SHANGHAI, April 11,
2023 /PRNewswire/ -- China's 2023 government work report states
that the country will focus on expanding domestic demand and
prioritize restoring and expanding consumption. The Ministry of
Commerce has declared 2023 as the "Year of Consumption Boost,"
proposing ways to improve consumption conditions, create innovative
consumption scenarios, cultivate a consumption atmosphere, and
boost consumer confidence. With tourism being a critical aspect of
post-pandemic consumption, the hotel industry will play a
significant role in restoring and expanding consumption.
After the lifting of pandemic lockdowns, the market rebounded
exceptionally quickly. According to Horwath HTL's "China Hotel
Market Sentiment Survey Report for First Quarter of 2023," released
in February of the same year, the overall market sentiment index
has returned to positive territory for the first time in three
years. In addition, the domestic hotel market has demonstrated a
clear trend toward recovery, with many operators maintaining
optimistic attitudes about the market.
Maintaining resilience in the face of pandemic challenges and
achieving an 8.4% increase in 2022 revenue
H World Group Limited managed to overcome pandemic-related
difficulties in 2022, maintaining its resilience and achieving
excellent financial results. H World Group Limited (NASDAQ:
HTHT)(HKEX:1179) ("H World" or the "Group") recently released its
financial results for the fourth quarter of 2022 ("Q4-22") and the
entire year of 2022 ("FY22"). Revenue increased by 10.7%
year-over-year to RMB3.7 billion in
Q4-22, in line with the previously announced revenue guidance of a
7% to 11% increase compared to Q4-21 and increased 8.4%
year-over-year to RMB13.9 billion for
FY22. Hotel turnover surged by 10.5% year-over-year to RMB13.1 billion in Q4-22 and increased 9.3%
year-over-year to RMB49.6 billion for
FY22.
He Jihong, the Group's Chief Financial Officer, stated, "Despite
the challenges posed by the Covid-19 pandemic in China, the Group was able to achieve
Adjusted EBITDA of RMB 610 million,
Adjusted EBITDA before non-cash impairment and forex loss was
RMB 1.74 billion. This accomplishment
can be attributed to the strong recovery of our international
business, as well as rigorous cost reduction efforts across the
Group implemented both at the hotel level and within our
headquarters."
H World Group's Europe-based
business experienced a great recovery since its reopening in
February 2022. Deutsche Hospitality
(DH) saw a 22.9% increase in Average Daily Rate (ADR) and a 96.2%
increase in full-year blended revenue per available room (RevPAR)
compared to 2021. In the fourth quarter, Steigenberger hotels
located in Qatar and Egypt drove the rebound of the blended RevPAR
to 110% of 2019's performance. Additionally, the Legacy-DH
segment's revenue in 2022 reached RMB3.2
billion, reporting a 108.5% year-over-year increase with an
adjusted EBITDA of RMB134 million
before impairment and unrealized losses.
Jin Hui, the CEO of H World,
stated the Group displayed resilience while expanding its
portfolio of new hotels in the face of pandemic
challenges. The Group remained committed to its
"Sustainable Quality Growth" strategy, opening 1,244 new hotels in
2022 while continuing to upgrade its existing brands' facilities to
enhance the user experience. Additionally, Legacy-Huazhu
established six regional branches as part of its organizational
upgrade, strengthening its foundation for full market penetration
and high-quality operations in the future. The Group exercised
reasonable cost control measures, achieving a rental reduction of
about RMB300 million in 2022. Even in
the most challenging times in the industry, H World prioritized its
franchisees as crucial partners of the Group's business. As such,
the Group waived the franchise fee of around RMB 300 million for its franchisees.
China's consumption and
economic recovery are strong; H World is confident in the potential
of the Chinese market
The tourism and hotel industry in China has experienced a remarkable rebound
following the lifting of the pandemic lockdown, with popular
tourist cities becoming crowded, hotel occupancy rates rising,
market investment transactions becoming active, and brands actively
upgrading and expanding.
Jin Hui highlighted the hotel
industry's recovery following the easing of the pandemic lockdown.
Especially during the Spring Festival, the recovery of China's entire consumer market, especially the
travel and vacation market, was highly robust. Moreover, the
recovery is noticeable in economy-class, upper-midscale, and resort
markets.
According to the Business Travel Outlook Survey for the first
quarter of 2023 published by the Global Business Travel Association
(GBTA), corporate travel spending is expected to increase in 2023,
with many companies sending more employees on business trips.
