- A total of 8,592 hotels or 820,099 hotel rooms in operation as of March 31, 2023.
- Hotel turnover1 increased 71.3% year-over-year to RMB16.2 billion in the first quarter of 2023. Excluding Steigenberger Hotels GmbH and its subsidiaries (“DH”, or “Legacy-DH”), hotel turnover increased 68.8% year-over-year in the first quarter of 2023.
- Revenue increased 67.1% year-over-year to RMB4.5 billion (US$652 million)2 in the first quarter of 2023, surpassing the revenue guidance previously announced of a 61% to 65% increase compared to the first quarter of 2022. Revenue from the Legacy-Huazhu segment in the first quarter of 2023 increased 58.0% year-over-year, exceeding the revenue guidance previously announced of a 53% to 57% increase.
- Net income attributable to H World Group Limited was RMB990 million (US$144 million) in the first quarter of 2023, compared with a net loss attributable to H World Group Limited of RMB630 million in the first quarter of 2022 and a net loss attributable to H World Group Limited of RMB124 million in the previous quarter. Net income attributable to H World Group Limited from the Legacy-Huazhu segment was RMB1.2 billion in the first quarter of 2023, compared with a net loss attributable to H World Group Limited from the Legacy-Huazhu segment of RMB307 million in the first quarter of 2022 and a net loss attributable to H World Group Limited from the Legacy-Huazhu segment of RMB84 million in the previous quarter.
- EBITDA (non-GAAP) in the first quarter of 2023 was RMB1.6 billion (US$238 million), compared with a negative RMB301 million in the first quarter of 2022 and RMB529 million in the previous quarter. EBITDA from the Legacy-Huazhu segment, which is a segment measure, was RMB1.7 billion in the first quarter of 2023, compared with a negative RMB61 million in the first quarter of 2022 and RMB528 million in the previous quarter.
- Adjusted EBITDA (non-GAAP), which excluded share-based compensation expenses and gains (losses) from fair value changes of equity securities from EBITDA (non-GAAP), was RMB1.7 billion (US$240 million) in the first quarter of 2023, compared with a negative RMB333 million in the first quarter of 2022 and RMB398 million in the previous quarter. Adjusted EBITDA from the Legacy-Huazhu segment (non-GAAP) was RMB1.7 billion in the first quarter of 2023, compared with a negative RMB93 million in the first quarter of 2022 and RMB397 million in the previous quarter.
- For the second quarter of 2023, H World expects its revenue growth to be in the range of 51%-55% compared to the second quarter of 2022, or in the range of 64%-68% excluding DH.
H World Group Limited (NASDAQ: HTHT and HKEX: 1179) today announced its unaudited financial results for the first quarter ended March 31, 2023.
As of March 31, 2023, H World’s worldwide hotel network in operation totaled 8,592 hotels and 820,099 rooms, including 128 hotels from DH. During the first quarter of 2023, our Legacy-Huazhu business opened 262 hotels, including 2 leased and owned hotels and 260 manachised and franchised hotels, and closed a total of 209 hotels, including 5 leased and owned hotels and 204 manachised and franchised hotels. During the first quarter of 2023, the Legacy-DH business opened 2 hotels, including 1 leased hotel and 1 manachised and franchised hotel, and closed a total of 6 hotels, including 2 leased hotels and 4 manachised and franchised hotels. As of March 31, 2023, H World had a total of 2,339 unopened hotels in the pipeline, including 2,304 hotels from the Legacy-Huazhu business and 35 hotels from the Legacy-DH business.
Legacy-Huazhu Only – First Quarter 2023 Operational Highlights
As of March 31, 2023, Legacy-Huazhu had 8,464 hotels in operation, including 620 leased and owned hotels, and 7,844 manachised and franchised hotels. In addition, as of the same date, Legacy-Huazhu had 793,927 hotel rooms in operation, including 88,416 rooms under the lease and ownership model, and 705,511 rooms under the manachise and franchise models. Legacy-Huazhu also had 2,304 unopened hotels in its pipeline, including 13 leased and owned hotels, and 2,291 manachised and franchised hotels. The following discusses Legacy-Huazhu’s RevPAR, average daily room rate (“ADR”) and occupancy rate for its leased and owned hotels, as well as manachised and franchised hotels for the periods indicated.
- The ADR was RMB277 in the first quarter of 2023, compared with RMB224 in the first quarter of 2022, RMB240 in the previous quarter, and RMB221 in the first quarter of 2019.
- The occupancy rate for all the Legacy-Huazhu hotels in operation was 75.6% in the first quarter of 2023, compared with 59.2% in the first quarter of 2022, 66.2% in the previous quarter, and 80.6% in the first quarter of 2019.
- Blended RevPAR was RMB210 in the first quarter of 2023, compared with RMB132 in the first quarter of 2022, RMB159 in the previous quarter, and RMB178 in the first quarter of 2019.
- For all the Legacy-Huazhu hotels which had been in operation for at least 18 months, the same-hotel RevPAR was RMB210 in the first quarter of 2023, representing a 51.8% increase from RMB138 in the first quarter of 2022, with a 20.8% increase in ADR and a 15.7 percentage-point increase in occupancy rate.
Legacy-DH Only – First Quarter of 2023 Operational Highlights
As of March 31, 2023, Legacy-DH had 128 hotels in operation, including 80 leased hotels and 48 manachised and franchised hotels. In addition, as of the same date, Legacy-DH had 26,172 hotel rooms in operation, including 15,497 rooms under the lease model, and 10,675 rooms under the manachise and franchise models. Legacy-DH also had 35 unopened hotels in the pipeline, including 25 leased hotels and 10 manachised and franchised hotels. The following discusses Legacy-DH’s RevPAR, ADR and occupancy rate for its leased as well as manachised and franchised hotels (excluding hotels temporarily closed) for the periods indicated.
- The ADR was EUR104 in the first quarter of 2023, compared with EUR88 in the first quarter of 2022 and EUR122 in the previous quarter.
