H World Group (NASDAQ:HTHT) released second-quarter financial results and hosted an earnings call on Monday. Read the complete transcript below.

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Summary

H World Group's Q2 2026 revenue grew 10.8% year over year to RMB 7.1 billion, driven by a 14.9% increase in China revenue.

Adjusted EBITDA increased 20% to RMB 2.7 billion, with a margin expansion to 38.3%, supported by asset-light business growth and controlled expenses.

The company achieved a 12.7% year-over-year increase in the number of rooms in operation, and managed and franchised revenue grew 25.2% to RMB 3.6 billion.

H World is expanding into lower-tier cities while optimizing its footprint in core cities, with a goal of reaching 20,000 hotels in 2,000 cities.

The company's international RevPAR decreased by 3.8% year over year, influenced by Middle East conflict and Southeast Asia expansions.

Management remains cautiously optimistic about future demand despite weather-related impacts on summer travel, maintaining their full-year RevPAR outlook.

H World is emphasizing high-quality development, focusing on its multi-brand strategy and upgrading economy segment hotels like Hanting.

The company announced a new three-year shareholder return plan totaling US$2.5 billion, demonstrating a commitment to shareholder returns.

The H Rewards membership program is a core competitive advantage, with plans to enhance benefits and expand internationally.

Full Transcript

OPERATOR

Good day and thank you for standing by. Welcome to the H World Group Q2 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 this session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again.

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ivy Law. Please go ahead.

Ivy Law, Investor Relations

Thank you, operator. Good evening and good morning, everyone. Thanks for joining us today. Welcome to H World Group 2026 second quarter and first half earnings conference call. Joining us today is our Founder and Executive Chairman, Mr. Jiqi, our CEO, Mr. Jin Hui, and our CFO, Mr. Arthur Yu. 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 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. H World Group does not undertake any obligation to update any forward-looking statements except as required under applicable laws. On the call today, we will also mention adjusted financial measures during the discussion of our performance.

Reconciliations 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 the supplementary slide presentation, is available at ir.hworld.com. With that, now I will hand over the call to our CEO, Mr. Jin Hui, to discuss our business performance in the second quarter of 2026. Mr. Jin, please.

Jin Hui, CEO

Dear investors and analysts, good day. Thanks for joining us today. Welcome to the H World Group second quarter 2026 earnings conference. During the first half of 2026, domestic culture and tourism travel in China maintained steady growth. According to the Ministry of Culture and Tourism, domestic resident trips reached 3.5 billion in the first half, representing a 5.4% year-over-year increase. As visa-free policies for multiple countries continue to take effect, inbound tourism gained strong momentum, bringing new growth opportunities to China's lodging industry.

On the consumption structural front, the growth of total domestic travel spending moderated, up 2% year over year to RMB 3.2 trillion in the first half. This reflects new consumption characteristics among travelers, which are more frequent trips with more prudent spending decisions. Recently, the government issued a plan to build China into a nation strong in tourism during the 15th Five-Year Plan, which laid out 2030 targets including annual domestic resident trips exceeding 8.3 billion with total consumption reaching RMB 7.7 trillion, and inbound tourist arrivals reaching 190 million with total spending exceeding USD 150 billion.

The plan also outlined adjustments to the tourism regional layout and a greater supply of high-quality culture and tourism-related products. We believe the travel-related industry supply chain has great long-term growth potential. Moving forward, H World Group will keep leveraging our multi-brand portfolio, hotel operation expertise, and digital capabilities to steadily expand our brand network and capture accommodation demand brought by travelers.

Facing the current industry opportunities and challenges, H World will remain committed to doing the right thing for the long term. We focus on the mass market lodging segment and emphasize high-quality development of our hotel network. We continue expanding to lower-tier cities while at the same time securing prime locations in core cities, continuously optimizing our existing hotel footprint. In the second quarter, we achieved high-quality network expansion through regional breakthroughs and lower-tier city penetration, backed by a 12.7% year-over-year increase in the number of rooms in operation.

