H World Group (NASDAQ:HTHT) released first-quarter financial results and hosted an earnings call on Friday. Read the complete transcript below.
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Summary
H World Group Ltd reported a 11.1% year-over-year increase in group revenue to RMB 6.0 billion for Q1 2026, with HWC revenue up 12.4% and HWI revenue up 5.1%, benefiting from favorable exchange rates.
The company achieved a 24.2% increase in adjusted EBITDA to RMB 1.9 billion, driven by asset-light business growth, with the margin improving by 3.3 percentage points to 31.0%.
H World Group Ltd maintained its full-year guidance for 2026, emphasizing high-quality hotel network expansion, especially in lower-tier cities and premium locations in tier 1 and 2 cities.
The company expanded its hotel network with a 14.1% year-over-year increase in rooms and achieved a 17.4% year-over-year growth in hotel GMV.
H World Group Ltd continues strategic expansion in Southeast Asia, reporting initial success in Vietnam, Laos, and Cambodia, and plans further investments in the region.
Management highlighted the successful performance of upper midscale brands and aims to strengthen competitiveness in this segment.
The company is focused on enhancing its membership program and leveraging direct sales to maintain growth.
H World Group Ltd has a strong cash position with RMB 15.8 billion in cash and equivalents, supporting future shareholder returns.
Full Transcript
Operator
Good day and thank you for standing by. Welcome to H World Group Ltd first quarter 2026 earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising. Your hand is raised to withdraw your question. Please press star 11 again. Please be advised that today's conference is being recorded. Now hand the conference over to your first speaker today, Ms. Ivy Luo, head of Investor Relations. Please go ahead.
Jing Hui
Thank you. Operator. Good morning and good evening everyone. Thanks for joining us today. Welcome to H World's first quarter 2026 earnings conference call. Joining us today is our Founder and Executive Chairman, Mr. Qiqi, our CEO, Mr. Jinghui, our CFO, Mr. Arthur Yu, our COO, Ms. Chenghui and our CSO, Ms. He Jihong. Following our prepared remarks, management will be available to answer your questions. 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 Security 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. HWOD Group does not undertake any obligation to update any forward looking statements except as required under applicable law 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 early today. As a reminder, this conference call is being recorded. The webcast of this conference call as well as supplementary slide presentation is [email protected] with that, now, I will hand over the call to our CEO, Mr. Jing Hui to discuss our business performance in the first quarter of 2026. Mr. Jing, please. Dear investors and analysts, Good day. Thank you for joining for first quarter of 2026 earnings earnings call. In 2026, China's domestic travel demanded solid momentum. The overall railway and aviation cross region traffic, number of trips as well as tourism spending rose steadily. We also saw several regions rolling out spring breaks this year. So spring breaks right before or after Qingming Festival and May Day holidays enable Chinese consumers to enjoy five to eight days of vacation, which effectively help balancing out passenger flows in between peak and off peak period. Meanwhile, a further step up in the implementation of Visa-free policy has fueled the continuous growth of inbound tourism which serves as an additional growth engine of China's hospitality industry. We think structurally there is still a mismatch between the hotel supply and the consumer demand in China. Therefore, pushing forward supply side reform and hotel network optimization will remain a key strategic. This closely aligns with the 15th Five-Year Plan guideline on deepening supply side structural reform and revitalizing existing resources. Meanwhile, backed by our strong brand reputation, proven operational expertise and digitalization advantages, we aim to further expand our market share, deliver sustainable high quality growth and fulfill our mission of redo China's hotel industry. As we enter 2026 H worlds remain committed to brand led high quality development and we achieved solid business results across network expansion, brand building, membership, ecosystem development and profitability. By breaking through into new cities and regions and deepening penetration in the lower tier cities, we delivered another quarter of strong network expansion driven by a 14.1% year over year increase in the number of rooms in operation. Our group Hotel GMV grew 17.4% year over year to RMB 26.4 billion. I booked by members increased 10.7% year over year to 16 million. Our asset light and franchise business registered another quarter of solid growth in its hotel network revenue as well as profit. Our first quarter 26 group MNS revenue rose 