- The occupancy rate for all Legacy-DH hotels in operation was 53.5% in the first quarter of 2023, compared with 38.0% in the first quarter of 2022 and 59.3% in the previous quarter.
- Blended RevPAR was EUR55 in the first quarter of 2023, compared with EUR33 in the first quarter of 2022 and EUR72 in the previous quarter.
Jin Hui, CEO of H World commented: “We are very pleased to see a strong beginning of the year in China post-reopening. For our Legacy-Huazhu business, RevPAR in Q1 2023 recovered to 118% of the Q1 2019 level. Broken down into monthly numbers, our RevPAR in January, February and March 2023 recovered to 96%, 140% and 120% of the 2019 levels of the corresponding months, respectively. The strong recovery was largely driven by the ADR growth in the first quarter due to pent-up demand, a combination of product mix change and continued product upgrades, as well as market penetration and synergy through regional offices. More importantly, our franchisees’ confidence level also gradually improved. It led to a strong momentum for our new signings, reaching over 670 new hotels during the quarter.”
“Regarding our business outside China, our Legacy-DH business continued its promising business recovery. Q1 2023 Blended RevPAR recovered to 94% of the 2019 level.”
First Quarter of 2023 Unaudited Financial Results
| (RMB in millions) | Q1 2022 | Q4 2022 | Q1 2023 |
| Revenue: | |||
| Leased and owned hotels | 1,642 | 2,450 | 2,874 |
| Manachised and franchised hotels | 989 | 1,158 | 1,554 |
| Others | 50 | 98 | 52 |
| Total revenue | 2,681 | 3,706 | 4,480 |
Revenue in the first quarter of 2023 was RMB4.5 billion (US$652 million), representing a 67.1% year-over-year increase and a 20.9% sequential increase. Revenue from the Legacy-Huazhu segment in the first quarter of 2023 was RMB3.6 billion, representing a 58.0% year-over-year increase and a 30.4% sequential increase. The 58.0% year-over-year increase exceeds the previously announced revenue guidance of a 53% to 57% increase, which was mainly due to continued product upgrades, operational optimization at regional headquarters, and pent-up demand post-Covid re-opening policy. Revenue from the Legacy-DH segment in the first quarter of 2023 was RMB886 million, representing a 118.2% year-over-year increase and a 6.6% sequential decrease. The year-over-year increase was mainly due to the recovery of our European business since Europe’s opening-up in mid-February in 2022, and the sequential decrease was mainly due to hotel closures and seasonality.
Revenue from leased and owned hotels in the first quarter of 2023 was RMB2.9 billion (US$418 million), representing a 75.0% year-over-year increase and a 17.3% sequential increase. Revenue from leased and owned hotels from the Legacy-Huazhu segment in the first quarter of 2023 was RMB2.0 billion, representing a 60.6% year-over-year increase. Revenue from leased and owned hotels from the Legacy-DH segment in the first quarter of 2023 was RMB854 million, representing a 122.4% year-over-year increase.
Revenue from manachised and franchised hotels in the first quarter of 2023 was RMB1.6 billion (US$226 million), representing a 57.1% year-over-year increase. Revenue from our Legacy-Huazhu segment from manachised and franchised hotels in the first quarter of 2023 was RMB1.5 billion, representing a 57.7% year-over-year increase. Revenue from manachised and franchised hotels from the Legacy-DH segment in the first quarter of 2023 was RMB18 million, representing a 20.0% year-over-year increase.
Other revenue represents revenue generated from businesses other than our hotel operations, which mainly includes revenue from the provision of IT products and services and Huazhu Mall™ and other revenue from the Legacy-DH segment, totaling RMB52 million (US$8 million) in the first quarter of 2023, compared to RMB50 million in the first quarter of 2022 and RMB98 million in the previous quarter.
| (RMB in millions) | Q1 2022 | Q4 2022 | Q1 2023 | |||
| Operating costs and expenses: | ||||||
| Hotel operating costs | (2,813 | ) | (3,430 | ) | (3,250 | ) |
| Other operating costs | (11 | ) | (22 | ) | (11 | ) |
| Selling and marketing expenses | (122 | ) | (169 | ) | (195 | ) |
| General and administrative expenses | (462 | ) | (440 | ) | (425 | ) |
| Pre-opening expenses | (26 | ) | (14 | ) | (9 | ) |
| Total operating costs and expenses | (3,434 | ) | (4,075 | ) | (3,890 | ) |
Hotel operating costs in the first quarter of 2023 were RMB3.3 billion (US$473 million), compared to RMB2.8 billion in the first quarter of 2022 and RMB3.4 billion in the previous quarter. The year-over-year increase was mainly due to the recovery of Legacy-DH business. Hotel operating costs from the Legacy-Huazhu segment in the first quarter of 2023 were RMB2.4 billion, which represented 66.3% of the quarter’s revenue, compared to RMB2.3 billion or 99.1% of the revenue in the first quarter in 2022 and RMB2.4 billion or 88.7% of the revenue for the previous quarter.
Selling and marketing expenses in the first quarter of 2023 were RMB195 million (US$28 million), compared to RMB122 million in the first quarter of 2022 and RMB169 million in the previous quarter. The increase was mainly due to the recovery of both Legacy-Huazhu and Legacy-DH businesses. Selling and marketing expenses from the Legacy-Huazhu segment in the first quarter of 2023 were RMB117 million, which represented 3.3% of this quarter’s revenue, compared to RMB78 million or 3.4% of the revenue in the first quarter in 2022, and RMB88 million or 3.2% of the revenue for the previous quarter.
General and administrative expenses in the first quarter of 2023 were RMB425 million (US$62 million), compared to RMB462 million in the first quarter of 2022 and RMB440 million in the previous quarter. The decrease was mainly due to streamlined headquarters expenses. General and administrative expenses from the Legacy-Huazhu segment in the first quarter of 2023 were RMB312 million, which represented 8.7% of this quarter’s revenue, compared to RMB346 million or 15.2% in the first quarter in 2022 and RMB320 million or 11.6% for the previous quarter.
