Q2 2023 H World Group Ltd Earnings Call

August 25, 2023

Thank you.

Really face flavoring again Thank you.

Man 4, update on the economic development of digital energy points, hills and passport the to yourAhshusSpot.

Figure does was we wein So So you what get the your turn on the one sheet that I can have the each that actually actually can use and DI you V to you woman and UH do your open issue H CES how CH coulder P went the on boto for that to you to nsusho four year and have a new popose' support the So car turn other pthat and then you see it some boto that when you TI to E the to.

So D other find ANS up be sian one higher soci she and your the outts and want you to send up some water ANDs also are so that some voteen you and when they share people she someone somewhat where chinder and you can came about to je it your help the balu things jingy the people the somebody joing priuious ENT people were to do away is Co when that just as.

If my decision is to the Berman we're gonna get high up with candle high underlying And I choose it in the cartoon show you Inlet open breathe into the woman can develop All me sister yeah Oh I When I can't know you're chief would you chase the boxing industry powerful causes Valor plainly creates a voiceup system for tearful development.

Boris points out whether our impression and planning have led to a public desire to reincont Taxi his

Operator: Good day, and thank you for standing by. Welcome to H World Q2 2023 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 need to press star one one on your telephone. You'll then hear an automated message advising that your hand is raised. Please be advised that today's conference is being recorded. I'd now like to hand the call over to your host today, Mr. Jason Chen. Please go ahead.

Well, for your question, I think that we have different definitions on business related travels with some of our competitors. But if you look at the statistics issued by ZTrip and other industrial players, you notice such a common trend that is usually due to a summer holiday vacation or the peak seasons for China's travel and leisure market. And that's all always true. And speaking of the good performance in this period, larger reason comes from the stimulus package the government has taken to stimulate the overall leisure and tourism travel market on the overall macro.

I Thank you.

culture and tourism market, right? For example, the barbecue festival in Zhebo, the Guizhou village basketball activities. The Chinese government has constantly been investing on promoting the culture and tourism sector. So overall in the mega trend we definitely sense that on basis of such a peak season growth we have seen very good performance with the demand.

But in the pure commercial and travel related trips and travels, I think Partly it is impacted by Chinese macroeconomic prospect and partly it is because it usually delivers Longer term recovery because if you look at the real opening since now it is just eight months Eight months time is not long enough for the full recovery of this market Yes in the last several years We have experienced some setbacks and it takes time to cure these and heal these setbacks I think it's very easy to understand so I don't think there will be too much of a discrepancy For all the players in the industry if you look at H world group We are a top player in the hospitality market. We have very wide covering market coverage We are much favored by the mass market. Yes in some regional markets. There are some overpriced Issues and we will continue to provide more products and services to cover these markets So all in all I don't think there will be too much of discrepancy among all players. Thank you

Good day and thank you for standing by. Welcome to HVOC Quarter 2, 2023 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 need to press star 1-1 on your telephone. You will then hear an automated message providing your hand is raised.

Good day and thank you for standing by. Welcome to HVAC Quarter 2, 2023 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 need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded.

Jason Chen: Thank you. Good morning and good evening, everyone. Thanks for joining us today. Welcome to H World Group 2023 Q2 Earnings Conference Call. Joining us today is our chairman, Mr. Qi Ji, our CEO, Mr. Jin Hui, our CFO, Ms. Jihong He, and our president, Ms. Xinxin Liu. Following their prepared remarks, management will be available to answer your questions. Before we continue, please note that 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 obligations to update any forward-looking statements except as required by applicable laws.

Joining us today is our Chairman, Mr. Jee Jee.

Our CEO , Mr. Jing Hui.

our CFO Ms. He Ji Hong, and our President Ms. Liu Xingxin.

following their prepared remarks.

Management will be available to answer your questions.

before we continue.

Please note that discussion today will include forward-looking statements made under the Safe Harbor Provision of the United States' Private Security Litigation Reform Act of 1995.

Thank you for the questions. With that, I would like to hand the call back to management for closing remarks. Thanks everyone for taking your time with us today and we look forward to seeing you in the upcoming quarter. Thank you. Bye bye. That concludes today's conference call. Thank you for your participation. You may now disconnect.

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.

Each workgroup does not undertake any obligations to update any forward-looking statements except as required by applicable laws.

Jason Chen: 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 yesterday. 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.hworld.com. With that, now I will hand over the call to our CFO, Ms. Jihong He, for opening speech. Ms. He, please.

On the court 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 yesterday.

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.hward.com.

With that, now I will hand over the call to our CFO , Ms. He Jihong, for opening speech. Ms. Hua, please.

Jihong He: Thank you, Jason. Good morning and good evening, ladies and gentlemen. Welcome to H World Group Q2 2023 Earnings Call. We are very happy to report that with a strong recovery of domestic China travel activities and continuous global travel improvement, our overall financial performance in this quarter and H1 2023 exceeded the guidance we announced earlier this year. In today's presentation, Group CEO, Mr. Jin Hui, will first highlight our business performance and the key initiatives we undertook to further improve our operations. I will then discuss the financial performance in more detail. Now I will hand over to Mr. Jin Hui.

Thank you, Jason. Good morning and good evening, ladies and gentlemen. Welcome to H-word Group 2020, the second quarter 2023 earning call.

We are very happy to report that with strong recovery of domestic China travel activities and continuous global travel improvements.

Our overall financial performance in this quarter and the first half year 2023 exceeded the guidance we announced earlier this year. In today's presentation, Group CEO Mr. Jing Hui will first highlight our business performance and key initiatives you undertook to further improve our operations.

I will then discuss the financial performance in more detail.

Jin Hui: 谢谢Jihong。按照惯例，我们先来回顾一下近期华住RevPAR恢复的情况。请大家翻到第三页。得益于持续强劲的出行需求，二季度华住中国保持了自中国去年底开放以来良好的恢复态势。RevPAR恢复至2019年同期的121%。分月度来看，四到六月华住中国综合RevPAR分别恢复至2019年的127%、115%、123%。随着年初疫情的开放，经济逐步恢复，加之各地政府不断程度的内需刺激和文旅活动的积极展开，我们看到整体出行需求呈现非常强劲的复苏势头。同时我们也发现到，消费者的出行意愿也随着疫情开放后的消费习惯改变持续提高。因此我们可以看到，在一些特殊的时间段，例如大型展会、节假日，出现比较集中的出行需求爆发。进入七月暑期旺季，我们看到RevPAR进一步恢复至2019年同期的132%。虽然目前整体恢复的情况好于我们年初的预期，但是我们对未来相对谨慎乐观的态度依然没有改变。我们需要清楚地认识到，中国疫情开放至今还没有满一年，整体的宏观经济尚处于逐步恢复的过程当中，期间不可避免地出现一些波动和变化，给行业未来的发展带来了一定的不确定性。但是，华住对中国经济的长期发展依然保持充足的信心。因此，华住需要不断夯实自身的核心竞争力，在不确定当中寻找确定性，以支持公司长期的可持续的业务发展。

Jin Hui: [Non-English content]

hand over to Mr. Jing Hui.

stitching plate.

shirqi Ho ANDA wany Omar shenetet will go Sha Jin Chi harjurah huway the chin orck singandajabandan design.

Do you to see chchanging the switching fut ual? R you do? How do don't work about to, to don't go through and if have you like, how with realise?

We'll see you next week. We'll see you around. We'll see you soon. that.

So IND in the Cariva pportity to PO way food capical IES food produ CT can do the major sury her when you hold on the Che and have. But can does need swushing F show and Champion chchangenging the four counil overome year by and the shely, the twoushing IND years RA eatingcan came out for the shop she one So we kick off.

We will continue to work on the development of the new technology, and the development of the new technology in the future. We will continue to work on the development of the new technology in the future. Thank you very much.

So am Mo, Gent qui for the CH, how your ominion, So each chat and so the world. Am ING SIM one and to E may, almost you are Ching through the adthe. Some go E kindi the ING Mae, my India. Then he the combining G out for you to go away for the Co down to three J M book, a premium that a important beam Mark, a higher the part tell eating the purtrating in.

Thank you. What you, you do its own. Going G the changuni father in about. Turn to the changing.

We are discussing how118.4 fromgal film production on veteran TV. Such webinars have been presented Thank you for your attention.

Jin Hui: Thank you, He Jihong. As usual, let's quickly review our RevPAR recovery in Q2 2023. Please turn to page three. Let's look at the reasons. Thanks to robust travel demands in Q2 2023, H World maintains sound business rebound since the economic reopening of last year, and the RevPAR for Q2 recorded 121% of that of Q2 2019. In April, May, June respectively, H World's blended RevPAR has reached 127% of April, 115% of May, and 123% of June in 2019. With the reopening of the Chinese economy, rebound of our economy, being coupled with the stimulus policies and travel activities resumption from everywhere, we have seen very strong rebound of the overall travel activities and willingness. We have also found that the consumers travel willingness increased after the reopening. Therefore in Q2, we have seen explosive and concentrated travels around major exhibitions and holidays. Entering the peak season in the beginning of this year, we have seen the RevPAR resumed to 132% of Q2 of 2019. It is a recovery much better than our forecast in the beginning of this year. Yet still, we have to be cautiously optimistic about the outlook. We must realize that it has been less than one year since opening the macro economy is still in gradual recovery, during which period we will see turbulences and changes. This means uncertainties for our hospitality industry. However, H World is still confident in the prospect of the Chinese economy in the longer term, and that's exactly why we are and will continue to enhance our core competitiveness and seek for certainties out of the uncertainties in order to sustain our business development. Thank you.

[Translator]: Thank you, He Jihong. As usual, let's quickly review our RevPAR recovery in Q2 2023. Please turn to page three. Let's look at the reasons. Thanks to robust travel demands in Q2 2023, H World maintains sound business rebound since the economic reopening of last year, and the RevPAR for Q2 recorded 121% of that of Q2 2019. In April, May, June respectively, H World's blended RevPAR has reached 127% of April, 115% of May, and 123% of June in 2019.

Thank you Jihong. As usual let's quickly review our Revpar recovery in Q2 2023. Please turn to page 3. Let's look at the reasons. Thanks to robust travel demands in 2023 Q2 each world maintained sound business rebound since the economic reopening of last year and the Revpar for Q2 recorded 121% of that of Q2 2019. In April , May, June respectively, each world's blended Revpar has reached

to 127% of April , 115% of May, and 123% of June in 2019.

[Translator]: With the reopening of the Chinese economy, rebound of our economy, being coupled with the stimulus policies and travel activities resumption from everywhere, we have seen very strong rebound of the overall travel activities and willingness. We have also found that the consumers travel willingness increased after the reopening. Therefore in Q2, we have seen explosive and concentrated travels around major exhibitions and holidays.

With the reopening of the Chinese economy, rebound of our economy, coupled with the stimulus policies and travel activities resumption from everywhere, we have seen very strong rebound of the overall travel activities and willingness. We have also found that the consumers' travel willingness increased after the reopening. Therefore, in Q2, we have seen explosive and concentrated travels around major exhibitions and holidays. Again, thank you for watching and be well.

[Translator]: Entering the peak season in the beginning of this year, we have seen the RevPAR resumed to 132% of Q2 of 2019. It is a recovery much better than our forecast in the beginning of this year. Yet still, we have to be cautiously optimistic about the outlook. We must realize that it has been less than one year since opening the macro economy is still in gradual recovery, during which period we will see turbulences and changes. This means uncertainties for our hospitality industry. However, H World is still confident in the prospect of the Chinese economy in the longer term, and that's exactly why we are and will continue to enhance our core competitiveness and seek for certainties out of the uncertainties in order to sustain our business development. Thank you.

Entering the peak season in the beginning of this year, we have seen the RAPPA resume to 132% of Q2 of 2019. It is a recovery much better than our forecast in the beginning of this year, yet still we have to be consciously optimistic about the outlook. We must realize that it has been less than one year of opening. The macro economy is still in gradual recovery during which period we will see turbulences and changes.

This means uncertainties for our hospitality industry. However, each world is still confident in the prospect of the Chinese economy in the longer term, and that's exactly why we are and will continue to enhance our core competitiveness and seek for certainties out of the uncertainties in order to sustain our business development. Thank you.

Jin Hui: 请大家翻到第四页。我们想再次强调，华住中国长期可持续的RevPAR增长动力来源于，一，通过不断的产品升级和服务提升来获取更高的客户溢价。二，完善的交通基础设施伴随国民出行意愿的不断增强，中国的低线城市极具经济韧性。第三，通过组织结构的调整和优化，建立区域分公司，使得运营更加精细和高效，区域的渗透能力进一步加强，并在薄弱区域加速打开市场。第四，通过持续在中高端品牌的发力，优化完善了我们酒店结构，提升了中高端酒店市场的份额。

Jin Hui: [Non-English content]

Thank you.

spearhead You have the

If anyone tries to pull the huge

He tgo able time being SJ her fourse for you can guard the Kia by understand the job which is also B with you and the pin town. t't go the deent Chin CH? R. she is a? tgo to the Jago. The held her yoa changy PR? mon to the Union Ken J? Ing she her CAA.

theoretical skills, and whore- Hell fields, follow us.

can be used in many lines at a time.

yovha once and old judan IA ago season to mordern. judi ES of the fun.

Jin Hui: Page four please. I must stress here the driving forces of our sustainable RevPAR. Firstly, higher premium through conscious product and services upgrade. Secondly, uncovering opportunities in lower tier cities with high resilience as the travel infrastructure and travel willingness both improve. Thirdly, operate our business more intensively and effectively by setting up the regional offices and headquarters, increasing the regional penetration, and organizational restructuring. Fourthly, improve our market share in the upper mid scale market and further optimize our product mix.

[Translator]: Page four please. I must stress here the driving forces of our sustainable RevPAR. Firstly, higher premium through conscious product and services upgrade. Secondly, uncovering opportunities in lower tier cities with high resilience as the travel infrastructure and travel willingness both improve. Thirdly, operate our business more intensively and effectively by setting up the regional offices and headquarters, increasing the regional penetration, and organizational restructuring. Fourthly, improve our market share in the upper mid scale market and further optimize our product mix.

Page 4, please. I must stress here the driving forces of our sustainable REVpar. Firstly, higher premiums through conscious product and services upgrade. Secondly, uncovering opportunities in lower tier cities with high resilience as the travel infrastructure and travel willingness both improve.

Thirdly, operate our business more intensively and effectively by setting up the regional offices and headquarters, increasing the regional penetration and organizational restructuring. Fourthly, improve our market share in the upper mid-scale market and further optimize our product mix.

Jin Hui: 公司坚定不移地贯彻执行精益发展的战略。请大家翻到第五页。华住基于高质量门店持续拓展酒店网络，今年第二季度，我们新签约酒店达到1,054家，同比接近翻番，创季度历史新高。这其中有去年二季度因为疫情所导致的低基数的因素。同时，今年强劲的签约也包含了过去三年因为疫情而导致加盟商签约积压的影响。但不可否认的是，加盟商的信心随着疫情开放后酒店业绩的强劲恢复，进一步提高。开业方面，二季度开店速度环比逐步提升，二季度新开店374家，同比提升了41%。关店方面，二季度共歇业216家酒店，主要由于去年疫情导致部分酒店歇业流程延续延期到今年，以及我们持续清理低质量的经济型软品牌和汉庭1.0的产品，以提高酒店整体酒店网络的质量。同期所关闭的汉庭1.0及经济型软品牌门店共计106家。

Jin Hui: [Non-English content]

Thank you.