Additionally, sectors such as finance, insurance, professional
services, and consulting are expected to experience robust growth
in travel spending. A new GBTA survey of more than 600 travel
buyers, travel suppliers, and industry professionals worldwide
indicates that the business travel industry will continue to
recover. Although business leaders have had to face a recessionary
situation, three-quarters (78%) of respondents expect their
companies to do very much (22%) or more (55%) business travel in
2023 compared to 2022. Only 15% anticipated the same level of
business travel compared to the previous year, while 7% expected to
travel less. Furthermore, 90% of respondents believed their
employees were willing to travel for work, and 88% of respondents
were more optimistic about the recovery of the business travel
industry than the previous month.
Despite the economic slowdown in China in 2022 due to the pandemic and other
factors, the international community generally believes that
China's economic and social
dynamics will be further released as the pandemic enters a new
phase of prevention and control. As such, China is expected to continue being a
"stabilizer" and "engine" of growth for the world's economic
recovery. The American Chamber of Commerce in China, the British Chamber of Commerce, the
German Chamber of Commerce, and many other foreign chambers of
commerce in China said that
China's adjustment of its pandemic
prevention policy would help restore the flow of people and
business travel between China and
abroad and restore market optimism and that China would continue to be a priority
investment destination for foreign investors. The World Bank's
latest China Economic Briefing concluded that with the
deterioration of global demand growth, the aggregate demand
structure of China's economy is
expected to shift gradually towards domestic demand. As consumer
confidence improves and suppressed consumer demand is released,
consumption will gradually recover, while infrastructure investment
spending and rebounding investor sentiment will drive investment
growth to pick up.
The World Travel & Tourism Council (WTTC) predicts that
China will have the world's
largest tourism market by 2032, and China was also one of the largest markets
before the pandemic. The 14th Five-Year Plan for Tourism
Development in China clearly
outlines the government's efforts to improve the tourism product
supply system, stimulate the vitality of the tourism market, and
create a new situation of multi-industry integration and
development. The Chinese government will also expand the public
tourism consumption system, improve tourism consumption services,
and better cater to the multi-level and diversified needs of the
people.
China has long been a top
destination for inbound tourism and a significant source of
outbound tourism, generating substantial revenue for the
international tourism industry. As per relevant platform data, the
volume of air tickets for some popular overseas destinations has
increased significantly, and the demand for inbound tourism,
visiting relatives, and business is being released. The Ministry of
Commerce of China aims to
collaborate with all stakeholders to create better conditions for
the safe, healthy, and orderly movement of Chinese and foreign
personnel, making positive contributions to developing
international tourism and the world economy's recovery.
Regarding the post-pandemic era's prospects for China's hotel industry, Jin Hui is confident in the Chinese market,
given the overall supply's rise due to China's long-term economic growth. The
Group still holds optimistic expectations for the market in
2023, especially after the pandemic, and investor confidence is
rising in the industry's overall recovery. In 2023, the
Group aims to strengthen its foothold in the Chinese market
and strive to maintain a positive development trend. Jin Hui acknowledges that hotel operations are
in a long cycle, and companies need to maintain resilience during
that period. He believes that on the one hand, the Group must
continue to enhance the core competitiveness of enterprises. On the
other hand, companies should innovate and adapt to different times
and changes, matching the environment and challenges, to constantly
pursue innovation and breakthroughs around customer needs.
Insisting on "Sustainable Quality Growth", with a network of
high-quality hotels, upper-midscale brands layout, and
digital management improvement progressing together.
In 2023, H World aims to strengthen its foothold in the Chinese
market with a strategic focus on "Sustainable Quality Growth." To
achieve this, the Group has identified three key areas:
expanding its network of high-quality hotels, empowering
upper-midscale brands, and upgrading its platform organization
and digital operating system.
First, the Group will continue to expand its network of
high-quality hotels. As the development of lower tier cities lags
behind that of first and second-tier cities in China, the regional distribution of the hotel
industry is relatively uneven. However, with China's economic development, urbanization,
infrastructure construction, and logistics systems improving along
with the increase of disposable income of residents in lower-tier
cities, the lower-tier cities are developing unprecedented
consumption potential. Thus, the Group will focus on developing and
penetrating the lower-tier cities in China.
As of 2022, the number of Legacy-Huazhu hotels in China was 8,411, which is a net increase of
705. The number of hotels operating in lower tier cities
increased to 38%, compared to 2021's 37%. The number of hotels
under development was 2,544, of which 57% were lower
tier cities compared to 56% in 2021. The number of cities
covered by hotels in operation and under development increased from
1,062 at the end of 2021 to 1,126 at the end of 2022.
