From January to July 2024, the number of foreigners entering China surged 129.9% year-on-year to 17.254 million, driving the topic of "china travel" to continue to explode on global social media. Many foreign friends have become fans of "china hotel" during their travels.
Spanish boy Oliver is one of them. After he made a vlog of his experience of staying at a hotel in Huazhu Shenzhen and released it, it immediately became popular on social media. In this 20-minute video, a series of technologically advanced functions and services, from electric curtains to wireless charging to door-to-door service by smart robots, impressed overseas friends deeply with the "china hotel".
While experiencing the beautiful scenery, delicious food and Chinese culture, many overseas tourists also gain an experience that far exceeds their expectations when staying in Chinese hotels - from appearance design to hardware facilities and services, "china hotel" has reached the world's first-class level.
As one of the largest "china hotels", Huazhu Group showed strong operating resilience and growth momentum in its latest second quarter report for 2024. At the end of the second quarter, Huazhu Group had 10,286 hotels in operation worldwide, of which 10,150 were in operation in China. A series of key data disclosed in the financial report also answered many foreign tourists' questions about "china hotel". How do you achieve high-quality products and a user experience that exceeds expectations?
User experience beyond expectations traceability: continuous upgrading of products and services
The hotel industry is a standard service industry, and industry competition is based on product strength and service quality. can only win the recognition of the vast number of Chinese and foreign users by creating high-quality mass products.
Huazhu Group’s latest disclosed second quarter report for 2024 reflects the results of Chinese and foreign users’ “voting with money” – they used real money to give “five-star praise” to the quality of the hotel. Financial report data shows: Huazhu Group's revenue in 2024q2 increased by 15.5% year-on-year to 23.4 billion yuan (RMB), and revenue increased by 11.2% year-on-year to 6.1 billion yuan, which is better than the previously announced guidance upper limit of 7%-11%, driven by Revenue in the first half of 2024 increased by 14.1% year-on-year to 11.4 billion yuan.
Judging from the three most critical operating indicators in the hotel industry, Huazhu China achieved quarter-on-quarter growth in the second quarter. Among them, the mixed average rentable room revenue of Huazhu China's leased and owned hotels, as well as managed franchised and franchised hotels ( revpar) was 244 yuan, an increase of 28 yuan from the previous quarter; the average daily room rate (adr) was 296 yuan, an increase of 16 yuan from the previous quarter; the occupancy rate (occ) of all operating hotels was 82.6%, 5.4 higher than the previous quarter. percentage points.
Compared with the same period last year, Huazhu China's revpar dropped slightly by 2% in the second quarter. This was mainly due to the high base of the "retaliatory rebound" in tourism and the ramp-up of new stores after the epidemic was lifted last year. However, Huazhu China's revpar is still significantly better than the industry performance. According to The Paper, international hotel brands such as Marriott, Hyatt, and InterContinental saw revpar decreases of 4.6%, 3.2%, and 7% year-on-year respectively in the second quarter of this year; in terms of average daily room rates, ADR decreased by 5.9% year-on-year respectively. 4.8% and 0.2%.
It is precisely by providing an unexpected experience for Chinese and foreign tourists like Oliver, the Spanish boy, that Huazhu Group's revpar indicator "outperformed the market" in the second quarter. traces back to its origins, and the user experience that exceeds expectations comes from Huazhu's continuous product upgrades and excellent services.
Since the beginning of its business in 2005, Huazhu has made it clear that it will be a hotel hotel that serves the vast majority of people. Huazhu has chosen the right track and focused on the largest rigid demand market to achieve rapid growth. In the 19 years since its inception with Hanting, Huazhu Group has developed into an industry leader with more than 30 chain hotel brands - among them, the economic hotel brands serving the public include Hanting, Hi Inn, Nihao, and mid-range hotel brands. There are All Seasons, Orange, and mid-to-high-end and high-end hotel brands such as Orange Crystal, Intercity, Huajiantang, and Shibaige, which also complete the Huazhu brand matrix.
Huazhu’s hotel brands are continuing to “evolve”. For example, Hanting, the largest budget hotel brand in China, has been upgraded to version 3.5. In terms of color matching, the brand's spot color blue and earth colors are used as the main tone, and the simple design of color block splicing enriches the space and enhances the texture.The overall design creates an elegant and warm atmosphere, giving guests a lighter experience; functionally, the self-service scene has been completely renovated, from a single-function hotel to a happy and convenient station during the national journey, becoming a "community hotel" for 1.4 billion citizens , allowing customers to enjoy the high-quality services provided by the hotel efficiently and conveniently.