Thank you for your attention.

I hope you enjoyed this video. Please subscribe to my channel. Thank you for watching. Please like and share this video. See you next time. See you next time. Please subscribe to my channel.

So she don't, your trunior Al you doing more eaching, So thought to the digyou. So the insuit ponor changin chy and Chang you all. Kind poet, ry FAM. In my E thought the Germans on changy other in IA.

Thank you for your attention.

kvamiah, areyou o kazian sudo C bit to buddhism. Are you doingha there? samback CH a suja fromitism not ban socihi kan.ami, a. You o bunhi andberthat is oj of them. So we are your euinia ish D to prevent jordthe chia. Au SH anry the ginia.

The you woman, So you aching D down the changish in ramping pad or H Ian in the timebeing EP regardge of being, jkge would not, or they?

Thank you for your attention.

Jin Hui: We will further execute the lean development strategy set upon by the management. Page five, please. The H World Group will continue to expand our hotels network based on the quality development strategy. In Q2 this year, we have a total of 1,054 new signings. That is an 88% increase year on year, making it a historic high. Naturally, this is a high growth contributed by the low baseline in Q2 last year, as well as the backlog signings from the COVID period. Undeniably, we see the confidence of the franchises boosted by the strong rebound in the hospitality sector after the reopening. In terms of the number of hotel openings, it increased much faster than Q1, with a total of 374 hotel openings, up by 41% year on year.

[Translator]: We will further execute the lean development strategy set upon by the management. Page five, please. The H World Group will continue to expand our hotels network based on the quality development strategy. In Q2 this year, we have a total of 1,054 new signings. That is an 88% increase year on year, making it a historic high. Naturally, this is a high growth contributed by the low baseline in Q2 last year, as well as the backlog signings from the COVID period. Undeniably, we see the confidence of the franchises boosted by the strong rebound in the hospitality sector after the reopening. In terms of the number of hotel openings, it increased much faster than Q1, with a total of 374 hotel openings, up by 41% year on year.

We will further execute the Lean Development Strategy set upon by the management. Page 5, please. The H-World Group will continue to expand our hotels network based on the quality development strategy. In Q2 this year, we have a total of 1,054 new signings. That is an 88% increase year on year, making it a historic high. Naturally, this is a high growth contributed by the low baseline in Q2 last year, as well as the backlog signings from the COVID period. Undeniably, we see the confidence of the franchises boosted by the strong rebound in the hospitality sector after the reopening.

In terms of the number of hotel openings, it increased much faster than Q1 with a total of 374 hotels openings, up by 41% year on year.

Jin Hui: In terms of the store closure, there are 216 hotels closed, mostly the deferred and backlog COVID-related closures from last year. The closure aims to streamline the economy soft brands of lower quality, HanTing 1.0, and further optimize our network quality. There are a total of 130 HanTing 1.0 and economy soft branded hotels closures.

[Translator]: In terms of the store closure, there are 216 hotels closed, mostly the deferred and backlog COVID-related closures from last year. The closure aims to streamline the economy soft brands of lower quality, HanTing 1.0, and further optimize our network quality. There are a total of 130 HanTing 1.0 and economy soft branded hotels closures.

In terms of the store closure, there are 216 hotels closed, mostly the deferred and backlogged COVID-related closure from last year. The closure aims to streamline the economic soft brands of lower quality and hunting 1.0 and further optimize our network quality. There are a total of 130 hunting 1.0 and economic soft branded hotels closure.

Jin Hui: 请大家翻到第六页。随着我们持续推进对低质量门店的清理，提升集团整体酒店质量，汉庭1.0及经济型软品牌的占比从2020年底的26%逐步降低到了今年六月底的10%以下。与此同时，汉庭2.7以及以上版本的占比从2020年底的14%稳步提升至今年六月底的26%。

Jin Hui: [Non-English content]

Thank you for your attention.

He's a cheetah and sent each audience about hunting beginning to English in running by the time he told Arlene Arlene and he the balance are to do so pooch on the dollar gene Yeah, you'll be a diva, but I'm sure you shall

oxygen to hunting are being she team some by minute and plan on adding another impact is what booty things which in here Do you agree that I'm in charge to do?

Jin Hui: Page six, please. As we continue to streamline the lower quality hotels to enhance our overall performance and quality, the percentage of HanTing 1.0 and economic soft brands account now for less than 10% out of our overall hotels, down from the 26% at the end of 2020. Meanwhile, the percentage of the HanTing 2.7 and above accounts for 26% at the end of June this year, up from the 14% at the end of 2020.

[Translator]: Page six, please. As we continue to streamline the lower quality hotels to enhance our overall performance and quality, the percentage of HanTing 1.0 and economic soft brands account now for less than 10% out of our overall hotels, down from the 26% at the end of 2020. Meanwhile, the percentage of the HanTing 2.7 and above accounts for 26% at the end of June this year, up from the 14% at the end of 2020.

Page 6, please. As we continue to streamline the lower quality hotels to enhance our overall performance and quality, the percentage of hunting 1.0 and economic soft brands account now for less than 10% out of our overall hotels, down from the 26% at the end of 2020.

Meanwhile, the percentage of the hunting 2.7 and above accounts for 26% at the end of June 2020 is up from 14% at the end of 2020.

Jin Hui: 华住持续以经济型国民及中档酒店为核心，服务于大众市场。请大家翻到第七页。截止六月底，公司在营酒店数量为八千六百二十二家店，其中56%为经济型国民酒店，36%为中档酒店，中档酒店占比同比提升三个百分点。公司管道酒店数为两千八百零八家，其中38%为经济型国民酒店，48%为中档酒店，中档酒店占比同比提升五个百分点。今年二季度新开业的酒店中，90%是经济型国民和中档酒店。我们可以看到，华住不断提升综合酒店质量的同时，持续聚焦于经济型和中档组成的有限服务领域，以满足广大国民的住宿需求。

Jin Hui: [Non-English content]

Aro sushi Ching E chsingeng King G chundown Jan waak H singin fu, you don't how chintadap andati Che.

Thank you for your attention.

Thanks for watching. you

I've enjoyed 25-30 years of film, which equallymicrosoft cracking.

H to the qut. Do them to weigh their sham bab in bja CH Z seven sens about where you thinkinteish him cominging. Ju them seven's about where you T down. Them T down J time with T B T go the back end IA.

Thank you for watching.

Ok, we will leave the screen here. Do consider subscribing to the Comms Party channel, before watching our dw enforcement video, many thanks because they are quite popular... management entities and are well liked by this society you

Jin Hui: The H World Group will continue to focus on the economy and the midscale hotels to serve the mass market. Page seven, please. At the end of June, we have a total of 8,622 hotels in operation, among which 56% economy hotels, 36% midscale hotels, and the percentage of midscale increased by 3% year on year. There are a total of 2,808 hotels in pipeline, among which 38% are economy, 48% are midscale, and the percentage of midscale up by 5% year on year. Of all the hotel openings in Q2 this year, among which 90% are economy and midscale hotels. This is a proof that as we optimize our overall hotels quality, we continue to focus on economy and midscale segment to serve the mass market consumers.

[Translator]: The H World Group will continue to focus on the economy and the midscale hotels to serve the mass market. Page seven, please. At the end of June, we have a total of 8,622 hotels in operation, among which 56% economy hotels, 36% midscale hotels, and the percentage of midscale increased by 3% year on year. There are a total of 2,808 hotels in pipeline, among which 38% are economy, 48% are midscale, and the percentage of midscale up by 5% year on year. Of all the hotel openings in Q2 this year, among which 90% are economy and midscale hotels. This is a proof that as we optimize our overall hotels quality, we continue to focus on economy and midscale segment to serve the mass market consumers.

So the H-World Group will continue to focus on the economy and the mid-scale hotels. To serve, the mass market.

At the end of June , we have a total of 8622 hotels in operation, among which 56% economy hotels, 36% mid-scale hotels, and the percentage of mid-scale increased by 3% year on year. There are a total of 2808 hotels in pipeline, among which 38 are economy, 48% are mid-scale, and the percentage of mid-scale up by 5% year on year.

of all the hotel openings in Q2 this year, among which 90% are economy and mid-scale hotels.

This is a proof that as we optimize our overall hotels' quality, we continue to focus on economy and mid-scale segments to serve the mass market consumers.

Jin Hui: 华住在低线城市以及历史薄弱区域的渗透在持续进行。请大家翻到第八页。截止六月底，公司在营酒店中39%位于低线城市，同比提升两个百分点。公司管道酒店中55%分布在低线城市。公司的城市覆盖数量也进一步增长到1,196个。

Jin Hui: [Non-English content]

Also the de sentence which is borrow through the Central type situ.

Thank you for watching.

For more information, please please visit OSHO.com

Consider theeb Ord cached I'm not sure about that.

Jin Hui: H World continue to increase our penetration in the lower tier cities and weaker regions. Page eight, please. Out of the hotels in operation, 39% is located in the lower tier cities, up by 2% year on year. Out of the hotels in pipeline, 55% is located in lower tier cities, and our city coverage now increased to 1,196.

[Translator]: H World continue to increase our penetration in the lower tier cities and weaker regions. Page eight, please. Out of the hotels in operation, 39% is located in the lower tier cities, up by 2% year on year. Out of the hotels in pipeline, 55% is located in lower tier cities, and our city coverage now increased to 1,196.

The age world continue to increase.

Our penetration in the lower tier cities and weaker regions, page 8 please. Out of the hotels in operation, 39% is located in the lower tier cities, up by 2% year on year. Out of the hotels in pipeline, 55% is located in lower tier cities. And our city coverage now increased to 1,196.

Jin Hui: 请大家翻到第九页。华住的中高端酒店发展持续稳步推进。截至今年六月底，公司在营的中高端酒店数量达到562家，同比增长了18%。管道中的中高端酒店数量为317家，同比增长29%。管道中酒店数量的快速增长，为华住未来中高端酒店的开业提供了强有力的保障。

Jin Hui: [Non-English content]

Thank you.

Thank you for your attention.

ches anuity H sute in the chungoan Juan Sudan, dado ubber deosiia. two reasons are the fames about when and thousand moan Julian Sudan, where samb is chiia. two reasons out B Oro two

As a 2020 citizen of optimal language transfer andernel students, Thank you for your attention.

Jin Hui: Page nine please. We continue to grow our upper midscale hotels segment. By the end of June this year, we have a total of 562 upper midscale hotels in operation, up by 18% year on year. We have a total of 317 upper midscale hotels in the pipeline, up by 29% year on year. The faster growth of midscale hotels in our pipeline will support our future opening and market development in this segment.

[Translator]: Page nine please. We continue to grow our upper midscale hotels segment. By the end of June this year, we have a total of 562 upper midscale hotels in operation, up by 18% year on year. We have a total of 317 upper midscale hotels in the pipeline, up by 29% year on year. The faster growth of midscale hotels in our pipeline will support our future opening and market development in this segment.

Page 9, please. We continue to grow our upper mid-scale hotels segment. By the end of June this year, we have a total of 562 upper mid-scale hotels in operation, up by 18% year-on-year. We have a total of 317 upper mid-scale hotels in the pipeline, up by 29% year-on-year.

The fast growth of mid-scale hotels in our pipeline will support our future opening and market development in this segment.

Jin Hui: 请大家翻到第十页。华住长期以来十分重视会员发展。我们升级重塑了我们的华住会品牌形象与定位。在华住会APP端，我们加入了更多度假元素，推出了度假频道、逛逛内容、频道二点零等模块，为会员提供更加丰富的度假休闲场景以及会员专享礼遇。华住会不再只是商务出行用的酒店预订平台，实现了从单一商务场景预订到多元商务场景服务的转型。

Jin Hui: [Non-English content]

OK, got it.

Thank you for your attention.

Om an SA Jie hongsu. La woman and the hard way. nationaline Chi gingway.

Thank you very much for your attention.

chosula to IA in Ong on war, Ong Pina, than in the MOT were K you and tee Wong can ja pung food the J recent Changi. If you could, you and join CH.

20 condensers, 20 homeousler, 20™ Now we will increase efficiency of industrial products instead of create power plants287, mainland,recky farmers yelling the traction.

Jin Hui: Please turn to page ten. We value membership development. We have upgraded our H World brand image and market position. In terms of the H World members app, we have added more vacation related element. We have increased our member offerings such as vacation channel, content channel 2.0, and member exclusive services. We hope that the H World Group membership is more than just a hotel reservation platform. We are now transitioning it from a single business scenario only reservation platform to a diverse business and travel activities scenario service platform.

[Translator]: Please turn to page ten. We value membership development. We have upgraded our H World brand image and market position. In terms of the H World members app, we have added more vacation related element. We have increased our member offerings such as vacation channel, content channel 2.0, and member exclusive services. We hope that the H World Group membership is more than just a hotel reservation platform. We are now transitioning it from a single business scenario only reservation platform to a diverse business and travel activities scenario service platform.

Please turn to page 10. We value membership development. We have upgraded our H-World brand image and market position. In terms of the H-World Members app, we have added more vocation-related elements. We have increased our member offerings such as Vocation Channel, Content Channel 2.0, and Member exclusive services.

We hope that the H-World Group membership is more than just a hotel reservation platform without transitioning it from a single business scenario only reservation platform to a diverse business and travel activities scenario service platform.

Jin Hui: 以上就是华住中国第二季度业务情况的更新。下面有请CFO何纪虹为大家阐释华住集团二季度经营和财务数据情况。谢谢。

Jin Hui: [Non-English content]

These are ES: Hu tunggoah: TI R IU Yo Chi Hong conchin, shman yeo Chin Del J H with jah Chan HUL, J RIU Chin Teo solution Hock chesh.

Jin Hui: That's all for Q2 earnings overview. Now I will hand over to our CFO, Ms. Jihong He, to walk you through our operational and financial results. Thank you.

[Translator]: That's all for Q2 earnings overview. Now I will hand over to our CFO, Ms. Jihong He, to walk you through our operational and financial results. Thank you.

That's all for Q2 earnings overview. Now I will hand over to our CFO , Madame Hejdu-Hong, to walk you through our operational and financial results. Thank you.

Jihong He: Thank you, Jin Hui. I will now highlight the key financial metrics in this quarter. Please turn to page 12. Our hotel network continues to expand in this quarter. Our number of rooms in operations increased 9% to 844,417. According to the research published by Hotels Magazine, we rank 6th worldwide in terms of rooms in operation. Our hotel turnover increased 72% compared to Q2 2022, totaling to more than RMB 20 billion. Please turn to page 13. Legacy Huazhu blended RevPAR in Q2 stands at RMB 250, improved 21.4% compared to the same period in 2019 and 77% over 2022. This recovery is largely driven by ADR improvement.

Thank you, Ting-Hui.

I will now highlight the key financial metrics in this quarter.

Please turn to page 12.

Our hotel network continues to expand in this quarter.

Our number of rooms in operations increased 9% to 844,417.

According to the research published by Hotels Magazine, we rank number six worldwide in terms of rooms in operation.

Our hotel turnover increased 72% compared to the second quarter 2022, totaling to more than $20 billion.

Please turn to page 13.

Legacy Huaju blended the rest part in the second quarter stands at a DMB 250.

improved 21.4% compared to the same period in 2019, and 77% over 2022.

