H World Group achieves 8.1% revenue growth in Q3 2025, boosted by strategic hotel expansion and rising membership engagement amid changing consumer demand.

Group 2025 third quarter earnings conference Call Joining us today is our founder and chairman, Mr. Jiqi, our CEO Mr. Jinghui, our CFO, Ms. Chen Hui, and our CSO, Ms. He Jihong. Following their prepared remarks, management will be available to answer your questions. Before we continue, please note that the discussion today will include forward looking statements made under the Safe harbor provision of the United States Private securities Litigation Reform act of 1995. Forward looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the views expressed today. A number of potential risks and uncertainties are outlined in our public filings with the SEC as H World Group does not undertake any obligations to update any forward looking statements except as required and applicable laws? On the call today, we will also mention adjusted financial measures during the discussion of our performance. Reconciliations of those measures to comparable GAAP information can be found in our earnings release that was distributed earlier today. As a reminder, this conference call is being recorded. The webcast of this conference call as well as supplementary slides presentation is available@ir.edgeworth.com with that, now I will hand over the call to our CEO Mr. Jinghui to discuss our business performance in the third quarter of 2025. Mr. Jing Sanji in Kanyado Kwanzu Da moment, I believe many of you have noticed that two weeks ago on the occasion of Edgewater's 20th anniversary, we successfully held a partner conference themed 20 Years Forging Ahead. Therefore, before diving into our third quarter performance review, I'd like to take a few minutes to once again share some of our thoughts on the long term outlook of China's hotel industry and us. In summary, we believe Edgeworth has great long term growth potentials by deeply rooted in China market. Currently we can observe that while the industry supply is relatively ample, high quality supply is in noticeable shortage compared to the matured US Market. China still has low hotel channel penetration and the industry remains fragmented as a unified large singular market similar to the US but with an even larger population base. The increase in churn ratio and the phase out of low quality supply will inevitably become a long term trend. More importantly, the demand for travel is gradually shifting from discretionary demand to necessity for Chinese consumers. Nowadays, China has the best infrastructure worldwide with extensive high speed rail and highway networks coverage. This has made traveling much easier and more convenient, facilitating the penetration of accommodation needs from major cities to county level markets. Additionally, Chinese consumers are beginning to redefine consumption concepts and oriental aesthetics. We can see a substantial increase in consumer design in seeking self pleasure which further drives the growth of experiential consumption such as tourism, exhibitions, concerts and sports events. Apparently the current supply quality in China's hotel industry is unable to fully meet consumers increasingly upgraded and diversified demand. Therefore, supply side reform will be the main theme of the future industry development and this will undoubtedly bring tremendous growth opportunities for domestic branded hotels. Like us, as the leading players in China's hotel industry, we will continue deepening our roots in the China market, pursuing high quality growth and delivering service excellence with a brand led approach to reduced industry. With centering on high quality and efficiency, we are full of confidence in the future development of China's hotel industry. after sharing our perspectives on the long term outlook, now let's turn to our third quarter performance. We are pleased to see early signs of improvements in the overall market condition. On the demand side, data from Railway, aviation and the number of tourists indicate that the domestic travel demands continuously to grow steadily with the increasing demand for travel being particularly evident during the National Day and mid autumn festivals holiday period. On the supply side, third party data shows that the sequential supply growth has stabilized and the year over year growth rate has moderated. However, we still need more time to see if this trend is sustainable. La we are glad to report that Edgeworth delivered good results across several key metrics in the quarter. In the third quarter we achieved a year over year increase in ADR while maintaining a relatively stable occupancy rate driven by refined revenue management initiatives including optimizing pricing strategies across flagship hotel, newly opened hotel and a matured hotel as well as refining promotional strategies and enhancing incentive programs. As a result, our RevPAR stayed largely stable compared to the same period last year. Xi Twan Jiang through breaking through in new cities and regions and further penetrating in the lower tier cities, we achieved another quarter of high quality network expansion driven by a 17.3% year over year increase in the number of rooms in operation. Our group Hotel Gross Merchandise Value (GMV) grew by 17.5% year over year to RMB 30.6 billion. Meanwhile, along with our network expansion and the continuous enhancement of Edge Rewards membership program, our membership base exceeded 300 million by the end of the third quarter, up 17.3% year over year and ranking number one globally. In addition, room nights sold to the members rose 19.7% compared to the same period of last year, exceeding 66 million and accounting for 74% of the total room nights sold which is also leading position in worldwide and . More importantly, our managerial franchise business delivered strong growth in its hotel network revenue as well as profit. Our third quarter growth management and franchise (MNF) revenue rose 27.2% year over year to RMB 3.3 billion and Group management and franchise (MNF) gross operating profits increased by 28.6% year over year to RMB 2.2 billion contributing over 70% of the Group's total gross operating profit. in terms of hotel network expansion, we remain steadfast in executing our strategic focus on economy and midscale segments to serve the mass market. This strategic positioning aligns precisely with the current consumer behavior of seeking value for money, products and services and can further demonstrate our competitive advantages by continuously upgrading our core products and enhancing our excellent service. With a customer centric principle, we are enhancing the quality of our hotel portfolio and strengthening our brand positioning to achieve long term sustainable growth. The new version of Huangting along with our middle school brand G Hotel and Orange Hotel will serve as the key growth engines for our expansion in the lower tier cities and provide strong foundation for achieving our strategic goal of 20,000 hotels in 2000 cities. At the same time, Edgewood has also made rapid breakthrough in the upper midscale segments. At the end of third quarter, our number of upper midscale hotels in operation and in pipeline exceeded 1,600 up 25.3% year over year. More importantly, to meet the growing consumer demand for quality living, oriental aesthetics and unique experiences, we recently launched a brand new upper midscale brand G icons during our 20th anniversary. The introduction of G Icon further enriches our upper mid scale brand portfolio and help us to achieve comprehensive coverage from oriental to Western brands and from selected service to lifestyle hotel offerings. G Icons brand embodies a combination of subtle, understated and elegant oriental aesthetic enabling a value leap from accommodation functionality to a holistic lifestyle experiences. Go. The success of G Hotels has demonstrated Chinese consumers affinity for Oriental aesthetics and culture. We are confident that building upon G Hotels foundation G Icon will further deepen the expression of Oriental aesthetics and the cultural element. Moreover, our group's strong supply chain and modular construction capability as well as our global leading membership and direct sales capability will effectively support our G Icons to reach low construction cost, high operational efficiency and high product quality. We believe G Icons will become one of the big driving force to support our penetration in the upper mid scale segment and has the potential to become another world class brand after hunting GE Hotel and Orange Brand Thank you. We remain focusing on strengthening our direct sales capabilities through entry rewards Membership program. Our membership program and direct sales capability are vital to our sustainable long term business growth. Our membership base has been growing as we expand our hotel network and entering into more cities. By the end of third quarter, Edge Rewards membership exceeded 300 million and the room night sold to the members grew 19.7% year over year with enlarging portion of contribution to the total room night sold. Going forward, we will further enhance our membership benefits, expand loyalty points usage scenarios and explore cross industry partnership to strengthen member engagement and enhance direct sales capability. This concludes the business updates for Edgeworth's third quarter 2025. Now I will hand over the call to our CFO Ms. Chen Hui to present the group's financial performance for the quarter.

