H World Group Limited · HKEX:1179
H World — Huazhu Group — Q2 2019 Earnings Presentation
27 slides from H World's earnings presentation, Aug 21, 2019
Slide 1: Huazhu Group Limited Q2 2019 Earnings Call
Huazhu Group Limited (NASDAQ: HTHT) Q2 2019 Earnings Call August 21, 2019
Slide 2: Agenda
Agenda • Strategy Review • Operational and Financial Review • Q and A • Appendix 1
Slide 3: Rapid Expansion Accompanied by Strategic Investments for Future Growth
Rapid Expansion Accompanied by Strategic Investments for Future Growth Hotel Network Expansion Hotel Turnover (Number of hotels in operation) (in RMB millions) 10,000 9,000 8,000 7,000 4,665 6,000 8,762 3,903 5,000 7,456 4,000 3,000 Q2'18 Q2'19 Q2'18 Q2'19 Net Revenues Adjusted EBITDA* and Margin (i
Slide 4: Softer Same-hotel RevPAR and Occupancy due to Macro Weakness
Softer Same-hotel RevPAR and Occupancy due to Macro Weakness Mature Hotel Occupancy Outperformed Industry Average by 20 pp Same-hotel RevPAR and Occupancy Decline Mature Hotel Occupancy Remains High 30.0% 96% 93% 92% 93% 87% 88% 87% 89% 86% RevPAR 83% 20.0% 9.5% 10.0% 8.3% 6.5% 6.5% 7.9% 5.8% 4.2% 3
Slide 5: Strategic Focus for 2019
Strategic Focus for 2019 Fast Expansion in Hotel Network 01 Innovative Technology Applications to Improve Guest 02 Experience and Operational Efficiency Strategic Deployment in Upscale Segment 03 4
Slide 6: Strong Hotel Openings – Accelerated in Q2 2019
Strong Hotel Openings – Accelerated in Q2 2019 01 Hotel Openings (net) 2.8 X 3.1 X 435 269 157 86 Q2'18 Q2'19 1H'18 1H'19 5
Slide 7: Growing Hotel Pipeline Mainly Contributed by F&M Hotels
Growing Hotel Pipeline Mainly Contributed 01 by F&M Hotels 1,800 35% 33% 1,600 30% 30% 1,400 26% Unopened Hotel Pipeline as a % of Hotels in Operation 25% 1,200 23% 21% 19% 20% 1,000 19% 17% 800 1,553 96.5% 15% F&M* hotels 1,311 600 1,105 10% 924 400 839 696 744 606 5% 200 - 0% Q3'17 Q4'17 Q1'18 Q2'
Slide 8: Fast Expansion in Midscale & Upscale Segments
Fast Expansion in Midscale & Upscale Segments 01 Number of Rooms in Operation Number of Unopened Rooms in Pipeline ~125,300 198,271 133,913 ~ 72,300 43% 80% 34% 80% Q2'18 Q2'19 Q2'18 Q2'19 Mid and Upscale Rooms As % of Total Rooms 7
Slide 9: HanTing 3.0 - Intelligent and Affordable
HanTing 3.0 - Intelligent and Affordable 01 Self-service check-in Robot delivery “Hello Huazhu” AI -Voice control of lights, TV, air-conditioning, window shades, etc. -Voice-activated two-way communication 8
Slide 10: Huazhu App to Optimize Seamless Stay Experience
Huazhu App to Optimize Seamless Stay Experience 02 Easy Breakfast Room Services Add-on Services In-house Control (online shopping) Digital Room Key Zero-second 16 Checkout Control Elevator Extend Stay Mobile Check-in Touch Points Improve Guest WiFi Portal Experience Easy VAT/Invoice “Hello HuaZhu” A
Slide 11: Technology to Drive Corporate Direct Sales
Technology to Drive Corporate Direct Sales 02 • Direct bookings vs. various booking channels (e.g., Travel agents, Walk-in, etc.) • Lowest price guaranteed Direct • Benefits guaranteed – Breakfasts, loyalty points Booking • Direct monthly settlement with corporate clients • No more reliance on staff
Slide 12: Joya - Oriental Upscale Business Hotel
Joya - Oriental Upscale Business Hotel 03 1. Taikoo Li, Chengdu 2. Qianjiang CBD, Hangzhou 3.Gubei SOHO, Shanghai China 3&4 1 2 4. Lujiazui, Shanghai 11
Slide 13: New Mid and Upscale Soft brands - Madison and Grand Madison
New Mid and Upscale Soft brands - Madison and 03 Grand Madison to Convert 4 and 5 Star Hotels • To be officially launched in September 2019 • Hotels with non-standardized design to benefit from Huazhu’s operating platform (e.g., technology platform, procurements, sales channels) • 12 hotels in pipel
Slide 14: Agenda
