Huazhu Group Limited Reports First Quarter of 2021 Financial Results
Huazhu Group Limited (HTHT) reported its Q1 2021 financial results, showing a strong recovery from COVID-19 effects. The hotel turnover surged 66.3% year-over-year to RMB8.2 billion, while net revenues increased 15.6% to RMB2.3 billion (US$355 million), exceeding previous guidance. Despite a net loss of RMB248 million (US$38 million), this was significantly improved from RMB2.1 billion in Q1 2020. Huazhu anticipates Q2 2021 net revenue growth of 87%-89% year-over-year and expects to operate 6,881 hotels, with 2,649 in the pipeline. The acquisition of CitiGO is set to enhance its brand portfolio.
- Net revenues increased 15.6% year-over-year to RMB2.3 billion (US$355 million).
- Hotel turnover surged 66.3% year-over-year to RMB8.2 billion.
- Net revenue growth expected in Q2 2021 in the range of 87%-89% compared to Q2 2020.
- Improved net loss of RMB248 million compared to RMB2.1 billion loss in Q1 2020.
- Acquisition of CitiGO for RMB750 million expected to enhance brand portfolio.
- Net loss attributable to Huazhu Group Limited was RMB248 million, indicating ongoing challenges.
- Adjusted EBITDA for Q1 2021 was negative RMB133 million (US$21 million).
- Operating cash outflow for Q1 2021 was RMB957 million (US$147 million).
- A total of 6,881 hotels or 662,512 hotel rooms in operation as of March 31, 2021.
- Hotel turnover1 increased
66.3% year-over-year to RMB8.2 billion for the first quarter. Excluding Steigenberger Hotels AG and its subsidiaries (“DH”), hotel turnover increased113.4% year-over-year for the first quarter. - Net revenues increased
15.6% year-over-year to RMB2.3 billion (US$355 million )2 for the first quarter, better than revenue guidance previously announced of8% to10% . Excluding DH, net revenues for the first quarter increased68.8% year-over-year, better than revenue guidance previously announced of61% to63% . - Net loss attributable to Huazhu Group Limited was RMB248 million (US
$38 million ) for the first quarter of 2021, compared with a RMB2.1 billion loss for the first quarter of 2020 and net income attributable to Huazhu Group Limited of RMB703 million in the previous quarter. Net income attributable to Huazhu Group Limited from Legacy-Huazhu was RMB53 million for the first quarter of 2021. - Excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities, adjusted net loss attributable to Huazhu Group Limited (non-GAAP) for the first quarter of 2021 was RMB451 million (US
$70 million ), compared with RMB1.1 billion for the first quarter of 2020. Adjusted net loss attributable to Huazhu Group Limited (non-GAAP) from Legacy-Huazhu for the first quarter of 2021 was RMB150 million. - EBITDA (non-GAAP) for the first quarter of 2021 was RMB70 million (US
$11 million ), compared with negative RMB1.7 billion for the first quarter of 2020. EBITDA from Legacy-Huazhu (non-GAAP) was RMB410 million for the first quarter of 2021, compared with negative RMB1.7 billion for the first quarter of 2020. - Excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities, adjusted EBITDA (non-GAAP) was negative RMB133 million (US
$21 million ) for the first quarter of 2021. Adjusted EBITDA from Legacy-Huazhu (non-GAAP) was RMB207 million for the first quarter of 2021. - In the second quarter of 2021, Huazhu expects net revenues growth to be in the range of
87% -89% compared to the second quarter of 2020, or90% -92% if excluding DH. To provide a more meaningful guidance excluding the impact of COVID-19, Huazhu expects net revenue growth to be in the range of27% -29% compared to pre-COVID-19 results in the second quarter of 2019, or20% -22% if excluding DH.
SHANGHAI, China, May 25, 2021 (GLOBE NEWSWIRE) -- Huazhu Group Limited (NASDAQ: HTHT and HKEX: 1179) (“Huazhu”, “the Company”, “we” or “our”), a world-leading hotel group, today announced its unaudited financial results for the first quarter ended March 31, 2021.
