H World Group Q1 2025 Earnings Report

H World Group EPS Results

• Actual EPS: N/A
• Consensus EPS: $0.42
• Beat/Miss: N/A
• One Year Ago EPS: N/A

H World Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $5.54 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

H World Group Announcement Details

• Quarter: Q1 2025
• Date: 5/20/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, May 20, 2025
• Conference Call Time: 8:00AM ET

H World Group (NASDAQ:HTHT) develops leased and owned, manachised, and franchised hotels in the People's Republic of China. The company operates hotels under its own brands, such as HanTing Hotel, Ni Hao Hotel, Hi Inn, Elan Hotel, Zleep Hotels, Ibis Hotel, JI Hotel, Orange Hotel, Starway Hotel, Ibis Styles Hotel, CitiGO Hotel, Crystal Orange Hotel, IntercityHotel, Manxin Hotel, Mercure Hotel, Madison Hotel, Novotel Hotel, Joya Hotel, Blossom House, Steigenberger Hotels & Resorts, MAXX by Steigenberger, Jaz in the City, Grand Mercure, Steigenberger Icon, and Song Hotels. The company was formerly known as Huazhu Group Limited and changed its name to H World Group Limited in June 2022. H World Group Limited was founded in 2005 and is headquartered in Shanghai, the People's Republic of China.

H World Group Q1 2025 Earnings Call Transcript

Key Takeaways

• Despite resilient leisure demand, RevPAR declined 3.9% YoY in Q1 2025 due to supply surge and ADR pressure, with management cautious on tariff-related market volatilities.
• The network expanded with 695 hotel openings and 2,865 in the pipeline, notably boosting the share of upper midscale & above properties and raising the managed and franchised mix to 46%.
• Regional penetration deepened as 54% of pipeline hotels are now in tier-three-and-below cities (11pp higher than current operations), while the member base hit 280 million and central reservation sales rose to 65.1%.
• Legacy DH RevPAR jumped 12.7% to €65 in Q1, driven by ADR +2.8% and occupancy +5.3pp, and the conversion of ten leased hotels pushed the franchise ratio to 46% and asset-light pipeline to 57%.
• Group revenue grew 2.2% to RMB 5.4bn (with managed and franchised revenue up 21.1%), while strict cost control limited hotel operating costs to +1.1% and cut SG&A, delivering 5.3% growth in adjusted EBITDA to RMB 1.5bn and an RMB 6.5bn net cash position.

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to the H World Q1 twenty twenty five Earnings You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded.

[Operator]

I would now like to hand the conference over to your speaker today, Jason Chen, Head of IR. Please go ahead.

[Jason Chen, Investor Relations Director at H World Group]

Thank you. Good morning, and good evening, everyone. Thanks for joining us today. Welcome to Edgewood Group twenty twenty five First Quarter Earnings Conference Call. Joining us today is our Chairman, Mr.

[Jason Chen, Investor Relations Director at H World Group]

Ji Qi our CEO, Mr. Jinhui our CFO, Ms. Chen Hui and our CSO, Ms. He Ji Hong. Following their prepared remarks, management will be available to answer your questions.

[Jason Chen, Investor Relations Director at H World Group]

Before we continue, please note that the discussion today will include forward looking statements made under the Safe Harbor provision of The United States Private Securities Litigation Reform Act of 1995. Forward looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the views expressed today. A number of potential risks and uncertainties are outlined in our public filings with the SEC. Edgeworth Group does not undertake any obligations to update any forward looking statements except as required under applicable laws.

[Jason Chen, Investor Relations Director at H World Group]

On the call today, we will also mention adjusted financial measures during the discussion of our performance. Reconciliation of those measures to comparable GAAP information can be found in our earnings release that was distributed earlier today. As a reminder, this conference call is being recorded. The webcast of this conference call as well as supplementary slide presentation is available at ir.edgeworld.com. With that, now I will hand over the call to our CEO, Mr.

[Jason Chen, Investor Relations Director at H World Group]

Jing Hui, to discuss our business performance in the first quarter of twenty twenty five. Mr. Jin, please. Hello, everyone. Thanks for joining Edgeworth First Quarter of twenty twenty five Earnings Conference Call.