Agenda • Strategy Review • Operational and Financial Review • Q and A • Appendix 13
Slide 15: Blended RevPAR Increased by 1.3% Driven by ADR Growth
Blended RevPAR Increased by 1.3% Driven by ADR Growth ADR Grew 4.4% in Q2’19 (RMB) 236 226 RevPAR Increased 1.3% in Q2’19 (RMB) 206 203 Q2'18 Q2'19 Occupancy Dropped 2.7 pp in Q2’19 Q2'18 Q2'19 90% 87% Q2'18 Q2'19 14
Slide 16: Group Same-hotel ADR Growth Continued while Occupancy Rate Fell
Group Same-hotel ADR Growth Continued while Occupancy Rate Fell due to Softness in Business Travel Demand Quarterly Group Same-hotel RevPAR Growth 9.5% 7.9% 8.3% 6.5%6.5% 5.8% 4.2% 3.9% 2.5% -0.4% 0.5% -0.3% -1.2% -2.1% RevPAR=202 -3.0%-2.9% ADR=226 (+0.4%) -4.0% Occ= 89%(-2.3pp) 15Q2 15Q3 15Q4 16Q1
Slide 17: Q2 Net Revenues Increased 13.4%, in line with Guidance
Q2 Net Revenues Increased 13.4%, in line with Guidance (13%-15%) Net Revenues from Leased Net Revenues and Owned Hotels (in RMB millions) (in RMB millions) 2,859 2,001 2,521 1,899 Q2'18 Q2'19 Net Revenues from Manachised and Franchised Hotels (in RMB millions) Q2'18 Q2'19 803 616 Manachised and Fran
Slide 18: Increasing Revenue Contribution from Mid and Upscale Hotels
Increasing Revenue Contribution from Mid and Upscale Hotels Revenues from Mid and Upscale Hotels Grew by 27%; Mid and Upscale Hotels Revenues Contribution Increased by 7pp to 56% 1,700 Revenue Growth Continued Revenue split by Segment (in RMB millions) 1,566 Q2’19 1,500 1,300 1,231 1,100 economy, 44
Slide 19: Lower Operating Margin in Q2 2019 Due to Investments
Lower Operating Margin in Q2 2019 Due to Investment in Hotel Development Team, Upscale Hotels and IT Capabilities Income from Operations as % of Net Revenues 26.6% 3.6pp 23.0% Q2'18 Q2'19 Hotel operating costs Pre-opening expenses SG&A Expenses and other and other operating costs as % of net as %
Slide 20: Strong Cash Balances Support Hotel Expansion and Capital Investments
Strong Cash Balances Support Hotel Expansion and Capital Investments Abundant Funding Resource for Expansion (in RMB millions) (301) 1,161 (1,074) (252) 74 4,457 Free cash flow = RMB 860 m 4,065 Cash and cash Net Cash from Capex for Repayment of Investments Others Cash and cash equivalents and Opera
Slide 21: Q3 2019 Guidance
Q3 2019 Guidance Hotel Openings Revenue Guidance • Maintain gross opening target • Q3’19 net revenues to grow 9%-11% of 1,100-1,200 hotels • FY19 net revenues to grow 10%-12% • To close about 200-250 hotels 20
Slide 22: Share Repurchase Program
Share Repurchase Program • Board of Directors has approved a share repurchase program of up to US$750 million, effective for five years • Authorized to repurchase in open market or privately negotiated transactions its own outstanding American Depositary Shares (“ADSs”) with an aggregate value of up
Slide 23: Agenda
Agenda • Strategy Review • Operational and Financial Review • Q and A • Appendix 22
Slide 24: 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 September 30, September 30, September 30, September 30, yoy change yoy change yoy change 2017 2018 2017 2
Slide 25: Number of Hotels in Operation
Number of Hotels in Operation As of As of As of As of As of As of As of 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 3/31/2019 6/30/2019 Economy hotels 1,819 2,453 2,741 2,874 2,892 2,916 2,990 HanTing Hotel 1,648 2,003 2,181 2,244 2,283 2,303 2,331 Hi Inn 158 302 375 396 402 399 415 Elan
Slide 26: Number of Rooms in Operation
Number of Rooms in Operation As of As of As of As of As of As of 12/31/2015 12/31/2016 12/31/2017 12/31/2018 3/31/2019 6/30/2019 Economy hotels 238,156 260,557 266,145 261,037 262,040 265,025 HanTing Hotel 205,577 221,157 223,121 220,646 221,825 222,983 Hi Inn 21,340 25,600 26,063 25,403 25,218 25,5
Slide 27: OD *e fé
OD *e fé NNASJY KEE