The Group’s hotel GMV grew 13.2% year over year to RMB 30.5 billion. Room nights booked by members also achieved steady growth. More importantly, the Group’s asset-light managed hotels and franchise business delivered robust growth across scale, revenue, and profit. In the second quarter, managed and franchised revenue increased 25.2% year over year to RMB 3.6 billion, and gross operating profit grew 18.5% year over year to RMB 2.2 billion. With industry competition rationalizing, H World China achieved a 2.6% year-over-year increase in ADR in the second quarter, which was backed by our continuous product and service upgrades, revenue management, and integrated marketing capabilities. This marked our fourth consecutive quarter of positive ADR growth. The ADR improvement fueled a 1.1% year-over-year increase in RevPAR in the same period. We continue to steadily expand our high-quality hotel network and enhance our nationwide network presence. As of end-June, we had 13,417 hotels in operation in China. Our hotel brands and products continue to gain strong favor and recognition from franchisees, and we maintain a solid signing momentum.

As of end-June, hotels in the pipeline increased both year over year and quarter over quarter, reaching 3,054. Our hotels in operation and in pipeline cover 1,468 cities in China, and we are marching towards our goal of 20,000 hotels in 2,000 cities. While expanding the lower-tier market, we also continue optimizing our hotel footprint in core cities and prime commercial districts. We believe that with H World’s strengthened product competencies and brand influence, we can achieve further breakthroughs in China’s core existing market.

Okay, let’s continue. We focus on the economy and midscale segments, deeply cultivating the mass market and continuously strengthening the core competitiveness of our flagship brands. With the upgrades of Hanting and Ji, we are pleased to see that the new-version hotels delivered meaningful improvement in RevPAR and gained broader recognition from guests and franchisees. With the rollout of Hanting Yin, we are further solidifying our leading position in the economy and midscale lodging markets.

In the recently released Hotels 2025 global rankings for single-branded room counts, Ji Hotel leaped from the number four place globally to the top spot, with Hanting closely following in second place. This marks the first time Chinese hotel brands have claimed the top two positions on this list and underscores the effectiveness of our brand strategy. In addition, our core midscale brand Orange Hotel climbed to 26th place globally, representing another notable milestone in our brand-led expansion.

We view this scale leadership as a milestone to date, and we will continue to adhere to high-quality development, focusing on product refinement and continuous iteration to improve product quality and services to better serve guests’ diversified lodging demands. Looking ahead, our limited-service Golden Triangle brands, namely Hanting, Ji, and Orange, will continue to unleash strong market competitiveness and serve as a key growth engine for the Group’s 20,000 hotels in 2,000 cities strategy.

Besides deepening our core mass-market brands and network expansion, our upper midscale segment has also been making steady progress. We stick to our multi-brand strategy with distinct brand positioning and value propositions and push ahead with our development strategy centered on four flagship brands: Intercity, Grand Ji, Crystal, and Mercure. As of end-June, H World China’s upper midscale brands had 1,738 hotels in operation and in the pipeline, up 13.4% year over year.

On the marketing front, we have always centered our strategy on our H Rewards membership program. We firmly believe that our membership program and direct sales capability are core competitive advantages underpinning the Group’s long-term sustainable growth. As our hotel network expands to more cities, H Rewards’ membership base and room nights booked by members have both achieved steady growth. In addition to upgrading membership benefits and enhancing our guest experiences, we are refining our membership-centric operation, deepening cross-industry partnerships, and expanding diversified loyalty point consumption scenarios for our members.

At the same time, we are accelerating our H Rewards international presence, optimizing our H Rewards app to capture more inbound travel demand and empower global membership services. Going forward, we will further strengthen brand building, broaden customer acquisition channels, and continuously optimize membership benefits to enhance member conversion and strengthen member loyalty. In addition to focusing on internal operational management and running steady business expansion across the Group, we are also committed to proactively fulfilling our social responsibilities.

I would like to share three key areas. Firstly, H World boosts local employment and creates job opportunities. The continuous expansion of our hotel network enables us to recruit more employees on an ongoing basis. As of end-June, the total number of employees of the Group exceeded 260,000. In addition, we continue to refine our internal talent development program, providing employees with clear career paths. Secondly, we pursue energy-saving management of our hotels and have rolled out multiple initiatives.