As of March 31, 2021, Huazhu’s worldwide hotel network in operation totaled 6,881 hotels and 662,512 rooms, including 120 hotels from DH. During the first quarter of 2021, our Legacy-Huazhu3 business opened 209 hotels, including 2 leased (or leased-and-operated) hotels and 207 manachised (or franchised-and-managed) hotels and franchised hotels, and closed a total of 117 hotels, including 19 leased hotels and 98 manachised and franchised hotels. During the first quarter of 2021, the Legacy-DH4 business opened 1 leased hotels and closed 1 manachised and franchised hotel. As of March 31, 2021, Huazhu had a total of 2,649 unopened hotels in the pipeline, including 2,608 hotels from the Legacy-Huazhu business and 41 hotels from the Legacy-DH business.
Legacy-Huazhu Only – First Quarter of 2021 Operational Highlights
As of March 31, 2021, Legacy-Huazhu had 6,761 hotels in operation, including 664 leased and owned hotels, and 6,097 manachised hotels and franchised hotels. In addition, as of the same date, Legacy-Huazhu had 638,619 hotel rooms in operation, including 89,901 under the lease and ownership model, and 548,718 under the manachise and franchise models. Legacy-Huazhu also had 2,608 hotels in the pipeline, including 19 leased and owned hotels and 2,589 manachised and franchised hotels. The following discusses Legacy-Huazhu’s RevPAR, average daily room rate (“ADR”) and occupancy rate for its leased and owned hotels, as well as manachised and franchised hotels (excluding hotels under governmental requisition) for the periods indicated.
- The ADR was RMB209 in the first quarter of 2021, compared with RMB189 in the first quarter of 2020, RMB231 in the previous quarter, and RMB221 in the first quarter of 2019.
- The occupancy rate for all Legacy-Huazhu hotels in operation was
66.2% in the first quarter of 2021, compared with46.7% in the first quarter of 2020,80.6% in the previous quarter, and80.6% in the first quarter of 2019. - Blended RevPAR was RMB138 in the first quarter of 2021, compared with RMB88 in the first quarter of 2020, RMB186 in the previous quarter, and RMB178 in the first quarter of 2019.
- For all Legacy-Huazhu hotels which had been in operation for at least 18 months, the same-hotel RevPAR was RMB138 for the first quarter of 2021, representing a
50.2% increase from RMB92 for the first quarter of 2020, with a7.6% increase in ADR and a 19.2-percentage-point increase in occupancy rate; comparing the first quarter of 2021 with the pre-COVID-19 first quarter of 2019, RevPAR represented a29.9% decrease from RMB187 for the first quarter of 2019, with a12.6% decrease in ADR, and a 16.6-percentage-point decrease in occupancy rate.
Legacy-DH Only – First Quarter of 2021 Operational Highlights
As of March 31, 2021, Legacy-DH had 120 hotels in operation, including 73 leased and owned hotels and 47 manachised hotels and franchised hotels. In addition, as of the same date, Legacy-DH had 23,893 hotel rooms in operation, including 13,527 under the lease and ownership model and 10,366 under the manachise and franchise models. Legacy-DH also had 41 hotels in the pipeline, including 27 leased and owned hotels and 14 manachised and franchised hotels. The following discusses Legacy-DH’s RevPAR, ADR and occupancy rate for its leased as well as manachised and franchised hotels (excluding hotels temporarily closed) for the periods indicated.
- The ADR was EUR69 in the first quarter of 2021, compared with EUR89 in the first quarter of 2020 and EUR76 in the previous quarter.
- The occupancy rate for all Legacy-DH hotels in operation was
18.8% in the first quarter of 2021, compared with51.7% in the first quarter of 2020 and22.5% in the previous quarter. - Blended RevPAR was EUR13 in the first quarter of 2021, compared with EUR46 in the first quarter of 2020 and EUR17 in the previous quarter.
Ji Qi, Founder, Executive Chairman and CEO of Huazhu commented: “Despite the COVID-19 resurgence and 'stay local' guidance pressuring our RevPAR recovery in January and February, we are very pleased to see the recovery quickly resumed since later March at an even stronger pace. Our April RevPAR recovered to the same pre-COVID-19 level of 2019, and RevPAR over the Labor Day holiday in China recorded an increase of over
First Quarter of 2021 Financial Results
In the first quarter of 2021, both the Legacy-Huazhu business and Legacy-DH businesses were negatively affected by the COVID-19 pandemic.