[Jason Chen, Investor Relations Director at H World Group]

First of all, I'd like to share some of our observations on the industry during the quarter. In the first quarter, we saw the overall traveling demand was still resilient and grow steadily according to the data released by railway and airline industries. However, RevPAR remained under some pressure, especially on ADR. We believe it was largely due to the overall supply surge last year. Therefore, our RevPAR declined by 3.9% year over year, with ADR decreased by 2.6% year over year and occupancy rate declined slightly by one percentage point.

[Jason Chen, Investor Relations Director at H World Group]

The slight decline in occupancy rate was mainly because those hotels newly opened in the last several quarters were still ramping up. Entering into the second quarter, the tariff issues started from April brought some uncertainties to the market outlook. Also, we saw some temporary solution on tariff issues recently. We remain cautious on potential future volatilities and uncertainties. However, on the leisure traveling front, we are still relatively optimistic as we saw the overall leisure traveling demand and the willingness remain strong.

[Jason Chen, Investor Relations Director at H World Group]

For instance, we saw both number of travelers and total spending grow mid to high single digit year over year for Chinese New Year holiday, Qingming festival holiday and the Labor Day holidays. More importantly, according to third party data, the industry RevPAR recorded a positive year over year growth during the Labor Day holiday. Therefore, we have been developing differentiated strategies on products and service offering with targeted sales and marketing program to better capture the rising leisure demand, especially those emerging travelers such as SilverHale tourists and inbound tourists. Also, we are still facing some uncertainties and challenges. We will insist on implementing our core strategy with long term focus.

[Jason Chen, Investor Relations Director at H World Group]

With that, I will share with you more data on our operational performance during the quarter. Please turn to Page four. In the first quarter of twenty twenty five, we opened six ninety five hotels and closed 155 of hotels, respectively. Pipeline was 2,865 hotels by quarter end. The slight quarter over quarter decline is mainly due to fast new hotels opening and a proactive pipeline clearance to improve quality.

[Jason Chen, Investor Relations Director at H World Group]

The new signings in the quarter remain stable and healthy. Please turn to Page five. The proportion of upper midscale and above hotels increased meaningfully to our pipeline by the end of first quarter. It was mainly due to the fast new signings of our upper mid hotels as well as the different lengths of construction period and timing of new hotel openings. However, in terms of the hotel in operation, limited service segment hotels remains our core market.

[Jason Chen, Investor Relations Director at H World Group]

As I mentioned earlier, we maintained a strong growth momentum in the upper mid scale segment. Please turn to Page six. As of the first quarter, the number of upper mid sales hotels in operation increased by 36% year over year to nine thirty three, and the pipeline grew by 22% year over year to five twenty three. Over the past several years, we have been seeing a clear trend that customers are seeking high quality products and services with good value for money. Therefore, we have been continuously upgrading products and our core brands to better meet the customers' evolving demand.

[Jason Chen, Investor Relations Director at H World Group]

Please turn to Page seven. The proportion of newer products and our core brands, including Hanqing, G Hotel and Orange, has been increasing constantly. In terms of regional expansion, our penetration in the lower tier cities continued progressing. Please turn to Page eight. At the end of first quarter of twenty twenty five, '50 '4 percent of the company's hotels in pipeline were located in Tier three and below cities, 11 percentage points higher than the proportion in operating hotels.

[Jason Chen, Investor Relations Director at H World Group]

Additionally, by the first quarter, we are now covering thirteen ninety four cities and counties, 104 more than a year ago. Membership program and direct sales capability are the most critical aspects for our business to achieve long term sustainable development. Please turn to Page nine. At the end of first quarter of twenty twenty five, our member base further increased to nearly two eighty million. Room nights generated through the central reservation system accounted for 65.1%, representing an increase of 5.4 percentage points year over year.

[Jason Chen, Investor Relations Director at H World Group]

All above concludes the first quarter of twenty twenty five operational updates for Lexin Huazhu. Now I will hand over the call to our CSO, Ms. He Qingong, to give an update on Lexi DH. Thank you.

[Jihong He, Chief Strategy Officer at H World Group]

Thank you, Jinhua. Please turn to Page 10. In first quarter twenty twenty five, RevPAR of legacy DH improved 12.7% to €65 with ADR improved 2.8% and occupancy increased 5.3 percentage points. This increase of RevPAR is a mixture of different markets. We have seen particularly strong performance in North Africa and Middle East.

[Jihong He, Chief Strategy Officer at H World Group]

Please turn to page 11. In first quarter twenty twenty five, we did several transactions to change the leased hotel contracts to franchise contracts. Therefore, our managed and franchised hotel increased to 46%. This is a significant improvement compared to 38% in the first quarter twenty twenty four. The percentage of asset light hotels in our pipeline is 57% in first quarter twenty twenty five, which is also an improvement compared to the same period last year.

