H World Group Limited (NASDAQ: HTHT and HKEX: 1179) yesterday announced preliminary results for hotel operations in the third quarter (“Q3 2022”) ended September 30, 2022.

COVID-19 update

For our Legacy-Huazhu business, our RevPAR in Q3 2022 recovered to 90% of the 2019 level, thanks to pent-up leisure travelling demand in the summer holiday during July and August 2022, as well as gradual recovery of business travelling in late September 2022. Breaking down into each month, our RevPAR in July, August and September 2022 recovered to 90%, 89% and 90% of the 2019 levels, respectively. However, we remain cautious on the recovery path in Q4 2022 as we are seeing more sporadic resurgences of COVID in various provinces and cities in China recently.

Steigenberger Hotels AG and its subsidiaries (“DH”, or “Legacy-DH”) have experienced continuing RevPAR recovery in Q3 2022. After recovering to 93% of 2019 levels in Q2 2022, blended RevPAR increased to 102% of 2019 levels in Q3 2022. Blended RevPAR recovery was driven by a 17% increase in ADR, while occupancy remained 10 percentage points behind 2019 levels. Due to expected energy shortages and resulting high inflation rates in Europe, further ADR increases will be required to cover the cost increases. Therefore, the focus of DH will continue to be on efficiency improvements, re-negotiation of lease contracts, and personnel cost optimization.

Operating Results: Legacy-Huazhu(1)

Number of hotels Number of rooms
Opened

in Q3 2022

Closed (2)

in Q3 2022

Net added

in Q3 2022

As of

September 30,

2022 (3)

As of

September 30,

2022

Leased and owned hotels 4 (19 ) (15 ) 631 90,034
Manachised and franchised hotels 425 (185 ) 240 7,645 682,193
Total 429 (204 ) 225 8,276 772,227
(1) Legacy-Huazhu refers to H World and its subsidiaries, excluding DH.

(2) The reasons for hotel closures mainly included non-compliance with our brand standards, operating losses, and property-related issues. In Q3 2022, we temporarily closed 14 hotels for brand upgrade and business model change purposes.

(3) As of September 30, 2022, 558 hotels were requisitioned by governmental authorities.

As of September 30, 2022
Number of hotels Unopened hotels in pipeline
Economy hotels 4,898 950
Leased and owned hotels 363 1
Manachised and franchised hotels 4,535 949
Midscale and upscale hotels 3,378 1,324
Leased and owned hotels 268 16
Manachised and franchised hotels 3,110 1,308
Total 8,276 2,274
Operational hotels excluding hotels under requisition(4)
For the quarter ended
September 30, June 30, September 30, yoy
2021 2022 2022 change
Average daily room rate (in RMB)
Leased and owned hotels 296 243 294 -0.6 %
Manachised and franchised hotels 238 215 248 4.3 %
Blended 246 218 254 3.1 %
Occupancy Rate (as a percentage)
Leased and owned hotels 69.7 % 62.9 % 73.1 % +3.4 p.p.
Manachised and franchised hotels 72.2 % 64.9 % 76.4 % +4.2 p.p.
Blended 71.9 % 64.6 % 76.0 % +4.2 p.p.
RevPAR (in RMB)
Leased and owned hotels 206 153 215 4.2 %
Manachised and franchised hotels 172 139 190 10.4 %
Blended 177 141 193 9.1 %
For the quarter ended
September 30, September 30, yoy
2019 2022 change
Average daily room rate (in RMB)
Leased and owned hotels 288 294 2.1 %
Manachised and franchised hotels 235 248 5.5 %
Blended 245 254 3.4 %
Occupancy Rate (as a percentage)
Leased and owned hotels 90.0 % 73.1 % -16.9 p.p.
Manachised and franchised hotels 87.2 % 76.4 % -10.8 p.p.
Blended 87.7 % 76.0 % -11.7 p.p.
RevPAR (in RMB)
Leased and owned hotels 259 215 -17.1 %
Manachised and franchised hotels 205 190 -7.5 %
Blended 215 193 -10.3 %

(4) If including hotels under requisition, RevPAR in Q3 2022 would have been 90% of the 2019 level.

