The US Stock Research Agency learned that on November 27, 2023, Huazhu Group’s third quarter 2023 results conference was held online. Due to Huazhu's good performance in its third quarter financial report, many securities companies gave it a buy rating. CITIC Securities believes that Huazhu Group’s domestic and overseas RevPAR recovery this quarter was better than the upper limit of previous guidance, and its net store openings were better than expected. In addition, Huazhu Group has high operating efficiency and continuous improvement in store quality. It is expected to continue to lead the industry in 2024 and maintains a "buy" rating for the company; Founder Securities Research Report stated that it maintains a "recommended" rating for Huazhu Group and is optimistic about Huazhu Group. The group has leading scale advantages and excellent operation and management efficiency.
All indicators exceeded expectations, and franchise store sales increased, showing resilience
Data show that Huazhu Group’s net profit in the third quarter was RMB 1.3 billion; its turnover increased by 55.1% year-on-year and 15.8% month-on-month to 23.5 billion yuan; revenue reached 6.3 billion yuan, an increase of 53.6% year-on-year and 14.5% month-on-month. Adjusted EBITDA in the third quarter was 2.2 billion, significantly exceeding previous market expectations. Overall, Huazhu's revenue this quarter still exceeded expectations, and with relatively inert costs and expenses, the company's profit growth is more elastic than expected.
At the results conference, Huazhu Group CEO Jin Hui said that due to the strong rise of the summer leisure travel market and the recovery of business travel, Huazhu China continued to maintain a recovery trend that was better than the industry since the beginning of the year in the third quarter. Huazhu China's RevPAR (revenue per available room) recovered to 129% of the same period in 2019. Specifically, Huazhu China's continued growth in RevPAR is mainly driven by the increase in ADR (average daily room price) brought about by product structural changes, and the occupancy rate has also improved quarter-on-quarter in this quarter. The eye-catching performance of Huazhu China RevPAR also reflects the superior product and brand power of Huazhu Group.
High-quality growth also gives franchisees more confidence. In terms of single store performance in the third quarter, the single store turnover of franchise hotels increased by 9.2% month-on-month, which was slightly better than the 8.7% average turnover of Huazhu's self-operated hotels. More franchised stores and better single-store performance have resonated, and Huazhu has further moved towards an asset-light and high operating leverage model.
Financial report data shows that the group opened 545 new hotels in the third quarter, a year-on-year increase of 28%, and the number of hotels to be opened reached 2,935. As of the end of the third quarter, Huazhu had 9,157 hotels in operation worldwide. Among them, Huazhu China has 9,028 hotels in operation, with franchise stores accounting for 93%.
Policy-driven consumption picks up, and four major growth drivers lay a solid foundation for sustainable growth
Since the beginning of this year, favorable policies have stimulated a continued recovery in the domestic consumption scene, demand for leisure travel has surged, and the summer cultural tourism market has entered a "climax." During the reporting period, the average room revenue and occupancy rate of Huazhu Group's leased and owned hotels, as well as managed franchised and franchised hotels showed an upward trend. Financial report data shows that Huazhu China's OCC (occupancy rate) reached 85.9%, compared with 75.6% in the first quarter and 81.8% in the second quarter, achieving continued growth; Huazhu China's RevPAR (average available room revenue) in the third quarter was 278 yuan year-on-year. An increase of 44.3% has reached 129% of the same period before the epidemic. The prosperity continues to rise and further reaches a new high.
At the results conference, Jin Hui, CEO of Huazhu Group, gave a detailed explanation of the sources of RevPAR’s long-term sustainable growth momentum: First, Huazhu Group’s continuous penetration in low-tier cities with extremely economic resilience has helped companies survive in volatile markets. Achieve relatively stable performance under the macro environment. Second, the adjustment and optimization of the organizational structure and the establishment of regional branches have further improved regional penetration capabilities, making Huazhu's operations more refined and efficient; third, Huazhu has continuously upgraded its products and services to win over franchisees and consumers. fourth, continue to improve the product structure, continue to focus on the mid-to-high-end market, and increase the market share of mid-to-high-end hotels.
