H World Group’s Earnings Call Highlights Strategic Growth

H World Group Limited ((HTHT)) has held its Q4 earnings call. Read on for the main highlights of the call.

The recent earnings call for H World Group Limited highlighted a positive sentiment, focusing on the company’s strategic expansion and asset-light approach, which contributed to revenue and EBITDA growth. Despite facing challenges such as declines in RevPAR and ADR, and increased SG&A expenses, the overall performance was commendable with significant shareholder returns and a robust cash position.

Record Hotel Expansion

In 2024, H World Group Limited achieved a milestone by opening a record high of 2,442 new hotels, with 2,430 from Legacy-Huazhu. This expansion was largely supported by the company’s penetration into lower-tier cities, marking a significant step in its growth strategy.

Upper-Mid Segment Growth

The company’s upper-mid segment hotel network saw impressive growth, expanding by 35% year-over-year in 2024. This growth was primarily driven by the development of the Intercity and Crystal Orange brands, showcasing the company’s focus on diversifying its offerings.

Asset-Light Strategy Success

H World Group’s asset-light strategy proved successful in 2024, with the asset-light revenue contribution exceeding 50% of the business. This approach has been instrumental in achieving more stable and sustainable development for the company.

Revenue Growth

The group reported a 9.2% year-over-year increase in total revenue, reaching RMB23.9 billion in 2024. This growth reflects the company’s effective strategies and operational efficiency.

Core Adjusted EBITDA Increase

The core adjusted EBITDA for H World Group increased by 15.5% year-over-year to RMB1.7 billion in Q4 and grew 13.9% year-over-year to RMB7.5 billion for the full year, indicating strong operational performance.

Strong Cash Position

At the end of 2024, the group maintained a strong cash position with RMB11.9 billion in cash and equivalents and a solid net cash position of RMB6.5 billion, underscoring its financial stability.

Shareholder Returns

In 2024, H World Group delivered a total shareholder return of US$770 million, accounting for more than one-third of its three-year plan, demonstrating its commitment to delivering value to its shareholders.

RevPAR Decline

Legacy-Huazhu’s blended RevPAR saw a slight decline of 3% to RMB235 in 2024, reflecting some operational challenges faced by the company.

ADR Decline

The average daily rate (ADR) decreased by 3.2% to RMB289, primarily due to a high base last year and an increase in supply, indicating market pressures.

Legacy-DH Operating Loss

Legacy-DH experienced a widened operating loss due to impairment loss and approximately RMB100 million in one-off restructuring costs, highlighting areas of concern within the business.

SG&A Increase

SG&A expenses for Legacy-Huazhu increased by 19.7% year-over-year in 2024, mainly attributed to higher share-based compensation, pointing to rising operational costs.

Forward-Looking Guidance

Looking ahead, H World Group projects a 2% to 6% revenue growth for 2025 and plans to open around 2,300 new hotels, aiming for a 15% increase in their hotel network. The group also announced a US$300 million final cash dividend, contributing to a total shareholder return of US$770 million for 2024.

In conclusion, H World Group Limited’s earnings call reflected a positive outlook with strategic expansions and a successful asset-light strategy driving growth. Despite some operational headwinds, the company remains focused on delivering shareholder value and achieving sustainable development.