Jihong He: The average ADR of RMB 305 is 28.9% over Q2 2019, and 39.8% over 2022. Occupancy of 82% in Q2 is slightly lower than Q2 2019 of 87%, but it is a 17.2 percentage point improvement over 2022. Please turn to page 14. RevPAR of our international business, Deutsche Hospitality, also improved by 18.5% over the same period in 2022. Blended RevPAR stands at EUR 78 this quarter. This is driven both by ADR improvement, which is 5.6% over 2022, as well as occupancy improvement, which is 7.3 percentage point over 2022. Please turn to page 15.

This recovery is largely driven by ADR improvement.

The average ADR of renminbi 305 is 28.9% over second quarter 2019 and 39.8% over 2022.

Occupancy of 82% in second quarter is slightly lower than second quarter 2019 of 87%.

But it is a 17.2 percentage point improvement over 2022.

Please turn to page 14.

The rough part of our international business, Deutsche Hospitality, also improved by 18.5% over the same period in 2022.

Blended Refpar stands at €78 this quarter.

This is driven both by ADR improvement, which is 5.6% over 2022, as well as occupancy improvement, which is 7.3% over 2022.

percentage point over 2022.

Jihong He: Our total group revenue in this quarter was RMB 5.53 billion, including RMB 4.35 billion from Legacy Huazhu and RMB 1.18 billion from DH. This is an improvement of 64% compared to 2022, higher than our guidance set up earlier this year. Our China business delivered a 76.6% revenue improvement. This strong performance is due to, first, strong recovery of travel demand, especially domestic Chinese market. Secondly, continued product upgrade and the product mix change. And thirdly, market penetration and synergies achieved through our regional offices. In H1 2023, we opened 638 hotels group wide. We expected the hotel opening to accelerate in the second half of this year due to faster pickup of construction activities and supply chain recovery.

Please turn to page 15.

Our total group revenue in this quarter was renminbi 5.53 billion, including renminbi 4.35 billion from legacy HUAC and renminbi 1.18 billion from DH.

This is an improvement of 64% compared to 2022.

higher than our guidance set up earlier this year.

Our China business delivered a 76.6% revenue improvement.

This strong performance is due to first, strong recovery of travel demand, especially domestic Chinese markets.

Secondly, continue the product upgrade and the product mix change.

And thirdly, market penetration and synergies achieved through our regional offices.

In first half year, 2023, we opened 638 hotels group wide.

We expected the hotel opening to accelerate in the second half of this year due to faster pickup of construction activities and supply chain recovery.

Jihong He: We stay with our guidance of 1,400 hotel opening this year. European market further recovered this year as well, and our DH business delivered 28.4% revenue improvement over 2022. Please turn to page 16. Hotel operating costs were 17.2% higher than the same quarter 2022, driven by business recovery. We continue to spend serious effort to improve operational efficiencies and manage costs on the hotel level. SG&A cost was 45% higher than 2022 due to higher marketing and sales expense to drive the business. I would like to highlight that Legacy-Huazhu SG&A cost was 11.6% of revenue in this quarter. Operating income of Legacy-Huazhu in Q2 stands at RMB 1.35 billion, which represents a 31% operating profit margin.

We stay with our guidance of 1400 hotels opening this year.

European market further recovered this year as well and our DH business delivered 28.4% revenue improvement over 2022.

Please turn to page 16.

Hotel operating costs were 17.2% higher than the same quarter 2022, driven by business recovery.

We continue to spend serious effort to improve operational efficiency and manage costs on the hotel level.

SG&A costs were 45% higher than 2022 due to higher marketing and sales expense to drive the business.

I would like to highlight that Legacy Hua Zhu SG&A cost was 11.6% of revenue in this quarter.

Operating income of legacy Hua Zhuo in second quarter stands at renminbi 1.35 billion.

Jihong He: This is a significant improvement over 2022, when China was under serious COVID control. Income from operations at DH also turned positive in this quarter compared to the loss situation both in Q2 last year and the previous quarter. Please turn to page seventeen. Adjusted EBITDA in Q2 stands at RMB 1.77 billion. Legacy Huazhu delivered RMB 1.66 billion adjusted EBITDA, which represents a 38% EBITDA margin. This quarter, we did not have special effect like our core shares divestment gains as in the last quarter. Adjusted net income stands at RMB 1.07 billion. Legacy Huazhu delivered RMB 1.05 billion adjusted net income, which represents 24% net income profit margin. This improved EBITDA and net income margin is a result of business recovery as well as cost management.

which represents a 31% operating profit margin.

This is a significant improvement over 2022 when China was under serious COVID control.

Income from operations at DH also turned positive in this quarter compared to the loss situation both in second quarter last year and the previous quarter.

Please turn to page 17.

adjusted EBITDA in second quarter stands at the renminbi 1.77 billion

Legacy Huazhou delivered Renminbi 1.66 billion adjusted EBITDA, which represents a 38% EBITDA margin.

This quarter we did not have special effects like our core shares, divestment gains as the last quarter.

Adjusted net income stands at an NMB of 1.07 billion.

Legacy Huazhou delivered an NMB 1.05 billion.

adjusted net income which represents 24% net income profit margin.

This improved EBITDA and net income margin is a result of business recovery as well as cost management.

Jihong He: As we continue to move towards asset-light business model and add hotels through our franchisees and partners, we expect our profit margin to continue to improve. DH business turned positive in this quarter with RMB 112 million adjusted EBITDA and an RMB 21 million adjusted net income. This is a result of conscious improvement of sales effort and continued cost management of our European team. Our operating cash flow at group level remains strong at RMB 2.2 billion in this quarter. Please turn to page 18. Our net cash at Q2 2023 is RMB 2 billion. Our cash balance is RMB 7.8 billion, and we have RMB 2.8 billion unutilized bank facility. Please turn to page 19.

As we continue to move towards asset-like business model and as hotels through our franchisees and partners, we expect our profit margin to continue to improve.

The H business turned positive in its quarter with NMB $112 million adjusted APDA and NMB $21 million adjusted net income.

This is a result of conscious improvement of sales effort and continued cost management of our European team.

Our operating cash flow at group level remains strong at 2.2 billion in this quarter.

Please turn to page 18.

Our net cash at the second quarter 2023 is going to be 2 billion.

Our cash balance is maybe 7.8 billion and we have maybe 2.8 billion unutilised bank facility.

Jihong He: We expect our group revenue in Q3 2023 to grow 43% to 47% over Q3 2022. Excluding DH, Legacy Huazhu is expected to grow 49% to 53%. Based on a good recovery of travel demand and a better than expected performance compared to the estimation made at the beginning of this year, we raised our guidance for the full year 2023. We estimate the revenue in full year 2023 to grow 48% to 52% over 2022. Excluding DH, we estimate Legacy Huazhu revenue in 2023 to grow 54% to 58% over 2022. This concludes our management presentation. We can now start with Q&A session.

Please turn to page 19.

We expect our group revenue in the third quarter 2023 to grow 43 to 47% over third quarter 2022.

Exceed excluding DH, Legacy Hua Zhu is expected to grow 49-53%.

Based on a good recovery of travel demand and better expected performance compared to the estimation made at the beginning of this year, we raised our guidance for the full year 2023.

We estimate the revenue in full year 2023 to grow 48 to 52% over 2022.

Excluding TH, we estimated Legacy Hwaju revenue in 2023 to grow 54-58% over 2022.

This concludes our management presentation. We can now start with Q&A session.

Operator: Thank you. We will now begin the question and answer session. To ask a question, please press star one one on your telephone and wait for your name to be announced. To cancel your request, please press star one one again. Please stand by while we compile the Q&A roster. The first question comes from the line of Ronald Leung from Bank of America. Your line is open.

Thank you. We will now begin the question and answer session. To ask a question, please press star 1 1 on your telephone.

and wait for our name to be announced. To cancel your request, please press star 1-1 again.

Please standby while we compile the Q&A roster.

The first question comes from the line of Ronald Leung from Bank of America. Your line is open.

Ronald Leung: 管理层你们好，早上好。首先恭喜你们在二季度有一个很好的业绩。其实我有两个问题，第一个问题是关于RevPAR的预期的。所以管理层提高了全年的收入的指引，还提供了第三季度收入的指引。我可以问的是，管理层对第三季度还有全年现在RevPAR的预期是什么？这个是第一个问题。第二个问题是想问关于签约的预期，就是我们看见第一季度跟第二季度的签约都很长，是第一季只有六百，第二季度有一千，往后的预期，这个签约的预期还会是怎么样？I'll ask my questions in English as well.

Ronald Leung: [Non-English content] I'll ask my questions in English as well.

one is H house. I somehow So going C two how the T way out one leg one is one years a rough part. You see the So one is go. Then take some high to. How would OK one does the one is to high out, then sens I rough part. They go U C more because a leggo one T the one 1, one years a 10. U U C say one hundred EAs Y two to the 10 CH the to can one how would take U C take 10. you C high ques young. I will ask my questionions in anggress as well. My first question is about the rough part expectations.

Ronald Leung: My first question is about the RevPAR expectations. Management has raised the full year revenue guidance and also provide a Q3 revenue guidance. May I ask what is the implied RevPAR expectations in Q3 and for full year? My second question is about expectations for hotel signings. We have seen very strong hotel signings in both Q1 and Q2. May I ask what's managing expectations for the hotel signings for the rest of the year? Thank you very much.

Management has raised the full year revenue guidance and also provided third quarter revenue guidance. May I ask what is the implied RAPPA expectations in three kilo and for full year? My second question is about the expectations for hotel signings. So we have seen great strong hotel signings in both first quarter and the second quarter. May I ask what's the expectations for the hotel signings for the rest of the year? Thank you very much.

Jin Hui: 好的，我是金辉，我来回答这两个问题。确实，RevPAR受到整个内循环下刺激消费和整个文旅的复苏，确实取得了不错的增长。我们三季度应对的RevPAR恢复度大致在123%到128%，全年应对的RevPAR恢复度为116%到121%。

Jin Hui: [Non-English content]

Thank you.

I choas a R houseo do and gir nature W Sha to TE shop a someilar whenueyou fulsue.

Traces put for that in the home's doing GRE. apwe put to started the 70 V's of empd of evalba changaining GRE. reapplicable way V the evalc.

Jin Hui: Thank you for your question. My name is Jin Hui. I will take over your question. Yes, as you said, given the overall economic development momentum, especially during the domestic circulation, consumption rebound and the recovery of the tourism and activities, we have seen very good growth, especially in Q3. We believe that the RevPAR will be growing to 130% to 128%, and all year round, the growth will reach 116% to 121%.

[Translator]: Thank you for your question. My name is Jin Hui. I will take over your question. Yes, as you said, given the overall economic development momentum, especially during the domestic circulation, consumption rebound and the recovery of the tourism and activities, we have seen very good growth, especially in Q3. We believe that the RevPAR will be growing to 130% to 128%, and all year round, the growth will reach 116% to 121%.

Thank you for your question. My name is Jing Hui. I will take over your question. Yes, as you said, given the overall economic development momentum, especially during the domestic circulation, consumption rebound and the recovery of the tourism and activities, we have seen very good growth, especially in Q3. We believe that the REFPA will be growing to 130% to 128% and all year round the growth will reach 116% to 121%.

Jin Hui: 好，第二个关于签约，确实我们很高兴看到二季度我们取得了非常好的这样的历史的签约的进展。我想表达几个观点。第一，确实由于经济的复苏和整个特别是酒店业的RevPAR的复苏，带来了整个加盟商的整个信心的恢复。我们二季度的签约确实达到了历史记录，当然其中一部分是由于我认为是过去三年的整个发展的积压的这样的因素，但是我更希望大家能理解，我们今天取得这样的发展是来自于过去几年华住持续在两个领域的这样的一个坚守。第一个就是我们在整个下沉市场的整个组织能力的部署和发展能力的部署。第二个在取决于在过去几年华住在中高端整个业务的持续的投入和发展。所以华住整个签约的未来我们还是保持一个乐观的一个状态，我们会持续在整个中国的有限服务市场和中高端经验服务市场持续地保持稳健的长期的增长。

Jin Hui: [Non-English content]

But the the point you chain CH WAL not contining kindandthe ARO and should develolo ATE on how that the under ase to the Inu, ated to the ING that.

uhwasan OSHA Ko chick panian TE TR Yo Yu Ching chter fuusu, who has some GIRL to best. Juan the a RO had fuussua.

parala and the jamman sound, the single shinking of with or already do, the chyouatress T Ity's Ed, time she going to fancy, or you well always coach to's. And the single father, the gother and the init.

What Thank you are. And each woman eng with the town, your father, So like to your portrait in your heart, to they holding you the family, the chance of T? Sor better, the UT, and so art, and that' alsoly the pus, a father, and the P?

Thank you for your attention.

Single year with to shoe the total other. So if I some Cha single well, I had a aboutyure LO money, the cont Act, our number, shoot that some gir and go. The eucean forces are some modernengian forces are to shoe about when gender town sheet. That's in done.

Jin Hui: A little bit to add on to your first question. We're talking about the RevPAR recovery. I gave you a number of 130% to 128% for Q3, and all year round, 160% to 121% recovery. Now, speaking of the new signings, yes, in Q2, we are very happy to see we have achieved such great accomplishment. I have a few points to make. Firstly, because of economic recovery and the overall hospitality recovery, we have seen strengthened confidence from the franchisees. Partly, of course, that achievement this quarter is because of the backlog of delayed signings from the previous period. I hope you understand that, for H World Group, we have achieved such accomplishment because of several reasons.

[Translator]: A little bit to add on to your first question. We're talking about the RevPAR recovery. I gave you a number of 130% to 128% for Q3, and all year round, 160% to 121% recovery. Now, speaking of the new signings, yes, in Q2, we are very happy to see we have achieved such great accomplishment. I have a few points to make. Firstly, because of economic recovery and the overall hospitality recovery, we have seen strengthened confidence from the franchisees. Partly, of course, that achievement this quarter is because of the backlog of delayed signings from the previous period. I hope you understand that, for H World Group, we have achieved such accomplishment because of several reasons.

So, a little bit to add on your first question, we're talking about the RAPFAR recovery. So I gave you a number of 130% to 128% per Q3 and all year round 160% to 121% recovery. Now speaking of the new signings, yes, in Q2 we're very happy to see we have achieved such great accomplishment. I have a few points to make, firstly because of economic recovery and the overall hospitality recovery, we have seen strengthened confidence from the franchisers. Partly of course that achievement this quarter is because of the backlog delayed signings from the previous period.

So I hope you to understand that for each world group we have achieved such accomplishment because of several reasons. Firstly, because in the last few years we continue to develop the lower tier cities and secondly we continue to move towards the mid scale and premium market.

Jin Hui: Firstly, because in the last few years we continue to develop the lower-tier cities, and secondly, we continue to move towards the mid-scale and premium market.

[Translator]: Firstly, because in the last few years we continue to develop the lower-tier cities, and secondly, we continue to move towards the mid-scale and premium market.

Ronald Leung: 好，谢谢管理层。Thank you, management.

Ronald Leung: [Non-English content] Thank you, management.

Thank you.

Operator: For the questions. One moment for the next question. Next question comes from the line of Simon Cheung from Goldman Sachs. Your line is now open.

So the questions, one moment for the next question.

Next question comes from the line of Simon Ching from Goldman Sachs. Your line is now open.

