Huazhu Group Limited Announces Preliminary Results for Hotel Operations in the Third Quarter of 2020

Rhea-AI Summary

Huazhu Group Limited (NASDAQ: HTHT) announced preliminary Q3 2020 results, highlighting a gradual recovery in hotel operations despite COVID-19 impacts. The occupancy rate improved, driven mainly by leisure travel, with 91% of Steigenberger Hotels AG's properties operational as of October 31. However, the recovery paused in late September due to a new COVID-19 wave in Europe. Huazhu is adjusting its hotel portfolio by closing 550-600 hotels, increasing from 350-450. Expected net revenues for Q3 2020 may see a 0-2% rise year-over-year, with a decline of 10-12% if excluding Steigenberger.

Positive

• Occupancy rates showed recovery, backed by leisure traveling.
• 91% of Steigenberger Hotels AG's properties operational as of October 31.

Negative

• Recovery trend paused in late September due to COVID-19 resurgence in Europe.
• Average daily room rates decreased by 10.3% to 11.4% in Q3 2020.

SHANGHAI, China, Nov. 05, 2020 (GLOBE NEWSWIRE) -- Huazhu Group Limited (NASDAQ: HTHT and HKEX: 1179) (“Huazhu”, “we” or “our”), a world-leading hotel group, today announced preliminary results for hotel operations in the third quarter ended September 30, 2020 (“Q3 2020”).

Recovery continued in Q3 2020

During Q3 2020, despite some mini-outbreaks in several cities, our occupancy rate recovery continued, thanks to China’s effective control of the COVID-19 pandemic. In addition, our average daily room rate had also recovered gradually along with the occupancy rate. More importantly, leisure traveling was the key driver to lead this recovery, which had resulted in outstanding performance of our upper-midscale and upscale brand hotels.

Steigenberger Hotels AG and its subsidiaries (“DH”) operating performances had also recovered steadily from July until mid-September 2020. However, this recovery trend was temporarily paused since late September due to the second wave of COVID-19 outbreak in European countries. To mitigate the effects of this situation, we are taking further cost and cash flow measures, such as deferred rental payments, reducing or eliminating discretionary corporate spending and capital expenditures, etc. As of October 31, 2020, 91% or 107 of DH hotels were in operation.

Starting from Q3 2020, we have been evaluating our soft brand hotel portfolio and removing hotels with poor product quality or those that do not fit Huazhu’s long-term development strategy from our portfolio. We believe this will help to improve the hotels’ performance and attract like-minded franchisees to join our network. Accordingly, we are now revising our hotel closure target to 550-600 hotels for 2020, up from our initial expectation of 350-450 hotels.

In Q3 2020, Huazhu expects net revenues to increase 0% to 2% year-over-year or to decline 10% to 12% if excluding the addition of DH.

Operating Results: Legacy-Huazhu⁽¹⁾

				Number of hotels						Number of rooms
		Opened in Q3 2020		Closed(2) in Q3 2020		Net added in Q3 2020		As of September 30, 2020(3)		As of September 30, 2020
Leased and owned hotels		9		(12	)	(3	)	687		91,218
Manachised and franchised hotels		511		(189	)	322		5,703		519,547
Total		520		(201	)	319		6,390		610,765

 

		As of September 30, 2020
		Number of hotels		Unopened hotels in pipeline
Economy hotels		4,213		1,097
Leased and owned hotels		446		4
Manachised and franchised hotels		3,767		1,093
Midscale and upscale hotels		2,177		1,175
Leased and owned hotels		241		18
Manachised and franchised hotels		1,936		1,157
Total		6,390		2,272

Operational hotels (excluding hotels under requisition)

		For the quarter ended
		September 30,		June 30,		September 30,		yoy
		2019		2020		2020		change
Average daily room rate (in RMB)
Leased and owned hotels		288		205		255		-11.4	%
Manachised and franchised hotels		235		181		211		-10.3	%
Blended		245		185		218		-11.1	%
Occupancy rate (as a percentage)
Leased and owned hotels		90.0	%	67.4	%	82.9	%	-7.1	p.p.
Manachised and franchised hotels		87.2	%	69.1	%	81.8	%	-5.3	p.p.
Blended		87.7	%	68.8	%	82.0	%	-5.7	p.p.
RevPAR (in RMB)
Leased and owned hotels		259		138		211		-18.5	%
Manachised and franchised hotels		205		125		173		-15.8	%
Blended		215		127		179		-16.9	%