We share proven energy-saving management solutions with our franchisees to help them cut water and electricity costs and secure better operating returns. Thirdly, through our social welfare initiatives supported by the Group's charity foundation, we have launched a wide range of public welfare programs to give back to society through educational assistance, post-disaster support, and other initiatives. Going forward, H World Group will continue to push forward social responsibility initiatives, balancing business growth with social commitment and upholding our corporate mission to guests, franchisees, employees, and the wider community.

Next, let’s go over our operational performance in the international market in the second quarter. H World International’s blended RevPAR was affected by the Middle East conflict as well as our Southeast Asia expansion, which were still in the ramp-up period. In the second quarter, H World International’s RevPAR decreased 3.8% year over year, with ADR up 0.9% and occupancy rate down 3.5 percentage points. Nevertheless, our Europe business delivered a solid performance.

The European segment’s RevPAR grew 1.1% year over year in the second quarter, driven by improvements in both ADR and occupancy. Going forward, we will continue to optimize H World International’s operational efficiency in Europe and push forward our strategic layout in the Asia Pacific market. This concludes the business update for the second quarter of 2026. I will now hand over the call to our CFO, Mr. Arthur Yu, for financial performance for the quarter.

OPERATOR

Thank you. We will now begin the question-and-answer session. If you wish to ask a question, you will need to press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press Star 11 again. We will take our first question, and the question comes from Lydia Ling from Citi. Please go ahead, your line is open.

Lydia Ling, Analyst at Citi

Thanks. Management, this is Lydia from Citi, and congratulations on the solid results in the second quarter. My question is mainly on the RevPAR trend. So, into the quarter we observed volatile travel demand affected by the extreme weather, especially during this peak summer season. So could you share the RevPAR performance during the summer holiday and also into second half? Base comps are relatively higher, so what's management's latest expectation on the third quarter and also full-year RevPAR trend?

Jin Hui, CEO

Shujian. Sorry, I will translate first. So thank you for your question. This is Jing Hui, I will answer this question. So currently, China's leisure travel demand is still steadily growing. We firmly believe that in China, consumers have treated leisure travel as one of the necessities. This has been very clear after the COVID reopening. Secondly, the government is very supportive of the culture and tourism travel. In the first half this year, we do see multiple regional governments introducing spring holidays, and in early August we also saw government encouraging public servants to take holidays.

And certainly, around this round of leisure travel trend, we do see new scenarios and new customers emerging. For example, family trips, travel by silver hairs, travel by self-driving — those both have been performing very strong. Of course, inbound travel has also brought us increasing demand, especially in those core cities in the tier 1 and tier 2 cities. Shi Moshe.

OPERATOR

We will take our next. Your next question comes from Dan Chi from Morgan Stanley. Please go ahead. Your line is open.

Ben, Analyst at Morgan Stanley

This is Ben from Morgan Stanley. I have two questions. My first question is on hotel opening. We saw gross openings in first half ’26 was 1,035 hotels. Although on track with Mr. Jing's reassurance on full-year target of 2.2 to 2.3 thousand, it is 20% below first half last year. Is there any structural change in the contribution of the two halves in the year, seasonality-wise? That was my first question. My second question is about economy segment upgrade Hanting product.

We see that it's now more than 55% are version 3.5 and above. Can the management share some progress made on the latest edition of 4.0 in Hanting, such as quantity or operating improvements? Thank you.

OPERATOR

Thank you. We will take our next question. The next question comes from the line of Yuel Lu from Citi CS. Please go ahead. Your line is open.

UNKNOWN Analyst

The company now has more than 1,700 upper mid-scale hotel properties. What's your view on this year's supply-demand balance in the upper mid-scale hotel segment? Will we speed up expansion? Also, Ji Grand has opened in Hangzhou, Guangzhou and Wuhan. Could you please—

OPERATOR

Operator. Hello. We still have the participant connected. I believe the signal was cut. Yuao Lu, are you able to repeat your questions please?

Zhiwei, Analyst

I'm Zhiwei from CTEX. The company has more than 1,700 upper mid-scale hotel properties. What's your view on this year's supply-demand balance in the upper mid-scale hotel segment? Will we speed up expansion? Also, Grant G has opened in Hangzhou, Guangzhou and Wuhan. Could you give more color on its operating performance and the development roadmap?