Pre-opening expenses in the first quarter of 2023 were primarily related to the Legacy-Huazhu segment and totaled RMB9 million (US$1 million), compared to RMB26 million in the first quarter of 2022 and RMB14 million in the previous quarter.
Other operating income, net in the first quarter of 2023 was RMB74 million (US$11 million), compared to RMB45 million in the first quarter of 2022 and RMB276 million in the previous quarter.
Income from operations in the first quarter of 2023 was RMB664 million (US$97 million), compared to losses from operations of RMB708 million in the first quarter of 2022 and losses from operations of RMB93 million in the previous quarter. Income from operations from the Legacy-Huazhu segment in the first quarter of 2023 was RMB822 million, compared to losses from operations of RMB416 million in the first quarter of 2022 and losses from operations of RMB3 million in the previous quarter. The Legacy-DH segment had a loss from operations of RMB158 million in the first quarter of 2023, compared to RMB292 million in the first quarter of 2022 and RMB90 million in the previous quarter.
Operating margin, defined as income from operations as a percentage of revenue, was 14.8% in the first quarter of 2023, compared with a negative 26.4% in the first quarter of 2022 and a negative 2.5% for the previous quarter. Operating margin from the Legacy-Huazhu segment in the first quarter of 2023 was 22.9%, compared with a negative 18.3% in the first quarter of 2022 and a negative 0.1% in the previous quarter.
Other income, net in the first quarter of 2023 was RMB514 million (US$75 million), compared to RMB59 million in the first quarter of 2022 and a negative RMB65 million for the previous quarter. The increase was mainly due to the sale of all of the Company’s holdings of Accor shares.
Gains from fair value changes of equity securities in the first quarter of 2023 were RMB13 million (US$2 million), compared to RMB54 million in the first quarter of 2022, and RMB140 million in the previous quarter. Gains (losses) from fair value changes of equity securities mainly represent the unrealized gains (losses) from our investment in equity securities with readily determinable fair values, such as AccorHotels, but we sold all of the Company’s holdings of Accor shares in March 2023.
Income tax expense in the first quarter of 2023 was RMB194 million (US$28 million), compared to an income tax benefit of RMB131 million in the first quarter of 2022 and income tax expense of RMB203 million in the previous quarter.
Net income attributable to H World Group Limited in the first quarter of 2023 was RMB990 million (US$144 million), compared with a net loss attributable to H World Group Limited of RMB630 million in the first quarter of 2022 and a net loss attributable to H World Group Limited of RMB124 million in the previous quarter. Net income attributable to H World Group Limited from the Legacy-Huazhu segment was RMB1.2 billion in the first quarter of 2023, compared with a net loss attributable to H World Group Limited from the Legacy-Huazhu segment of RMB307 million in the first quarter of 2022 and a net loss attributable to H World Group Limited from the Legacy-Huazhu segment of RMB84 million in the previous quarter.
EBITDA (non-GAAP) in the first quarter of 2023 was RMB1.6 billion (US$238 million), compared with a negative RMB301 million in the first quarter of 2022 and RMB529 million in the previous quarter. EBITDA from the Legacy-Huazhu segment, which is a segment measure, was RMB1.7 billion in the first quarter of 2023, compared with a negative RMB61 million in the first quarter of 2022 and RMB528 million in the previous quarter. Adjusted EBITDA (non-GAAP), which excluded share-based compensation expenses and gains (losses) from fair value changes of equity securities from EBITDA (non-GAAP), was RMB1.7 billion (US$240 million) in the first quarter of 2023, compared with a negative RMB333 million in the first quarter of 2022 and RMB398 million in the previous quarter. Adjusted EBITDA from the Legacy-Huazhu segment (non-GAAP) was RMB1.7 billion in the first quarter of 2023, compared with a negative RMB93 million in the first quarter of 2022 and RMB397 million in the previous quarter.
Cash flow. Operating cash inflow in the first quarter of 2023 was RMB1.8 billion (US$267 million). Investing cash inflow in the first quarter of 2023 was RMB2.0 billion (US$289 million). The investing cash inflow was mainly due to the sale of all of the Company’s holdings of Accor shares for net proceeds to the Company of approximately EUR300 million in March. Financing cash inflow in the first quarter of 2023 was RMB1.5 billion (US$213 million). The financing cash inflow was mainly due to our successful completion of a follow-on public offering of 7,118,500 ADSs with net proceeds of approximately RMB2.0 billion in January.
Cash and cash equivalents and restricted cash. As of March 31, 2023, the Company had a total balance of cash and cash equivalents of RMB9.0 billion (US$1.3 billion) and restricted cash of RMB1.4 billion (US$202 million).
Debt financing. As of March 31, 2023, the Company had a total debt and net cash balance of RMB9.4 billion (US$1.4 billion) and RMB957 million (US$139 million), respectively, and the unutilized credit facility available to the Company was RMB2.0 billion.
Guidance
In the second quarter of 2023, H World expects its revenue growth to be in the range of 51%-55% as compared to the second quarter of 2022, or in the range of 64%-68% excluding DH.
The above forecast reflects the Company’s current and preliminary view, which is subject to change.
