H World Group Limited · HKEX:1179
H World — Huazhu Group — Q1 2020 Earnings Presentation
37 slides from H World's earnings presentation, Jul 1, 2020
Slide 1: Huazhu Group Limited Q1 2020 Earnings Call
Huazhu Group Limited (NASDAQ: HTHT) Q1 2020 Earnings Call July 1, 2020 0
Slide 2: Agenda
Agenda • Lodging Industry Outlook • 2020 Strategy Review • Q1’20 Operational and Financial Review • Financial Impacts and Guidance • Q and A • Appendix 1
Slide 3: Tick-shaped Recovery
LU’ HED Tick-shaped Recovery
Slide 4: Fast Recovery of Local Market
本地市场的快速恢复 Fast Recovery of Local Market Room Nights Sold to Local Market Room Nights Sold to Non-Local Market as % of Room Nights Available as % of Room Nights Available JAN FEB MAR APR MAY JAN FEB MAR APR MAY 2019 2020 2019 2020 * Ratio refers to Huazhu’s number * Local market refers to customers t
Slide 5: New Model and International Operators Heavily Impacted; Time for Leaders to Reform
新模式公司和国际品牌受到冲击 New Model and International Operators Heavily Impacted 头部企业迎来变革和调整的时机 Time for Leaders to Reform 4
Slide 6: Organizational Restructuring
华住组织架构调整 Organizational Restructuring 大部制&冗余减员 组织下沉 Streamline Head Office Decentralization 人才梯队 华住中国&全球布局 Talent Program Huazhu China & Huazhu International 5
Slide 7: Agenda
Agenda • Lodging Industry Outlook • 2020 Strategy Review • Q1’20 Operational and Financial Review • Financial Impacts and Guidance • Q and A • Appendix 6
Slide 8: 97% Hotels Resumed Operation in Q2'20
97% Hotels Resumed Operation in Q2’20 Legacy-Huazhu operational hotels %* As of June 29: 157 hotels under requisition 100.00% 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 1/1 1/15 1/29 2/12 2/26 3/11 3/25 4/8 4/22 5/6 5/20 6/3 6/17 * Operational hotels % = number of hotels in operation excluding requis
Slide 9: Occupancy is Recovering
Occupancy is Recovering Occupancy of operational hotels, weekly data June 11: New COVID-19 cases in Beijing 90.00% 80.00% 70.00% Huazhu : 74% 60.00% 50.00% 40.00% China: 47%* 30.00% 20.00% 10.00% 0.00% 1/4 1/18 2/1 2/15 2/29 3/14 3/28 4/11 4/25 5/9 5/23 6/6 6/20 20 * STR China hotels, weekly data 8
Slide 10: RevPAR is Improving
RevPAR is Improving Same-Hotel RevPAR in 2020 as % of 2019 100% 90% 80% 71% 70% 65% 59% 60% 51% 50% 39% 40% 22% 30% 20% 10% 0% JAN FEB MAR APR MAY JUN Data in JUN 2020 as of June 28, 2020 9
Slide 11: Strategic Focus for 2020
Strategic Focus for 2020 1 Accelerated Quality Hotel Expansion 2 Multi-Dimensional Direct Sales 3 Global Technology-based Shared Service Platform 10
Slide 12: Pipeline Remained Robust
Pipeline Remained Robust 01 Pipeline Breakdown Number of Pipeline Hotels (As of March 31, 2020) Tier-1 cities Tier-2 cities Tier-3 cities 2,262 2,334 15% 40% 45% Upper Economy Midscale Upscale Midscale hotels hotels hotels hotels 50% 39% 9% 2% Q4'19 Q1'20 Soft brands Standardized brands 37% 63% Pipe
Slide 13: New Signings of Hotels Remained Stable
New Signings of Hotels Remained Stable 01 New Signings of Hotels Why Franchisees Choose Us (Jan to May) 877 873 • Franchise network resilient to market risks • Higher efficiency and lower cost structure • Membership driven direct sales channel • Agile and responsive organization 2019 2020 New signin
Slide 14: Huazhu Upscale Hotels Outperformed Industry Average
Huazhu Upscale Hotels Outperformed Industry Average 01 Occupancy in 2020 • Huazhu upscale brand hotel’s 60% occupancy was ~20 pct above industry average in May 2020 50% Joya • China’s staycation and travelling 40% Blossom House nearby trend drives Blossom House popularity 30% 20% • Introduce DH bran