Thank you Jinghui, Good evening and good morning everyone. Let me walk you through our third quarter financial overview. During the quarter our Group revenue grew 8.1% year over year to RMB 7 billion and legacy Huazhou revenue grew 10.8% year over year to RMB 5.7 billion. Both surpassed the high end of our previous guidance. It was mainly driven by better than expected REVPAR performance as well as hotel network expansion. Group adjusted EBITDA rose by 18.9% year over year to RMB 2.5 billion with margin improved by 3.3 percentage points year over year to 36.1%. The faster adjusted EBITDA growth and margin expansion were mainly contributed to further enlarged profit contribution from our slide business cost saving from Legacy DH partially on the absence of RMB81 million restructuring cost incurred in the third quarter last year as well as cost optimization efforts from Legacy Huaju. Looking into our slide management and franchise business in the third quarter, powered by our high quality asset line network expansion and better than expected REVPAR performance, our management and franchise business revenue recorded a robust 27.2% year over year growth to RMB 3.3 billion. More importantly, Merchandising franchise business gross operating profit rose by 28.6% year over year to RMB 2.2 billion with a margin of 68% in the third quarter. As a result, gross operating profit contribution from our management and franchise business further enlarged to 70% in the third quarter up 11.1 percentage point year over year. Moving to our cash flow and liquidity position in the third quarter, we generated $1.7 billion operating cash flow and at the quarter end The Group had RMB 13.3 billion cash and cash equivalent and RMB 6.6 billion net cash on the balance sheet. Lastly, on our guidance for the fourth quarter of 2025 we expect our group revenue to grow 2% to 6% compared to the same quarter last year and 3% to 7% if excluding DH, the monetized and franchise revenue in the fourth quarter of 2025 is expected to grow in the range of 17% to 21% compared to the fourth quarter last year. With that we are ready to take your questions. Operator, please open the line for Q and A.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 11 on your telephone and wait for our name to be announced. One moment for the first question. The first question comes from the line of Dan Chi of Morgan Stanley. Please go ahead.