20.3% year over year to RMB 3.0 billion and group MNS gross operating profit increased by 20.7% year over year to RMD 1.9 billion. You guys said as market competition became more rational and healthier, H World China achieved 4.5% year over year increase in ADR which was also supported by our continuous product upgrades and revenue management optimization. The ADR expansion drove a 3.0% year over year growth in the blended RevPAR which represents a sequential improvement from fourth quarter of 2025. We remain focused on serving the mass market, using our economy and mid scale hotels and solidifying the competencies of our core brands. The continuous upgrades of Hanqing and Ji Hotel together with the launch of Han Jingying have further strengthened our competitiveness in economy and mid scale hotel markets, reinforcing H4's absolute leadership in China's mass market hospitality segment. We're steadily expanding hotel network and enhancing geographic coverage. By the end of first quarter, HWC Hotel in operation totaled 13,095 and we have another 2,865 hotels in the pipeline. Our city coverage increased to 1,461 cities across China. We are moving steadily towards our strategic goal of 2000 cities 20,000 hotels while expanding into lower tier cities. We are also optimizing and refining our hotel portfolio in the tier 1 and 2 cities, especially in those core business districts. In the top tier cities. We believe our premium product quality and a strong brand power will enable us to recapture opportunities in the mature tier one and two cities market. Aside from strengthening our core mass market brands and optimizing hotel coverage, we're also making steady halfway in the upper mid scale segment. We're adopting a multi brand strategy with clear brand positioning and value propositions. We're steadily pushing forward the development of our four key upper midscale brands namely Intercity, Grand G, Crystal and Mercure. At the end of first quarter, the number of our upper midscale hotels in operation and in pipeline reached 1,658 up 14.4% year over year. We always insist on strengthening our direct sales capabilities through H Reward membership program which we believe is vital to our sustainable long term development. As our hotel network covers more cities, our membership base and room night booked by members also achieve robust growth. Going forward, we'll further strengthen brand building, diversify customer acquisition scenarios and enhance member benefit and member stickiness. To betterment more accurately reflect our future development prospects. We have adopted the new HWC and HWI Disclosure framework and terminology beginning this quarter The acronym HWC refers to our operations inside China and HWI includes all overseas hotel business covering Lattice DH as well as our APAC business. Now let's go over the operational performance of our HWI business. In the first quarter 2026, HWI achieved a 5.0% year over year increase in RevPAR driven by a 1.6% increase in ADR and a 2.1 percentage improvement in occupancy rate. As you may have noticed, aside from our DH business, H World International has also made initial progress and breakthroughs in the Asia Pacific market. Leveraging the development opportunities under the Belt and ROAD initiatives, we are accelerating our strategic layout across apec. With Singapore as its operational hub, HWI is expanding its footprint into key Southeast Asian markets including Vietnam, Laos and Cambodia. To date we have opened six hotels across Southeast Asia. By rolling out brands ranging from Hanqing, G Hotel to Intercity and Max, we have built a covering economy mid scale and upper mid scale segments catering to diverse guest travel needs. We opened our first overseas Hanqing hotel in late 2025. Featuring our latest Hanqing 4.0 version, the hotel sits in the very prime center business district of Ho Chi Minh City. Vietnam, the hotel posted strong operational results with a nearly RMB500 RevPAR in the first quarter. It's also worth mentioning that this property was invested by one of our large domestic franchisees, which shows our franchisees acknowledgement and confidence in our brand power and operational capabilities. This quarter, our first overseas GE 5.0 officially opened in Vientiane, the capital of Laos. Located in a prime area of the city, the hotel continues Ji's signature design language rooted in Eastern culture, representing the overseas expansion of one of H world's Eastern cultural brands. We believe our standardized branded hotel products, systematic and digitalized operation capabilities and supply chain advantages will enable us to empower our overseas hotels. Moving forward, we aim to build solid brand influence in Asia Pacific region while accumulating local operational expertise in the Southeast Asian market. This concludes the business Update for the first quarter of 2026. I will now hand over the call to our CFO, Mr. Author Yu. Financial Performance for the
Author Yu (CFO)
