H World Group Limited · HKEX:1179
H World — Huazhu Group — Q4 2019 Earnings Presentation
36 slides from H World's earnings presentation, Mar 26, 2020
Slide 1: Fourth Quarter and Full Year of 2019 Earnings Call
Huazhu Group Limited (NASDAQ: HTHT) Fourth Quarter and Full Year of 2019 Earnings Call March 26, 2020 0
Slide 2: Agenda
Agenda • 2019 Strategy Review • COVID-19 Outbreak • 2019 Operational and Financial Review • Financial Impacts and Guidance • Q and A • Appendix 1
Slide 3: Our Achievements in 2019
Our Achievements in 2019 Key priorities Achievements 01• Fast Expansion in Hotel Network • Gross opening of 1,715 hotels VS planned gross opening of 1,100- 1,200 • Pipeline grew to 2,262 (2019 year-end) VS 1,105 (2018 year-end) Innovative Technology • Online booking increased to 40% from 35% in 2018
Slide 4: Agenda
Agenda • 2019 Strategy Review • COVID-19 Outbreak • 2019 Operational and Financial Review • Financial Impacts and Guidance • Q and A • Appendix 3
Slide 5: Industry Impact
疫情对行业影响 Industry Impact 4
Slide 6: Huazhu Persistence
SEAT ASLEST Huazhu Persistence
Slide 7: No layoff, no pay cut; keep hotels open; our franchisees
一线员工保留、不减薪 No layoff, No pay cut on hotel staff 坚持开店、提供安心房 Keep hotels open for customers 加盟商 Our franchisees
Slide 8: Keep striving
HRS ES s+ Keep striving
Slide 9: Huazhu Co-Presidents
Huazhu Co-Presidents • President of Huazhu Group since 2016. • Served as Chairman and CEO of Cjia Apartments (a member of Huazhu Group), Chief Development Officer of Huazhu and various other roles in development and engineering • Joined the company since its inception in 2005 • EMBA from CEIBS Hui J
Slide 10: Huazhu's Battle against COVID-19
Huazhu’s Battle against COVID-19 new confirmed cases in China Quarantine before Nationwide resumption of work WHO emergency Overseas Wuhan declared Chinese fly lockdown COVID-19 back to China pandemic COVID-19 Outbreak Stage 1: Swift response Stage 2: Mobilized on-site efforts Stage 3: Multi-channel
Slide 11: A Battle to Revive - Getting Through the Lowest Point
A Battle to Revive - Getting Through the Lowest Point 93.5% hotels in operation… Operational hotels %* 100% Huazhu March 26: 93.5% 90% 80% 70% Turning point 60% 50% 40% 1/20 1/27 2/3 2/10 2/17 2/24 3/2 3/9 3/16 3/22 3/26 Stage 1 Stage 2 Stage 3 * Operational hotels % = number of hotels in operation
Slide 12: A Battle to Revive - Getting Through the Lowest Point
A Battle to Revive - Getting Through the Lowest Point …Occupancy of 62% Occupancy for operational hotels 90% 80% 70% Huazhu March 26: 62% 60% Huazhu: 50% 50% 40% 30% Turning point 20% 10% China: 19%* 0% 1/20 1/27 2/3 2/10 2/17 2/24 3/2 3/9 3/16 3/22 3/26 Stage 1 Stage 2 Stage 3 * STR China hotels, w
Slide 13: Letters from Our Franchisees
Letters from Our Franchisees “… In spite of the difficulties in logistics during lockdown, Huazhu’s timely provision of emergency hotel safety supplies made it possible to keep my hotel open for my guests …” Mr. DUAN Yiping Hotel owner of HanTing Hotel, Yizhuang Development Zone, Beijing 12
Slide 14: Letters from Our Franchisees
Letters from Our Franchisees “… I am grateful to Huazhu’s on-site sales team. They went all-out to help fill my rooms when the OTA traffic slowed. Now, my hotel occupancy hits 75%, about 30% higher than the branded chain hotel next door. Joining Huazhu is my smartest choice …” Mr. LIU Huanghui Hotel
Slide 15: Sales Package to Capture Evolving Needs
Sales Package to Capture Evolving Needs Rooms for Returning Workers • 26-steps cleaning process • Intelligent non-contact services • COVID-19 insurance for members Rooms for Inbound Travelers 14
Slide 16: Intelligent Non-contact Services
Intelligent Non-contact Services Online payment & room Self-service Food and supplies selection check in/out delivery by robots > 6 million online payment orders > 1 million times of self-service check in ~240,000 times of robot delivery 1.7 million times of online room selection Data from January 1
Slide 17: Technology-enabled Efficient Administration Platform
Technology-enabled Efficient Administration Platform • Timely and complete Epidemic Prevention SOP Guidelines • 100,000 staff health and travel online reports for quick identification • 24-hour hotline employee psychological counseling • Twice a day hotel reports x ~6,000 hotels H-Tone (华通） Huazhu W
Slide 18: Customers and Staff Cross Infection at Our Hotels
Customers and Staff Cross Infection at Our Hotels 0 17
Slide 19: Agenda
Agenda • 2019 Strategy Review • COVID-19 Outbreak • 2019 Operational and Financial Review • Financial Impacts and Guidance • Q and A • Appendix 18
Slide 20: Hotel Turnover Growth Driven mainly by Hotel Network Expansion
Hotel Turnover Growth Driven mainly by Hotel Network Expansion Hotel Turnover Hotel Network Expansion (in RMB millions) (Number of rooms in operation) 536,876 35,248 422,747 29,703 2018 2019 2018 2019 19