Simon Cheung: 谢谢金总跟何总的分享。我有两个问题。第一个就是你刚才说的全年那个RevPAR，大概回到120左右，然后我没记错的话，第一季度118，第二季度125，然后现在121，然后现在第三季度125的话，那就基本上也拍出来是第四季度可能有一点点慢下来。我想了解一下，你们是觉得第四季度有一个高基数的原因，还是有什么其他的原因，你觉得是可能会慢下来，这个是第一个问题。然后第二个问题，就是你们也看到刚才何总你分享到你现在是一定是在cash，两个billion的cash，那你们的想法是比如说你有一个同行有派息嘛，那我不知道你们有没有这个想法，以及如果不是的话，那可能花钱会花在哪里呢？I would just ask the question again in English.

Simon Cheung: [Non-English content] I would just ask the question again in English.

Hey, this is a question from a friend of mine. I'm wondering, if you have any questions about the webinar, please let me know. I'm sure you will be able to answer them in the comments. I'm sure you will be able to answer them in the comments. I'm sure you will be able to answer them in the comments. I want to tell everyone that you have received questions about the foothold of your current three years success due in Operation Ourself and everybody else remember that i am working hard, at that time it was useful.

Simon Cheung: I've observed that, you know, the guidance haven't been revised up quite aggressively, with I think Q1 1.8%, Q2 1% to 1%, and Q3 1% to 5% 2019 level. Based on your full year guidance that would imply the deceleration into Q4. Are you seeing any sign of weaknesses or any reason why you are expecting there's going to be a slowdown? Then the second one is in relation to potential use of the cash or cash flows, because, you know, your company already in a CNY 2 billion net cash position. How are you thinking about, you know, capital reallocation and whether you would consider paying dividends like one of your competitors does? Xie xie.

I would just ask the question again in English. I've observed that the guidance, having been revised up quite aggressively with I think first quarter 118%, second quarter 121% and third quarter 125% 2019 level, but based on your full year guidance that would imply the deceleration into fourth quarter, are you seeing any sign of weaknesses or any reason why you are expecting there's going to be a slowdown? And then the second one is in relation to potential use of the cash or cash flows because your company is already in a two billion cash positions. How are you thinking about capital reallocation and whether you would consider paying dividends like one of your competitors does? Thank you Simon for the question. I will answer your question. For your first question about the rest part, yes we're very happy and very grateful to see the very good recovery of Chinese domestic travel. The first quarter was really revenge after COVID and the second quarter we observed very high leisure travel demand in the summer holidays.

Jihong He: Thank you, Simon, for the question. I will answer your question. For your first question about the RevPAR, yes, we are very happy and very grateful to see the very good recovery of Chinese domestic travel. Q1 was really a revenge after COVID. In Q2, we observed very high leisure travel demand in the summer holiday. In Q3, we believe because the October Golden Week, we will also have some good effect from that. In Q4, because of the lack of the summer holidays and those prolonged Golden Week effect, we expect the demand to come back to normal. We are still optimistic about the full year results.

And in the third quarter, we believe because of October golden week, we will also have some good effect from that. And in the fourth quarter, because of the lack of the summer holidays and those prolonged golden week effect, we expect the demand to come back to normal. We are still optimistic about the full year results. That's why we still have 116 to 121% rest by improvement over 2019 for the full year.

Jihong He: That's why we still have 116% to 121% RevPAR improvement over 2019 for the full year. The second question, as to your cash, capital allocation. Yes, we are also very, very happy to see that with the business recovery, our cash position improved significantly over 2022. We will continue to monitor the business recovery, speed and also the cash accumulation, in appropriate time, we will also decide on the dividend policy, as you mentioned.

The second question as to your cash allocation, capital allocation, yes, we are also very, very happy to see that with the business recovery, our cash position improved significantly over 2022. So we will continue to monitor the business recovery speed and also the cash accumulation. In appropriate time, we will also decide on a dividend policy as you mentioned.

Simon Cheung: 好的，谢谢管理层，谢谢。

Simon Cheung: [Non-English content]

Operator: Thank you for the questions. One moment to the next question. Next question comes from the line of Dan Chi from Morgan Stanley. Your line is now open.

Thank you for the questions. One more to the next question.

Next question comes from the line of Dan Chi from Morgan Stanley . Your line is now open.

Dan Chi: 各位管理层，大家早上好。我是大摩的分析师Dan。正如刚才金总还有何总所说，这个暑假也看到非常出行需求也非常旺盛。想询问一下，就是关于商旅类的出行的需求的这个恢复情况。记得上季度管理层有提到这个商旅需求，特别是OCC这边没有完全恢复到2019年的水平，就想请教一下公司能不能分享近期或者这个二到三季度的这个商旅需求这边，比如说可能是一些周中的一些需求，或者是说展会上面的一些情况好吗？谢谢。 Thank you, management, for the opportunity to ask my question. This is Dan from Morgan Stanley. My question is related to business travel demand and the pace of its recovery. In the last earning call, management mentioned about occupancy not yet fully recovered in terms of business travel demand. So I'm wondering if the management can share some recent colors on business travel demand recovery, such as weekday and exhibition demand in Q2 and possibly Q3, please. Thank you.

Dan Chee: [Non-English content] Thank you, management, for the opportunity to ask my question. This is Dan from Morgan Stanley. My question is related to business travel demand and the pace of its recovery. In the last earning call, management mentioned about occupancy not yet fully recovered in terms of business travel demand. So I'm wondering if the management can share some recent colors on business travel demand recovery, such as weekday and exhibition demand in Q2 and possibly Q3, please. Thank you.

The concond that somehow what down mother F think a turn you can high thing Don T Don T? Also, which are kind of make a two things? ual every one and some some Su to one you some lateray foodocsing the F? ual take a with foodoting it, the some do conition. He take a sound? ual to be a o? T C J P? M. may one train withave without, without early ustrating. So some think concerant, seventethink he what take a thousand? Y do the take a sound F? ual P? M. we also con the what does away some C?

Thank you management for the opportunity to ask my question. This is Dan from Morgan Stanley . My question is related to business travel demand and the pace of its recovery. In the last earning call, management mentioned about occupancy not yet fully recovered in terms of business travel demand. So I'm wondering if the management can share some recent pilots on business travel demand recovery such as weekday and exhibition demand in Q2 and possibly Q3. Please, thank you.

Jin Hui: 的确，正如我前面分享的，中国的疫情开放啊，实质上到现在还没有满一年，从全球的商务的恢复来讲，也需要一个较为长期的时间。所以我们看到在今年华住的RevPAR很大程度上受益于本地休闲市场和传统的这样的一个度假的旺季带来的很好的业绩增长，我们的商务需求确实还在持续的恢复当中。

Jin Hui: [Non-English content]

detr general Cha IA and J one were the to the each paper. This is our doion that I made over my some changeren, the some of the prophity. Yes, your E ither job town she res So Canda thir in IA part to the R par and du news are so you when the childrenudiances is how her chance on the FAM go.

Yes, as I said in the previous statements, if you look at China's economic reopening since then to now, it is less than one year's time. And usually if you talk about the recovery of the global business travels, it takes a longer term. So I can say that the recovery of our RAPPA this year is really mostly attributable to the leisure travel market and the traditional summer holiday demands. And the business and business related travel activities are still in gradual recovery.

Jin Hui: Yes, as I said in the previous statements, if you look at China's economic reopening since then to now, it is less than one year's time. Usually if you talk about the recovery of the global business travels, it takes a longer term. I can say that the recovery of our RevPAR this year is really mostly attributable to the leisure travel market and the traditional summer holidays demands, and the business-related travel activities are still in gradual recovery.

[Translator]: Yes, as I said in the previous statements, if you look at China's economic reopening since then to now, it is less than one year's time. Usually if you talk about the recovery of the global business travels, it takes a longer term. I can say that the recovery of our RevPAR this year is really mostly attributable to the leisure travel market and the traditional summer holidays demands, and the business-related travel activities are still in gradual recovery.

Thank you management for your answers.

Dan Chi: Oh, thank you, management. Thank you, Mr. Jin. Thank you, management for your answers. Thank you.

Dan Chee: Oh, thank you, management. Thank you, Mr. Jin. Thank you, management for your answers. Thank you.

Operator: Thank you for the questions. Next question comes from the line of Sijie Lin from CICC. Please go ahead.

Thank you for the questions. Next question comes from Surti Elling from CICC. Please go ahead.

Sijie Lin: 好，谢谢管理层。我有两个问题，就第一个呢，就是我们，其实看到现在在很多的这个投资的回报都下行的这个大环境下，其实酒店加盟的这个热情是比较高的嘛，那这个会不会导致就是品牌酒店的这种供给增长很快，从而这个竞争格局恶化，然后这个不同品牌之间的加盟的热情有没有出现更大的一个分化？这是第一个。然后第二个呢，就是关于这个华南地区，想再问一下，就我们今年的这个新签约里面，大概有多少是在这个华南的地区，以及我们预计什么时候在华南地区的这个渗透率会有一个更明显的提升。

Sijie Lin: [Non-English content]

So I have two questions. The first one is that we observe strong interest in becoming a hotel franchisee and will the supply of branded hotels grow fast which leads to intensifying competition? Do we see the interest differentiated from different brands?

Jin Hui: The first one is that we observed strong interest in becoming a hotel franchisee. With the supply of branded hotels grow fast, which leads to intensifying competition. Do we see the interest differentiate from different brands? My second question is about the Southern China part. Among our new signings this year, how many of them are in Southern China? When we expect our penetration rates in Southern China to see a significant increase. Thank you.

[Translator]: The first one is that we observed strong interest in becoming a hotel franchisee. With the supply of branded hotels grow fast, which leads to intensifying competition. Do we see the interest differentiate from different brands? My second question is about the Southern China part. Among our new signings this year, how many of them are in Southern China? When we expect our penetration rates in Southern China to see a significant increase. Thank you.

So my second question is about the Southern China part. Among our new findings this year, how many of them are in Southern China? And when we expect our penetration rates in Southern China to see a significant increase? Thank you. In a short while she bloomed into the background looking at the diagram for their periodicDr

Jin Hui: 好的，我来回答这两个问题。第一个关于酒店投资收益，确实酒店一定程度上受到整个周期性的影响。目前一个RevPAR的恢复好，第二个，房地产的租金处于一个低位，它确实是个非常好的投资的周期。但是我们更注意看到，由于这一轮的头部连锁化的这样的一个趋势，使得华住和华住旗下的品牌，带来了对加盟商更好的回报，也展现了更强的品牌溢价和市场的覆盖率。关于华南的，对不起，第一个问题，先翻译一下。

Jin Hui: [Non-English content]

But what I have put out, element you are going to there and totalto the So Y TR there E can do out. So dogtss, and let's also Cha either real produ for Ho have found the families twoaching us like the what touches, fect out how the to to the toach as So looking to hand out your you.

When you Due to Kavanaugh, briefing the CIA more than hundred times had different dogfights.

Jin Hui: I will take the two questions. Yes, first on the ROI in the hospitality sector. Yes, because of the macroeconomic impact, we can see that in the hospitality the RevPAR recovery is now very good. Secondly, we can see that the real estate rental expenses are now in a very low position. Right now it makes it a very good window to invest in the hospitality sector. I must say that for us to have such a very good signing, it is because the franchisees have seen the value of the H World brand has bring to them, which also of course underscores the brand premium, as well as our very strong market coverage.

[Translator]: I will take the two questions. Yes, first on the ROI in the hospitality sector. Yes, because of the macroeconomic impact, we can see that in the hospitality the RevPAR recovery is now very good. Secondly, we can see that the real estate rental expenses are now in a very low position. Right now it makes it a very good window to invest in the hospitality sector. I must say that for us to have such a very good signing, it is because the franchisees have seen the value of the H World brand has bring to them, which also of course underscores the brand premium, as well as our very strong market coverage.

I will take the two questions. Yes, first on the ROI in the hospitality sector, yes, because of the macroeconomic impacts we can see that in the hospitality the REPA recovery is now very good. Secondly, we can see that the real estate rental expenses are now in a very low position. So right now it makes it a very good window to invest in the hospitality sector. But I must say that for us to have such very good signing it is because the franchisers have seen the value of the H-World brand has bring to them which also of course underscores the brand premium as well as our very strong market coverage.

Jin Hui: 第二个问题关于南方，大家都很关心，因为作为大湾区，是中国经济和未来这个人口最多的大区之一。华住对南方非常的重视，应该讲在通过两年的组织的优化和这个下沉的这样的一个战略的部署下，我们很高兴看到了整个南方的渗透速度比2019年应该是翻倍还多。所以我们对南方和大湾区未来的整个发展，市占率的持续提升是充满了充足的信心。谢谢。

Jin Hui: [Non-English content]

ven you going B? I pointing So with our inchoes on goingg. Will the M code lead to the? Actually threeha do the nambang F on the Tosin that chance conbodian took to the Ya.

Because we your voice wants to hear us now, we index in rework and connect with former

I will be looking forward to continuing to compete inHER Jinh

development promised people education could change update on this pilot and that is Moe WHAT?

Jin Hui: Second question, South China. I know that many of you are interested in our further penetration in South China region, because this part of the regions are place with, very large population base and strong economic power. Yes, H World Group attaches great importance to South China, and in the last two years with our organizational optimization, with our lower tier city strategy, I'm very happy to report that our penetration in South China is more than doubled than the level of 2019. That means we are very, very confident in the development of South China market, and we will further to improve our penetration in this region. Thank you. Thank you.

[Translator]: Second question, South China. I know that many of you are interested in our further penetration in South China region, because this part of the regions are place with, very large population base and strong economic power. Yes, H World Group attaches great importance to South China, and in the last two years with our organizational optimization, with our lower tier city strategy, I'm very happy to report that our penetration in South China is more than doubled than the level of 2019. That means we are very, very confident in the development of South China market, and we will further to improve our penetration in this region. Thank you. Thank you.

Second question, South China. I know that many of you are interested in our further penetration in South China region because this part of the region applies with very large population base and strong economic power. So yes, each world group attaches great importance to South China and in the last two years with our organizational optimization with our lower tier city strategy, I'm very happy to report that our penetration in South China is more than doubled than the level of 2019.

So that means we are very, very confident in the development of South China market and we will further improve our penetration in this region. Thank you.

Jin Hui: 我想补充一点。

Jin Hui: [Non-English content]

Jin Hui: Thank you.

[Translator]: Thank you.

Jin Hui: [Non-English content]

Jin Hui: 不，我想补充一点，不仅是我们的发展不错，而且华住旗下的品牌得到了本地消费者的认可，并且我们的经营业绩也保持了区域的领先。谢谢。

Thank you.

Thank you twent again, but we exam trying to get putting the Soul in the PO that.

's idea by do the is had a King high, the dollp and you, So that the room been here or mteen years to year about to the TR that CH.

Jin Hui: I also would love to add that not only do we see very good development for our own business, we also receive increasing recognition from the local consumers for our brand, and that has been shown by our operational results in this region. Our operational results in this region is leading. Thank you.

[Translator]: I also would love to add that not only do we see very good development for our own business, we also receive increasing recognition from the local consumers for our brand, and that has been shown by our operational results in this region. Our operational results in this region is leading. Thank you.

I also would love to add that not only do we see very good development for our own business, we also receive increasing recognition from the local consumers for our brand and that has been shown by our operational results in this region. Our operational results in this region is leading. Thank you.