Slide 15: Central Reservation Rebounded Stronger than OTAs
Central Reservation Rebounded Stronger than OTAs 02 60% 56% 55% Central Reservation % in 2020 52% 49% 50% 45% Central Reservation % in 2019 52% 47% 48% 36% 44% 40% 30% 19% 20% 16% 15% 13% 13% OTA % in 2019 10% 14% 13% 13% 11% OTA% in 2020 11% 0% JAN FEB MAR APR MAY Central reservation % in this page
Slide 16: Further Strengthened Offline Direct Sales
Further Strengthened Offline Direct Sales 02 Local Corporate Sales Sales • 17% of hotels have sales team，~90% • As of May 31，room nights sold to of hotels have delegated hotel staff corporate customers recovered to the responsible for local sales same level as last year • Local sales focus on drivin
Slide 17: Technology and Efficiency is the Key Business Enabler for Huazhu's Globalization
03 Technology and Efficiency is the Key Business Enabler for Huazhu’s Globalization Growth Direct Sales Efficiency Technology 16
Slide 18: One System Strategy: 500 Days to Empower DH Digitalization
03 One System Strategy: 500 Days to Empower DH Digitalization One One Channel One CRS One CRM One PMS/ERP One Backbone Infrastructure One Platform 3 Phases One Identity Central High Unified Customer Central Data 1. Seamless Guest Strong Direct Distribution Efficiency Technology Insights Central Jour
Slide 19: Integrated Solution with In-House Products Deployed from China to Global
03 Integrated Solution with 42 In-House Products Deployed from China to Global Huazhu PMS & Mobile Loyalty App Integrated ERP HReward CRM+ HSIA/WIFI Portal Employee Automated Check-In Mobile Communication / Check Out Housekeeping Delivery Robot 18
Slide 20: Agenda
Agenda • Lodging Industry Outlook • 2020 Strategy Review • Q1’20 Operational and Financial Review • Financial Impacts and Guidance • Q and A • Appendix 19
Slide 21: Hotel Network Continue to Expand
Hotel Network Continue to Expand Hotel Network Expansion Hotel Turnover (Number of rooms in operation) (in RMB millions) 7,195 575,488 Legacy-DH 23,126 439,614 4,900 Legacy-DH 1,198 Legacy- Huazhu 552,362, +26% Legacy- Huazhu 3,702, -49% Q1'19 Q1'20 Q1'19 Q1'20 20
Slide 22: Legacy-Huazhu - Blended RevPAR Declined in Q1'20
Legacy-Huazhu - Blended RevPAR Declined in Q1’20 ADR -15% in Q1’20 (RMB) RevPAR -58% in Q1’20 （excluding hotels under requisition) 221 189 (RMB) 178 Q1‘19 Q1’20 75 Occupancy -41 pct in Q1’20 （excluding hotels under requisition) Q1‘19 Q1’20 81% 40% Excluding ①hotels under requisition, ②hotels tempora
Slide 23: DH - Blended RevPAR Declined in Q1'20 starting from March
DH - Blended RevPAR Declined in Q1’20 starting from March 2020 ADR -6% in Q1’20 (EUR) RevPAR -22% in Q1’20 95 89 (EUR) 59 46 Q1‘19 Q1’20 Occupancy -10 pct in Q1’20 62% 52% Q1‘19 Q1’20 Q1‘19 Q1’20 22
Slide 24: Q1'20 Net Revenues Decreased by 16%
Q1’20 Net Revenues Decreased by 16% Net Revenues Net Revenues from Leased and Owned Hotels (in RMB millions) (in RMB millions) 1,706 1,516 2,387 Legacy-DH 2,013 709 Legacy-DH Legacy- 725 Huazhu 807, -53% Legacy- Huazhu Q1'19 Q1'20 1,288, -46% Net Revenues from Manachised and Q1'19 Q1'20 Franchised H
Slide 25: DH Acquisition Accelerated Revenue Contribution from Mid and Upscale Hotels
