HTHT: Resilient, Leader Shines!

Before U.S. mkt open on Aug 17, 2026 (Beijing time), Huazhu Group (1179.HK/HTHT.O) reported Q2 results. Overall, the quarter was solid: revenue beat, guidance raised across the board, and a new $2.5bn three-year shareholder return program was announced. The blemishes: same-store RevPAR at mature hotels turned negative for the first time in three quarters, and Intl revenue growth flipped to a decline.

1) China RevPAR growth cooled; Intl turned negative. On the key KPI RevPAR, China RevPAR was RMB 238/nt in Q2, +1.1% YoY. While this marked a fourth straight quarter of growth, the pace slowed noticeably vs. Q1’s +2.9%. By driver, ADR rose 2.6% YoY to RMB 298/nt and remained the core tailwind, mainly as newer versions of Hanting and Ji Hotel lifted the mix and unlocked pricing premium. OCC was 79.8%, down 1.2pct YoY, similar to Q1’s decline.

For Intl, Q2 RevPAR fell 3.8% YoY to $98/nt, with OCC down a sharp 3.5pct YoY to 70.5%, the main drag. Dolphin Research believes Middle East tensions likely weighed on local ops. In addition, early-stage ramp in new SE Asia markets (Vietnam, Laos, Cambodia) and lower local price points diluted the consolidated metrics.

2) Openings slowed QoQ, but pipeline expanded. Net adds were 324 hotels in Q2 (501 openings, 177 closures). Mid-to-upscale brands (Intercity, Orange Crystal, Mercure, Grand Barony) continued to drive mix upgrade, while economy brands focused more on renovations. Moreover, despite a cooler supply side and very cautious franchisee capex, the pipeline reached 3,054 not-yet-opened hotels by quarter-end, accelerating vs. Q1. This underscores Huazhu’s franchise model and investor appeal, which remain dominant in the sector.

3) Revenue growth accelerated QoQ; franchise led. Q2 revenue was RMB 7.1bn, +10.8% YoY, with a clear QoQ acceleration. Franchise revenue benefited from ongoing room count expansion, jumping 25.2% YoY to RMB 3.6bn, the fastest in the past four quarters and the core driver. Leased-and-operated revenue was ~RMB 3.2bn, -4.9% YoY, mainly due to continued closures of older leased hotels and weaker leased revenue overseas.

4) Disciplined opex; further margin improvement. With franchise mix higher (50.3% in 1H, +4.9pct YoY), GPM expanded 1.8pct YoY to 43.4%. While pushing new mid-to-upscale brands and expanding overseas, the company kept sales & G&A ratios roughly flat YoY. OPM rose 3.3pct YoY to 31.1%, and Adj. EBITDA reached RMB 2.73bn, +20% YoY.

5) Guidance raised; new shareholder return plan. FY2026 guidance was lifted from 'group revenue +2% to +6%, franchise revenue +12% to +16%' to 'group revenue +4% to +8%, franchise revenue +16% to +20%'.

6) Key financial highlights

Dolphin Research view:

Both the beat this quarter and the above-consensus guidance reflect Huazhu’s ability to offset sector-wide RevPAR softness via the continued expansion of its asset-light franchise network. As long as new-store ramp curves track normally and franchisee signing appetite does not deteriorate systemically, Huazhu can keep absorbing share from independent hotels during industry consolidation. This should solidify market share and position the company for higher earnings elasticity than peers in the next upcycle.

On supply dynamics, channel checks indicate 71% of new hotels have ≤150 rooms (mostly 80–120), signaling a broad shift to 'lightweight' openings that lower per-hotel investment thresholds. This aligns closely with Huazhu’s lightweight formats such as 'Hanting Express'. It also implies competition in lower-tier markets is shifting from 'speed of openings' to 'lighter model and faster payback'.

Notably, 'lightweight' here is not about stripping features, but about leveraging industrialized back-end supply chains (to lower per-room build cost) and revenue management systems (analogous to Coca-Cola using AI to price by channel and audience), to deliver 'lighter capex, comparable experience, stable returns'.

On demand, Q2 included May Day and Dragon Boat Festival. Data from the Ministry of Culture & Tourism showed total domestic travel spend +2.9%, while per-capita spend -0.6%, indicating more frequent trips but lower ticket sizes in Q2.

Further, channel checks suggest early summer (late Jun to late Jul) saw national hotel RevPAR down ~2.8% YoY and ADR down 3.7% YoY. With supply still elevated and per-capita spending subdued, pricing pressure emerged even in peak season, and some regions/brands started to trade price for volume.

Valuation: on the raised +4–8% revenue growth guide and a 20% NPM, 2026E implies ~17x P/E. If Q3 peak-season RevPAR holds without further deterioration, Dolphin Research sees scope for a rerate toward ~20x, implying 15–20% upside; investors can calibrate to their risk appetite.

Detailed exhibits below:

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Dolphin Research past coverage on 'Huazhu':

Earnings reviews

Mar 18, 2026 review: 'Huazhu: After the deep squat, how long can the 'honor student' stay on top?'

Aug 21, 2025 review: 'Huazhu: Fundamentals fortified — ready for a leap after the deep squat?'

Risk disclosure and statement: Dolphin Research disclaimer and general disclosure