H World Group Limited · HKEX:1179
H World — Huazhu Group — Q3 2020 Earnings Presentation
39 slides from H World's earnings presentation, Dec 7, 2020
Slide 1: Huazhu Group Limited Q3 2020 Earnings Call
Huazhu Group Limited (NASDAQ: HTHT and HKEX: 1179) Q3 2020 Earnings Call Dec 7, 2020 0
Slide 2: 1
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Slide 3: Agenda
Agenda • Lodging Industry Outlook • 2020 Strategy Review • Q3’20 Operational and Financial Review • Financial Impacts and Guidance • Q and A • Appendix 2
Slide 4: Market Consolidation Accelerated after Crisis
危机加速行业整合 Market Consolidation Accelerated after Crisis Before and After SARS (2003) Before and After Financial Crisis (2008) Post Financial Crisis Era (Since 2012) +14.1% 24.9% +4.2% 7.8% +1.4% 2.5% 22.2% 2.1% 5.1% 19.1% 4.1% 18.1% +1.1% +1.1% 1.1% 16.4% 3.6% 0.7% 3.2% 13.9% 2.8% 2.5% 12.4% 0.3% 10.
Slide 5: Chain Penetration Further Increased after COVID-19 Outbreak
疫情使得连锁化率进一步提升 Chain Penetration Further Increased after COVID-19 Outbreak Number of Hotel Rooms in the Number of Branded Chain Hotel Lodging Market Decreased Rooms Increased Number of Hotel Rooms Q3’20 vs Q4’19 Branded Chain Hotels +2.8% Independent Hotels -5.7% Q4'19 Q3'20 Source: various OTAs’ dat
Slide 6: Industry Leaders to Consolidate the Market
头部企业将有更多整合机会 Industry Leaders to Consolidate the Market 5
Slide 7: Huazhu's Winning Formula
华住打造三位一体超级合金军团引领酒店行业发展 Huazhu’s Winning Formula Dominant Offline Brand Presence 品牌 线下大王 Member-centric Fully-digitalized Offerings Process 会员主导 数字化 Traffic Technology 流量 技术 The Three-in-one “Super Composite” 6
Slide 8: Agenda
Agenda • Lodging Industry Outlook • 2020 Strategy Review • Q3’20 Operational and Financial Review • Financial Impacts and Guidance • Q and A • Appendix 7
Slide 9: Occupancy is Recovering
Occupancy is Recovering Occupancy of operational hotels, weekly data The occupancy in the 2nd week of September and 4th week of October exceeded same period last year 90% 80% Huazhu : 76% (-2.6p.p. YoY) 70% 60% China: 62%* (-7.2p.p. YoY) 50% 40% 30% 20% 10% 0% 1/4 2/4 3/4 4/4 5/4 6/4 7/4 8/4 9/4 10/
Slide 10: RevPAR Continuously Recovering
RevPAR Continuously Recovering Blended RevPAR in 2020 as % of 2019 100% 98% 100% 79% 80% 74% 70% 73% 62% 60% 54% 41% 40% 24% 20% 0% JAN FEB MAR APR MAY JUN JUL AUG SEP OCT 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: Focusing on Quality Expansion
Focusing on Quality Expansion 01 New Signings of Hotels Optimizing Soft Brand Strategy 405 • Redefining soft brand: 287 • Removing soft brand hotels that do not meet 246 244 247 our quality standards; 150 • Raising the entry threshold of soft brand hotels; Q1'20 Q2'20 Q3'20 • Serving as reservoir fo
Slide 13: Hotel Products Upgrade for Economy Brands
Hotel Products Upgrade for Economy Brands 01 HanTing Hotel 3.5 HanTing Hotel 2.0 朱周空间设计 12 Hi Inn Hotel 6.0 Hi Inn Hotel 4.0 摄影师 ：张伟豪
Slide 14: Hotel Products Upgrade for Acquired Brands
Hotel Products Upgrade for Acquired Brands 01 Orange Hotel 2.0 Orange Hotel 1.0 Crystal Orange Hotel 2.0 Crystal Orange Hotel 1.0 朱周空间设计 摄影师 ：张伟豪 13
Slide 15: Strong Hotel Openings in Lower-tier Cities
Strong Hotel Openings in Lower-tier Cities 01 Net Hotel Openings in 2020 Operational Hotels Breakdown (As of October 31, 2020) (As of October 31, 2020) Tier-3 and Tier-1 cities Tier-2 cities below cities 21% 42% 37% Tier-3 and below Pipeline Hotels Breakdown cities, 44% (As of October 31, 2020) Tier