Same-hotel operational data by class
Mature hotels in operation for more than 18 months (excluding hotels under requisition)
Number of hotels Same-hotel RevPAR Same-hotel ADR Same-hotel Occupancy
As of

September 30,

For the quarter yoy For the quarter yoy For the quarter yoy
ended

September 30,

change ended

September 30,

change ended

September 30,

change
2021 2022 2021 2022 2021 2022 2021 2022 (p.p.)
Economy hotels 3,366 3,366 146 148 1.4 % 189 188 -0.7 % 77.0 % 78.6 % +1.6
Leased and owned hotels 363 363 158 164 3.7 % 215 211 -1.8 % 73.5 % 77.6 % +4.1
Manachised and franchised hotels 3,003 3,003 143 145 1.0 % 185 184 -0.5 % 77.6 % 78.7 % +1.1
Midscale and upscale hotels 2,122 2,122 228 242 6.2 % 324 322 -0.5 % 70.3 % 75.0 % +4.7
Leased and owned hotels 233 233 261 273 4.6 % 398 389 -2.4 % 65.5 % 70.3 % +4.7
Manachised and franchised hotels 1,889 1,889 221 236 6.6 % 311 311 0.0 % 71.2 % 75.8 % +4.7
Total 5,488 5,488 183 190 3.9 % 248 248 -0.2 % 73.9 % 76.9 % +3.0
Number of hotels Same-hotel RevPAR Same-hotel ADR Same-hotel Occupancy
As of

September 30,

For the quarter yoy For the quarter yoy For the quarter yoy
ended

September 30,

change ended

September 30,

change ended

September 30,

change
2019 2022 2019 2022 2019 2022 2019 2022 (p.p.)
Economy hotels 2,057 2,057 189 147 -22.5 % 203 187 -7.5 % 93.5 % 78.4 % -15.2
Leased and owned hotels 346 346 211 161 -23.5 % 226 208 -7.9 % 93.4 % 77.5 % -15.9
Manachised and franchised hotels 1,711 1,711 184 143 -22.1 % 196 182 -7.3 % 93.5 % 78.6 % -14.9
Midscale and upscale hotels 994 994 295 234 -20.7 % 341 319 -6.3 % 86.7 % 73.4 % -13.2
Leased and owned hotels 181 181 354 251 -29.2 % 405 362 -10.5 % 87.5 % 69.2 % -18.2
Manachised and franchised hotels 813 813 277 229 -17.3 % 321 307 -4.3 % 86.4 % 74.7 % -11.7
Total 3,051 3,051 230 180 -21.6 % 254 236 -6.9 % 90.9 % 76.5 % -14.4

Operating Results: Legacy-DH(5)

Number of hotels Number of

rooms

Unopened hotels

in pipeline

Opened

in Q3 2022

Closed

in Q3 2022

Net added

in Q3 2022

As of

September 30,

2022(6)

As of

September

30, 2022

As of

September

30, 2022

Leased hotels - 79 14,939 27
Manachised and franchised hotels 1 - 1 47 10,323 12
Total 1 - 1 126 25,262 39
(5) Legacy-DH refers to DH.

(6) As of September 30, 2022, a total of 4 hotels were temporarily closed. 1 hotel was closed for renovation and 1 hotel was closed due to flood damage. Additionally, 1 hotel was temporarily closed due to extensive hotel refurbishment, and 1 hotel was temporarily closed due to seasonal break .

