Steadily increasing market share amid macroeconomic challenges, Huazhu's long-term investment value emerges.

Driven by the rebound in post-pandemic consumer demand, China's hotel industry experienced a bottoming out of OCC (occupancy rate) and an increase in ADR (average daily rate) in 2023, entering a "correction period" this year that aligns with market expectations. Reduced disposable income has led to more cautious travel spending, while the macroeconomic bottoming phase has caused companies to cut business travel budgets, resulting in declining domestic ADR and pressure on OCC, increasing operational challenges for the hotel industry.

Affected by industry-wide beta factors, the performance and operational metrics of the hotel industry in the third quarter also generally declined due to high base effects. As a leading player in the hotel industry, Huazhu Group's performance has drawn significant attention.

Strong Performance with Clear Industry Leadership

Huazhu Group achieved revenue of 6.4 billion yuan in the third quarter of 2024, a year-on-year increase of 2.4%, setting a new historical high for a single quarter. Net profit stood at 1.3 billion yuan, remaining stable compared to last year. Among peers, Huazhu's revenue growth significantly outpaced others, with Jinjiang and BTG reporting year-on-year declines of 7.1% and 6.38%, respectively. This demonstrates Huazhu's ability to maintain steady growth momentum even during an industry adjustment period, with its revenue scale remaining higher than domestic peers.

Despite industry-wide impacts, Huazhu China's RevPAR declined by 8.1% year-on-year in the third quarter, a significantly smaller drop compared to peers. Internationally, Wyndham Greater China and InterContinental Hotels Group Greater China saw declines of 10% and 10.3%, respectively. Management expects the RevPAR decline to narrow further in the fourth quarter and anticipates continued improvement in the coming months. Huazhu's greatest strength lies in its stable and high OCC. Specifically, Huazhu China's occupancy rates for the first three quarters were 77.2%, 82.6%, and 84.9%, compared to 73.36% and 69.7% for Jinjiang and BTG, respectively. Among currently published hotel data, Huazhu's figures are the highest.

Overall, during the industry's downturn phase, Huazhu's operational performance remains among the best for both domestic and international hotel groups, demonstrating resilience in both financial results and operational metrics, showcasing its ability to weather cyclical challenges.

Lean Growth with Prominent Long-Term Investment Value

Huazhu's stable OCC is attributed to years of accumulated strong reputation and private domain operations. Huazhu Rewards boasts over 260 million members. Through close partnerships with vertical partners like Didi and airlines, the company continuously expands its customer pipeline while enhancing customer loyalty. The company has also made significant preparations and capability-building efforts, which are now bearing fruit. In the third quarter, the number of room nights booked through direct corporate connections exceeded 7.5 million, a 41% year-on-year increase, while the number of active corporate clients surpassed 4,500, up 45% year-on-year.

Additionally, Huazhu opened a cumulative total of 1,910 new hotels in the first three quarters. The company's ability to achieve low-risk counter-cyclical expansion through a light-asset model during the industry's bottoming phase highlights the strong appeal of its brands to franchisees. Through large-scale procurement and revenue management systems, Huazhu reduces operational costs while ensuring efficiency, delivering consistent experiences across properties and creating more profit space for franchisees, thereby attracting their participation. On the consumer side, the high OCC mentioned earlier reflects the brand's strong appeal.

Overall, Huazhu has built a moat through trust from both consumers and franchisees. Even during an economic downturn, it strictly executes a high-quality development strategy to achieve lean growth, which is one of its long-term investment values. As the market recovers, Huazhu is poised to seize first-mover advantages.

Currently, Huazhu's expansion is preemptively capturing market share. While this may impact short-term performance, it will benefit its long-term strategic layout and development. As the overall industry environment gradually improves, Huazhu's growth potential in the coming quarters is worth anticipating. Huazhu's investment value is not fully reflected in its stock price, and as market conditions gradually improve and the company's strategy advances, its stock price is expected to see further upside.