(RMB in millions) | Q1 2020 | Q4 2020 | Q1 2021 |
| Revenues: | |||
| Leased and owned hotels | 1,516 | 2,024 | 1,398 |
| Manachised and franchised hotels | 465 | 999 | 897 |
| Others | 32 | 48 | 32 |
| Net revenues | 2,013 | 3,071 | 2,327 |
Net revenues for the first quarter of 2021 were RMB2.3 billion (US
Net revenues from leased and owned hotels for the first quarter of 2021 were RMB1.4 billion (US
Net revenues from manachised and franchised hotels for the first quarter of 2021 were RMB897 million (US
Other revenues represent revenues generated from businesses other than our hotel operations, which mainly include revenues from the provision of IT products and services to hotels, and revenues from Huazhu Mall™ and other revenues from the Legacy-DH business, totaling RMB32 million (US
(RMB in millions) | Q1 2020 | Q4 2020 | Q1 2021 |
| Operating costs and expenses: | |||
| Hotel operating costs | 2,377 | 2,748 | 2,463 |
| Other operating costs | 8 | 22 | 12 |
| Selling and marketing expenses | 146 | 181 | 107 |
| General and administrative expenses | 316 | 336 | 328 |
| Pre-opening expenses | 111 | 36 | 21 |
| Total operating costs and expenses | 2,958 | 3,323 | 2,931 |
Hotel operating costs for the first quarter of 2021 were RMB2.5 billion (US
Selling and marketing expenses for the first quarter of 2021 were RMB107 million (US
General and administrative expenses for the first quarter of 2021 were RMB328 million (US
Pre-opening expenses for the first quarter of 2021 were mostly related to Legacy-Huazhu totaling RMB21 million (US
Other operating income, net for the first quarter of 2021 was RMB29 million (US
Loss from operations for the first quarter of 2021 was RMB575 million (US
Operating margin, defined as income from operations as a percentage of net revenues, for the first quarter of 2021, was a negative
Other income, net for the first quarter of 2021 was RMB262 million (US
Unrealized gains from fair value changes of equity securities for the first quarter of 2021 was RMB238 million (US
Income tax benefit for the first quarter of 2021 was RMB122 million (US
Net loss attributable to Huazhu Group Limited for the first quarter of 2021 was RMB248 million (US
Basic and diluted losses per share/American depositary share (ADS). For the first quarter of 2021, basic and diluted losses per share were RMB0.80 (US
EBITDA (non-GAAP) for the first quarter of 2021 was RMB70 million (US
Cash flow. Operating cash outflow for the first quarter of 2021 was a RMB957 million (US
Cash and cash equivalents and Restricted cash. As of March 31, 2021, the Company had a total balance of cash and cash equivalents of RMB5.7 billion (US
Debt financing. As of March 31, 2021, the Company had a total debt balance of RMB11.0 billion (US
COVID-19 update
Due to a COVID-19 resurgence in Shanghai, Beijing and Hebei Province and the “stay local” guidance prior to the Chinese New Year holiday (CNY), Legacy-Huazhu RevPAR in January and February 2021 recovered to
DH suffered from the lockdown policy in Germany due to the second and third wave of the COVID-19 pandemic in European countries since later last year. The lockdown period in Germany has been extended several times and still continues but with some relaxation in this policy depending on local vaccination processes. European countries began their vaccination process in December 2020. As of May 22nd, 2021, about
Acquisition of CitiGO
In May 2021, Huazhu completed the acquisition of CitiGO for a total consideration of RMB750 million enterprise value. Established in China in 2017, CitiGO had a total of 28 hotels in operation as of May 1st, 2021. The acquisition of CitiGO, which is known for its boutique design and distinct lodging experiences, is expected to further enrich Huazhu’s leisure and lifestyle brand portfolio.
Guidance
COVID-19 resurgence in January and February 2021 slowed down our hotel opening plan in the first quarter. In addition to that, we further emphasis on our quality hotels expansion strategy with revising down our non-standardized brand opening plan for the year. Therefore, we lowered our total gross opening target in 2021 from 1,800-2,000 hotels to 1,600-1,800 hotels. Moreover, due to the prolonged lockdown period in Germany, we also lowered our full year revenue growth guidance to be in range of
In the second quarter of 2021, Huazhu expects net revenue growth to be in the range of
The above forecast reflects the Company’s current and preliminary view, which is subject to change.