thank you Jinhui. Good evening and good morning to everyone. Before we get into the details of our quarterly financial performance, I'd like to quickly highlight one accounting update. First, starting this quarter, we have renamed our operating segments to HWC and hwi, replacing the previous Legacy Legacy FAJU and Legacy DH segment segments. Additionally, we made a minor business realignment between HWC and HWI effective 2026. For consistency and comparability, we have restated prior period figures to align with our current segment presentation. Now let's walk through our quarter. 1. Financial Highlights Group revenue grew 11.1% year over year to RMB 6.0 billion. Within this HWC revenue increased 12.4% year over year to RMB 5.0 billion, primarily driven by steady hotel network expansion and continued RevPAR recovery. HWI revenue rose 5.1% year over year in Quarter 1 2026, partially benefited by favorable foreign exchange rates on profitability group adjusted EBITDA was up 24.2% year over year to RMB 1.9 billion, with the margin expanding 3.3 percentage points year over year to 31.0%. The strong EBITDA growth and margin improvement were mainly attributable to a growing profit contribution from our asset Light business. Adjusted net income grow 38.6 year over year to RMB 1.1 billion, with the adjusted net income margin improving 3.5 percentage points to 17.9%. Next on our asset Light M and S business, supported by ongoing high quality I Set Lite network expansion and improved RevPAR performance. Our MNS business revenue grew a solid 20.3% year over year, increased 20.7% year over year to RMB 1.9 billion with a growth operating margin of 63.6% for the quarter. Let's now turn to our cash flow and liquidity position. We generated RMB233 million in operating cash flow during quarter one. As of quarter end, the Group holds RMB 15.8%, 15.8 billion in cash and cash equivalents with a net cash position of RMB 9.6 billion on our balance sheet. Our healthy operating cash flow and strong balance sheet provide solid support for future shareholder return arrangements, which concludes our financial review for the first quarter of 2026.
Operator
We are ready to take your questions. Operator, please open the line for Q and A As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q and A roster. One moment for our first question. We will now take our first question from the line of Dan Chi of Morgan Stanley. Please ask your question, Dan. Your line is open.
Dan Chi (Equity Analyst)
Jenjang. Thank you Management. This is Dan from Morgan Stanley. Congratulations on another quarter of strong profit growth. My question is around recent demand and RevPAR trend. First quarter RevPAR saw sequential improvement and Mr. Jing mentioned about the demand balance during the Qingming and also May spring holiday and several holidays in Q2. So can management share more colors especially on business demand and any impact from energy cost increase? Lastly, any comments on the occupancy stabilization? Thank you, You can.
Jing Hui
So after reopening we actually see that for the leisure travel demand it still has been growing steadily. A couple reasons behind I think. One is that after reopening the leisure travel and experimental experience behavior is becoming a necessity to Chinese consumers. Secondly, we are also seeing government pushing out supportive policies such as the one that I mentioned during my prepared remarks, the spring breaks that was rolled out in multiple regions and cities this year. Thirdly, we are also seeing a rising demand or increase in overall inbound which was an additional growth driver to the overall leisure travel market. Overall, we are seeing that in terms of the number of trips, it is growing steadily after reopening, but probably because of the consumption power we still see some fluctuations in the overall spending. But to conclude we do believe that overall leisure travel is still growing steadily. The Rising Energy Cost we haven't been observing any impact on the overall travel demand because of the rising energy cost. We Think partially this is also because the popular new energy vehicle in China. So that is also why for the full year 2026 we still maintain our four year backhaud guidance of a slight increase. For each world. We will continue to focus on building our own core competencies including our hotel brand, including our operational management capability as well as membership. So given that the overall industry supply increase has been slowing down and rationalizing, we maintain cautiously optimistic on overall occupancy rate outlook.
Operator
Thank you. We will now take our next question from the line of Ronald Loan of Bank of America. Please ask your question. Ronald, your line is open.
Ronald Loan (Equity Analyst)
Let me translate my question into English. So my question is about the opening and closures outlook for the full year. So what is the latest outlook for the full year opening and closures? And could management also comment about the city coverage in terms of the overall openings? Thank you.