Slide 16: Increased New Signings of Hotels from Conversion
Increased New Signings of Hotels from Conversion 01 Conversion Rate of New Signings Hotels 59% 54% 2019 2020.1-10 Hotels in this page refers to the hotels of Legacy-Huazhu 15
Slide 17: Resilient Recovery of Direct Sales
Resilient Recovery of Direct Sales 02 Members Contribution of Room Nights Central Reservation Contribution of Room Nights 80% 60% 76% 75% 75% 56% 56% 55% 68% 70% 50% 50% 60% 50% 40% 2019 Q1'20 Q2'20 Q3'20 2019 Q1'20 Q2'20 Q3'20 16
Slide 18: Multiple Touch-Points to Attract New Members
Multiple Touch-Points to Attract New Members 02 QR Code Invoice Receiving Welcome Package Screening for… Bank Power “30-second” Self Sharing Check-in Accessing Purchasing WIFI Portal Breakfast Multiple Touch-Points Room TV Room Service Projection Handbook Laundry Online shopping Service & Niiicacafe
Slide 19: Reinforced Offline Corporate Sales
Reinforced Offline Corporate Sales 02 Number of Corporate Penetration Rate of Customers(1) Top 3,000 Public Listed Companies (in thousands) 12 30% 9 10% 2019 2020Q3 2019 2020Q3 (1) Business entities who have signed business agreement with Huazhu 18
Slide 20: Contribution from Corporate Members Increased
Contribution from Corporate Members Increased 02 Corporate Members Room Nights Room Nights Contributed from as % of Total Room Nights Corporate Members(1) (in millions) 11% 3.9 10% 10% 9% 2.7 9% 8% 8% 8% 7% 6% 2019 Q1'20 Q2'20 Q3'20 Q3'19 Q3'20 (1)Room nights booking through using corporate membersh
Slide 21: One System Strategy - the Progress of DH Digitalization
One System Strategy- the Progress of DH Digitalization 03 Despite the current hardships faced in Europe (pandemic outbreak and lock down), we are pursuing our digital integration, and will come out stronger. One Platform One 1. Seamless Guest One Channel One CRS One ERP One CRM One Backbone Infrastr
Slide 22: Agenda
Agenda • Lodging Industry Outlook • 2020 Strategy Review • Q3’20 Operational and Financial Review • Financial Impacts and Guidance • Q and A • Appendix 21
Slide 23: Hotel Network Continue to Expand
Hotel Network Continue to Expand Hotel Network Expansion Hotel Turnover (Number of rooms in operation) (in RMB millions) 634,087 10,552 9,852 Legacy-DH Legacy-DH 23,322 787 504,414 Legacy- Legacy- Huazhu Huazhu 610,765, 9,765, +21% -1% Q3'19 Q3'20 Q3'19 Q3'20 22
Slide 24: Legacy-Huazhu - Blended RevPAR Declined in Q3'20
Legacy-Huazhu - Blended RevPAR Declined in Q3’20 ADR -11% in Q3’20 (RMB) 245 218 RevPAR -17% in Q3’20 （excluding hotels under requisition) (RMB) 215 Q3‘19 Q3’20 179 Occupancy -6 p.p. in Q3’20 （excluding hotels under requisition) 88% 82% Q3‘19 Q3’20 Q3‘19 Q3’20 23
Slide 25: DH - Blended RevPAR Declined in Q3'20
DH - Blended RevPAR Declined in Q3’20 ADR -5% in Q3’20 (EUR) RevPAR -52% in Q3’20 (EUR) 98 93 74 Q3‘19 Q3’20 35 Occupancy -50 p.p. in Q3’20 76% Q3‘19 Q3’20 38% Q3‘19 Q3’20 24
Slide 26: Q3'20 Net Revenues Increased by 3%
Q3’20 Net Revenues Increased by 3% Net Revenues Net Revenues from Leased and Owned Hotels (in RMB millions) (in RMB millions) 2,089 2,131 Legacy-DH 3,055 3,158 414 Legacy-DH Legacy- 425 Huazhu 1,717, -18% Legacy- Huazhu 2,733, Q3'19 Q3'20 -11% Net Revenues from Manachised and Q3'19 Q3'20 Franchised