Same-hotel operational data by class

Mature hotels in operation for more than 18 months (excluding hotels under requisition)

		Number of hotels				Same-hotel RevPAR						Same-hotel ADR						Same-hotel Occupancy
		As of September 30,				For the quarter ended September 30,				yoy change		For the quarter ended September 30,				yoy change		For the quarter ended September 30,				yoy change
		2019		2020		2019		2020				2019		2020				2019		2020		(p.p.)
Economy hotels		2,604		2,604		185		144		-21.9	%	199		168		-15.7	%	92.7	%	85.9	%	-6.8
Leased and owned hotels		421		421		207		159		-23.0	%	222		184		-17.2	%	93.4	%	86.9	%	-6.6
Manachised and franchised hotels		2,183		2,183		179		140		-21.6	%	193		164		-15.3	%	92.6	%	85.7	%	-6.9
Midscale and upscale hotels		1,108		1,108		289		238		-17.4	%	335		298		-11.2	%	86.1	%	80.1	%	-6.0
Leased and owned hotels		188		188		352		269		-23.5	%	402		345		-14.2	%	87.4	%	78.0	%	-9.4
Manachised and franchised hotels		920		920		271		230		-15.2	%	316		284		-9.9	%	85.8	%	80.7	%	-5.0
Total		3,712		3,712		222		178		-19.8	%	245		212		-13.5	%	90.4	%	83.8	%	-6.5

Operating Results: Legacy-DH⁽⁴⁾

										Number of		Unopened hotels
		Number of hotels								rooms		in pipeline
								As of		As of		As of
		Opened		Closed		Net added		September		September 30,		September 30,
		in Q3 2020		in Q3 2020		in Q3 2020		30, 2020(5)		2020		2020
Leased hotels		2		—		2		70		12,820		28
Manachised and franchised hotels		1		(2	)	(1	)	47		10,502		13
Total		3		(2	)	1		117		23,322		41

		For the quarter ended
		September 30,		June 30,		September 30,		yoy
		2019		2020		2020		change
Average daily room rate (in EUR)
Leased hotels		100		82		88		-11.8	%
Manachised and franchised hotels		94		97		101		6.9	%
Blended		98		87		93		-4.7	%
Occupancy rate (as a percentage)
Leased hotels		78.7	%	18.7	%	38.2	%	-51.4	p.p.
Manachised and franchised hotels		72.3	%	17.3	%	37.5	%	-48.2	p.p.
Blended		75.7	%	18.3	%	37.9	%	-49.9	p.p.
RevPAR (in EUR)
Leased hotels		79		15		34		-57.1	%
Manachised and franchised hotels		68		17		38		-44.6	%
Blended		74		16		35		-52.2	%

Hotel Portfolio by Brand

		As of September 30, 2020
		Hotels		Rooms		Unopened hotels
		in operation				in pipeline
Economy hotels		4,226		355,402		1,107
HanTing Hotel		2,722		253,155		477
Hi Inn		443		25,946		103
Elan Hotel(6)		849		53,471		461
Ibis Hotel		199		21,323		56
Zleep Hotel		13		1,507		10
Midscale and upscale hotels		2,281		278,685		1,206
Ibis Styles Hotel		63		7,470		28
Starway Hotel		428		37,137		307
JI Hotel		1,033		128,994		453
Orange Hotel		308		35,101		171
Crystal Orange Hotel		110		14,896		50
Manxin Hotel		59		5,854		34
Madison Hotel		23		2,953		24
Mercure Hotel		98		16,685		60
Novotel Hotel		12		3,387		13
Joya Hotel		10		1,926		1
Blossom House		26		978		25
Grand Mercure Hotel		7		1,489		8
Steigenberger Hotels & Resorts		49		11,556		8
IntercityHotel		44		7,827		20
Maxx by Steigenberger		5		777		1
Jaz in the City		2		424		2
Other partner hotels		4		1,231		1
Total		6,507		634,087		2,313