Thank you for the questions. One moment for the next question.

Operator: Thank you for the questions. One moment for the next question. Next on the line, Lydia Ling from Citigroup, please ask your question.

Next from the line of Lydia Ling from Citi. Please ask your question.

Lydia Ling: 管理层好，金总、何总你们好，我是花旗的Lydia，我这边有两个问题想请教一下。那我第一个问题呢，就是想问一下，首先非常感谢跟我们分享了一个全年的RevPAR的指引。那么我们也想了解一下，管理层现在目前对于明年的RevPAR走向是如何看的，尤其是基于今年一个比较相对高的基数。那么尤其在ADR方面，今年也看到了非常强劲的表现，那么是否这个在ADR这个部分能够在明年持续，这是第一个问题。那么第二个问题呢，是想请教一下在开店关店方面的，因为看到二季度呢，关店相对还是比较多，因为之前疫情的关系，那么能分享一下，就是说现在七八月份的净开店的情况，大概是怎么样一个情况，那个关店的这个部分是不是基本上是在上半年已经做完了这样子的。我翻译一下。 Management, this is Lydia from Citi, and I have two questions. The first one is thanks for sharing your full year RevPAR guidance, so could you give us some color on your outlook for next year on RevPAR trends, and especially given a very high base this year. ADR has showed a very strong performance this year, so do you think it's going to continue next year?

Lydia Ling: [Non-English content] Management, this is Lydia from Citi, and I have two questions. The first one is thanks for sharing your full year RevPAR guidance, so could you give us some color on your outlook for next year on RevPAR trends, and especially given a very high base this year. ADR has showed a very strong performance this year, so do you think it's going to continue next year?

So, self-management, this is Lydia from Citi. And so I have two questions. The first one is, thanks for sharing your four-year report guidance. So could you give us some color on your outlook for the next year report trends, especially given the high phase this year? And so, well, Lydia has showed a very strong performance this year, so do you think it's course of thing next year? And so my second question is on expansion. So closure, stock closure looks more in the second quarter, and so because of the COVID impact previously. So could you share with us updates on your July and also August net opening trend? And so, yes, like the closure almost down in the first half. Thank you.

Lydia Ling: My second question is on expansion. Closure, store closure was more in the Q2 and, so, because of the COVID impact previously. Could you share the updates on your July and also August net opening trend? Yes, like the closure almost done in the H1. Thank you.

Jin Hui: 我来先回答一下，如果季虹需要补充，到时候再来补充一下。我觉得华住始终坚持的有一点就是，华住在中国始终要塑造自己的核心竞争能力，并且在不确定的环境下保持一个长期的、可持续的、具有竞争力的这样的一个市场的这样的一个地位。面对未来的不确定，我认为整个对营销和无论是ADR和出租率的提升，都是华住管理层对长期最为重要的关注的内容。我们在未来在本地化的营销、华住会面对多场景业务的覆盖，以及我们科技的持续使用，都是华住在整个的营销和提升我们业绩方面，我认为是长期的努力的方向。这个大概是第一个问题的回复，关于是否可持续的这个问题。

Jin Hui: [Non-English content]

To answer your question, is the Static I hope you enjoyed this video. If you want to see more videos like this, please subscribe to my channel. I hope you will enjoy the video. Thank you very much for watching. I hope you will enjoy this video. Please subscribe to my channel. Thank you.

So this is the data that we have been working on. Let me first respond to your question regarding whether we are going to sustain such good performance for ADR and Revpar. And then I think CFO can make some additions if necessary. I believe that each world always stays true to one point, that is, we must.

Jin Hui: Let me first respond to your question regarding whether we are going to sustain such good performance for ADR and RevPAR. I think CFO can make some additions if necessary. I believe that H World always stays true to one point, that is, we must always shape our own core competitive edge in the China market. Given the uncertainties, we need to keep long-term sustainable competitive market position. Facing the future uncertainties as the backdrop, I think for the overall improvement and sustainable development of ADR and OCC, the management attaches great importance to these issues. In the future, we are going to have more localized marketing covering multiple scenarios. We will continue to leverage technologies to improve our overall conversion and our performance. This definitely is going to be something we stay true to in the long term. That's for your first question regarding whether it is sustainable development in the future.

[Translator]: Let me first respond to your question regarding whether we are going to sustain such good performance for ADR and RevPAR. I think CFO can make some additions if necessary. I believe that H World always stays true to one point, that is, we must always shape our own core competitive edge in the China market. Given the uncertainties, we need to keep long-term sustainable competitive market position.

always shape our own core competitive edge in the China market and given the uncertainties we need to keep long-term sustainable competitive market position. So facing the future uncertainties as the backdrop I think for the overall improvement and sustainable development of ADR and OCC the management attach great importance to these issues. In the future we are going to have more localized marketing covering multi scenarios. We will continue to leverage technologies to improve our overall conversion and our performance.

[Translator]: Facing the future uncertainties as the backdrop, I think for the overall improvement and sustainable development of ADR and OCC, the management attaches great importance to these issues. In the future, we are going to have more localized marketing covering multiple scenarios. We will continue to leverage technologies to improve our overall conversion and our performance. This definitely is going to be something we stay true to in the long term. That's for your first question regarding whether it is sustainable development in the future.

definitely is going to be something we stay true to in the long term. That's for your first question regarding whether it is sustainable development in the future.

Jin Hui: 关于第二个问题，我手上没有七八月精准的数字，但是我可以随着我们整个华住的管道数字，高质量的管道的签约量持续的提升，华住在今年的下半年和明年肯定会迎来相对的开业的一个周期。因为大家都知道，我们的筹开时间大概差不多有一个半年以上的这个周期，所以随着管道数量的增加，必然会增加我们季度的开业的数量。同时对于低质量门店的清理，华住在过去几年，哪怕在疫情下最艰难的时刻，我们都坚定不移，因为提供高质量的这样的一个产品和服务是华住战略转型非常重要的一个方面，所以我们也一定程度上会对于低质量和1.0的这个产品的转型升级，包括重新的换新，都是华住未来的工作的重点。谢谢。

Jin Hui: [Non-English content]

sure is not that the sushi funny Don't forget to check out Thank you for watching

The Chinese government has been very interested in the development of the Chinese government. We are very interested in the development of the Chinese government. Now on your second question, I don't have any specific net opening numbers for July and August , but I must say if you pay attention to our hotels in the pipeline, you see that the improvement of the signings for the higher quality premium hotels in the pipeline, which definitely will take place of more openings in the second half of the year. And next year, because usually, you know, it takes us about half a year's time to prepare the pipeline hotels into official opening. So as we have more hotels in our pipeline with the specific high quality segment, it will definitely increase our next quarter openings. Speaking of the closure of the lower quality hotels over the last few years, even if we were stricken the hardest during the pandemic, we stay true to this operation strategy that is to improve our quality and to improve our products and services. Thank you.

Jin Hui: Now, on your second question, I don't have any specific net opening numbers for July and August, but I must say if you pay attention to our hotels in the pipeline, you see that the improvement of the signings for the higher quality premium hotels in the pipeline, which definitely will take place of more openings in the H2 this year and next year. Because usually, you know it takes us about half a year's time to prepare the pipeline hotels into official opening. As we have more hotels in our pipeline with the specific high quality segment, it will definitely increase our next quarter openings. Speaking of the closure of the lower quality hotels over the last few years, even if we were stricken the hardest during the pandemic, we stay true to this operation strategy, that is to improve our quality and to improve our products and services. This is a very important part of H World's strategic transformation. We will continue to either transform or upgrade or repackage the lower quality 1.0 version and some other lower brands. This will continue to be our strategy. Thank you.

[Translator]: Now, on your second question, I don't have any specific net opening numbers for July and August, but I must say if you pay attention to our hotels in the pipeline, you see that the improvement of the signings for the higher quality premium hotels in the pipeline, which definitely will take place of more openings in the H2 this year and next year. Because usually, you know it takes us about half a year's time to prepare the pipeline hotels into official opening.

[Translator]: As we have more hotels in our pipeline with the specific high quality segment, it will definitely increase our next quarter openings. Speaking of the closure of the lower quality hotels over the last few years, even if we were stricken the hardest during the pandemic, we stay true to this operation strategy, that is to improve our quality and to improve our products and services. This is a very important part of H World's strategic transformation. We will continue to either transform or upgrade or repackage the lower quality 1.0 version and some other lower brands. This will continue to be our strategy. Thank you.

This is a very important part of H-World's strategic transformation. We will continue to either transform or upgrade or repackage the lower quality 1.0 version and some other lower brands. This will continue to be our strategy. Thank you. Thank you. I just wanted to summarize here. We stay with our forecast.

important part of each world's strategic transformation. So we will continue to either transform or upgrade or repackage the lower quality 1.0 version and some other lower brands. This will continue to be our strategy. Thank you. Thank you. I just wanted to summarize here. We stay with our forecast this year or our guidance this year.

Jihong He: Thank you. I just wanted to summarize here. We stay with our forecast this year or our guidance this year. We will open 1,400 hotels and plan to close 650 hotels.

Operator: Thank you for the questions. Our next question comes on the line from Lina Yin from HSBC. Please go ahead.

Lina Yin: 管理层谢谢接受我的问题。我有两个问题，第一个问题我还是想请教一下RevPAR的一个问题。这回在路演材料里面，非常感谢，分享了很多关于这个酒店portfolio升级的一些信息，那我们可不可以重新考虑一下我们稳态的这个RevPAR。其实即使我们对行业的RevPAR有一个就是会逐渐normalize的这个预期，但是因为我们升级的动力，就比如说我们觉得行业它是会稳态的RevPAR，就是疫情后大概对比疫情前是110，就华住的话，因为升级的动力应该是远远高于这个的，比如说120或者120以上，就不知道这个问题可不可以帮我们这个再理解一下。 So I will translate my first question. First question is to ask management to help us to reconsider the steady state RevPAR for 华住. We got a lot of new information on the upgrade of 华住 hotel portfolio over the COVID period. So if we think the overall hotel industry, the RevPAR probably will stabilize at 110% above 2019 level, does that mean 华住's hotel RevPAR will stabilize at a much higher level versus 2019, say 120% or even above? 第一个问题是这个，谢谢。

Lina Yin: [Non-English content] So I will translate my first question. First question is to ask management to help us to reconsider the steady state RevPAR for [Non-English content]. We got a lot of new information on the upgrade of [Non-English content] hotel portfolio over the COVID period. So if we think the overall hotel industry, the RevPAR probably will stabilize at 110% above 2019 level, does that mean [Non-English content] hotel RevPAR will stabilize at a much higher level versus 2019, say 120% or even above? [Non-English content]

Jihong He: Thank you for your question. I will take your question about RevPAR. Yes, we are very happy to see that 华住's RevPAR recovery was higher than the average industry, because really our product continue the product upgrade, product mix change, and our sales effective sales effort. For the full year, we gave our guidance that 116% to 121%, and we remain confident that we can deliver this number. For the further how RevPAR will develop in the near future beyond this year, RevPAR is always a result of the economic activity. I can only give you the confidence that 华住's hotel is really very well positioned, independent of economic cycle in the short term. 'Cause our very large portfolio of our hotels are really affordable hotels, and we have observed that a lot of guests coming from different segments, really enjoying our hotels as well.

Jihong He: Thank you for your question. I will take your question about RevPAR. Yes, we are very happy to see that [Non-English content] RevPAR recovery was higher than the average industry, because really our product continue the product upgrade, product mix change, and our sales effective sales effort. For the full year, we gave our guidance that 116% to 121%, and we remain confident that we can deliver this number. For the further how RevPAR will develop in the near future beyond this year, RevPAR is always a result of the economic activity. I can only give you the confidence that [Non-English content] hotel is really very well positioned, independent of economic cycle in the short term. 'Cause our very large portfolio of our hotels are really affordable hotels, and we have observed that a lot of guests coming from different segments, really enjoying our hotels as well.

Lina Yin: 好，谢谢回答我的问题。我有第二个问题，其实就是还是行业的问题，我自己不太理解的，就是我们看到我们的竞对嘛，就是比较那个高端的这个有限服务酒店，它其实在RevPAR的这个恢复趋势，还有扩张趋势都比较强劲，当然基数也比较低一点。那同时我们也有评论到，就是商务出行这块，其实恢复是比较缓慢的，但竞争对手其实是以商务出行这个为主的嘛。所以就是为什么我们会有这样这个不同的结果呀，这个可以帮助理解一下吗？My second question is on the peer comparison. So we see some peers who focus on upper and limited service hotel deliver the very strong RevPAR growth and expansion growth, likely from a low base. Meanwhile we have commented the business related travel has a more moderate and gradual recovery. So can management help me reconcile the discrepancy and comments and the results from the two perspectives. 谢谢。

Lina Yin: [Non-English content] My second question is on the peer comparison. So we see some peers who focus on upper and limited service hotel deliver the very strong RevPAR growth and expansion growth, likely from a low base. Meanwhile we have commented the business related travel has a more moderate and gradual recovery. So can management help me reconcile the discrepancy and comments and the results from the two perspectives. [Non-English content]

Jin Hui: 我来试图回答、理解这个问题和回答这个问题。事实上我们提的商务和整个商旅，它是一个定义的不一样。我认为从大的，你们可以看到携程和整个其他行业的、同类行业的这个分享，我们都关注到了这样的一个趋势，因为今年的二季度和暑假都是传统的中国的旅游和休闲旺季，这个大势我想谁都不会避免，对吧？所以我觉得在旅游和传统的旺季带来更好的业绩的展现，肯定更大原因是来自于我们整个旅游本地休闲市场的这样的一个激发。特别可以关注到中国政府在持续刺激内需服务业，展开文旅，对吧，包括什么直播的烧烤、这个村超的比赛等等一些中国政府在文旅产业的持续的投入，在大的环境上必然展现了我们行业在休闲旅游市场在传统旺季的增长。在商务，纯商务市场受到中国经济宏观的影响，且恢复周期算晚、算短，因为现在整个疫情开放至今也就差不多八个月时间，整个经济的恢复的叫伤疤效应，它还需要一些时间去恢复，我认为也是客观的事实。所以我不认为我们的整个行业会有太大的差异。其实整个趋势里面，华住受益于整个头部和市场覆盖的这样的完整度，使得我们更得到国民市场的需要，或者喜爱。我们也看到一些局部区域确实展现了价格的过高，或者是这样的趋势，我们也关注到如何提供更多的产品去覆盖这样的市场。所以我不认为有太大的差异在恢复当中。谢谢。

Jin Hui: [Non-English content]

Jihong He: Well, for your question, I think that we have different definitions on business related travels with some of our competitors. If you look at the statistics issued by Ctrip and other industry players, you notice such a common trend that is usually Q2 and summer holiday and vacation are the peak seasons for China's travel and leisure market, and that's always true. Speaking of the good performance in this period, larger reason comes from the stimulus package the government has taken to stimulate the overall leisure and tourism travel market on the overall macro

[Translator]: Well, for your question, I think that we have different definitions on business related travels with some of our competitors. If you look at the statistics issued by Ctrip and other industry players, you notice such a common trend that is usually Q2 and summer holiday and vacation are the peak seasons for China's travel and leisure market, and that's always true. Speaking of the good performance in this period, larger reason comes from the stimulus package the government has taken to stimulate the overall leisure and tourism travel market on the overall macro

Jin Hui: culture and tourism market, right? For example, the barbecue festival in Zibo, in the Guizhou village basketball activities. The Chinese government has constantly been investing in promoting the culture and tourism sector. Overall, in the megatrend, we definitely sense that, on basis of such a peak season growth, we have seen very good performance with the demand. But in the pure commercial and travel-related trips and travels, I think, partially it is impacted by Chinese macroeconomic prospects, and partly it is because it usually delivers longer-term recovery. Because if you look at the reopening, it's now just eight months. Eight months' time is not long enough for the full recovery of this market.