For the quarter ended
September 30, June 30, September 30, yoy
2021 2022 2022 change
Average daily room rate (in EUR)
Leased hotels 94.3 112.6 112.9 19.7 %
Manachised and franchised hotels 104.5 106.7 115.6 10.6 %
Blended 98.6 110.4 113.9 15.5 %
Occupancy rate (as a percentage)
Leased hotels 48.0 % 61.2 % 67.4 % +19.5 p.p.
Managed and franchised hotels 49.4 % 57.9 % 64.1 % +14.7 p.p.
Blended 48.6 % 59.8 % 66.1 % +17.5 p.p.
RevPAR (in EUR)
Leased hotels 45.3 68.9 76.1 68.2 %
Managed and franchised hotels 51.6 61.8 74.1 43.5 %
Blended 47.9 66.0 75.3 57.2 %

Hotel Portfolio by Brand

As of September 30, 2022
Hotels Rooms Unopened hotels
in operation in pipeline
Economy hotels 4,913 386,911 964
HanTing Hotel 3,207 285,313 603
Hi Inn 460 24,128 127
Ni Hao Hotel 140 10,074 192
Elan Hotel 868 42,810 -
Ibis Hotel 223 22,876 28
Zleep Hotels 15 1,710 14
Midscale hotels 2,816 308,164 1,001
Ibis Styles Hotel 85 8,864 18
Starway Hotel 565 46,492 212
JI Hotel 1,629 192,872 534
Orange Hotel 505 54,822 229
CitiGO Hotel 32 5,114 8
Upper midscale hotels 525 75,500 263
Crystal Orange Hotel 161 21,314 53
Manxin Hotel 111 10,443 52
Madison Hotel 50 7,276 62
Mercure Hotel 133 22,250 54
Novotel Hotel 17 4,424 18
IntercityHotel(7) 53 9,793 24
Upscale hotels 124 21,223 76
Jaz in the City 3 587 1
Joya Hotel 8 1,368 1
Blossom House 43 2,055 52
Grand Mercure Hotel 8 1,897 5
Steigenberger Hotels & Resorts(8) 53 13,754 10
MAXX(9) 9 1,562 7
Luxury hotels 15 2,326 4
Steigenberger Icon(10) 9 1,847 1
Song Hotels 6 479 3
Others 9 3,365 5
Other hotels(11) 9 3,365 5
Total 8,402 797,489 2,313

(7) As of September 30, 2022, 3 operational hotels and 10 pipeline hotels of IntercityHotel were in China.

(8) As of September 30, 2022, 11 operational hotels and 3 pipeline hotels of Steigenberger Hotels & Resorts were in China.

(9) As of September 30, 2022, 3 operational hotels and 7 pipeline hotels of MAXX were in China.

(10) As of September 30, 2022, 3 operational hotels of Steigenberger Icon were in China.

(11) Other hotels include other partner hotels and other hotel brands in Yongle Huazhu Hotel & Resort Group (excluding Steigenberger Hotels & Resorts and Blossom House).

About H World Group Limited

Originated in China, H World Group Limited is a key player in the global hotel industry. As of September 30, 2022, H World operated 8,402 hotels with 797,489 rooms in operation in 17 countries. H World’s brands include Hi Inn, Elan Hotel, HanTing Hotel, JI Hotel, Starway Hotel, Orange Hotel, Crystal Orange Hotel, Manxin Hotel, Madison Hotel, Joya Hotel, Blossom House, Ni Hao Hotel, CitiGO Hotel, Steigenberger Hotels & Resorts, MAXX, Jaz in the City, IntercityHotel, Zleep Hotels, Steigenberger Icon and Song Hotels. In addition, H World also has the rights as master franchisee for Mercure, Ibis and Ibis Styles, and co-development rights for Grand Mercure and Novotel, in the pan-China region.

H World’s business includes leased and owned, manachised and franchised models. Under the lease and ownership model, H World directly operates hotels typically located on leased or owned properties. Under the manachise model, H World manages manachised hotels through the on-site hotel managers that H World appoints, and H World collects fees from franchisees. Under the franchise model, H World provides training, reservations and support services to the franchised hotels, and collects fees from franchisees but does not appoint on-site hotel managers. H World applies a consistent standard and platform across all of its hotels. As of September 30, 2022, H World operates 13 percent of its hotel rooms under lease and ownership model, and 87 percent under manachise and franchise models.