H World Group Limited American Depositary Shares 2026 Q2 Earnings Call

Please go ahead. Thank you, operator.

Good evening and good morning, everyone. Thanks for joining us today. Welcome to H World Group 2026 second quarter and first half earnings conference call. Joining us today is our founder and Executive Chairman, Mr. Ji Qi, our CEO, Mr. Jin Hui, our CFO, Mr. Arthur Yu. Following our prepared remarks, management will be available to answer your questions. Before we continue, please note that the discussion today will include forward-looking statements made under the Safe Harbor provision of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the views expressed today. A number of potential risks and uncertainties are outlined in our public filings with SEC. H World Group does not undertake any obligation to update any forward-looking statements except as required under applicable laws.

On the call today, we will also mention adjusted financial measures during the discussion of our performance. Reconciliation of those measures to comparable GAAP information can be found in our earnings release that was distributed earlier today. As a reminder, this conference call is being recorded. The webcast of this conference call, as well as supplementary slide presentation, is available at ir.hworld.com. With that, now I will hand over the call to our CEO, Mr. Jin Hui, to discuss our business performance in the second quarter of 2026. Mr. Jin, please. Dear investors and analysts, good day. Thanks for joining us today. Welcome to H World Group's second quarter 2026 earnings conference call. During the first half of 2026, domestic culture and tourism travel in China maintained steady growth.

According to the Ministry of Culture and Tourism, domestic resident trips reached 3.5 billion in the first half, representing a 5.4% year-over-year increase. As visa-free policy for multiple countries continued to take effect, inbound tourism gained strong momentum, bringing new growth opportunities to China's lodging industry. On the consumption structural front, the growth of total domestic travel spending moderated up 2% year-over-year to RMB 3.2 trillion in the first half. This reflects new consumption characteristics among travelers, which are more frequent trips with more prudent spending decisions. Recently, the government issued a plan to build China into a nation strong in tourism during the 15th five-year plan period, which laid out 2030 targets including annual domestic resident trips exceeding 8.3 billion, with total consumption reaching RMB 7.7 trillion, and inbound tourist arrivals reaching 190 million, with total spending exceeding $150 billion.

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

面对当下行业机遇与挑战，华住始终坚守长期主义，做难而正确的事情。我们扎根大众住宿赛道，锚定高质量发展。在酒店网络的布局上，我们持续开拓下沉市场，同时抢占核心城市优质点位，持续优化存量门店布局。二季度，集团通过区域突破和低线城市渗透，实现了高质量的网络扩张。在营房量同比增加12.7%的驱动下，集团酒店GMV同比增长13.2%至305亿元。华住会员体量及会员预订间夜量也均实现稳步增长。更为重要的是，集团轻资产的加盟业务，无论在规模、收入还是利润上，均实现了强劲的增长。2026年二季度加盟收入同比提升25.2%至36亿元，经营毛利同比增长18.5%至22亿元。 Facing the current industry opportunities and challenges, H World remains committed to do the right thing for the long term.

We focus on the mass market lodging segment and emphasize high quality development. On hotel network, we continue expanding into lower tier cities, while at the same time securing those prime locations in the core cities, continuously optimizing our existing hotel footprint. In the second quarter, we achieved high quality network expansion through regional breakthroughs and lower tier city penetration, backed by a 12.7% year-over-year increase in the number of rooms in operation. The group's hotel GMV grew 13.2% year-over-year to RMB30.5 billion. Room nights booked by members also achieved steady growth. More importantly, the group assets light, managed and franchised business delivered robust growth across scale, revenue, and profit.

In the second quarter, managed and franchise revenue increased 25.2% year-over-year to RMB3.6 billion, and gross operating profit grew 18.5% year-over-year to RMB2.2 billion.

在行业竞争环境趋于良性的背景之下，华住中国依托产品服务的迭代升级、精细化收益管理及综合营销能力的持续提升，二季度ADR同比增长2.6%，实现了连续四个季度ADR的正增长。ADR的增长也带动二季度RevPAR同比提升1.1%。 With industry competition rationalizing, H World China achieved a 2.6% year-over-year increase in ADR in the second quarter, which was backed by our continuous product and service upgrades, revenue management, and integrated marketing capabilities.

This marked our fourth consecutive quarters of positive ADR growth. The ADR improvement fueled a 1.1% year-over-year increase in RevPAR in the same period.

我们稳步推进高质量的网络扩张，持续完善城市布局。截至二季度末，华住中国在营酒店达到13417家。我们的酒店品牌和产品持续获得加盟方的青睐和高度认可，公司签约表现稳健。截止6月底，管道内酒店同比、环比均有提升，达3054家。我们的在营及管道内酒店已覆盖1468个城镇，继续向千城万店2.0的目标迈进。在布局低线下沉市场的同时，我们持续优化核心城市优质商圈的门店布局。我们相信，依托华住不断精进的产品实力与品牌势能，我们能够在中国核心存量市场取得进一步突破。 We continue to steadily expand our high quality hotel network and enhance our nationwide network presence.

As of end June, we had 13,417 hotels in operation in China. Our hotel brands and products continue to gain strong favor and recognition from franchisees, and we maintain a solid signing momentum. As of end June, hotels in pipeline increased both year-over-year and quarter-over-quarter, reached 3,054. Our hotels in operation and in pipeline cover 1,468 cities in China, and we are matching towards our goal of 20,000 hotels in 2,000 cities. While expanding the lower tier market, we also continue optimizing hotel footprint in core cities and prime commercial districts. We believe that with H World's strengthened product competencies and brand influence, we can achieve further breakthrough in China's core existing markets.