[Jihong He, Chief Strategy Officer at H World Group]

With this, I conclude the discussion about Legacy DH, and I will turn to CFO, Ms. Chen Hui, for financial performance.

[Chen Hui, CFO at H World Group]

Thank you, Ji Hong. Good evening and good morning, everyone. Let me walk you through our financial review for the first quarter of twenty twenty five. Please turn to Page thirteen. We continued expanding our hotel network.

[Chen Hui, CFO at H World Group]

Number of rooms increased 20% year over year to over 1,100,000 by the end of the quarter. Hotel turnover in the first quarter grew 14% year over year. Revenue grew steadily in the quarter. Please turn to Page fourteen. Our group revenue increased 2.2% year over year to RMB 5,400,000,000.0, in line with our guidance.

[Chen Hui, CFO at H World Group]

Revenue from Lexi Huazhu grew 5.5% year over year, while DH revenue decreased 11.3% year over year, mainly due to the transformation of 10 leased hotels to franchised hotels during the quarter. However, our managed and franchised business achieved a robust growth of 21.1% year over year, at the high end of our guidance. The strong managed and franchised revenue growth was driven by our strong network expansion. As a result, our revenue contribution from our asset light model further enlarged to 46% for the group and 55% for the legacy Huazhu, as shown on Page 15. Moving to cost and expense side.

[Chen Hui, CFO at H World Group]

Both hotel operating costs and SG and A expenses were well managed during the quarter. Please turn to Page 16. In the first quarter, hotel operating costs only grew by 1.1% year over year, slower than our revenue growth, thanks to our continued asset light transformation. Total SG and A expenses decreased 1.8 year over year or reduced by 4.6% year over year, if excluding SBS. At SBC, mainly benefiting from 11.1% year over year, SG and A expenses decreased from Nexidh as a result of restructuring and the cost optimization started second half last year.

[Chen Hui, CFO at H World Group]

Our group's adjusted EBITDA grew 5.3% year over year to RMB 1,500,000,000.0 in the fourth quarter, of which Lexi Huazhu's adjusted EBITDA increased 5.8% year over year to RMB 1,600,000,000.0. Moving to our cash flow and liquidity position on Page 17. In the first quarter, we generated RMB $580,000,000 operating cash flow. As of the quarter end, the group had RMB 11,800,000,000.0 cash and cash equivalent and was in a solid cash net cash position of RMB6.5 billion. Lastly, turn to Page 18 on guidance.

[Chen Hui, CFO at H World Group]

For the second quarter of twenty twenty five, we expect our group revenue to grow 1% to 5% compared to the same quarter last year and 3% to 7% if excluding DH. The franchised and franchised revenue is expected to grow in the range of 18% to 22% compared to the same quarter last year. With that, we are ready to take your questions. Operator, please open the line for Q and A.

[Operator]

Thank you. Our first question comes from the line of Candace Zhang from Bank of America. Please go ahead. Your line is open.

[Analyst]

Let me translate my questions into English. So I have two questions. My first question is about our expectations. So what is management latest expectations on RevPAR for 2Q twenty twenty five and also full year 2025? This is my first question.

[Analyst]

My second question is about the business travel. So the business travel has been under pressure even though off an easy base last year. Could management share with us any specific weakness behind any specific reasons behind the weakness? Thank you very much.

[Jason Chen, Investor Relations Director at H World Group]

So let me do the translation for you. So in terms of the first question, in regarding to the RevPAR, so as we mentioned in our prepared remarks, so basically, the tariff issue had happened in April at some of the uncertainties and volatilities for the overall market outlook. But again, overall, year to date, we still see the demand is growing steadily. But the business, of course, because of the tariff, we are under some kind of the pressures, but we are trying very hard to navigate the difficulties and trying to increase our RevPAR to a more stabilized level. However, on the leisure traveling demand side, from various data, you know, as we observed a year to date, so we think the leisure traveling demand still being very strong and still growing very steadily as the people's willingness to do traveling is still very strong.