About H World Group Limited
As of March 31, 2023, H World operated 8,592 hotels with 820,099 rooms in operation in 18 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 March 31, 2023, H World operates 13 percent of its hotel rooms under the lease and ownership model, and 87 percent under manachise and franchise models.
| H World Group Limited | |||||||||
| Unaudited Condensed Consolidated Balance Sheets | |||||||||
| December 31, 2022 | March 31, 2023 | ||||||||
| RMB | RMB | US$3 | |||||||
| (in millions) | |||||||||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | 3,583 | 8,963 | 1,305 | ||||||
| Restricted cash | 1,503 | 1,389 | 202 | ||||||
| Short-term investments | 1,788 | 96 | 14 | ||||||
| Accounts receivable, net | 1,113 | 936 | 136 | ||||||
| Loan receivables, net | 134 | 129 | 19 | ||||||
| Amounts due from related parties, current | 178 | 195 | 28 | ||||||
| Inventories | 70 | 63 | 9 | ||||||
| Other current assets, net | 809 | 804 | 117 | ||||||
| Total current assets | 9,178 | 12,575 | 1,830 | ||||||
| Property and equipment, net | 6,784 | 6,544 | 953 | ||||||
| Intangible assets, net | 5,278 | 5,302 | 772 | ||||||
| Operating lease right-of-use assets | 28,970 | 29,200 | 4,252 | ||||||
| Finance lease right-of-use assets | 2,047 | 2,096 | 305 | ||||||
| Land use rights, net | 199 | 197 | 29 | ||||||
| Long-term investments | 1,945 | 1,931 | 281 | ||||||
| Goodwill | 5,195 | 5,216 | 760 | ||||||
| Amounts due from related parties, non-current | 6 | 6 | 1 | ||||||
| Loan receivables, net | 124 | 127 | 18 | ||||||
| Other assets, net | 688 | 692 | 101 | ||||||
| Deferred tax assets | 1,093 | 1,086 | 158 | ||||||
| Total assets | 61,507 | 64,972 | 9,460 | ||||||
| LIABILITIES AND EQUITY | |||||||||
| Current liabilities: | |||||||||
| Short-term debt | 3,288 | 2,874 | 418 | ||||||
| Accounts payable | 1,171 | 915 | 133 | ||||||
| Amounts due to related parties | 71 | 95 | 14 | ||||||
| Salary and welfare payables | 657 | 538 | 78 | ||||||
| Deferred revenue | 1,308 | 1,400 | 204 | ||||||
| Operating lease liabilities, current | 3,773 | 3,799 | 553 | ||||||
| Finance lease liabilities, current | 41 | 44 | 6 | ||||||
| Accrued expenses and other current liabilities | 2,337 | 3,388 | 493 | ||||||
| Income tax payable | 500 | 381 | 56 | ||||||
| Total current liabilities | 13,146 | 13,434 | 1,955 | ||||||
| Long-term debt | 6,635 | 6,521 | 950 | ||||||
| Operating lease liabilities, non-current | 27,637 | 27,777 | 4,045 | ||||||
| Finance lease liabilities, non-current | 2,513 | 2,577 | 375 | ||||||
| Deferred revenue | 828 | 870 | 127 | ||||||
| Other long-term liabilities | 977 | 1,003 | 146 | ||||||
| Deferred tax liabilities | 858 | 849 | 124 | ||||||
| Retirement benefit obligations | 110 | 111 | 16 | ||||||
| Total liabilities | 52,704 | 53,142 | 7,738 | ||||||
| Equity: | |||||||||
| Ordinary shares | 0 | 0 | 0 | ||||||
| Treasury shares | (441 | ) | (441 | ) | (64 | ) | |||
| Additional paid-in capital | 10,138 | 12,129 | 1,766 | ||||||
| Retained earnings | (1,200 | ) | (210 | ) | (31 | ) | |||
| Accumulated other comprehensive income | 232 | 271 | 39 | ||||||
| Total H World Group Limited shareholders' equity | 8,729 | 11,749 | 1,710 | ||||||
| Noncontrolling interest | 74 | 81 | 12 | ||||||
| Total equity | 8,803 | 11,830 | 1,722 | ||||||
| Total liabilities and equity | 61,507 | 64,972 | 9,460 | ||||||
| H World Group Limited | ||||||||||||||||
| Unaudited Condensed Consolidated Statements of Comprehensive Income | ||||||||||||||||
| Quarter Ended | ||||||||||||||||
| March 31, 2022 | December 31, 2022 | March 31, 2023 | ||||||||||||||
| RMB | RMB | RMB | US$ | |||||||||||||
| (in millions, except share, per-share and per-ADS data) | ||||||||||||||||
| Revenue: | ||||||||||||||||
| Leased and owned hotels | 1,642 | 2,450 | 2,874 | 418 | ||||||||||||
| Manachised and franchised hotels | 989 | 1,158 | 1,554 | 226 | ||||||||||||
| Others | 50 | 98 | 52 | 8 | ||||||||||||
| Total revenues | 2,681 | 3,706 | 4,480 | 652 | ||||||||||||
| Operating costs and expenses: | ||||||||||||||||
| Hotel operating costs: | ||||||||||||||||
| Rents | (1,026 | ) | (956 | ) | (1,051 | ) | (153 | ) | ||||||||
| Utilities | (155 | ) | (162 | ) | (204 | ) | (30 | ) | ||||||||
| Personnel costs | (838 | ) | (981 | ) | (1,036 | ) | (151 | ) | ||||||||
| Depreciation and amortization | (357 | ) | (351 | ) | (346 | ) | (50 | ) | ||||||||
| Consumables, food and beverage | (206 | ) | (289 | ) | (278 | ) | (40 | ) | ||||||||
| Others | (231 | ) | (691 | ) | (335 | ) | (49 | ) | ||||||||
| Total hotel operating costs | (2,813 | ) | (3,430 | ) | (3,250 | ) | (473 | ) | ||||||||