Oh gosh. Good evening. My question is about RevPAR and demand trend. Firstly on the company's fourth quarter China revenue guidance of 3 to 4% year on year growth. What's the implied RevPAR assumption? Can the management share any 2026 outlook for us? Especially after seeing third quarter RevPAR decline turns almost flat Especially on the new experiential demand Jinghui mentioned versus the original business demand weakness. So which one is driving the RevPAR stabilization? Thank you.

Control the one Jenna. We now mention the Kohandong. So as many of you may notice that in the third quarter our RevPAR is a bit stabilized on a year over year basis it's kind of flat, it's not further declining compared to last two quarters. And of course we observed the several trends during the quarter in terms of of the demand. Obviously the demand was mainly driven by the leisure traveling demand especially from the tourism activities starting from you know, summer holiday to September and of course the beginning of the October National Day and mid autumn festival as well. But on the supply side, as I mentioned before on a year over year basis from the third party data we saw the supply growth actually moderated so it was not growing as fast as before. So it's becoming a bit moderated which brings some of the benefits to the RevPAR stabilization. But more Importantly for us, H World Group has been putting a lot of efforts over the last six months in terms to further enhance our such as revenue management as I mentioned in my prepared remarks, in terms of setting a new pricing strategy among different tiers of hotels like flagship new hotels and matured hotels and therefore I think but looking to the fourth quarter because we are entering to the low season, there are still some of the uncertainties. So as of now based on our revenue guidance it implies our fourth quarter RevPAR which is somewhere around flat to slightly positive for the fourth quarter in terms of business demand and the Leisure demand. Of course there are still some of the macro uncertainties. So to be very frank, the business demand is not that strong yet. But on the other hand, for the leisure demand and was continuously growing as I mentioned previously for the Chinese consumers nowadays the leisure traveling demand has become gradually becoming a necessity instead of discretional demand and especially for some emerging new demands such as concerts, marathons, sports events and inbound traveler as well. So the leisure remain very strong. In terms of the outlook for the next year, we think it's a bit too early. It still takes time to see whether the stabilization in terms of the RevPAR and the supply demand equivalent is sustainable. So we will give more colors for our fourth quarter earnings. Thank you.

Thank you.

Thank you for the questions. One moment for the next question. Our next question comes from the line of Sujie Lin of cicc. Please go ahead.

Thank you. Management. My question is about RevPAR breakdown. If we look at ADR and occupancy, we see that ADR performs better recently. So trying to understand the reason behind this and the sustainability. Also if we look at the gap between blended RevPAR and Sim hotel RevPAR, the gap remained at similar level with last few quarters. So is there any chance that the gap narrows in the future and what measures need to be taken? Thank you.

Okay, so in terms of the Average Daily Rate (ADR) of course for 2025, the improvements of RevPAR has been a very key task for our top management team and of course they have been putting a lot of efforts on that. So in terms of Average Daily Rate (ADR), as I mentioned earlier, so we have doing a lot of work on further enhancing our revenue management capability, especially on the pricing, you pricing for different layer of the hotel and different products. And of course on the front line we give a lot of, you know, various incentives to our salespeople to further motivate them to do a lot of, you know, sales activities. However, apart from these things we have been doing over the six months, over the last six months actually, you know, the Average Daily Rate (ADR) increasing the third quarter is results from our continuous efforts on the product upgrades, the quality improvements as well as our service excellence. Because we have been doing these things for many, many years and continuously doing so. And we have more and more recommendations from our customers. So that's why in certain area or in certain regions, our products and service is definitely in a leading position which gave us some of the pricing power which led us to achieve a better Average Daily Rate (ADR) for the third quarter. And in terms of the like, for like hotel or matured hotels, the gap, we are glad to see the year over year decline was narrowed significantly in the third quarter. On one hand in terms of the pricing we use a lot of different layer for pricing the different products. Over the last one and a half years we opened a lot of high quality hotels, new hotels in some of tier 1, tier 2 cities which creating some of the cannibalizations to the existing hotels but through different pricing in different pricing strategy for different products I think we are seeing some of the improvements for our matured hotels and more importantly we keep doing a lot of existing hotels upgrades to further improve the hotel quality itself in order to improve the revpar as a whole. Thank you.

Thank you Jingdong thank you for the questions. One moment for the next question. The next questions will come from the line of Lydia Lin of City Please go ahead.

The number Fence Sex Management Lydia from Citi so I have a question regarding the brand accessory for the newly launched upper midscale brand G Icon. So could you actually share some your plans for this brand and such as your store opening plan and also the store economics like the capital expenditure (CapEx) and the payback period and how actually your advantage versus like the current other leading upper midscale brand in the market and how is the feedback from the franchisees so far? Thank you.