[Jason Chen, Investor Relations Director at H World Group]

So in terms of the number in terms of the RevPAR for the second quarter, we think the RevPAR will decline at low single digit, but narrowed on a sequential basis. And for the full year, again, because of the uncertainties, there are some of the volatilities and uncertainties ahead. We will try our best to achieve our full year guidance. And in terms of the second question on the business traveling, we don't think it is the demand issue. It is more like the supply issues, as, you know, over the last two years, there was a lot of, you know, supply increase, which add a lot of pressures to the RevPAR, especially on the ADR.

[Jason Chen, Investor Relations Director at H World Group]

However, we try to leverage more our corporate customers and B2B business to overcome some of the uncertainties and shortage of the demand from the individual traveling. Thank you.

[Operator]

Thank you. We'll now move on to our next question. Our next question comes from the line of Lydia Ling from Citi. Please go ahead. Your line is open.

[Lydia Ling, Director - Equity Research at Citi]

Hi, management. I have two questions. The first one is on the DH side. And so we saw some progression on SLI strategy in the first quarter. So what's your further plan on the DH strategy to further improve the profitability?

[Lydia Ling, Director - Equity Research at Citi]

And for example, how many like the lease and old hotels you plan to transfer to franchise looking ahead? And then my second question is more on the industry supply. And so how you evaluate the competition landscape currently in the limited service. And so how we see some like the pipeline sequential decline in the first quarter. So what's the reason and how is the sentiment on the opening so far?

[Lydia Ling, Director - Equity Research at Citi]

Thank you.

[Jihong He, Chief Strategy Officer at H World Group]

Okay. Let me take the first question about the DH. So to improve the profitability of a DH legacy DH business is of course our priority. There are different measures and different strategies. Asset light transaction is one of the part that we can reduce negative impact.

[Jihong He, Chief Strategy Officer at H World Group]

So we will continue to we're very happy that we finished the transaction of 10 hotels in the first quarter, and we will continue to look for opportunities. There are several discussions currently in the pipeline, and we will disclose as when it comes through. Other than an asset light transaction, we are also looking further into reducing our overhead cost, restructuring our business, streamline our processes. So first quarter, you see still a negative EBITDA contribution. This is because we continued our restructuring effort.

[Jihong He, Chief Strategy Officer at H World Group]

And first quarter is traditionally a very weak first quarter as well. So we are confident that with the time, especially with the second and third quarter coming, our profitability, especially adjusted EBITDA, will increase over the time.

[Jason Chen, Investor Relations Director at H World Group]

Okay, So, to answer your second question in terms of the demand supply dynamic for the industry, so as you may notice that I know a lot of people are concerned about our RevPAR decline or the RevPAR pressure because of the oversupply or the supply surge over the several past several years. But let me share with you, Edgeworth has been doing what we call the reform of the overall supply side reform of the supply side of the China long chain industry. And that's we have been building several capabilities to ensure that our franchisees do achieve a pretty good return in terms of the opening of the hotels. Of all, from the franchisee sentiment front, there are several key costs. One is the fixed cost.

[Jason Chen, Investor Relations Director at H World Group]

As you may see that over the past several years, the biggest fixed cost is the rental cost, which has been gradually declining over the past several years. And another key cost of running a hotel is the OpEx. So the OpEx is the combination of the label cost, sales and marketing cost, as well as the supplies cost. However, Edgewater has been putting a lot of efforts to improve the efficiency operational efficiency and achieve the lowest cost, and then trying to be leading in the overall industry. And by leveraging our very strong capability of supply chain management, our loyalty program or membership program, as well the technology capability.

[Jason Chen, Investor Relations Director at H World Group]

So in conclusion, what I can share with you now is the overall sentiment has been quite stable and healthy for our existing franchisees. Thank you. Next question, please.

[Operator]

Thank you. Our next question comes from the line of Dan Chi from Morgan Stanley. Please go ahead. Your line is open.

[Dan Chee, Vice President, Equity Research at Morgan Stanley]

Thank you management for the opportunity. My first question is about DH. After restructuring program in second half twenty twenty four, SG and A cost of DH declined 11% year on year. Is there still any one off restructuring costs embedded in this quarter? And going forward, can we assume this quarter's SG and A is clean and normalized?

[Dan Chee, Vice President, Equity Research at Morgan Stanley]

After the cost savings in SG and A together with the 11 asset heavy hotel changing to asset light, adjusted EBITDA loss still widened a little bit by RMB11 million. What's the main reason for such hotel operating cost increase? Let me translate my second question. It's about legacy Huazhu. So blended RevPAR climbed 3.9% year on year in q one, but like for like, declined 8.3% year on year.