[Translator]: culture and tourism market, right? For example, the barbecue festival in Zibo, in the Guizhou village basketball activities. The Chinese government has constantly been investing in promoting the culture and tourism sector. Overall, in the megatrend, we definitely sense that, on basis of such a peak season growth, we have seen very good performance with the demand. But in the pure commercial and travel-related trips and travels, I think, partially it is impacted by Chinese macroeconomic prospects, and partly it is because it usually delivers longer-term recovery. Because if you look at the reopening, it's now just eight months. Eight months' time is not long enough for the full recovery of this market.

Jin Hui: Yes, in the last several years, we have experienced some setbacks, and it takes time to cure these and heal these setbacks. I think it's very easy to understand. I don't think there will be too much of a discrepancy for all the players in the industry. If you look at H World Group, we are a top player in the hospitality market. We have very wide covering market coverage. We are much favored by the mass market. Yes, in some regional markets, there are some overpriced issues, and we will continue to provide more products and services to cover these markets. All in all, I don't think there will be too much of a discrepancy among all players. Thank you.

[Translator]: Yes, in the last several years, we have experienced some setbacks, and it takes time to cure these and heal these setbacks. I think it's very easy to understand. I don't think there will be too much of a discrepancy for all the players in the industry. If you look at H World Group, we are a top player in the hospitality market. We have very wide covering market coverage. We are much favored by the mass market. Yes, in some regional markets, there are some overpriced issues, and we will continue to provide more products and services to cover these markets. All in all, I don't think there will be too much of a discrepancy among all players. Thank you.

Operator: Thank you for the questions. With that, I would like to hand the call back to management for closing remarks.

Jason Chen: Thanks everyone for taking your time with us today, and we look forward to see you in upcoming quarter. Thank you. Bye-bye.

Operator: That concludes today's conference call. Thank you for your participation. You may now disconnect. Good day. Thank you for standing by. Welcome to H World Q2 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you need to press star one one on your telephone. You'll then hear an automated message advising that your hand is raised. Please be advised that today's conference is being recorded. I'll now like to hand the call over to your host today, Mr. Jason Chen. Please go ahead.

Jason Chen: Thank you. Good morning and good evening, everyone. Thanks for joining us today. Welcome to H World Group 2023 Q2 Earnings Conference Call. Joining us today is our chairman, Mr. Qi Ji, our CEO, Mr. Jin Hui, our CFO, Ms. Jihong He, and our president, Ms. Xinxin Liu. Following their prepared remarks, management will be available to answer your questions. Before we continue, please note that 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 obligations to update any forward-looking statements except as required by applicable laws.

Jihong He: Thank you, Jason. Good morning and good evening, ladies and gentlemen. Welcome to H World Group Q2 2023 Earnings Call. We are very happy to report that with a strong recovery of domestic China travel activities and continuous global travel improvement, our overall financial performance in this quarter and the H1 2023 exceeded the guidance we announced earlier this year. In today's presentation, Group CEO Mr. Jin Hui will first highlight our business performance and the key initiatives we undertook to further improve our operations. I will then discuss the financial performance in more detail. Now I will hand over to Mr. Jin Hui.

Jin Hui: 谢谢Jihong。按照惯例，我们先来回顾一下近期华住RevPAR恢复的情况。请大家翻到第三页。得益于持续强劲的出行需求，二季度华住中国保持了自中国去年底开放以来良好的恢复态势，RevPAR恢复至2019年同期的121%。分月度来看，四到六月，华住中国综合RevPAR分别恢复至2019年的127%、115%、123%。随着年初疫情的开放，经济逐步恢复，加之各地政府不断程度的内需刺激和文旅活动的积极展开，我们看到整体出行需求呈现非常强劲的复苏势头。同时我们也发现到，消费者的出行意愿也随着疫情开放后的消费习惯改变持续提高。因此我们可以看到，在一些特殊的时间段，例如大型展会、节假日，出现比较集中的出行需求爆发。进入七月暑期旺季，我们看到RevPAR进一步恢复至2019年同期的132%。虽然目前整体恢复的情况好于我们年初的预期，但是我们对未来相对谨慎乐观的态度依然没有改变。我们需要清楚地认识到，中国疫情开放至今还没有满一年，整体的宏观经济尚处于逐步恢复的过程当中，期间不可避免地出现一些波动和变化，给行业未来的发展带来了一定的不确定性。但是华住对中国经济的长期发展依然保持充足的信心。因此，华住需要不断夯实自身的核心竞争力，在不确定当中寻找确定性，以支持公司长期的可持续的业务发展。

Jin Hui: [Non-English content]

Jin Hui: Thank you, He Jihong. As usual, let's quickly review our RevPAR recovery in Q2 2023. Please turn to page 3. Let's look at the reasons. Thanks to robust travel demands in Q2 2023, H World maintains sound business rebound since the economic reopening of last year, and the RevPAR for Q2 recorded 121% of that of Q2 2019. In April, May, June respectively, H World's blended RevPAR has reached to 127% of April, 115% of May, and 123% of June in 2019. With the reopening of the Chinese economy, rebound of our economy, coupled with the stimulus policies and travel activities resumption from everywhere, we have seen very strong rebound of the overall travel activities and willingness. We have also found that the consumers' travel willingness increased after the reopening. Therefore, in Q2, we have seen explosive and concentrated travels around major exhibitions and holidays. Entering the peak season in the beginning of this year, we have seen the RevPAR resumed to 132% of Q2 of 2019. It is a recovery much better than our forecast in the beginning of this year. Yet still, we have to be cautiously optimistic about the outlook. We must realize that it has been less than one year of opening. The macroeconomy is still in gradual recovery, during which period we will see turbulences and changes. This means uncertainties for our hospitality industry. However, H World is still confident in the prospect of the Chinese economy in the longer term, and that's exactly why we are and will continue to enhance our core competitiveness, and seek certainties out of the uncertainties in order to sustain our business development. Thank you.

[Translator]: Thank you, He Jihong. As usual, let's quickly review our RevPAR recovery in Q2 2023. Please turn to page 3. Let's look at the reasons. Thanks to robust travel demands in Q2 2023, H World maintains sound business rebound since the economic reopening of last year, and the RevPAR for Q2 recorded 121% of that of Q2 2019. In April, May, June respectively, H World's blended RevPAR has reached to 127% of April, 115% of May, and 123% of June in 2019.

[Translator]: With the reopening of the Chinese economy, rebound of our economy, coupled with the stimulus policies and travel activities resumption from everywhere, we have seen very strong rebound of the overall travel activities and willingness. We have also found that the consumers' travel willingness increased after the reopening. Therefore, in Q2, we have seen explosive and concentrated travels around major exhibitions and holidays.

[Translator]: Entering the peak season in the beginning of this year, we have seen the RevPAR resumed to 132% of Q2 of 2019. It is a recovery much better than our forecast in the beginning of this year. Yet still, we have to be cautiously optimistic about the outlook. We must realize that it has been less than one year of opening. The macroeconomy is still in gradual recovery, during which period we will see turbulences and changes. This means uncertainties for our hospitality industry. However, H World is still confident in the prospect of the Chinese economy in the longer term, and that's exactly why we are and will continue to enhance our core competitiveness, and seek certainties out of the uncertainties in order to sustain our business development. Thank you.

Jin Hui: 请大家翻到第四页。我们想再次强调，华住中国长期可持续的RevPAR增长动力来源于：一，通过不断的产品升级和服务提升来获取更高的客户溢价。二，完善的交通基础设施伴随国民出行意愿的不断增强，中国的低线城市极具经济韧性。第三，通过组织结构的调整和优化，建立区域分公司，使得运营更加精细和高效，区域的渗透能力进一步加强，并在薄弱区域加速打开市场。第四，通过持续在中高端品牌的发力，优化完善了我们酒店结构，提升了中高端酒店市场的份额。

Jin Hui: [Non-English content]

Jin Hui: Page four, please. I must stress here the driving forces of our sustainable RevPAR. Firstly, higher premium through conscious product and services upgrade. Secondly, uncovering opportunities in lower-tier cities with high resilience as the travel infrastructure and travel willingness both improve. Thirdly, operate our business more intensively and effectively by setting up the regional offices and headquarters, increasing the regional penetration, and organizational restructuring. Fourthly, improve our market share in the upper mid-scale market and further optimize our product mix.

[Translator]: Page four, please. I must stress here the driving forces of our sustainable RevPAR. Firstly, higher premium through conscious product and services upgrade. Secondly, uncovering opportunities in lower-tier cities with high resilience as the travel infrastructure and travel willingness both improve. Thirdly, operate our business more intensively and effectively by setting up the regional offices and headquarters, increasing the regional penetration, and organizational restructuring. Fourthly, improve our market share in the upper mid-scale market and further optimize our product mix.

Jin Hui: 公司坚定不移地贯彻执行精益发展的战略。请大家翻到第五页。华住基于高质量门店，持续拓展酒店网络。今年第二季度，我们新签约酒店达到1,054家，同比接近翻番，创季度历史新高。这其中有去年二季度因为疫情所导致的低基数的因素。同时，今年强劲的签约也包含了过去三年因为疫情而导致加盟商签约积压的影响。但不可否认的是，加盟商的信心随着疫情开放后，酒店业绩的强劲恢复，进一步提高。开业方面，二季度开店速度环比逐步提升，二季度新开店374家，同比提升了41%。关店方面，二季度共歇业216家酒店，主要由于去年疫情导致部分酒店歇业流程延续延期到今年，以及我们持续清理低质量的经济型软品牌和汉庭1.0的产品，以提高酒店整体酒店网络的质量。同期所关闭的汉庭1.0及经济型软品牌门店共计130家。

Jin Hui: [Non-English content]

Jin Hui: We will further execute the lean development strategy set out by the management. Page five, please. The H World Group will continue to expand our hotel network based on the quality development strategy. In Q2 this year, we have a total of 1,054 new signings. That is an 88% increase year on year, making it a historic high. Naturally, this is a high growth contributed by the low baseline in Q2 last year, as well as the backlog signings from the COVID period. Undeniably, we see the confidence of the franchises boosted by the strong rebound in the hospitality sector after the reopening. In terms of the number of hotel openings, it increased much faster than Q1 with a total of 374 hotel openings, up by 41% year on year.

[Translator]: We will further execute the lean development strategy set out by the management. Page five, please. The H World Group will continue to expand our hotel network based on the quality development strategy. In Q2 this year, we have a total of 1,054 new signings. That is an 88% increase year on year, making it a historic high. Naturally, this is a high growth contributed by the low baseline in Q2 last year, as well as the backlog signings from the COVID period. Undeniably, we see the confidence of the franchises boosted by the strong rebound in the hospitality sector after the reopening. In terms of the number of hotel openings, it increased much faster than Q1 with a total of 374 hotel openings, up by 41% year on year.

Jin Hui: In terms of the store closure, there are 216 hotels closed, mostly the deferred and backlog COVID-related closure from last year. The closure aims to streamline the economic soft brands of lower quality, HanTing 1.0, and further optimize our network quality. There are a total of 130 HanTing 1.0 and economic soft branded hotels closure.

[Translator]: In terms of the store closure, there are 216 hotels closed, mostly the deferred and backlog COVID-related closure from last year. The closure aims to streamline the economic soft brands of lower quality, HanTing 1.0, and further optimize our network quality. There are a total of 130 HanTing 1.0 and economic soft branded hotels closure.

Jin Hui: [Non-English content]

Jin Hui: Page six, please. As we continue to streamline the lower quality hotels to enhance our overall performance and quality, the percentage of HanTing 1.0 and economy soft brands accounts now for less than 10% out of our overall hotels, down from the 26% at the end of 2020. Meanwhile, the percentage of the HanTing 2.7 and above accounts for 26% at the end of June this year, up from the 14% at the end of 2020.

[Translator]: Page six, please. As we continue to streamline the lower quality hotels to enhance our overall performance and quality, the percentage of HanTing 1.0 and economy soft brands accounts now for less than 10% out of our overall hotels, down from the 26% at the end of 2020. Meanwhile, the percentage of the HanTing 2.7 and above accounts for 26% at the end of June this year, up from the 14% at the end of 2020.

Jin Hui: 华住持续以经济型国民及中档酒店为核心，服务于大众市场。请大家翻到第七页。截至六月底，公司在营酒店数量为八千六百二十二家店，其中56%为经济型国民酒店，36%为中档酒店，中档酒店占比同比提升三个百分点。公司管道酒店数为两千八百零八家，其中38%为经济型国民酒店，48%为中档酒店。中档酒店占比同比提升五个百分点。今年二季度新开业的酒店中，90%是经济型国民和中档酒店。我们可以看到，华住在不断提升综合酒店质量的同时，持续聚焦于经济型和中档组成的有限服务领域，以满足广大国民的住宿需求。

Jin Hui: [Non-English content]

Jin Hui: The H World Group will continue to focus on the economy and the mid-scale hotels to serve the mass market. Page seven, please. At the end of June, we have a total of 8,622 hotels in operation, among which 56% economy hotels, 36% midscale hotels, and the percentage of midscale increased by 3% year on year. There are a total of 2,808 hotels in pipeline, among which 38% are economy, 48% are midscale, and the percentage of midscale up by 5% year on year. Of all the hotel openings in Q2 this year, among which 90% are economy and midscale hotels. This is a proof that as we optimize our overall hotels quality, we continue to focus on economy and midscale segment to serve the mass market consumers.

[Translator]: The H World Group will continue to focus on the economy and the mid-scale hotels to serve the mass market. Page seven, please. At the end of June, we have a total of 8,622 hotels in operation, among which 56% economy hotels, 36% midscale hotels, and the percentage of midscale increased by 3% year on year. There are a total of 2,808 hotels in pipeline, among which 38% are economy, 48% are midscale, and the percentage of midscale up by 5% year on year. Of all the hotel openings in Q2 this year, among which 90% are economy and midscale hotels. This is a proof that as we optimize our overall hotels quality, we continue to focus on economy and midscale segment to serve the mass market consumers.

Jin Hui: 华住在低线城市以及历史薄弱区域的渗透在持续进行。请大家翻到第八页。截至六月底，公司在营酒店中39%位于低线城市，同比提升两个百分点。公司管道酒店中55%分布在低线城市。公司的城市覆盖数量也进一步增长到1,196个。

Jin Hui: [Non-English content]

Jin Hui: Page nine, please. We continue to grow our upper midscale hotels segment. By the end of June this year, we have a total of 562 upper midscale hotels in operation, up by 18% year on year. We have a total of 317 upper midscale hotels in the pipeline, up by 29% year on year. The faster growth of midscale hotels in our pipeline will support our future opening and market development in this segment. Please turn to page ten. We value membership development. We have upgraded our H World brand image and market position. In terms of the H World members app, we have added more vacation related element. We have increased our member offerings such as vacation channel, content channel 2.0 and member exclusive services.