Slide 27: 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, Q3’20 2,10 0 1,878 4% 1,729 Legacy-DH 1,70 0 420 economy, 1,30 0 midscale, 45% 51% Legacy- 900 Huazhu 1458, -16% 500 The r
Slide 28: Q3'20 Operating Margin Recovered Significantly
Q3’20 Operating Margin Recovered Significantly Income from Operations 703 523 (in RMB millions) -201 -494 Q3'19 Q2’20 Q3’20 Q3’20 (Excl. DH) Hotel operating costs Pre-opening expenses SG&A Expenses, impairment and other operating costs loss of goodwill and other 126 Impairment loss of 99 operating i
Slide 29: Adjusted EBITDA and Adjusted Net Income
Adjusted EBITDA and Adjusted Net Income Adjusted EBITDA Adjusted Net Income (in RMB millions) (in RMB millions) 901 434 Legacy- Huazhu Legacy- 853 Huazhu 476 184 Legacy-DH -669 218 Legacy-DH -694 Q3'19 Q3'20 Q3'19 Q3'20 • Adjusted EBITDA and adjusted net income excludes unrealized gain/ (loss) from
Slide 30: Agenda
Agenda • Lodging Industry Outlook • 2020 Strategy Review • Q3’20 Operational and Financial Review • Financial Impacts and Guidance • Q and A • Appendix 29
Slide 31: COVID-19 Update – China Business
COVID-19 Update – China Business • Revenue will continue to recover in Q4, but may be impacted by resurgence of COVID 19 cases during this winter • Improved liquidity due to: 1. Positive operating cash flow in China ~RMB1.2 billion in Q3 2. Proceeds from Convertible Bond issuance – US$500 million in
Slide 32: COVID-19 Update - Deutsche Hospitality
COVID-19 Update - Deutsche Hospitality • DH occupancy recovered to 42% at end September, from the lowest point of 13% in April • Recovery trend affected by the second wave of COVID-19 outbreak since late September. Germany is imposing a lock-down from beginning of November 2020 to early January 2021
Slide 33: Guidance
Guidance Q4 2020 Full year 2020 • Q4’20 net revenues to • Maintain gross opening target of about • range from a 0% to a 3% increase 1,600-1,800 hotels or • Closure of 550-600 hotels • range from a decline of 4-7%(1) if excluding the addition of Deutsche Hospitality (1) Considering potential uncertai
Slide 34: Agenda
Agenda • Lodging Industry Outlook • 2020 Strategy Review • Q3’20 Operational and Financial Review • Financial Impacts and Guidance • Q and A • Appendix 33
Slide 35: Agenda – Appendix
Agenda • Lodging Industry Outlook • 2020 Strategy Review • Q3’20 Operational and Financial Review • Financial Impacts and Guidance • Q and A • Appendix 34
Slide 36: Same-Hotel Operational Data by Segment
Same-Hotel Operational Data by Segment Legacy-Huazhu operational hotels excluding hotels under requisition 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 March 31, March 31, March 31, March 3
Slide 37: Number of Hotels and Rooms
Number of Hotels and Rooms As of September 30, 2020 Hotels Rooms Unopened hotels in operation in pipeline Economy hotels 4,226 355,402 1,107 HanTing Hotel 2,722 253,155 477 Hi Inn 443 25,946 103 Elan Hotel 849 53,471 461 Ibis Hotel 199 21,323 56 Zleep Hotel 13 1,507 10 Midscale and upscale hotels 2,
Slide 38: 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 9/30/2020 Economy hotels 1,309 1,819 2,453 2,741 2,874 2,892 3,485 4,226 HanTing Hotel 1,226 1,648 2,003 2,181 2,244 2,283 2,372 2,722 Hi Inn 83
Slide 39: 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 9/30/2020 Economy hotels 138,576 185,959 238,156 260,557 266,145 261,037 290,615 355,402 HanTing Hotel 130,747 172,341 205,577 221,157 223,121 220