Jin Hui, CEO

Let me answer your questions related to the upper mid-scale segment. Yes, upper mid-scale segment is one of H World's core strategic area, and we continue to put effort into the brand building as well as the overall development in this segment. For the upper mid-scale market in China, we do see good development opportunities. We actually see opportunities from two fronts. One is that the upper mid-scale segment actually has opportunities from consumption upgrade, while at the same time it also taking some of the demand from those traditional upscale hotels.

And for H World, we will continue to insist on our multi-brand strategy. We will be building on our Grant G, on Crystal, on Intercity as well as Mercure. We will be using this four core flagship brand to achieve fast development and market share gain in the upper mid-scale segment. Currently, for the Intercity hotel, it has been growing very strongly, and we are very confident on the future growth for this brand. And you mentioned Grant G. For Grant G, we have been gradually signing and opening some of the hotels.

As of now, the number of Grant G in pipeline have already exceeded 20. At this moment, we'll be really focusing on building Grant G at those very prime locations. We are still refining the overall business model, so we'll be relatively cautious developing the quantity of it. But we are very positive on what Grant G has already achieved in terms of the customer reputation, the brand reputation and the product model. In the future, we believe Grant G has very big growth potential and we are very optimistic on it.

Yeah, we are very confident that Grant G will become a flagship in China's upper middle segment. And we're really working hard on that.

OPERATOR

Thank you. Thank you. We will take our next question. Your next question comes from Ronald Leung from Bank of America. Please go ahead. Your line is open.

Ronald Leung, Analyst at Bank of America

Good evening, management. My question is related to the membership system. Could management comment on the latest breakdown in terms of the customer acquisition channel? Also, could management comment on the strategy in terms of optimizing the membership system? Thank you very much.

Jin Hui, CEO

Let me answer the question related to our members. Yes, membership is one of our core strategies for H World Group's operations and it's also one of our core competitive advantages. Right now, the overall members, the increase of the members as well as the member contribution in the booking, is in line with our expectations. Of course, as we are entering into more markets, for example the leisure market, the inbound market, as well as those lower-tier cities markets, H Rewards membership does need some time to grab traffic from those new markets for us.

But meanwhile the OTA contribution is actually quite stable at around 20 to 25%. We do believe that when we enter those new markets we do need OTA support, especially for inbound and lower-tier cities. And related to the overall strategy and the future strategic operations for H Rewards members, I will conclude it in three areas. Firstly, for the H Rewards members, we do emphasize the best benefit for our members. This is one of the key strategies for us.

This includes the best price, includes breakfast, etc. And going forward we are also doing more work on innovation. For example, recently we actually launched a family card under our H Rewards membership and it actually received quite good feedback from the market. So secondly is the cross-industry partnership. You may have already noticed that last year we actually partnered with DB and this year we're partnering with multiple airline companies as well as new energy vehicle companies to really work with those multiple business sectors.

This cross-industry partnership will also be one of our important strategies. Lastly is our international or overseas member development. In the second quarter we deepened our cooperation with Accor on the membership partnership. On the one hand, it's really to capture more inbound demand. And also it allows Chinese consumers or Chinese travelers to be able to stay in an Accor hotel when they go abroad. So we're really working on that. So to conclude, the first point is on the membership operation.

Secondly it's on the cross-industry partnership. And thirdly it's on the international development for H World Group. Thank you.

OPERATOR

Thank you. We will take our next question. Your next question comes from Simon Cheng from Goldman Sachs. Please go ahead. Your line is open.

Simon Cheng, Analyst at Goldman Sachs

So my question is in relation to the EBITDA margin trend. Over the last couple quarters they have seen a nice 3, 4% margin expansion in China, but yet in overseas markets the margins, they see some sluggishness or slippage. Wondering whether management do have any guidance going into second half and also for the full year. Thank you, I appreciate.

OPERATOR

Thank you. This concludes today's question and answer session. I'll now hand the call back to Ivy Law for closing remarks.

Ivy Law, 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 quarter. Goodbye.

OPERATOR

This concludes today's conference call. Thank you for participating. You may now disconnect.

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.