Second, the Group plans to accelerate the deployment of
upper-midscale hotels as consumers increasingly demand more
and better experiences and quality offerings. To meet these
demands, the Group aims to gradually form leading brands in
the entire upper-midscale market in China by sorting and adjusting its current
brands like Crystal Orange Hotel, IntercityHotel, MAXX, Manxin
Hotel, Mercure, and Novotel. By the end of 2022, the Group has
523 upper-midscale hotels in operation and 287 upper-midscale
hotels under development. The resort market is also a great concern
to the Group. The Group has initiated comprehensive
cooperation with many real estate enterprises and many government
cultural tourism enterprises in China. The development of the resort market,
its growth, and the establishment of the brand are all of great
importance. Brands like Blossom
House will be given good market placement and development
opportunities.
Third, the Group recognizes that the digital economy
represents the future direction of industrial development. In the
highly competitive hotel industry, hotels can only maintain the
leading position in the market by providing differentiated
services. The application and popularization of digital technology
in hotels can help the hotels build a younger, more convenient, and
more fashionable image, with the hotels' service, marketing, and
management mode more in line with the needs of mainstream
customers.
The H World Group aims to build on the strong membership
and traffic of H Rewards by exploring its potential and enhancing
the benefits and services available to its members. As part of this
plan, version 4.0 of the H Rewards program was launched in
2022, providing customers with new features such as intelligent
laundry services, remote reservation options, and real-time updates
on laundry status. This digital system offers increased convenience
and value to customers. The percentage of online services has
increased from 21% in 2021 to 71% in 2022. Additionally, the
Group is utilizing digital and intelligent management tools to
increase efficiency and reduce costs, including reducing the
employee-to-guest ratio and streamlining operations.
International business is enjoying a strong recovery while
the Group will continuously recruit top talent
worldwide
In February of 2022, the European pandemic policy was released,
providing new possibilities for overseas business development. He
Jihong mentioned that the progress of the Legacy-DH business has
increased rapidly due to the gradual resurgence of the market, with
a significant upturn in RevPAR and revenue. The profit margin of
the Legacy-DH business has significantly improved owing to the cost
management and efficiency enhancements, indicating a shift from a
loss to profit from operations. In the future, the Group will
strive to enhance its member movement strategy, increase investment
in the direct channel sales, and additionally better management
efficiency while reducing operating costs via
Group Digitalization.
Jin Hui highlighted that the
Group would seek to integrate the Deutsche Hotels business
more effectively and establish this business as the core of its
overseas operations. The Group would also focus on creating a
recognizable brand image for this business and maintaining its
profitability in Germany,
Europe, and the Middle East.
Furthermore, attracting high-end talents can effectively enhance
the competitiveness of enterprises. Jin
Hui noted that the Group constantly emphasizes
cultivating a team of exceptional talents. In the era of change,
building an agile and efficient organization and talent reserves to
ensure a high-quality customer experience is the most vital
challenge. The hotel industry needs numerous outstanding managers
to lead it. Therefore, the Group recognizes the importance of
recruiting talented individuals capable of providing first-rate
service and adapting to the changing times.
Currently, the Group has emerged as the leading hotel chain
in China. Jin Hui stated that the next phase of the
Group's management goal would be to bring China's hotel industry to global standards and
heights. To accomplish this, the Group must keep up with
world-class companies in terms of management philosophy, talent
requirements, and organizational capabilities.
The Group has always accorded significant importance to the
growth and training of front-line staff and actively participated
in school-enterprise cooperation initiatives. In 2021, the
Group achieved the distinction of being one of the
school-enterprise cooperative partners recognized by the Chinese
Ministry of Education, with their cases featured in the syllabus of
various universities. Furthermore, the Group plans to scour
Asia and the world to find
exceptionally talented professionals with diverse backgrounds and
expertise. The Group is confident that continuous innovation in
business models and products can help it overcome any
challenges and generate sustainable and high-quality growth
for investors and the ecosystem at large. He Jihong also
expressed her anticipation for the Group's future development,
estimating a 61-65% growth in net revenue for Q1 2023 compared to
Q1 2022, with the gross hotel opening target estimated at 1,400
hotels. Ji Qi, the Group's Executive Chairman, affirmed that the
Group would further strengthen the Group's core competencies
in operations and various platforms to build overall
resilience.
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SOURCE H World Group Limited