| Other operating costs | (11 | ) | (22 | ) | (11 | ) | (2 | ) | ||||||||
| Selling and marketing expenses | (122 | ) | (169 | ) | (195 | ) | (28 | ) | ||||||||
| General and administrative expenses | (462 | ) | (440 | ) | (425 | ) | (62 | ) | ||||||||
| Pre-opening expenses | (26 | ) | (14 | ) | (9 | ) | (1 | ) | ||||||||
| Total operating costs and expenses | (3,434 | ) | (4,075 | ) | (3,890 | ) | (566 | ) | ||||||||
| Other operating income (expense), net | 45 | 276 | 74 | 11 | ||||||||||||
| Income (losses) from operations | (708 | ) | (93 | ) | 664 | 97 | ||||||||||
| Interest income | 18 | 27 | 44 | 6 | ||||||||||||
| Interest expense | (109 | ) | (117 | ) | (130 | ) | (19 | ) | ||||||||
| Other income (expense), net | 59 | (65 | ) | 514 | 75 | |||||||||||
| Gains (losses) from fair value changes of equity securities | 54 | 140 | 13 | 2 | ||||||||||||
| Foreign exchange gain (loss) | (61 | ) | 181 | 104 | 15 | |||||||||||
| Income (loss) before income taxes | (747 | ) | 73 | 1,209 | 176 | |||||||||||
| Income tax (expense) benefit | 131 | (203 | ) | (194 | ) | (28 | ) | |||||||||
| Income (loss) from equity method investments | (33 | ) | 3 | (15 | ) | (2 | ) | |||||||||
| Net income (loss) | (649 | ) | (127 | ) | 1,000 | 146 | ||||||||||
| Net (income) loss attributable to noncontrolling interest | 19 | 3 | (10 | ) | (2 | ) | ||||||||||
| Net income (loss) attributable to H World Group Limited | (630 | ) | (124 | ) | 990 | 144 | ||||||||||
| Gain arising from defined benefit plan, net of tax | - | 22 | - | - | ||||||||||||
| Gains(losses) from fair value changes of debt securities, net of tax | - | 57 | - | - | ||||||||||||
| Foreign currency translation adjustments, net of tax | (4 | ) | 82 | 39 | 6 | |||||||||||
| Comprehensive income (loss) | (653 | ) | 34 | 1,039 | 152 | |||||||||||
| Comprehensive (income) loss attributable to noncontrolling interest | 19 | 3 | (10 | ) | (2 | ) | ||||||||||
| Comprehensive income (loss) attributable to H World Group Limited | (634 | ) | 37 | 1,029 | 150 | |||||||||||
| Earnings (losses) per share: | ||||||||||||||||
| Basic | (0.20 | ) | (0.04 | ) | 0.31 | 0.05 | ||||||||||
| Diluted | (0.20 | ) | (0.04 | ) | 0.30 | 0.04 | ||||||||||
| Earnings (losses) per ADS: | ||||||||||||||||
| Basic | (2.02 | ) | (0.40 | ) | 3.12 | 0.45 | ||||||||||
| Diluted | (2.02 | ) | (0.40 | ) | 3.05 | 0.44 | ||||||||||
| Weighted average number of shares used in computation: | ||||||||||||||||
| Basic | 3,118,897,668 | 3,109,528,097 | 3,174,229,716 | 3,174,229,716 | ||||||||||||
| Diluted | 3,118,897,668 | 3,109,528,097 | 3,343,723,364 | 3,343,723,364 | ||||||||||||
| H World Group Limited | ||||||||||||||||
| Unaudited Condensed Consolidated Statements of Cash Flows | ||||||||||||||||
| Quarter Ended | ||||||||||||||||
| March 31, 2022 | December 31, 2022 | March 31, 2023 | ||||||||||||||
| RMB | RMB | RMB | US$ | |||||||||||||
| (in millions) | ||||||||||||||||
| Operating activities: | ||||||||||||||||
| Net income (loss) | (649 | ) | (127 | ) | 1,000 | 146 | ||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||||||
| Share-based compensation | 22 | 9 | 27 | 4 | ||||||||||||
| Depreciation and amortization, and other | 399 | 369 | 385 | 56 | ||||||||||||
| Impairment loss | - | 390 | - | - | ||||||||||||
| Loss (Income) from equity method investments, net of dividends | 80 | (3 | ) | 15 | 2 | |||||||||||
| Investment (income) loss | (57 | ) | (362 | ) | (544 | ) | (79 | ) | ||||||||
| Changes in operating assets and liabilities | (888 | ) | 1,008 | 1,020 | 147 | |||||||||||
| Other | 172 | (242 | ) | (59 | ) | (9 | ) | |||||||||
| Net cash provided by (used in) operating activities | (921 | ) | 1,042 | 1,844 | 267 | |||||||||||
| Investing activities: | ||||||||||||||||
| Capital expenditures | (425 | ) | (229 | ) | (222 | ) | (32 | ) | ||||||||
| Acquisitions, net of cash received | (56 | ) | 2 | - | - | |||||||||||
| Purchase of investments | (77 | ) | (23 | ) | (1 | ) | (0 | ) | ||||||||
| Proceeds from maturity/sale of investments | 376 | 370 | 2,200 | 320 | ||||||||||||
| Loan advances | (74 | ) | (30 | ) | (34 | ) | (5 | ) | ||||||||
| Loan collections | 55 | 52 | 34 | 5 | ||||||||||||
| Other | 0 | 7 | 4 | 1 | ||||||||||||
| Net cash provided by (used in) investing activities | (201 | ) | 149 | 1,981 | 289 | |||||||||||
| Financing activities: | ||||||||||||||||
| Net proceeds from issuance of ordinary shares | - | 1,973 | 287 | |||||||||||||
| Payment of share repurchase | (191 | ) | - | - | - | |||||||||||
| Proceeds from debt | 809 | 2,288 | 428 | 62 | ||||||||||||
