel turnover was RMB85 billion, up 16% year-over-year. Revenue from manachised and franchised hotels reached 49% in 2024, exceeding revenue from owned business.
• Legacy-DH: Q4 2024 RevPAR improved over 10% to €81; full-year 2024 RevPAR increased 5.9% to €76. Full-year revenue was RMB4.9 billion, up 9.6% year-over-year. Core adjusted EBITDA increased 64% in 2024.

Guidance

• Q4 2025 group revenue expected to grow 0-4% year-over-year, 3-7% excluding DH. Full-year 2025 gross revenue expected to grow 2-6% year-over-year, 5-9% excluding DH.
• Manachised and franchised revenue expected to grow 18-22% in Q1 2025 and 17-21% full-year 2025. Expect to open ~2,300 hotels and close ~600 in 2025.

Risks

• Macro uncertainties and challenges affecting the business.
• Supply-demand imbalance in hotel industry leading to pressure on ADR.
• Potential short-term impact of asset-light transformation on revenue.

Question and Answer

Q: What is the outlook for 1Q and full-year RevPAR growth? And what is the strategy change ahead for DH?

A: For Q1, expected low single-digit decline year-over-year due to seasonality. Full-year RevPAR expected to be stabilized or slightly increased. For DH, strategy focuses on stopping the bleeding, stabilizing the business, and looking for growth via asset-light and organic growth, with impairment and restructuring costs expected to be lower than in 2024.

Q: Should we expect even higher dividend payout to match total shareholder return levels seen in 2024?

A: Will stick to the three-year plan of returning up to US$2 billion, mainly via cash dividend as part of the current shareholder return plan.