Slide 21: Blended RevPAR Stable in 2019
Blended RevPAR Stable in 2019 ADR Grew 0.9%in Q4’19 and 3.6% in 2019 (RMB) RevPAR Dropped 2.7% in Q4’19 and Increased 0.1% in 2019 230 232 226 234 (RMB) 196 191 197 198 Q4'18 Q4'19 2018 2019 Occupancy Dropped 3.0 pp in Q4’19 and 3.0 pp in 2019 87% Q4'18 Q4'19 2018 2019 85% 84% 82% Excluding our soft
Slide 22: Same-hotel RevPAR Declined in 2019
Same-hotel RevPAR Declined in 2019 7.7% 5.6% 5.5% 0.7% 0.4% -1.0% -3.3% -3.6% -3.1% 2011 2012 2013 2014 2015 2016 2017 2018 2019 21
Slide 23: Huazhu's Blended RevPAR Outperformed Peers
Huazhu’s Blended RevPAR Outperformed Peers 200 197 183 179 168 163 164 165 163 159 158 156 154 153 153 157 158 Peer A 150 150 147 146 162 147 156 155 145 152 141 150 Peer B 145 144 142 142 142 138 134 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 9M'19 Peer A and B have not released RevPAR
Slide 24: Net Revenues: Q4 +8.5%, FY +11.4%
Net Revenues: Q4 +8.5%, FY +11.4% Net Revenues from Leased Net Revenues and Owned Hotels (in RMB millions) (in RMB millions) 7,470 7,718 10,063 11,212 1,942 1,921 2,683 2,910 Q4'18 Q4'19 2018 2019 Q4'18 Q4'19 2018 2019 Net Revenues from Manachised and Franchised Hotels Manachised and Franchised Hote
Slide 25: Increasing Revenue Contribution from Mid and Upscale Hotels
Increasing Revenue Contribution from Mid and Upscale Hotels Revenues from Mid and Upscale Hotels Grew by 23%; Mid and Upscale Hotels Revenues Contribution Increased by 7pp to 57% Revenue Growth Continued Revenue split by Segment 7,30 0 (in RMB millions) 2019 6,30 0 6,205 5,30 0 5,044 economy, 43% 4,
Slide 26: 2019 Operating Margin Decreased by 4.5pp
2019 Operating Margin Decreased by 4.5pp Income from Operations as % of Net Revenues 23.3% 4.5pp 18.8% 2018 2019 Hotel operating costs Pre-opening expenses SG&A Expenses and other and other operating costs as % of net as % of net revenues operating income as % of net revenues revenues 2.0pp 2.
Slide 27: Pro Forma Adjusted EBITDA +15.5%, Margin +1.2pp
Pro Forma Adjusted EBITDA +15.5%, Margin +1.2pp 4,00 1 YoY +15.5% YoY +2.4% 3,50 1 3,00 1 2,50 1 2,00 1 3,777 1,50 1 3,269 3,349 1,00 1 501 Margin 32.5% Margin 29.9% Margin 33.7% YoY -2.6pp YoY +1.2pp 1 2018 2019 2019 Pro Forma • Adjusted EBITDA excludes unrealized gain/ (loss) from fair value chang
Slide 28: Agenda
Agenda • 2019 Strategy Review • COVID-19 Outbreak • 2019 Operational and Financial Review • Financial Impacts and Guidance • Q and A • Appendix 27
Slide 29: Financial Impact – China Business
Financial Impact – China Business • Expected to impact 2020 Q1 and Q2 revenue • Costs and Cash Flow Mitigation Measures 1. Reduce/defer rental payments; 2. Reduce/eliminate discretionary spending 3. Streamline head-office, adjust hotel staff to occupancy 4. Reduce/postpone capital expenditures • Liq
Slide 30: Financial Impact - Deutsche Hospitality
Financial Impact - Deutsche Hospitality Impacts Mitigation • Exceeded monthly revenue budget in • Discuss with landlords to defer rental January and February, 2020 payments • Closed 73% hotels on government • Place staff on temporary furlough, freeze instructions headcounts, etc. • Expect significan
Slide 31: Guidance
Guidance Q1 2020 Full year 2020 • Q1’20 net revenues to decline • Gross opening target of about 1,600- • 15% to 20% or 1,800 hotels • 45% to 50% if excluding the addition of Deutsche Hospitality • Closure of 350-450 hotels, including planned closure of 300-350 hotels and special closure of 50-100 ho
Slide 32: Agenda
Agenda • 2019 Strategy Review • COVID-19 Outbreak • 2019 Operational and Financial Review • Financial Impacts and Guidance • Q and A • Appendix 31
Slide 33: Agenda
Agenda • 2019 Strategy Review • COVID-19 Outbreak • 2019 Operational and Financial Review • Financial Impacts and Guidance • Q and A • Appendix 32
Slide 34: Same-Hotel Operational Data by Segment
Same-Hotel Operational Data by Segment Number of hotels in operation Same-hotel RevPAR Same-hotel ADR Same-hotel Occupancy As of For the quarter ended For the quarter ended For the quarter ended yoy change March 31, March 31, yoy change March 31, yoy change March 31, (p.p.) 2018 2019 2018 2019 2018
Slide 35: Number of Hotels in Operation
Number of Hotels in Operation As of As of As of As of As of As of As of 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2019 Economy hotels 1,309 1,819 2,453 2,741 2,874 2,892 3,485 HanTing Hotel 1,226 1,648 2,003 2,181 2,244 2,283 2,372 Hi Inn 83 158 302 375 396 402 465 Elan
Slide 36: Number of Rooms in Operation
Number of Rooms in Operation As of As of As of As of As of As of As of 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2019 Economy hotels 138,576 185,959 238,156 260,557 266,145 261,037 290,615 HanTing Hotel 130,747 172,341 205,577 221,157 223,121 220,646 224,626 Hi Inn 7,82