DH Acquisition Accelerated Revenue Contribution from Mid and Upscale Hotels Revenue from Mid and Upscale Legacy-Huazhu Hotels Revenue Split by Segment (in RMB millions) upscale, Q1’20 3% 1,50 0 1,419 1,264 Legacy-DH 1,30 0 720 1,10 0 900 midscale, economy, 54% 43% 700 Legacy- Huazhu 699, -45% 500 30
Slide 26: COVID-19 has Significant Impact on Q1'20 Operating Margin
COVID-19 has Significant Impact on Q1’20 Operating Margin Income from Operations 486 264 (in RMB millions) -857 -731 Q1'19 Q4’19 Q1’20 Q1’20 (Excl. DH) Hotel operating costs Pre-opening expenses SG&A Expenses and other and other operating costs operating income 149 2,385 110 375 374 1,900 104 111 1,
Slide 27: and also on Adjusted EBITDA and Adjusted Net Income
and also on Adjusted EBITDA and Adjusted Net Income Adjusted EBITDA Adjusted Net Income (in RMB millions) (in RMB millions) 528 222 Legacy-DH Legacy-DH -122 -73 Legacy- Huazhu Legacy- -981 Margin 32.5% Huazhu -631 -1,103 -704 Q1'19 Q1'20 Q1'19 Q1'20 • Adjusted EBITDA and adjusted net income excludes
Slide 28: Agenda
Agenda • Lodging Industry Outlook • 2020 Strategy Review • Q1’20 Operational and Financial Review • Financial Impacts and Guidance • Q and A • Appendix 27
Slide 29: COVID-19 Update – China Business
COVID-19 Update – China Business • Q2 to Q3 revenue will still be lower compared to 2019 • Liquidity 1. Obtained written amendent on financial covenants up to June 2021 for the US$1 billion syndication loan 2. Increased cash balance – RMB4.8 billion at June 27, 2020 3. Banks increased support – lowe
Slide 30: COVID-19 Update - Deutsche Hospitality
COVID-19 Update - Deutsche Hospitality • 79% or 91 of the hotels opened at end June 2020 up from 27% at end March • Occupancy recovered to 23% at end June, from the lowest point of 13% in April • Costs and cash flow mitigation measure: 1. Deferred rental payments 2. Place staff on temporary furlough
Slide 31: Guidance
Guidance Q2 2020 Full year 2020 • Q2’20 net revenues to decline • Maintain gross opening target of about • 32% to 34% or 1,600-1,800 hotels • 35% to 37% if excluding the • Closure of 350-450 hotels, including addition of Deutsche Hospitality planned closure of 300-350 hotels and special closure of 5
Slide 32: Agenda
Agenda • Lodging Industry Outlook • 2020 Strategy Review • Q1’20 Operational and Financial Review • Financial Impacts and Guidance • Q and A • Appendix 31
Slide 33: Agenda
Agenda • Lodging Industry Outlook • 2020 Strategy Review • Q1’20 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 June 30, June 30, yoy change June 30, yoy change June 30, (p.p.) 2018 2019 2018 2019 2018 2019
Slide 35: Number of Hotels and Rooms
Number of Hotels and Rooms As of March 31, 2020 Hotels Rooms Unopened hotels in operation in pipeline Economy hotels 4,004 336,004 1,138 HanTing Hotel(3) 2,630 245,171 503 Hi Inn 464 26,956 130 Elan Hotel 713 42,375 424 Ibis Hotel 185 20,254 71 Zleep Hotel 12 1,248 10 Midscale and upscale hotels 1,9
Slide 36: Number of Hotels in Operation
Number of Hotels in Operation As of 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 3/31/2020 Economy hotels 1,309 1,819 2,453 2,741 2,874 2,892 3,485 4,004 HanTing Hotel 1,226 1,648 2,003 2,181 2,244 2,283 2,372 2,630 Hi Inn 83
Slide 37: Number of Rooms in Operation
Number of Rooms in Operation As of 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 3/31/2020 Economy hotels 138,576 185,959 238,156 260,557 266,145 261,037 290,615 336,004 HanTing Hotel 130,747 172,341 205,577 221,157 223,121 220