Jing Hui
I will answer the opening and the city coverage question separately. So on the hotel HWC, we gradually opened 537 hotels which is at a relatively high level compared to historical performance. Of course, in the first quarter our net opening is kind of impacted by the late spring festival holiday. This year overall, the number of gross openings and net openings in the quarter was in line with our overall expectation. Our hotel opening strategies we insist on the high quality development of our hotel network. Since two years ago, we already shifted from purely focusing on quantity to focusing a high quality growth of the hotel network. So under our brand led high quality growth strategy, we have high standards and high requirement on the new signings and new openings. That strategy I'm happy to report that in the first quarter of overall new signings is still at a healthy and high level. With our healthy signing pace, we maintain our opening guidance for the full year of 2026 unchanged. On the city coverage strategy. We have two lacks of strategy which we are implementing at the same time. So firstly is still the penetration into lower tier cities and secondly, given the current real estate market, the current supply cycle of the real estate market, we are also returning to the tier one and tier two cities. We are grabbing those emerging opportunities of those high quality properties in those core and premium district and premium locations. We will be developing our premium hotel products in those tier one and tier two cities. We are fully confident that H World will be delivering high quality growth in both the lower tier cities as well as the tier one and two cities. Thank you.
Operator
Thank you. We will now take our next question from the line of Cijie Lin of cicc. Please ask your questions to Lin Cijie.
Cijie Lin (Equity Analyst)
So thank you management. My question is about the upper mid scale business development. For the last several quarters Upper mid scale especially Intercity achieved quite impressive expansion speed and we see that Grant G opened first hotel and has two new signings. They want to know how the revpar performance of upper mid scale compare with economy and mid scale. And additionally could you please share the expansion targets and operational focus of the upper mid scale segments especially the Intercity and Grant G in the coming period. Thank you.
Jing Hui
The upper midscale segment is a core strategic part of our overall edgeworth strategy. We are actually very happy to see that in the first quarter the overall revpar recovery in the upper midscale segment is actually slightly better than our economy and midscale. This showcases our growing brand power and product quality in the upper midscale segment. We adopt a multi brand strategy in the upper mid scale segment. So namely it's the Intercity grantee, Mercure and Crystal. Overall the total network growth in the upper mid scale is quite solid. But when we're breaking down into single brand we do see that some of the brands still need further improvement in overall brand power. Which. Upper midscale strategy we are returning to and refocusing back to the Tier 1 and Tier 2 cities to opening flagship stores in those core districts. At the initial stage of development. H World have been spending a lot of time setting the overall brand strategy as well as the design so we have very clear value proposition for each of our upper mid scale product. Of course at the initial stage you are always going to face some of the challenges but we are very confident that in the longer term our age world upper mid scale brands will be leading in the upper Mid skill segment. Thank you.
Operator
Thank you. We will now take our next question from of Citix. Please ask your question. Ji Wei, your line is open.
Ji Wei
I translate my question in English. High management from Citix against the backdrop of fluctuating business and narrow gas mix and increasing regulation across OTA industry. Can you share the current breakdown of our customer source channels and your outlook going forward as well as the company's plans and strategies for membership marketing? Thank you.
Jing Hui
Overall, our CRS as well as some of the other key matrix of our membership have been performing quite stable. Even under the case that we've been expanding our overall network rapidly last year and opened over 500 new hotels this year, the overall CRS contribution and the membership booking has been quite stable. But at the same time we are also observing some of the emerging trends including the leisure travel as well as the overall increase inbound tourism. So how to capture those emerging traffic and the new type of consumers is one of the very important topic for H World and for our H World membership. You may have noticed that H World we have been bringing in some of the new talents into the company and we are also working with some of the leading AI companies to develop new selling marketing strategies as well as to some of the new strategy and initiatives in member conversion. And improving our capability in the corporate B2B channel. We are using our membership to leading corporate business travelers. We do believe that this also showcases the improving membership capability of H World. Thank you.
Operator
Thank you. We will now take our next question from the line of Leah Pan of Goldman Sachs. Please ask your question Leah. Your line is open.
