H World Group Q2 Earnings Call Highlights

Key Points

• H World delivered strong Q2 financial results: Revenue rose 10.8% year over year to RMB7.1 billion, while adjusted EBITDA increased 20% to RMB2.7 billion and adjusted net income grew 26.9% to RMB1.7 billion. Margin expansion was supported by faster growth in managed and franchised operations and disciplined expense control.
• China operations continued to expand: China revenue increased 14.9%, ADR rose 2.6% and RevPAR improved 1.1%. H World operated 13,417 Chinese hotels at quarter-end, opened 498 during the quarter and maintained its target of 2,200–2,300 new hotels for the full year.
• International performance remained mixed, but shareholder returns increased: International RevPAR declined 3.8%, primarily because of Middle East-related disruption and Southeast Asia expansion costs, while European RevPAR rose 1.1%. The company launched a new three-year, $2.5 billion shareholder-return plan, including an approximately $275 million cash dividend.

H World Group NASDAQ: HTHT reported second-quarter revenue growth and higher profitability, supported by expansion in China, improving room rates and continued growth in its managed and franchised hotel business.

Group revenue rose 10.8% year over year to RMB7.1 billion in the second quarter, Chief Financial Officer Arthur Yu said. China revenue increased 14.9% to RMB5.9 billion, while international revenue declined 5.8% to RMB1.3 billion, primarily because of leased-hotel closures and lower lease revenue.

Adjusted EBITDA increased 20% from a year earlier to RMB2.7 billion, and the adjusted EBITDA margin expanded by 3 percentage points to 38.3%. Adjusted net income rose 26.9% to RMB1.7 billion, with the adjusted net income margin also improving by 3 percentage points to 24%.

China network expansion and RevPAR improvement

Chief Executive Officer Jin Hui said China’s domestic travel market continued to grow during the first half of 2026. Domestic resident trips reached 3.5 billion, up 5.4% year over year, according to figures cited from China’s Ministry of Culture and Tourism. Domestic travel spending rose 2% to RMB3.2 trillion, which management said reflected more frequent travel but more prudent consumer spending.

H World China’s average daily rate, or ADR, increased 2.6% year over year in the second quarter, marking the company’s fourth consecutive quarter of positive ADR growth. RevPAR, or revenue per available room, increased 1.1%.

The company’s hotel gross merchandise value rose 13.2% year over year to RMB30.5 billion. The number of rooms in operation increased 12.7% from a year earlier, while room nights booked by members also grew, management said.

As of June 30, H World operated 13,417 hotels in China and had 3,054 hotels in its pipeline. Its operating and pipeline properties covered 1,468 Chinese cities. The company reiterated its longer-term objective of reaching 20,000 hotels in 2,000 cities.

Management said it is expanding in lower-tier cities while continuing to pursue locations in core cities and prime commercial districts. The company opened 498 hotels during the second quarter. It maintained its full-year opening target of 2,200 to 2,300 hotels, despite first-half openings being affected by comparison with the prior-year base and supply-chain factors.

Focus on asset-light operations and core brands

Managed and franchised revenue increased by about 25% year over year to RMB3.6 billion, while gross operating profit from the business rose 18.5% to RMB2.2 billion. Yu said the growing contribution from asset-light operations, along with controlled general and administrative expenses, supported the company’s margin expansion.

Hotel operating costs increased 7.4% year over year and selling, general and administrative expenses rose 6.1%, both below the group’s revenue growth rate.

Management highlighted the performance of its economy and midscale brands, including HanTing, JI Hotel and Orange Hotel. Jin said newer HanTing and JI properties have delivered meaningful RevPAR improvement compared with older versions. More than 55% of HanTing hotels are version 3.5 or newer, according to an analyst’s question on the call.

Management said the number of HanTing Inn hotels in operation and in the pipeline had exceeded 200, with development and operating performance surpassing expectations. The company plans to continue upgrading older HanTing hotels while using HanTing Inn to serve smaller properties.

In the upper-midscale segment, H World China had 1,738 hotels in operation and in the pipeline as of the end of June, up 13.4% year over year. Management identified IntercityHotel, Grand JI, Crystal Orange Hotel and Mercure as its four key upper-midscale brands. Grand JI had more than 20 hotels in its pipeline, though the company said it would remain selective and focus on prime locations while refining the business model.

International operations and outlook

H World International’s blended RevPAR declined 3.8% year over year in the second quarter. ADR increased 0.9%, while occupancy declined 3.5 percentage points. Management attributed the result to the Middle East conflict and the ramp-up period for Southeast Asia expansion.

The company’s European business posted a 1.1% increase in RevPAR, supported by improvements in both ADR and occupancy. Yu said the Middle East impact on H World International’s financial results was controllable because its more than 20 hotels in the Middle East and Egypt are managed and franchised properties. The company maintained its goal of achieving positive profit for its international business for the full year.

Management said July travel demand in certain regions was affected by severe weather, and the first half of the summer holiday period came in below expectations in some markets. However, it said August trends had recovered so far. H World maintained its full-year RevPAR view, while describing the broader demand outlook as cautiously optimistic amid macroeconomic uncertainty.

Shareholder returns

Yu said H World completed its 2024 shareholder return plan one year ahead of schedule. The board approved a new three-year shareholder return plan totaling $2.5 billion, effective immediately. As the first distribution under the program, the board also approved an ordinary cash dividend of approximately $275 million.

The company said its membership program, H Rewards, remains central to its direct-sales strategy. Management said online travel agency contribution has remained stable at roughly 20% to 25%, while the company expands into lower-tier cities, leisure markets and inbound travel. Planned membership initiatives include enhanced benefits, cross-industry partnerships and expanded international membership offerings.

About H World Group (NASDAQ:HTHT)

H World Group, formerly known as Huazhu Group, is a leading hotel management and franchising company primarily serving the China market. The company operates a broad portfolio of midscale to luxury hotel brands, including Hi Inn, Blossom, Manxin, Madison International, Joya, Grand Mercure, Novotel, Mercure and ibis. Through a network of both directly managed and franchised properties, H World Group caters to business and leisure travelers by offering consistent service standards and loyalty benefits across its brands.

In addition to its core hotel operations, H World Group provides technology-driven hospitality solutions such as centralized reservation systems, revenue management platforms and customer relationship management tools.

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