[Dan Chee, Vice President, Equity Research at Morgan Stanley]

The gap was four percentage point. In fourth quarter twenty four, we also saw four percentage point, gap. But this were wider than the previous quarters. What's the reason for the gap widening? Thank you.

[Jihong He, Chief Strategy Officer at H World Group]

Thank you, Dan. Let me take the first question about the edge. So the restructuring is still ongoing. Last year we announced 30% reduction of overhead cost in one go. And that kind of cost effect still needs to be reflected gradually in our cost in this year, quarter by quarter, because some of the restructuring efforts are not completely done yet, even from the last year's restructuring measures.

[Jihong He, Chief Strategy Officer at H World Group]

And this year, we continue some of the not this kind of thirty percent one off, but we still identify possibilities in different departments, in different processes so that we can continue our effort in streamline. So to your question about whether the numbers and SG and A clean as of now, I would say not completely yet. And we will see still some of the effects coming through this year. But we are very sure that with this kind of measures, you know, this will only improve our SG and A in the mid and long term. So, you know, please do not look at only really quarter to quarter results.

[Jihong He, Chief Strategy Officer at H World Group]

We reflect the whole year, when we come to almost the end of our restructuring effort mid of this year. And to your second question about the first quarter loss, so there's actually a very special event in the first quarter that caused this higher loss on the paper. We gave up Davos as a hotel for as a leased hotel, and we've turned it into a franchise hotel. And you know that Davos is a very, very seasonal event. Actually, the whole year of EBITDA focused on this one week of effort and conference effort.

[Jihong He, Chief Strategy Officer at H World Group]

So that's why the first quarter results is very much skewed by this one time event every year. So this year, taking out the divorce event, actually our EBITDA is comparable to last year, even with the continued restructuring effort. What I wanted to say now with this answer to you is that we are very, very conscious of our EBITDA commitment, and we are very conscious also in streamline our unnecessary overhead costs. Please bear with us. In the short term, We will still see some of the variation SG and A and some of the other costs as well.

[Jihong He, Chief Strategy Officer at H World Group]

But we are very sure that in the mid and long term, we are on a better way.

[Jason Chen, Investor Relations Director at H World Group]

Okay. To answer your second question, it's in regarding to the gap between the blended RevPAR and the like for like RevPAR. So you are right. So the like for like RevPAR was underperforming compared to the blended RevPAR. There were two reasons behind.

[Jason Chen, Investor Relations Director at H World Group]

One is because of the product because we keep upgrading. As we mentioned earlier, we upgraded continuously upgraded our products and continuously do clearance of those older version of Toradox in order to improve the overall product quality. So that's the one of the reason why there was a gap or enlarge the gap between the blended RevPAR and the like for like RevPAR. And secondly, in certain area, because of the surge of the supply over the several years, Indeed, there were some of the pressure on the RevPAR in both ADR and occupancy rates. But we have already noticed that and we are doing a lot of optimization in terms of our revenue management to set up a more rational ADR and occupancy in these particular regions.

[Jason Chen, Investor Relations Director at H World Group]

Thank you. Next question, please.

[Operator]

Thank you. Our next question comes from the line of Simon Chung from Goldman Sachs. Please go ahead. Your line is open.

[Analyst]

Let me translate that into English. So the first question is in relation to the hotel opening. We noticed that your hotel opening were actually quite fast in the first quarter, almost 700, And that's compared to full year February. That was actually tracking ahead of the momentum last year. Just checking to see whether there's any timing issue here and that's whether there are going to be some upside risk to the full year February hotel additional guidance.

[Analyst]

And then the second question is in relation to the mid upscale hotel, whereby I think H2O has done a great job in terms of adding the hotel almost thousands by now. I think our tour did mention that out of the 13,500 hotel, they are only exposed to 200 cities and have no intention to go into other new cities. Just wondering the strategy for HOL and where would they see growth going forward?

[Jason Chen, Investor Relations Director at H World Group]

So I'm very happy to see we achieved a quite good number of hotel new openings in the first quarter. As our one of the key strategies, we are looking for a high quality scale growth. And we hope every newly opened hotel can be profitable. And therefore, in terms of the new opening, the quality of the hotel is much important than purely scale growth. We are not only looking for to achieve a leading position in terms of the market share, but also trying to achieve a leading position for each of the brands in different segments.