Zhonghoi okay so in terms of the G Icon brands, so obviously you know the launch of G Icon brands are showing a very strong determination for Edgewater to further break through and developing in the upper mid scale segment with you know multi brand strategy. This trend is very clear and secondly based on the current cultural confidence or Chinese cultural confidence and also the preference from the Chinese consumers on oriental culture, Oriental service as well as oriental lifestyle that also basically support the launch of the G Icon brands. And as I said before G Icon is going to definitely become one of the core brands in our upper midscale segments and we hope this brand can be the best brand or the best hotel that Chinese customers will like the most. So in terms of the UAE in terms of the Capex you outfit we hope we can share more information after the first hotels opened. Thank you.

Thank you for the questions. Our next question comes from Simon Jiang of Goldman Sachs. Please go ahead.

Simon Jiang.

The question is related to the hotel opening in the third quarter they have done very well in terms of hotel opening of course 700 and I think in the first nine months they opened more than 2,000 hotel that's on track or even exceeded the 2,300 hotel that they have targeted for the full year. Wondering whether there's Any update for that? And in particular also on the new signing as well. And then on the related questions given the focus and the strong momentum that they have seen in the upscale segments, upper mid scale segments where they achieve 1,600 hotel and we have seen you know similarly hunting they have done like 5,000 and that's you know Hanting done 4,000 wondering whether they have any targets for the upper mid scale in the long run.

Thank you. As a be a quiet. Okay, so benefiting from you know, fast new signings in 2023 and 2024 post as well as further improvements in terms of our supply chain capability which resulted improvements in conversion ratio from the pipeline to new openings. So we achieved quite good new openings for the first nine months which is slightly more than 2000. So therefore for the full year we could possibly open a bit more than 2,300 hotels as what we guided previously. But again so we emphasized several times over the last several quarters earnings call in terms of the new signings and openings we will focus more on quality expansion instead only looking for scale. So that theme never changed. So we're going to continuously implementing this strategy for high quality sustainable growth. In terms of the upper mid segment, as I said we have reached 1,600 in both pipeline and the operations which also achieved pretty rapid growth. But however if you look into a longer term, for example 2030 we're going to still focus on the mass market with the economy and the midscale. So in terms of the proportion economy and the midscale going to still contribute the majority. But in terms of the growth rate, we hope our upper mid segments could grow the fastest in the industry and become the leading players in China markets by 2030.

Thank you for the questions. Our next question comes from Ronald Leung of Bank of America. Please go ahead. Okay.

Let me translate my questions in English. So I have two questions. My first question is about cost and margins outlook. The company has achieved very decent margins expansion in the past two quarters. Could management share with us the latest outlook on cost control and also margins? My second question is about the memberships program. So the overall memberships has grown decently to over 300 million by the end of 3Q25. Could management share an update on the strategy on how to further enhance memberships loyalty and also marketing strategies to improve the conversion rates. Thank you very much.

The cheaper. Okay, so in terms of our members, so definitely, you know direct sales and membership is one of our core strategy. We are glad to see in terms of the member base as well as the room nights sold all members continuously to grow. But we think that's still not enough. So that's why we have been doing quite a lot of jobs over the past several months. First of all we introduced a price guarantee program which can ensure our members to get the best price and service as also the unique experiences at the hotel. And secondly we also trying to fulfill more diversified demand from the leisure travelers and some of the emerging demands for example as I mentioned earlier like sports events, like inbound travelers. So basically the H World Rewards membership program is gradually shifting from only business travelers to fulfill more diversified demands. And certainly we are also enhancing our capability to receive more business clients and corporate clients to further enhance our exposures. And lastly we have been experimenting a lot of cross industry cooperation with a lot of top tier vertical players trying to enhance members experiences and improve their engagement. Thank you.

Thank you for the questions. Our last questions. Our last questions comes from. Sorry, please continue.

Okay, let me do the translation. So overall the adjusted EBITDA margin improvement was mainly because of our management and franchise strategy. So obviously the MNF has higher margin compared to leased and owned. But in terms of the cost control in terms of the hotel operating cost, by leveraging our strong supply chain capability, we continuously to reduce the cost per room night sold and for our leased and owned hotels, we continuously seeking for more rental reduction just trying to improve the profitability level of our leased and owned hotels. And on SG&A (Selling, General and Administrative) perspectives we continuously optimizing our mid and back office and headquarters to trying to control the cost in terms of the sales and marketing we will based on ROI and to do some of necessary investment on for example the hotel brand membership as well as the new user acquisition. So as mentioned by Jinghui, we have been systematically improved our capability to improve our revenue management so as in the cost control side. So we are also doing a systematically capability improvement. Thank you.

Thank you. We have come to the end of the question and answer session that concludes the conference call for today. Thank you for your participation. You may now disconnect your lines.