Conference Call
The Company’s management will host a conference call beginning at 9:00 a.m. Hong Kong time on Wednesday, May 26, 2021 (or 9:00 p.m. U.S. Eastern time on Tuesday, May 25, 2021) following the announcement of the results. The conference call will be a Direct Event call. All participants must preregister online prior to the call. Please use the link http://apac.directeventreg.com/registration/event/1598819 to complete the online registration at least 15 minutes prior to the commencement of the conference call. Once preregistration has been completed, participants will receive dial-in numbers, an event passcode, and a unique registrant ID. To join the conference, please dial the number you receive, enter the event passcode, followed by your unique registrant ID, and you will be joined to the conference promptly. Please dial in approximately 10 minutes before the scheduled time of the call.
A recording of the conference call will be available after the conclusion of the conference call through June 2, 2021. Please dial +1 (855) 452 5696 (for callers in the US), 400 632 2162 (for callers in mainland China), 800 963 117 (for callers in Hong Kong) or +61 2 8199 0299 (for callers outside the U.S., mainland China and Hong Kong) and enter the passcode 1598819.
Use of Non-GAAP Financial Measures
To supplement the Company’s unaudited consolidated financial results presented in accordance with U.S. GAAP, the Company uses the following non-GAAP measures defined as non-GAAP financial measures by the SEC: hotel operating costs excluding share-based compensation expenses; general and administrative expenses excluding share-based compensation expenses; selling and marketing expenses excluding share-based compensation expenses; adjusted income from operations excluding share-based compensation expenses; adjusted net income (loss) attributable to Huazhu Group Limited excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities; adjusted basic and diluted earnings per share/ADS excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities; EBITDA; adjusted EBITDA excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities; and adjusted EBITDA margin; adjusted net income (loss) attributable to Huazhu Group Limited excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities from Legacy-Huazhu; EBITDA from Legacy-Huazhu; adjusted EBITDA excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities from Legacy-Huazhu. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the table captioned “Reconciliations of GAAP and non-GAAP results” set forth at the end of this release. The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding Company performance by excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities that may not be indicative of Company operating performance. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing Company performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to the Company’s historical performance. The Company believes these non-GAAP financial measures are also useful to investors in allowing for greater transparency with respect to supplemental information used regularly by Company management in financial and operational decision-making. A limitation of using non-GAAP financial measures excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities is that share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities have been and will continue to be significant and recurring in the Company’s business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.
The Company believes that EBITDA is a useful financial metric to assess the operating and financial performance before the impact of investing and financing transactions and income taxes, given the significant investments that the Company has made in leasehold improvements, depreciation and amortization expense that comprise a significant portion of the Company’s cost structure. In addition, the Company believes that EBITDA is widely used by other companies in the lodging industry and may be used by investors as a measure of financial performance. The Company believes that EBITDA information provides investors with a useful tool for comparability between periods because it eliminates depreciation and amortization expense attributable to capital expenditures. The Company also uses adjusted EBITDA, which is defined as EBITDA before share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities, to assess operating results of its hotels in operation. The Company believes that the exclusion of share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities helps facilitate year-on-year comparisons of the results of operations as the share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities may not be indicative of Company operating performance.
The Company believes that unrealized gains and losses from changes in fair value of equity securities are generally meaningless in understanding its reported results or evaluating its economic performance of its businesses. These gains and losses have caused and will continue to cause significant volatility in reported periodic earnings.
Therefore, the Company believes adjusted EBITDA more closely reflects the performance capability of hotels. The presentation of EBITDA and adjusted EBITDA should not be construed as an indication that the Company’s future results will be unaffected by other charges and gains considered to be outside the ordinary course of business.
The use of EBITDA and adjusted EBITDA has certain limitations. Depreciation and amortization expense for various long-term assets (including land use rights), income tax, interest expense and interest income have been and will be incurred and are not reflected in the presentation of EBITDA. Share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities have been and will be incurred and are not reflected in the presentation of adjusted EBITDA. Each of these items should also be considered in the overall evaluation of the results. The Company compensates for these limitations by providing the relevant disclosure of the deprecia
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