[Translator]: Page nine, please. We continue to grow our upper midscale hotels segment. By the end of June this year, we have a total of 562 upper midscale hotels in operation, up by 18% year on year. We have a total of 317 upper midscale hotels in the pipeline, up by 29% year on year. The faster growth of midscale hotels in our pipeline will support our future opening and market development in this segment. Please turn to page ten. We value membership development. We have upgraded our H World brand image and market position. In terms of the H World members app, we have added more vacation related element. We have increased our member offerings such as vacation channel, content channel 2.0 and member exclusive services.

Jin Hui: We hope that the H World Group membership is more than just a hotel reservation platform by transitioning it from a single business scenario only reservation platform to a diverse business and travel activities scenario service platform. That's all for Q2 earnings overview. Now I will hand over to our CFO, Ms. He Jihong, to walk you through our operational and financial results. Thank you.

[Translator]: We hope that the H World Group membership is more than just a hotel reservation platform by transitioning it from a single business scenario only reservation platform to a diverse business and travel activities scenario service platform. That's all for Q2 earnings overview. Now I will hand over to our CFO, Ms. He Jihong, to walk you through our operational and financial results. Thank you.

Jihong He: Thank you, Jin Hui. I will now highlight the key financial metrics in this quarter. Please turn to page 12. Our hotel network continues to expand in this quarter. Our number of rooms in operations increased 9% to 844,417. According to the research published by Hotels Magazine, we rank number 6 worldwide in terms of rooms in operation. Our hotel turnover increased 72% compared to Q2 2022, totaling more than RMB 20 billion. Please turn to page 13. Legacy Huazhu blended RevPAR in Q2 stands at RMB 250, improved 21.4% compared to the same period in 2019, and 77% over 2022. This recovery is largely driven by ADR improvement.

Jihong He: Our total group revenue in this quarter was RMB 5.53 billion, including RMB 4.35 billion from Legacy-Huazhu and RMB 1.18 billion from DH. This is an improvement of 64% compared to 2022, higher than our guidance set up earlier this year. Our China business delivered a 76.6% revenue improvement. This strong performance is due to, first, strong recovery of travel demand, especially domestic Chinese market. Secondly, continued product upgrade and the product mix change. Thirdly, market penetration and synergies achieved through our regional offices. In H1 2023, we opened 638 hotels group wide.

Jihong He: We expect the hotel opening to accelerate in H2 of this year. Due to faster pickup of construction activities and supply chain recovery, we stay with our guidance of 1,400 hotel opening this year. European market further recovered this year as well, and our DH business delivered 28.4% revenue improvement over 2022. Please turn to page 16. Hotel operating costs were 17.2% higher than the same quarter 2022, driven by business recovery. We continue to spend serious effort to improve operational efficiencies and manage costs on the hotel level. SG&A cost was 45% higher than 2022 due to higher marketing and sales expense to drive the business. I would like to highlight that Legacy-Huazhu SG&A cost was 11.6% of revenue in this quarter.

Jihong He: Operating income of Legacy Huazhu in Q2 stands at RMB 1.35 billion, which represents a 31% operating profit margin. This is a significant improvement over 2022, when China was under serious COVID control. Income from operations at DH also turned positive in this quarter compared to the loss situation both in Q2 last year and the previous quarter. Please turn to page 17. Adjusted EBITDA in Q2 stands at RMB 1.77 billion. Legacy Huazhu delivered RMB 1.66 billion adjusted EBITDA, which represents a 38% EBITDA margin. This quarter, we did not have special effect like Accor shares' divestment gains as in the last quarter. Adjusted net income stands at RMB 1.07 billion.

Jihong He: Legacy-Huazhu delivered RMB 1.05 billion adjusted net income, which represents 24% net income profit margin. This improved EBITDA and net income margin is a result of business recovery as well as cost management. As we continue to move towards asset-light business model and add hotels through our franchisees and partners, we expect our profit margin to continue to improve. DH business turned positive in this quarter with RMB 112 million adjusted EBITDA and RMB 21 million adjusted net income. This is a result of conscious improvement of sales effort and continued cost management of our European team. Our operating cash flow at group level remains strong at RMB 2.2 billion in this quarter. Please turn to page 18. Our net cash at Q2 2023 is RMB 2 billion.

Jihong He: Our cash balance is RMB 7.8 billion, and we have RMB 2.8 billion unutilized bank facility. Please turn to page 19. We expect our group revenue in Q3 2023 to grow 43% to 47% over Q3 2022. Excluding DH, Legacy-Huazhu is expected to grow 49% to 53%. Based on a good recovery of travel demand and a better than expected performance compared to the estimation made at the beginning of this year, we raised our guidance for the full year 2023. We estimate the revenue in full year 2023 to grow 48% to 52% over 2022. Excluding DH, we estimate Legacy-Huazhu revenue in 2023 to grow 54% to 58% over 2022. This concludes our management presentation. We can now start with Q&A session.

Operator: The first question comes from the line of Ronald Leung from Bank of America. Your line is open.

Ronald Leung: 管理层你们好，早上好。首先恭喜你们在二季度有一个很好的业绩。其实我有两个问题，第一个问题是关于这个RevPAR的预期的。所以管理层提高了全年的这个收入的指引，还要提供了第三季度收入的指引。我可以问的是，管理层对第三季度还有全年现在RevPAR的这个预期是什么？这个是第一个问题。第二个问题是想问关于这个签约的预期，就是我们看见第一季度跟第二季度的签约都很强，是第一季就有600，第二季度有1,000，往后的这个预期，这个签约的预期还会是怎么样？Uh, I will ask my questions in English as well.

Ronald Leung: [Non-English content] I will ask my questions in English as well.

Ronald Leung: My first question is about the RevPAR expectations. Management has raised the full year revenue guidance and also provide a Q3 revenue guidance. May I ask what is the implied RevPAR expectations in Q3 and for full year? My second question is about expectations for hotel signings. We have seen very strong hotel signings in both Q1 and the Q2. May I ask what's management expectations for the hotel signings for the rest of the year? Thank you very much.

Jin Hui: [Non-English content]

Jin Hui: Thank you for your question. My name is Jin Hui. I will take over your question. Yes. As you said, given the overall economic development momentum, especially during the domestic circulation, consumption rebound, and the recovery of the tourism and activities, we have seen very good growth, especially in Q3. We believe that the RevPAR will be growing to 130% to 128%, and all year round, the growth will reach 116 percentage points to 121 percentage points.

[Translator]: Thank you for your question. My name is Jin Hui. I will take over your question. Yes. As you said, given the overall economic development momentum, especially during the domestic circulation, consumption rebound, and the recovery of the tourism and activities, we have seen very good growth, especially in Q3. We believe that the RevPAR will be growing to 130% to 128%, and all year round, the growth will reach 116 percentage points to 121 percentage points.

Jin Hui: 好，第二个关于签约，确实我们很高兴看到二季度我们取得了非常好的这样的历史的签约的进展。我想表达几个观点。第一，确实由于经济的复苏和整个特别是酒店业的RevPAR的复苏，带来了整个加盟商的整个信心的恢复。我们二季度的签约确实达到了历史记录，当然其中一部分是由于我认为是过去三年的整个发展的积压的这样的因素，但是我更希望大家能理解，我们今天取得这样的发展，是来自于过去几年华住持续在两个领域的这样的一个坚守。第一个就是我们在整个下沉市场的整个组织能力的部署和发展能力的部署。第二个在取决于在过去几年华住在中高端整个业务的持续的投入和发展，所以华住整个签约的未来我们还是保持一个乐观的状态，我们会持续在整个中国的有限服务市场和中高端经验服务市场持续地保持稳健的、长期的增长。

Jin Hui: [Non-English content]

Jin Hui: A little bit add on your first question. We're talking about the RevPAR recovery. I gave you a number of 130% to 128% for Q3 and all year round, 160% to 121% recovery. Now, speaking of the new signings, yes, in Q2, we are very happy to see we have achieved such great accomplishment. I have a few points to make. Firstly, because of economic recovery and the overall hospitality recovery, we have seen strengthened confidence from the franchisers. Partly of course, that achievement this quarter is because of the backlog delayed signings from the previous period. I hope you to understand that, for H World Group, we have achieved such accomplishment because of several reasons.

[Translator]: A little bit add on your first question. We're talking about the RevPAR recovery. I gave you a number of 130% to 128% for Q3 and all year round, 160% to 121% recovery. Now, speaking of the new signings, yes, in Q2, we are very happy to see we have achieved such great accomplishment. I have a few points to make. Firstly, because of economic recovery and the overall hospitality recovery, we have seen strengthened confidence from the franchisers. Partly of course, that achievement this quarter is because of the backlog delayed signings from the previous period. I hope you to understand that, for H World Group, we have achieved such accomplishment because of several reasons.

Jin Hui: Firstly, because in the last few years we continue to develop the lower tier cities, and secondly, we continue to move towards the mid scale and premium market.

[Translator]: Firstly, because in the last few years we continue to develop the lower tier cities, and secondly, we continue to move towards the mid scale and premium market.

Ronald Leung: 好，谢谢管理层。Thank you, management.

Ronald Leung: [Non-English content] Thank you, management.

Operator: For the questions. One moment for the next question. Next question comes from the line of Simon Cheung from Goldman Sachs. Your line is now open.

Simon Cheung: 谢谢金总跟何总的分享。我有两个问题，第一个就是你刚才说的全年那个RevPAR，大概回到120左右，然后，我没记错的话，第一季度118，第二季度125，然后现在121，然后现在第三季度125的话，那就基本上也拍出来是第四季度可能有一点点慢下来。我想了解一下，你们是觉得第四季度有一个什么高基数的原因，还是有什么其他的原因，你觉得是可能会慢下来？这个是第一个问题。然后呢，第二个问题，就是你们也看到刚才何总你分享到你现在是已经是net cash了，两个billion of net cash，那你们的想法是，比如说你有一个同行有派息嘛，那我不知道你们有没有这个想法，以及，如果不是的话，那，可能花钱会花在哪里呢？I will just ask the question again in English.

Simon Cheung: [Non-English content] I will just ask the question again in English.

Simon Cheung: I've observed that, you know, the guidance hasn't been revised up quite aggressively, with I think Q1 118%, Q2 121%, and Q3 125% 2019 level. Based on your full year guidance that would imply the deceleration into Q4. Are you seeing any sign of weaknesses or any reason why you are expecting there's gonna be a slowdown? Then the second one is in relation to potential use of the cash or cash flows, 'cause you know, your company already in a CNY 2 billion net cash position. How are you thinking about, you know, capital reallocation and whether you would consider paying dividends like one of your competitors does?

Jihong He: Thank you, Simon, for the question. I will answer your question. For your first question about the RevPAR. Yes, we're very happy and very grateful to see the very good recovery of Chinese domestic travel. The Q1 was really a revenge travel after COVID. The Q2 we observed very high leisure travel demand in the summer holiday. In the Q3, we believe because the October Golden Week, we will also have some good effect from that. In the Q4, because of the lack of the summer holidays and those prolonged Golden Week effect, we expect the demand to come back to normal. We are still optimistic about the full year results.

Jihong He: That's why we still have 116 to 121% RevPAR improvement over 2019 for the full year. The second question as to your cash capital allocation. Yes, we are also very, very happy to see that with the business recovery, our cash position improved significantly over 2022. We will continue to monitor the business recovery speed, and also the cash accumulation. In appropriate time, we will also decide on the dividend policy, as you mentioned.

Operator: Thank you for the questions. One moment for the next question. Next question comes from the line of Dan Chi from Morgan Stanley. Your line is now open.

Dan Chi: Thank you, management, for the opportunity to ask my question. This is Dan Chi from Morgan Stanley. My question is related to business travel demand and the pace of its recovery. In the last earnings call, management mentioned about occupancy not yet fully recovered in terms of business travel demand. I'm wondering if the management can share some recent colors on business travel demand recovery such as weekday and exhibition demand in Q2 and possibly Q3, please. Thank you.

Dan Chee: Thank you, management, for the opportunity to ask my question. This is Dan Chi from Morgan Stanley. My question is related to business travel demand and the pace of its recovery. In the last earnings call, management mentioned about occupancy not yet fully recovered in terms of business travel demand. I'm wondering if the management can share some recent colors on business travel demand recovery such as weekday and exhibition demand in Q2 and possibly Q3, please. Thank you.

Dan Chee: [Non-English content]

Operator: Uh,

Jihong He: Yes. As I said in the previous statements, if you look at China's economic reopening since then to now, it is less than one year's time. Usually if you talk about the recovery of the global business travels, it takes a longer term. I can say that the recovery of our RevPAR this year is really mostly attributable to the leisure travel market and the traditional summer holidays demands. The business and business related travel activities are still in gradual recovery.

Dan Chi: Thank you, management, for your answers. Thank you.

Dan Chee: Thank you, management, for your answers. Thank you.

Operator: Thank you for the questions. Next question comes from the line of Sijie Lin from CICC. Please go ahead.

Sijie Lin: I have two questions. The first one is that we observed strong interest in becoming a hotel franchisee, and will the supply of branded hotels grow fast, which leads to intensifying competition. Do we see the interest differentiate from different brands?

Sijie Lin: [Non-English content] I have two questions. The first one is that we observed strong interest in becoming a hotel franchisee, and will the supply of branded hotels grow fast, which leads to intensifying competition. Do we see the interest differentiate from different brands?

Jin Hui: My second question is about the Southern China part. Among our new signings this year, how many of them are in Southern China? And when we expect our penetration rates in Southern China to see a significant increase? Thank you.

Sijie Lin: My second question is about the Southern China part. Among our new signings this year, how many of them are in Southern China? And when we expect our penetration rates in Southern China to see a significant increase? Thank you.

Jin Hui: 好的，我来回答这两个问题。第一个关于酒店投资收益，确实酒店一定程度上受到整个周期性的影响。目前一个RevPAR的恢复好，第二个，房地产的租金处于一个低位，它确实是个非常好的投资的周期。但是我们更注意看到，由于这一轮的头部连锁化的这样的一个趋势，使得华住和华住旗下的品牌，带来了对加盟商更好的回报，也展现了更强的品牌溢价和市场的这个覆盖率。关于华南的——对不起，第一个问题先翻译一下。

Jin Hui: [Non-English content]

Jin Hui: I will take the two questions. Yes. First on the ROI in the hospitality sector. Yes, because of the macroeconomic impact, we can see that in the hospitality, the RevPAR recovery is now very good. Secondly, we can see that the real estate rental expenses are now in a very low position. Right now it makes it a very good window to invest in the hospitality sector. I must say that for us, to have such a very good signing, it is because the franchisers have seen the value of the H World brand has bring to them, which also of course underscores the brand premium, as well as our very strong market coverage.

[Translator]: I will take the two questions. Yes. First on the ROI in the hospitality sector. Yes, because of the macroeconomic impact, we can see that in the hospitality, the RevPAR recovery is now very good. Secondly, we can see that the real estate rental expenses are now in a very low position. Right now it makes it a very good window to invest in the hospitality sector. I must say that for us, to have such a very good signing, it is because the franchisers have seen the value of the H World brand has bring to them, which also of course underscores the brand premium, as well as our very strong market coverage.