Leah Pan (Equity Analyst)
Nayaki, So please allow me to translate my question into English. Thanks Madison for taking my question. This is Leah from Goldman Sachs and I have a question on company's international strategy and I think you mentioned all the recent stepping up in the Southeast Asia market including the signing of G hotels in Malaysia and the entry into Cambodia with the brands Hotel and Schneider Electric. So could you please share with us more potentially in your Southeast Asia market and the growing targets over the next few years and also given companies business exposure in the Middle east market. How do you see the impact from the ongoing Middle east crisis to your current business and as well as the global expansion strategies? Thank you.
Jing Hui
So you do see that as a first step. We successfully opened hotels in Vietnam, in Laos and in Cambodia. This gives us very strong confidence that hor's products management, supply chain as well as members can actually empower the hotel operation in the overseas market. So going forward we are going to step up in the overall investment in the Southeast Asian market in terms of the network expansion, the size as well as the pace of expansion. We do think that overall the Southeast Asia is a brand new market that provides new opportunities to each world. So this is also answered the second question related to the Middle East conflict. Based on our first quarter results we see very limited impact from the Middle East conflict to our H World International in the Middle East our HWI only have 10 hotels and it has manageable and non material contribution to the revenue as well as profit and on the overall increase in the energy cost. We are taking effort in controlling the increase and managing the increase in overall energy. So so far we think the impact of the rising energy cost on HWI is still manageable. But of course there are still uncertainties in how the overall situation in the middle is going to evolve so we will keep a close eye on the overall development there. Thank you.
Operator
Thank you. We will now take our next question from the line of Lydia Ling of City Please ask your question Lydia, your line is open.
Lilia
Hi Management Lilia from Citi and thanks for taking my questions. So my question will be on the profitability so in first quarter we continue to see the margin improvement and further optimization in the cost ratios so what would be your outlook for the full year margin trend if by region in China as asset-light strategy continues to push forward so what be the upside from current high level and we see the international part the loss actually narrowed on year basis in first quarter so what would be your target for the overseas profitability on full year basis? Thank you.
Jing Hui
First quarter EBITDA There are several things that we are doing to improve the overall EBITDA performance so firstly is our asset-light strategy As we continue pushing forward asset-light strategy we are confident that for our H World hotel business the adjusted EBITDA margin will continue to improve steadily. Secondly also on the overall leased and owned business we are also improving the performance of this segment by revenue management as well as cost control including the negotiation of rental reduction. . On the overseas business HWI especially for DH we continue to push forward cost reduction initiatives. We are actually looking into each item in the overall cost structure to improve the overall efficiency in the first quarter this year and we will continue to push forward the cost reduction initiatives in Dharma. I would like to add that aside from the cost control and cost reduction, hwoard is also making some investment in key areas such as digitalization technology and AI development as well as our overall H reward, membership building, the promotion and marketing of our core brand. For example, in the first quarter we launched our Han Jinyin product. So based on the overall budget and overall planning we do need to make necessary investment but of course we will be looking at the overall ROI of those investment on the full year basis we will have control on the cost but we also make necessary investment for our long term sustainable growth. Thank you, I will take the last question.
Operator
Certainly our last question today comes from the line of Sing Chen of ubs Please ask your question Singh, your line is open.
Sing Chen (Equity Analyst)
Let me translate to English. This is Chen Xin from ups. My question is on dividends could the management Please share the 2026 shareholder return plan with us? Thank.
Jing Hui
Now. Thank you. So as you can see from our presentations, H World have very strong and solid balance sheet as well as stable cash flow and going forward as we continue pushing forward the Asset light strategy and those cost reduction initiatives. We will maintain our shareholder return plan in place going forward. If there's anything new, we will update with the market in time. But overall for the overall direction is that we will be using our own cash flow to return to the shareholders. Thank you.
Operator
Thank you. That's the end of the question and answer session. I'd now like to turn the conference back to Ms. Ivy Law for closing comments.
Ivy Luo (Head of Investor Relations)
Thank you everyone for taking your time with us today. This will conclude today's call and we look forward to seeing you in the upcoming quarters. Bye bye.
Operator
Thank you for your participation in today's conference. This concludes the program. You may now disconnect your lines.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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