| Repayment of debt | (462 | ) | (3,670 | ) | (889 | ) | (129 | ) | ||||||||
| Other | (10 | ) | (19 | ) | (50 | ) | (7 | ) | ||||||||
| Net cash provided by (used in) financing activities | 146 | (1,401 | ) | 1,462 | 213 | |||||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (16 | ) | 79 | (21 | ) | (3 | ) | |||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | (992 | ) | (131 | ) | 5,266 | 766 | ||||||||||
| Cash, cash equivalents and restricted cash at the beginning of the period | 5,141 | 5,217 | 5,086 | 741 | ||||||||||||
| Cash, cash equivalents and restricted cash at the end of the period | 4,149 | 5,086 | 10,352 | 1,507 | ||||||||||||
| H World Group Limited | ||||||||||||||||
| Unaudited Reconciliation of GAAP and Non-GAAP Results | ||||||||||||||||
| Quarter Ended | ||||||||||||||||
| March 31, 2022 | December 31, 2022 | March 31, 2023 | ||||||||||||||
| RMB | RMB | RMB | US$ | |||||||||||||
| (in millions, except shares, per-share and per-ADS data) | ||||||||||||||||
| Net income (loss) attributable to H World Group Limited (GAAP) | (630 | ) | (124 | ) | 990 | 144 | ||||||||||
| Share-based compensation expenses | 22 | 9 | 27 | 4 | ||||||||||||
| (Gains) losses from fair value changes of equity securities | (54 | ) | (140 | ) | (13 | ) | (2 | ) | ||||||||
| Adjusted net income (loss) attributable to H World Group Limited (non-GAAP) | (662 | ) | (255 | ) | 1,004 | 146 | ||||||||||
| Adjusted earnings (losses) per share (non-GAAP) | ||||||||||||||||
| Basic | (0.21 | ) | (0.08 | ) | 0.32 | 0.05 | ||||||||||
| Diluted | (0.21 | ) | (0.08 | ) | 0.31 | 0.05 | ||||||||||
| Adjusted earnings (losses) per ADS (non-GAAP) | ||||||||||||||||
| Basic | (2.12 | ) | (0.82 | ) | 3.17 | 0.46 | ||||||||||
| Diluted | (2.12 | ) | (0.82 | ) | 3.09 | 0.45 | ||||||||||
| Weighted average number of shares used in computation | ||||||||||||||||
| Basic | 3,118,897,668 | 3,109,528,097 | 3,174,229,716 | 3,174,229,716 | ||||||||||||
| Diluted | 3,118,897,668 | 3,109,528,097 | 3,343,723,364 | 3,343,723,364 | ||||||||||||
| Quarter Ended | ||||||||||||||||
| March 31, 2022 | December 31, 2022 | March 31, 2023 | ||||||||||||||
| RMB | RMB | RMB | US$ | |||||||||||||
| (in millions, except per-share and per-ADS data) | ||||||||||||||||
| Net income (loss) attributable to H World Group Limited (GAAP) | (630 | ) | (124 | ) | 990 | 144 | ||||||||||
| Interest income | (18 | ) | (27 | ) | (44 | ) | (6 | ) | ||||||||
| Interest expense | 109 | 117 | 130 | 19 | ||||||||||||
| Income tax expense (benefit) | (131 | ) | 203 | 194 | 28 | |||||||||||
| Depreciation and amortization | 369 | 360 | 367 | 53 | ||||||||||||
| EBITDA (non-GAAP) | (301 | ) | 529 | 1,637 | 238 | |||||||||||
| Share-based compensation expense | 22 | 9 | 27 | 4 | ||||||||||||
| (Gains) losses from fair value changes of equity securities | (54 | ) | (140 | ) | (13 | ) | (2 | ) | ||||||||
| Adjusted EBITDA (non-GAAP) | (333 | ) | 398 | 1,651 | 240 | |||||||||||
| H World Group Limited | ||||||||||||||||||||||||||||||||||||||||
| Financial Summary | ||||||||||||||||||||||||||||||||||||||||
| Quarter Ended March 31, 2022 | Quarter Ended December 31, 2022 | Quarter Ended March 31, 2023 | ||||||||||||||||||||||||||||||||||||||
| Legacy- Huazhu | Legacy- DH | Total | Legacy- Huazhu | Legacy- DH | Total | Legacy- Huazhu | Legacy- DH | Total | ||||||||||||||||||||||||||||||||
| RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | US$ | |||||||||||||||||||||||||||||||
| (in millions) | (in millions) | (in millions) | ||||||||||||||||||||||||||||||||||||||
| Leased and owned hotels | 1,258 | 384 | 1,642 | 1,537 | 913 | 2,450 | 2,020 | 854 | 2,874 | 418 | ||||||||||||||||||||||||||||||
| Manachised and franchised hotels | 974 | 15 | 989 | 1,130 | 28 | 1,158 | 1,536 | 18 | 1,554 | 226 | ||||||||||||||||||||||||||||||
| Others | 43 | 7 | 50 | 90 | 8 | 98 | 38 | 14 | 52 | 8 | ||||||||||||||||||||||||||||||
| Revenue | 2,275 | 406 | 2,681 | 2,757 | 949 | 3,706 | 3,594 | 886 | 4,480 | 652 | ||||||||||||||||||||||||||||||
| Hotel operating costs | (2,255 | ) | (558 | ) | (2,813 | ) | (2,446 | ) | (984 | ) | (3,430 | ) | (2,383 | ) | (867 | ) | (3,250 | ) | (473 | ) | ||||||||||||||||||||
| Selling and marketing expenses | (78 | ) | (44 | ) | (122 | ) | (88 | ) | (81 | ) | (169 | ) | (117 | ) | (78 | ) | (195 | ) | (28 | ) | ||||||||||||||||||||
| General and administrative expenses | (346 | ) | (116 | ) | (462 | ) | (320 | ) | (120 | ) | (440 | ) | (312 | ) | (113 | ) | (425 | ) | (62 | ) | ||||||||||||||||||||
| Pre-opening expenses | (26 | ) | - | (26 | ) | (14 | ) | (0 | ) | (14 | ) | (9 | ) | 0 | (9 | ) | (1 | ) | ||||||||||||||||||||||