As of the end of September 2023, 40% of Huazhu Group's hotels in operation are located in low-tier cities, and 55% of hotels to be opened are located in low-tier cities, further increasing the proportion. In lower-tier cities, the number of hotels in operation of Huazhu increased by 6% year-on-year to nearly 3,600 stores, and the number of hotels to be opened increased by 20% year-on-year to more than 1,600 stores. The number of cities covered by the company has further increased to 1,217.
The core position of "rigid demand" hotels is stable, and the power of mid-to-high-end brands continues to increase
At the results conference, Jin Hui, CEO of Huazhu Group, said that Huazhu will continue to focus on economical national and mid-range hotels to serve the mass market. The third quarter financial report data shows that 55% of the hotels in operation of Huazhu Group are economical national hotels, and 37% are mid-range hotels; 37% of the hotels to be opened in the third quarter are economical national hotels, 48% are mid-range hotels, and mid-range hotels The proportion increased by 5 percentage points year-on-year; among the newly opened hotels in the third quarter, 91% were economy national and mid-range hotels.
Based on the expansion of qualified stores, Huazhu continues to accelerate product iteration and structural upgrades to meet the accommodation needs of the vast number of citizens with high-quality products and services. During the reporting period, the "National Hotel" Hanting brand has been updated to version 3.5. By the end of the third quarter, the number of hotels in operation reached 3,500, making it the largest hotel brand in China.
Picture: Hanting 3.5 new product actual picture
All Seasons Hotels, which carries the confidence of Oriental Humanities, had 1,980 hotels in operation at the end of the third quarter, and recently welcomed the opening of its 2,000th store. The mid-range brand Orange Hotel has newly launched version 3.0, which not only attracts market attention to the life concepts of "Lohas", "healthy" and "sustainable", but also promotes them to scene design, facility configuration, catering experience, etc., hoping to use " A life attitude of "sunshine", "vitality" and "vigor" can ease the journey and create more vitality and freedom for consumers. In the third quarter, Orange Hotel has 284 hotels to be opened, making it one of the most watched hotel brands after Hanting and All Seasons. Huazhu is also continuing to clean up low-quality stores to ensure the continued improvement of the group's overall hotel quality.
Picture: Real pictures of new 5.0 products in the whole season
Picture: Real picture of the new Orange 3.0 product
Huazhu has also made breakthroughs in the development of mid- to high-end hotels. As of September 30, the number of mid-to-high-end hotels in operation of Huazhu Group reached 605, a year-on-year increase of 18%, and a month-on-month increase of 8%; the number of mid-to-high-end hotels to be opened was 357, a year-on-year growth of 35%, and a month-on-month increase of 357. up to 13%. Among them, the accelerated growth in the number of hotels to be opened reflects Huazhu's increasing brand power in the mid-to-high-end hotel segment, which also provides a strong guarantee for the future development of mid-to-high-end hotels in Huazhu. This year, Intercity Hotel has opened several direct-operated stores in Wuhan, Zhengzhou, Shenzhen and Shanghai. Financial report data shows that as of September 30, the number of Intercity Hotels to be opened has reached 41 stores; the number of Crystal Orange stores to be opened has reached 108 homes.
Picture: Real picture of Intercity’s newly opened hotel in Shenzhen
Picture: Real picture of the new Crystal Orange Hotel
"Achieving a better life" is Huazhu's mission as an enterprise. Huazhu aims to create a virtuous cycle of ecosystems. Every unit in this circle is happy, healthy, happy, beautiful, and full of positive energy. Huazhu's ideals and original aspirations even transcend the hotel industry itself. It hopes to make the world a better place and even promote the progress of human civilization. This is the great career and perfect life that Huazhu understands!
2024 is the year of excellent service for Huazhu. While actively fulfilling its mission of "achieving a better life", Huazhu will provide more Chinese people with high-quality products and services; at the same time, Huazhu will also cherish the goal of "becoming a great world-class enterprise". "The vision will add further impetus to the high-quality development of the industry.