About Huazhu Group Limited

Originated in China, Huazhu Group Limited is a world-leading hotel group. As of September 30, 2020, Huazhu operated 6,507 hotels with 634,087 rooms in operation in 16 countries. Huazhu’s brands include Hi Inn, Elan Hotel, HanTing Hotel, JI Hotel, Starway Hotel, Orange Hotel, Crystal Orange Hotel, Manxin Hotel, Madison Hotel, Joya Hotel, Blossom House, and Ni Hao Hotel. Upon the completion of the acquisition of DH on January 2, 2020, Huazhu added five brands to its portfolio, including Steigenberger Hotels & Resorts, Maxx by Steigenberger, Jaz in the City, IntercityHotel and Zleep Hotel. In addition, Huazhu also has the rights as master franchisee for Mercure, Ibis and Ibis Styles, and co-development rights for Grand Mercure and Novotel, in the pan-China region.

Huazhu’s business includes leased and owned, manachised and franchised models. Under the lease and ownership model, Huazhu directly operates hotels typically located on leased or owned properties. Under the manachise model, Huazhu manages manachised hotels through the on-site hotel managers that Huazhu appoints, and Huazhu collects fees from franchisees. Under the franchise model, Huazhu provides training, reservations and support services to the franchised hotels, and collects fees from franchisees but does not appoint on-site hotel managers. Huazhu applies a consistent standard and platform across all of its hotels. As of September 30, 2020, Huazhu operates 16 percent of its hotel rooms under lease and ownership model, and 84 percent under manachise and franchise models.

For more information, please visit Huazhu’s website: http://ir.huazhu.com.

Safe Harbor Statement Under the U.S. Private Securities Litigation Reform Act of 1995: The information in this release contains forward-looking statements which involve risks and uncertainties. Such factors and risks include our anticipated growth strategies; our future results of operations and financial condition; economic conditions; the regulatory environment; our ability to attract and retain customers and leverage our brands; trends and competition in the lodging industry; the expected growth of demand for lodging; and other factors and risks detailed in our filings with the U.S. Securities and Exchange Commission. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements, which may be identified by terminology such as “may,” “should,” “will,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “forecast,” “project” or “continue,” the negative of such terms or other comparable terminology. Readers should not rely on forward-looking statements as predictions of future events or results.

Huazhu undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law.

Contact Information
Huazhu Investor Relations
Tel: 86 (21) 6195 9561
Email: ir@huazhu.com
http://ir.huazhu.com

 ______________________
(1) Legacy-Huazhu refers to Huazhu and its subsidiaries, excluding DH.
(2) The reasons for hotel closures mainly include non-compliance with our brand standards, operating losses, and property-related issues. In Q3 2020, we temporarily closed 17 hotels for brand upgrade and business model change purposes.
(3) As of September 30, 2020, 83 hotels were requisitioned by governmental authorities.
(4) Legacy-DH refers to DH.
(5) As of September 30, 2020, a total of 12 DH brand hotels were temporarily closed due to COVID-19.
(6) As of September 30, 2020, 4 Ni Hao hotels were included in the operational hotel total for Elan Hotels and 27 Ni Hao hotels were included in the pipeline total for Elan Hotels.

FAQ

What were Huazhu Group's Q3 2020 results regarding occupancy rates?

In Q3 2020, Huazhu Group reported improved occupancy rates, primarily driven by leisure travel.

How many hotels does Huazhu plan to close in 2020?

Huazhu Group revised its hotel closure target to 550-600 hotels for 2020.

What challenges did Huazhu face in Q3 2020?

Huazhu faced challenges due to a resurgence of COVID-19 in Europe, which paused recovery efforts.

What is the expected year-over-year revenue change for Huazhu in Q3 2020?

Huazhu expects net revenues in Q3 2020 to increase by 0% to 2% year-over-year, with a decline of 10% to 12% if excluding Steigenberger.