Jin Hui: 第二个问题关于南方，大家都很关心，因为作为大湾区，是中国经济和未来这个人口最多的大区之一，华住对南方非常的重视。应该讲在通过两年的组织的优化和这个下沉的这样的一个战略的部署下，我们很高兴看到了整个南方的渗透速度比2019年应该是翻倍还多。所以我们对南方和大湾区未来的整个发展，市占率的持续提升是充满了充足的信心。谢谢。

Jin Hui: [Non-English content]

Jin Hui: Second question. South China. I know that many of you are interested in our further penetration in South China region, because this part of the region is a place with very large population base and strong economic power. Yes, H World Group attaches great importance to South China. In the last two years with our organizational optimization, with our lower tier city strategy, I'm very happy to report that our penetration in South China is more than doubled than the level of 2019. That means we are very, very confident in the development of South China market, and we will further improve our penetration in this region. Thank you.

[Translator]: Second question. South China. I know that many of you are interested in our further penetration in South China region, because this part of the region is a place with very large population base and strong economic power. Yes, H World Group attaches great importance to South China. In the last two years with our organizational optimization, with our lower tier city strategy, I'm very happy to report that our penetration in South China is more than doubled than the level of 2019. That means we are very, very confident in the development of South China market, and we will further improve our penetration in this region. Thank you.

Jin Hui: 我想补充一点。

Jin Hui: [Non-English content]

Jin Hui: Thank you.

[Translator]: Thank you.

Jin Hui: [Non-English content]

Operator: Thank you for the questions. One moment for the next question. Next on the line of Lydia Ling from Citi. Please ask your question.

Lydia Ling: 管理层好，金总，何总，你们好，我是花旗的Lydia。我这边有两个问题想请教一下，那我第一个问题呢，就是想问一下，首先非常感谢跟我们分享了一个全年的RevPAR的指引。那么我们也想了解一下，就是管理层现在目前对于明年的RevPAR走向是如何看的，尤其是基于今年一个比较相对高的基数。那么尤其在房价方面，今年也看到了非常强劲的表现，那么是否这个就是在房价ADR这个部分能够在明年持续？这是第一个问题。那么第二个问题呢，是想请教一下，在开店观念方面的，因为看到二季度呢观念相对还是比较多，因为之前的疫情的关系，那么能分享一下，就是说，现在七八月份的这个就是一个净开店的情况，大概是怎么样一个情况？那个观念的这个部分是不是基本上是在上半年已经就是说已经做完了这样子的。 Uh, so management, this is Lydia from Citi, and so I have two questions. The first one is thanks for sharing your full year RevPAR guidance, so could you give us some color on your outlook for the next year on RevPAR trend, and especially given a very high base this year. ADR has showed a very strong performance this year, so do you think it's course of thing next year?

Lydia Ling: [Non-English content] Management, this is Lydia from Citi, and so I have two questions. The first one is thanks for sharing your full year RevPAR guidance, so could you give us some color on your outlook for the next year on RevPAR trend, and especially given a very high base this year. ADR has showed a very strong performance this year, so do you think it's course of thing next year?

Lydia Ling: My second question is on expansion. Store closure looks more in Q2, and so because of the COVID impact previously. Could you share the updates on your July and also August net opening trend? Is, like, the closure almost done in H1? Thank you.

Jin Hui: 我来先回答一下，如果季虹需要补充的，到时候再来补充一下。我觉得华住始终坚持的有一点就是，华住在中国始终要塑造自己的核心竞争能力，并且在不确定的环境下保持一个长期的、可持续的、具有竞争力的这样一个市场的这样的一个地位。面对未来的不确定，我认为整个对营销和无论是ADR和出租率的提升，都是华住管理层对长期最为重要的关注的内容。我们在未来在本地化的营销、华住会面对多场景业务的覆盖，以及我们科技的持续使用，都是华住在整个的营销和提升我们业绩方面，我认为是长期的努力的方向。这个大概是第一个问题的回复，关于是否可持续的这个问题。

Jin Hui: [Non-English content]

Jin Hui: Let me first respond to your question, regarding the whether we are going to sustain such good performance for ADR and RevPAR. Then I think CFO can make some additions if necessary. I believe that H World always stay true to one point that is we must always shape our own core competitive edge in the China market. Giving the uncertainties we need to keep long term sustainable competitive market position. Facing the future uncertainties as the backdrop, I think for the overall improvement and sustainable development of ADR and OCC, the management attach great importance to these issues. In the future, we are going to have more localized marketing covering multi scenarios. We will continue to leverage technologies to improve our overall conversion and our performance. This definitely is going to be something we stay true to in the long term. That's for your first question regarding whether it is sustainable development in the future.

[Translator]: Let me first respond to your question, regarding the whether we are going to sustain such good performance for ADR and RevPAR. Then I think CFO can make some additions if necessary. I believe that H World always stay true to one point that is we must always shape our own core competitive edge in the China market. Giving the uncertainties we need to keep long term sustainable competitive market position.

[Translator]: Facing the future uncertainties as the backdrop, I think for the overall improvement and sustainable development of ADR and OCC, the management attach great importance to these issues. In the future, we are going to have more localized marketing covering multi scenarios. We will continue to leverage technologies to improve our overall conversion and our performance. This definitely is going to be something we stay true to in the long term. That's for your first question regarding whether it is sustainable development in the future.

Jin Hui: 关于第二个问题，我手上没有七八月精准的数字，但是我可以随着我们整个华住的管道数字，高质量的管道的这个签约量持续的提升，华住在今年的下半年和明年肯定会迎来相对的开业的一个周期。因为大家都知道，我们的筹开时间大概差不多有一个半年以上的这个周期，所以随着管道数量的增加，必然会增加我们基准的开业的数量。同时对于低质量门店的清理，华住在过去几年，哪怕在疫情下最艰难的时刻，我们都坚定不移，因为提供高质量的这样的一个产品和服务是华住战略转型非常重要的一个方面，所以我们也一定程度上会对于低质量和1.0的这个产品的转型升级，包括重新的换新，都是华住未来的工作的重点。谢谢。

Jin Hui: [Non-English content]

Jin Hui: Now on your second question, I don't have any specific net opening numbers for July and August, but I must say if you pay attention to our hotels in the pipeline, you see that the improvement of the signings for the higher quality premium hotels in the pipeline, which definitely will take place of more openings in the H2 this year and next year. Usually you know it takes us about half a year's time to prepare the pipeline hotels into official opening. As we have more hotels in our pipeline with the specific high quality segment, it will definitely increase our next quarter openings. Speaking of the closure of the lower quality hotels over the last few years, even if we were stricken the hardest during the pandemic, we stay true to this operation strategy, that is to improve our quality and to improve our products and services. This is a very important part of H World's strategic transformation. We will continue to either transform, upgrade, or repackage the lower quality 1.0 version and some other lower brands. This will continue to be our strategy. Thank you.

[Translator]: Now on your second question, I don't have any specific net opening numbers for July and August, but I must say if you pay attention to our hotels in the pipeline, you see that the improvement of the signings for the higher quality premium hotels in the pipeline, which definitely will take place of more openings in the H2 this year and next year. Usually you know it takes us about half a year's time to prepare the pipeline hotels into official opening.

[Translator]: As we have more hotels in our pipeline with the specific high quality segment, it will definitely increase our next quarter openings. Speaking of the closure of the lower quality hotels over the last few years, even if we were stricken the hardest during the pandemic, we stay true to this operation strategy, that is to improve our quality and to improve our products and services. This is a very important part of H World's strategic transformation. We will continue to either transform, upgrade, or repackage the lower quality 1.0 version and some other lower brands. This will continue to be our strategy. Thank you.

Jihong He: Thank you. I just wanted to summarize here. We stay with our forecast this year or our guidance this year. We will open 1,400 hotels, and plan to close 650 hotels.

Operator: Thank you for the question. Our next question comes from the line of Lina Yin from HSBC. Please go ahead.

Lina Yin: 管理层谢谢接受我的问题，我有两个问题。第一个问题我还是想请教一下RevPAR的一个问题，这回在路演材料里面，非常感谢分享了很多关于这个酒店portfolio升级的一些信息，那我们可不可以重新考虑一下我们稳态的这个RevPAR。其实即使我们对行业的RevPAR有一个就是会逐渐normalize的这个预期，但是因为我们升级的动力，就比如说我们觉得行业它是会稳态的RevPAR，就是疫情后大概对比疫情前是110，就华住的话，因为升级的动力应该是远远高于这个的，比如说120或者120以上，就不知道这个问题可不可以帮我们这个再理解一下。 So I will translate my first question. First question is to ask management to help us to reconsider the steady state RevPAR for 华住. We got a lot of new information on the upgrade of our 华住 hotel portfolio over the COVID period. So if we think the overall hotel industry, the RevPAR probably will stabilize at 110% above 2019 level, does that mean 华住's hotel RevPAR will stabilize at a much higher level versus 2019, say 120% or even above? 第一个问题是这个，谢谢。

Lina Yin: [Non-English content] So I will translate my first question. First question is to ask management to help us to reconsider the steady state RevPAR for [Non-English content]. We got a lot of new information on the upgrade of our [Non-English content] hotel portfolio over the COVID period. So if we think the overall hotel industry, the RevPAR probably will stabilize at 110% above 2019 level, does that mean [Non-English content] hotel RevPAR will stabilize at a much higher level versus 2019, say 120% or even above?[Non-English content]

Jihong He: Thank you for your question. I will take your question about RevPAR. Yes, we are very happy to see that 华住's RevPAR recovery was higher than the average industry, because really our continued product upgrade, product mix change, and our effective sales effort. For the full year, we gave our guidance of 116% to 121%, and we remain confident that we can deliver this number. For the further how RevPAR will develop in the near future beyond this year, RevPAR is always a result of the economic activity. I can only give you the confidence that 华住's hotel is really very well positioned, independent of economic cycle in the short term. 'Cause our very large portfolio of our hotels are really affordable hotels, and we have observed that a lot of guests coming from different segments, really enjoying our hotels as well.

Jihong He: Thank you for your question. I will take your question about RevPAR. Yes, we are very happy to see that [Non-English content] RevPAR recovery was higher than the average industry, because really our continued product upgrade, product mix change, and our effective sales effort. For the full year, we gave our guidance of 116% to 121%, and we remain confident that we can deliver this number. For the further how RevPAR will develop in the near future beyond this year, RevPAR is always a result of the economic activity. I can only give you the confidence that [Non-English content] hotel is really very well positioned, independent of economic cycle in the short term. 'Cause our very large portfolio of our hotels are really affordable hotels, and we have observed that a lot of guests coming from different segments, really enjoying our hotels as well.

Lina Yin: 好，谢谢回答我的问题。我有第二个问题，其实就是还是行业的问题，我自己不太理解的，就是我们看到我们的竞对嘛，就是比较那个高端的这个有限服务酒店，它其实在RevPAR的这个恢复趋势，还有扩张趋势都比较强劲，当然基数也比较低一点。那同时我们也有评论到，就是商务出行这块，其实恢复是比较缓慢的，但竞争对手其实是以商务出行这个为主的嘛。所以就是为什么我们会有这样这个不同的结果呀？这个可以帮助理解一下吗？ My second question is on the peer comparison. We see some peers who focus on upper and limited service hotel delivered very strong RevPAR growth and expansion growth, likely from a low base. Meanwhile, we have commented the business related travel has a more moderate and gradual recovery. Can management help me reconcile the discrepancy and comments and the results from the two perspectives? 谢谢。

Lina Yin: [Non-English content] My second question is on the peer comparison. We see some peers who focus on upper and limited service hotel delivered very strong RevPAR growth and expansion growth, likely from a low base. Meanwhile, we have commented the business related travel has a more moderate and gradual recovery. Can management help me reconcile the discrepancy and comments and the results from the two perspectives? [Non-English content]

Jin Hui: [Non-English content]

Jin Hui: 我来试图回答、理解这个问题和回答这个问题。事实上我们提的商务和整个商旅，它是一个定义的不一样。我认为从大的，你们可以看到携程和整个其他行业的、同类行业的这个分享，我们都关注到了这样的一个趋势，因为今年的二季度和暑假都是传统的中国的旅游和休闲旺季，这个大势我想谁都不会避免，对吧？所以我觉得在旅游和传统的旺季带来更好的业绩的展现，肯定是更大原因是来自于我们整个旅游本地休闲市场的这样的一个激发。特别可以关注到中国政府在持续刺激内需服务业，展开文旅，对吧？包括什么直播的烧烤，这个村超的比赛等等一些中国政府在文旅产业的持续的投入，在大的环境上必然展现了我们行业在休闲旅游市场的这样在传统旺季的增长。在商务，纯商务市场受到中国经济宏观的影响，且恢复周期算晚，算短。因为现在整个疫情开放至今也就差不多八个月时间，整个经济的恢复的叫伤疤效应，它还需要一些时间去恢复，我认为也是客观的事实。所以我不认为我们的整个行业会有太大的差异。其实整个趋势里面，华住受益于整个头部和市场覆盖的这样的完整度，使得我们更得到国民市场的需要，或者喜爱。我们也看到一些局部区域确实展现了价格的过高，或者是这样的趋势，我们也关注到如何提供更多的产品去覆盖这样的市场。所以我不认为有太大的差异在恢复当中。谢谢。

Jihong He: Well, for your question, I think that we have different definitions on business-related travels with some of our competitors. If you look at the statistics issued by Ctrip and other industry players, you notice such a common trend that is usually Q2 and summer holiday on vacation are the peak seasons for China's travel and leisure market, and that's always true. Speaking of the good performance in this period, larger reason comes from the stimulus package the government has taken to stimulate the overall leisure and tourism travel market on the overall macro.

[Translator]: Well, for your question, I think that we have different definitions on business-related travels with some of our competitors. If you look at the statistics issued by Ctrip and other industry players, you notice such a common trend that is usually Q2 and summer holiday on vacation are the peak seasons for China's travel and leisure market, and that's always true. Speaking of the good performance in this period, larger reason comes from the stimulus package the government has taken to stimulate the overall leisure and tourism travel market on the overall macro.

Jin Hui: The culture and tourism market, right? For example, the barbecue festival in Zibo, in the Guizhou village basketball activities. The Chinese government has constantly been investing on promoting the culture and tourism sector. Overall, in the mega trend, we definitely sense that, on basis of such a peak season growth, we have seen very good performance with the demand. In the pure commercial and travel related trips and travels, I think, partially it is impacted by Chinese macroeconomic prospect, and partly it is because it usually delivers longer term recovery. Because if you look at the reopening since now, it is just eight months. Eight months' time is not long enough for the full recovery of this market.

[Translator]: The culture and tourism market, right? For example, the barbecue festival in Zibo, in the Guizhou village basketball activities. The Chinese government has constantly been investing on promoting the culture and tourism sector. Overall, in the mega trend, we definitely sense that, on basis of such a peak season growth, we have seen very good performance with the demand. In the pure commercial and travel related trips and travels, I think, partially it is impacted by Chinese macroeconomic prospect, and partly it is because it usually delivers longer term recovery. Because if you look at the reopening since now, it is just eight months. Eight months' time is not long enough for the full recovery of this market.

Operator: Thank you for the questions. With that, I would like to hand the call back to management for closing remarks.

Jason Chen: Thanks everyone for taking your time with us today, and we look forward to see you in upcoming quarter. Thank you. Bye-bye.

Operator: That concludes today's conference call. Thank you for your participation. You may now disconnect.

Q2 2023 H World Group Ltd Earnings Call

Request a DemoDemo

HTHT

H World Group

Earnings