[Jason Chen, Investor Relations Director at H World Group]

So that's we are looking for in the longer term to both achieve in terms of the scale, in terms of the number one or the leading market share, But also in each of different segments, we want to be top one or two at least for the brand. Although we are seeing a pretty good in terms of the new opening and the new signings, but we want to stay at the conservative, not changing the full year opening target for now. We have been putting a lot of efforts last year, since last year, to break through the upper mid segment, and I'm very happy to see that you are looking in details in terms of our upper mid development over the last several quarters. We do see a lot of market opportunity, especially to reform those traditional upper midscale segment. At the current stage, would like to focus only on Tier one, Tier two cities, especially those prime area to establish stronger brand.

[Jason Chen, Investor Relations Director at H World Group]

The demand actually is very concentrated in the Tier one, Tier two cities, especially for those upper mid segment hotel. Therefore, in those particular areas and the cities, we won't like to take the most prime location to establish a brand. In a longer term perspectives, we are very confident to chase the leading company right now or even surpass them. Thank you. Next question, please.

[Operator]

Thank you. Our next question comes from the line of Suji Lin from CICC. Please go ahead. Your line is open.

[Analyst]

So, this year, we see relative bigger pressure on business demand compared with leisure demand. But meanwhile, why it seems that upper midscale segment performs better on both RevPAR and pipeline. Because first, our upscale upper mid scale pipeline stay flat quarter over quarter. Second, the same store rough pile mid scale and above segment also perform a bit better than economy segment. Don't know if this is correct.

[Analyst]

I'm trying to understand reason behind this. And what is our view towards the upper midscale market conditions and how we strengthen our competitiveness in this segment? Thank you.

[Jason Chen, Investor Relations Director at H World Group]

As I mentioned earlier, we see plenty of opportunity to reform the existing very traditional upper midscale segment. Therefore, we have been putting a lot of efforts in terms of the products and service offering, as well as the sales target sales and marketing, especially for those upper mid segment to establish our overall capability to do the breakthrough in this particular segment. Leveraging our good product design to improve our product power as well as leveraging our very strong membership program and to accumulate a lot of repeated customers for our upper mid segment products, therefore, to increase the recognitions and acceptance of the products by the customers. We have been keep upgrading and optimizing the membership, especially for the upper mid segment, and we hope you can have a look going forward, and you will see the progress. Thank you.

[Jason Chen, Investor Relations Director at H World Group]

Next question, please.

[Operator]

Thank you. Thank you. Our next question comes from the line of Juei Liu from Citi X. Please go ahead. Your line is open.

[Analyst]

Hi management. In the city, brand has received strong consumer reputation. Can management share some more insights regarding the franchise profile single store model and store opening target plans for this year or next five years? Thank you.

[Jason Chen, Investor Relations Director at H World Group]

So in terms of the Intercity brands, actually the growth momentum started from last year.

[Jason Chen, Investor Relations Director at H World Group]

And Intercity brand actually redefined the overall upper mid scale segment. And it's kind of a combination with Chinese as well as the Western design and service to provide a more suitable product and service to the Chinese customers. And I'm happy to see that probably by the end of twenty twenty five, we can have around, you know, 100 intercity hotels in operation. And more importantly, we have been seeing that, you know, there's a lot of, know, intercity hotel has been located in a very, you know, important key areas and the cities, which are we call flagship hotels in a very prime locations. That will bring a longer term benefits to for the brand establishment.

[Jason Chen, Investor Relations Director at H World Group]

For the NTau upper mid scale segment, we actually used the multi brand strategy. Apart from the Intercity, we still have Crystal Hotel as well as MerQ and the NovoTail, for example. So the key strategy is definitely the multi brand strategy, but with core brands focus. And I think for those foreign brands within our portfolio, as Mercure and Novotel, are going to benefit from a rising inbound tourist in the future. Thank you.

[Jason Chen, Investor Relations Director at H World Group]

Next question, please.

[Operator]

Thank you. There are no further questions at this time, so I'll hand the call back to Jason for closing remarks.

[Jason Chen, Investor Relations Director at H World Group]

Okay. Thank you, everyone, for taking your time with us today, and we look forward to see you in upcoming quarter. Thank you, and bye bye.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.

Participants

Executives

• Jason Chen, Investor Relations Director
• Jihong He, Chief Strategy Officer
• Chen Hui, CFO

Analysts

• Analyst
• Lydia Ling, Director - Equity Research at Citi
• Dan Chee, Vice President, Equity Research at Morgan Stanley