| Income (losses) from operations | (416 | ) | (292 | ) | (708 | ) | (3 | ) | (90 | ) | (93 | ) | 822 | (158 | ) | 664 | 97 | |||||||||||||||||||||||
| Net income (loss) attributable to H World Group Limited | (307 | ) | (323 | ) | (630 | ) | (84 | ) | (40 | ) | (124 | ) | 1,155 | (165 | ) | 990 | 144 | |||||||||||||||||||||||
| Interest income | (18 | ) | (0 | ) | (18 | ) | (27 | ) | (0 | ) | (27 | ) | (44 | ) | (0 | ) | (44 | ) | (6 | ) | ||||||||||||||||||||
| Interest expense | 77 | 32 | 109 | 84 | 33 | 117 | 99 | 31 | 130 | 19 | ||||||||||||||||||||||||||||||
| Income tax expense (benefit) | (123 | ) | (8 | ) | (131 | ) | 260 | (57 | ) | 203 | 202 | (8 | ) | 194 | 28 | |||||||||||||||||||||||||
| Depreciation and amortization | 310 | 59 | 369 | 295 | 65 | 360 | 304 | 63 | 367 | 53 | ||||||||||||||||||||||||||||||
| EBITDA (non-GAAP) | (61 | ) | (240 | ) | (301 | ) | 528 | 1 | 529 | 1,716 | (79 | ) | 1,637 | 238 | ||||||||||||||||||||||||||
| Share-based Compensation | 22 | - | 22 | 9 | - | 9 | 27 | - | 27 | 4 | ||||||||||||||||||||||||||||||
| (Gains) losses from fair value changes of equity securities | (54 | ) | - | (54 | ) | (140 | ) | - | (140 | ) | (13 | ) | - | (13 | ) | (2 | ) | |||||||||||||||||||||||
| Adjusted EBITDA (non-GAAP) | (93 | ) | (240 | ) | (333 | ) | 397 | 1 | 398 | 1,730 | (79 | ) | 1,651 | 240 | ||||||||||||||||||||||||||
Operating Results: Legacy-Huazhu(1)
| Number of hotels | Number of rooms | |||||||
| Opened in Q1 2023 | Closed(2) in Q1 2023 | Net added in Q1 2023 | As of March 31, 2023 | As of March 31, 2023 | ||||
| Leased and owned hotels | 2 | (5 | ) | (3 | ) | 620 | 88,416 | |
| Manachised and franchised hotels | 260 | (204 | ) | 56 | 7,844 | 705,511 | ||
| Total | 262 | (209 | ) | 53 | 8,464 | 793,927 | ||
| (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 Q1 2023, we temporarily closed 7 hotels for brand upgrade and business model change purposes. | ||||||||
| As of March 31, 2023 | ||
| Number of hotels | Unopened hotels in pipeline | |
| Economy hotels | 4,880 | 903 |
| Leased and owned hotels | 348 | 1 |
| Manachised and franchised hotels | 4,532 | 902 |
| Midscale and upscale hotels | 3,584 | 1,401 |
| Leased and owned hotels | 272 | 12 |
| Manachised and franchised hotels | 3,312 | 1,389 |
| Total | 8,464 | 2,304 |
| For the quarter ended | ||||||||
| March 31, | December 31, | March 31, | yoy | |||||
| 2022 | 2022 | 2023 | change | |||||
| Average daily room rate (in RMB) | ||||||||
| Leased and owned hotels | 263 | 279 | 337 | 28.4 | % | |||
| Manachised and franchised hotels | 218 | 236 | 269 | 23.4 | % | |||
| Blended | 224 | 240 | 277 | 23.9 | % | |||
| Occupancy Rate (as a percentage) | ||||||||
| Leased and owned hotels | 56.7 | % | 63.1 | % | 76.3 | % | +19.6 p.p. | |
| Manachised and franchised hotels | 59.6 | % | 66.6 | % | 75.5 | % | +16.0 p.p. | |
| Blended | 59.2 | % | 66.2 | % | 75.6 | % | +16.4 p.p. | |
| RevPAR (in RMB) | ||||||||
| Leased and owned hotels | 149 | 176 | 257 | 72.9 | % | |||
| Manachised and franchised hotels | 130 | 157 | 203 | 56.4 | % | |||
| Blended | 132 | 159 | 210 | 58.3 | % | |||
| For the quarter ended | ||||||
| March 31, | March 31, | yoy | ||||
| 2019 | 2023 | change | ||||
| Average daily room rate (in RMB) | ||||||
| Leased and owned hotels | 258 | 337 | 30.8 | % | ||
| Manachised and franchised hotels | 211 | 269 | 27.4 | % | ||
| Blended | 221 | 277 | 25.4 | % | ||
| Occupancy Rate (as a percentage) | ||||||
| Leased and owned hotels | 83.6 | % | 76.3 | % | -7.3p.p. | |
| Manachised and franchised hotels | 79.8 | % | 75.5 | % | -4.3p.p. | |
| Blended | 80.6 | % | 75.6 | % | -5.0p.p. | |
| RevPAR (in RMB) | ||||||
| Leased and owned hotels | 216 | 257 | 19.4 | % | ||
| Manachised and franchised hotels | 169 | 203 | 20.5 | % | ||
| Blended | 178 | 210 | 17.6 | % | ||
| Same-hotel operational data by class | |||||||||||||||
| Mature hotels in operation for more than 18 months | |||||||||||||||
| Number of hotels | Same-hotel RevPAR | Same-hotel ADR | Same-hotel Occupancy | ||||||||||||
| As of March 31, | For the quarter | yoy | For the quarter | yoy | For the quarter | yoy | |||||||||
| ended March 31, | change | ended March 31, | change | ended March 31, | change | ||||||||||
| 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | (p.p.) | |||||||
| Economy hotels | 3,427 | 3,427 | 111 | 160 | 44.6 | % | 171 | 208 | 21.3 | % | 64.7 | % | 77.1 | % | +12.4 |
| Leased and owned hotels | 332 | 332 | 116 | 190 | 63.2 | % | 188 | 241 | 28.5 | % | 62.0 | % | 78.7 | % | +16.7 |
| Manachised and franchised hotels | 3,095 | 3,095 | 110 | 155 | 41.4 | % | 168 | 202 | 19.8 | % | 65.2 | % | 76.9 | % | +11.7 |
| Midscale and upscale hotels | 2,433 | 2,433 | 167 | 263 | 57.1 | % | 292 | 344 | 18.0 | % | 57.3 | % | 76.3 | % | +19.0 |
| Leased and owned hotels | 250 | 250 | 187 | 319 | 71.1 | % | 355 | 426 | 20.2 | % | 52.7 | % | 75.0 | % | +22.3 |
| Manachised and franchised hotels | 2,183 | 2,183 | 164 | 253 | 54.4 | % | 282 | 330 | 17.3 | % | 58.1 | % | 76.5 | % | +18.4 |
| Total | 5,860 | 5,860 | 138 | 210 | 51.8 | % | 227 | 274 | 20.8 | % | 61.1 | % | 76.7 | % | +15.7 |
Operating Results: Legacy-DH(3)
| Number of hotels | Number of rooms | Unopened hotels in pipeline | ||||||||
| Opened in Q1 2023 | Closed in Q1 2023 | Net added in Q1 2023 | As of March 31, 2023 | As of March 31,2023 | As of March 31,2023 | |||||
| Leased hotels | 1 | (2 | ) | (1 | ) | 80 | 15,497 | 25 | ||
| Manachised and franchised hotels | 1 | (4 | ) | (3 | ) | 48 | 10,675 | 10 | ||
| Total | 2 | (6 | ) | (4 | ) | 128 | 26,172 | 35 | ||
| (3) Legacy-DH refers to DH. (4) As of March 31, 2023, a total of 2 hotels were temporarily closed. 1 hotel was closed due to flood damage, and 1 hotel was closed due to repair work. | ||||||||||
| For the quarter ended | ||||||||
| March 31, | December 31, | March 31, | yoy | |||||
| 2022 | 2022 | 2023 | change | |||||
| Average daily room rate (in EUR) | ||||||||
| Leased hotels | 90 | 114 | 108 | 19.9 | % | |||
| Manachised and franchised hotels | 85 | 134 | 97 | 13.9 | % | |||
| Blended | 88 | 122 | 104 | 17.7 | % | |||
| Occupancy rate (as a percentage) | ||||||||
| Leased hotels | 34.1 | % | 60.0 | % | 53.0 | % | +18.9 p.p. | |
| Manachised and franchised hotels | 44.0 | % | 58.3 | % | 54.1 | % | +10.2 p.p. | |
| Blended | 38.0 | % | 59.3 | % | 53.5 | % | +15.5 p.p. | |
| RevPAR (in EUR) | ||||||||
| Leased hotels | 31 | 68 | 57 | 86.2 | % | |||
| Manachised and franchised hotels | 38 | 78 | 53 | 40.1 | % | |||
| Blended | 33 | 72 | 55 | 65.8 | % | |||
Hotel Portfolio by Brand
| As of March 31, 2023 | |||
| Hotels | Rooms | Unopened hotels | |
| in operation | in pipeline | ||
| Economy hotels | 4,896 | 387,694 | 916 |
| HanTing Hotel | 3,285 | 291,489 | 596 |
| Hi Inn | 445 | 23,193 | 129 |
| Ni Hao Hotel | 184 | 13,553 | 153 |
| Elan Hotel | 747 | 35,255 | 1 |
| Ibis Hotel | 219 | 22,308 | 24 |
| Zleep Hotels | 16 | 1,896 | 13 |
| Midscale hotels | 2,956 | 322,093 | 1,103 |
| Ibis Styles Hotel | 87 | 9,114 | 34 |
| Starway Hotel | 563 | 47,691 | 206 |
| JI Hotel | 1,758 | 206,410 | 639 |
| Orange Hotel | 548 | 58,878 | 224 |
| Upper midscale hotels | 590 | 84,317 | 250 |
| CitiGO Hotel | 34 | 5,337 | 5 |
| Crystal Orange Hotel | 164 | 21,239 | 60 |
| Manxin Hotel | 114 | 10,903 | 57 |
| Madison Hotel | 56 | 7,369 | 41 |
| Mercure Hotel | 139 | 22,532 | 47 |
| Novotel Hotel | 19 | 4,734 | 12 |
| IntercityHotel(5) | 56 | 10,742 | 23 |
| MAXX(6) | 8 | 1,461 | 5 |
| Upscale hotels | 126 | 20,494 | 59 |
| Jaz in the City | 3 | 587 | 1 |
| Joya Hotel | 8 | 1,368 | - |
| Blossom House | 53 | 2,470 | 46 |
| Grand Mercure Hotel | 8 | 1,674 | 4 |
| Steigenberger Hotels & Resorts(7) | 54 | 14,395 | 8 |
| Luxury hotels | 15 | 2,318 | 5 |
| Steigenberger Icon(8) | 9 | 1,847 | 1 |
| Song Hotels | 6 | 471 | 4 |
| Others | 9 | 3,183 | 6 |
| Other hotels(9) | 9 | 3,183 | 6 |
| Total | 8,592 | 820,099 | 2,339 |
(5) As of March 31, 2023, 5 operational hotels and 10 pipeline hotels of IntercityHotel were in China.
(6) As of March 31, 2023, 3 operational hotels and 5 pipeline hotels of MAXX were in China.
(7) As of March 31, 2023, 11 operational hotels and 3 pipeline hotels of Steigenberger Hotels & Resorts were in China.
(8) As of March 31, 2023, 3 operational hotels of Steigenberger Icon were in China.
(9) Other hotels include other partner hotels and other hotel brands in Yongle Huazhu Hotel & Resort Group (excluding Steigenberger Hotels & Resorts and Blossom House).
_________________________________
1 Hotel turnover refers to total transaction value of room and non-room revenue from H World hotels (i.e., leased and operated, manachised and franchised hotels).
2 The conversion of Renminbi (“RMB”) into United States dollars (“US$”) is based on the exchange rate of US$1.00=RMB6.8676 on March 31, 2023 as set forth in H.10 statistical release of the U.S. Federal Reserve Board and available at http://www.federalreserve.gov/releases/h10/hist/dat00_ch.htm.
3 The conversion of Renminbi (“RMB”) into United States dollars (“US$”) is based on the exchange rate of US$1.00=RMB6.8676 on March 31, 2023 as set forth in H.10 statistical release of the U.S. Federal Reserve Board and available at http://www.federalreserve.gov/releases/h10/hist/dat00_ch.htm.