Picture: Interior view of Hanting 3.5 Hotel, with spacious public space
The new 5.0 product launched by the All Seasons brand further explains the oriental aesthetic lifestyle and demonstrates the confidence of Chinese services. All Seasons 5.0 implements the concept of sustainable development from the beginning of the design, such as using prefabricated design, intelligent dimming, and environmentally friendly building systems to reduce environmental pollution and energy consumption. All Seasons 5.0 also has new explorations and breakthroughs in the hotel space business model. Launched a new tea space and further strengthened the scene-based retail of "guest listening" throughout the season.
Picture: Tea Space in All Seasons 5.0 Hotel
While adhering to “product is king”, Huazhu also strengthens user operations through the powerful network of Huazhu Club - through this efficient independent customer source network, it serves more than 250 million members Provides accommodation and travel services. Huazhu Club's huge and precise traffic can continue to provide stable customer support for Huazhu's tens of thousands of hotels and deliver orders to hotel franchisees, thus forming a virtuous cycle and promoting sustainable growth of hotel performance.
It is worth noting that in the second quarter, Huazhu China still achieved a year-on-year increase of 0.7 percentage points in occupancy rate (occ) to 82.6% despite the accelerated expansion of its hotel network. In other words, in the context of a general downward trend in the "price per customer" indicator across the industry, Huazhu China's second quarter drove steady growth in revenue and profits by increasing occupancy rates and accelerating network expansion. occupied a leading position in the market competition. favorable position.
The original intention of serving the public remains unchanged, and it is sinking into the market to open up blue oceans.
The recently disclosed financial report shows that Huazhu China opened 567 new stores in the second quarter, continuing its development momentum. With the opening of Hanting Hotel Linzhi in Medog County, the number of Huazhu China stores has exceeded 10,000. Huazhu Group CEO Jin Hui calls this a new starting point for Huazhu's "Thousands of Cities and Ten Thousand Stores 2.0 Strategy."
Picture: Hanting Hotel Linzhi Motuo County is Huazhu’s 10,000th store in China.
Jin Hui said at the performance conference that Huazhu China’s network continues to develop, thanks to the group’s insistence on economical and mid-range products. The hotel is the core of the strategic layout of deeply exploring the mass market. As of the end of the second quarter, Huazhu China's economy and mid-range brands accounted for 92%, 82% and 89% of operating hotels, pipeline hotels and newly opened hotels respectively. While
is focusing on the expansion of the budget and mid-range hotel network, Huazhu is also the earliest pioneer of to enter the lower-tier market and penetrate low-tier cities to "open up the blue ocean". As of the second quarter of 2024, the company's operating hotels accounted for 41% in third-tier and below cities, a year-on-year increase of 2 percentage points. Pipeline hotels account for 54% in third-tier and below cities, and the number of cities covered has reached 1,328, 132 more cities than the same period last year.
The newly opened Hanting Hotel Linzhi Medog County is the embodiment of Huazhu’s downward expansion strategy. Medog County is the last county in China with access to highways, and is an important stop on the 318 National Highway on the Sichuan-Tibet Line. However, local chain hotels are scarce, and many tourists driving on the 318 National Highway have difficulty finding reliable hotels. The underexplored "blue ocean" markets like will have great potential in the future.
From 2019 to 2023, the hotel chainization rate in first- and second-tier cities has reached 33%, while the chainization rate in third-tier and below cities is only 18%. In addition, 56% of independent hotels in the country are located in third-tier cities and below. It is not easy for consumers to find a chain hotel with high quality, complete facilities and reliable services.
Since the beginning of this year, Huazhu has opened nearly 10 new hotels on the 2,142-kilometer Sichuan-Tibet Line 318 National Highway, and currently has a total of 40 hotels open, including Hanting, All Seasons, Orange, Starway, Hi Inn, and Ibis and other brands.
Not only along the Sichuan-Tibet Line 318 National Highway, Huazhu has also opened brand "first stores" in many cities. In Dazhu County, Sichuan Province, Huazhu opened the first local full-season store.In Renhuai City, Guizhou Province, Huazhu opened the first local intercity hotel, providing a new choice for elite business people to travel.
Picture: Zunyi Renhuai’s first intercity hotel
While promoting the establishment of hotels, Huazhu also provides employment opportunities for local talents. As of now, the Huazhu store on National Highway 318 on the Sichuan-Tibet Line has more than 600 employees, more than half of whom are ethnic minorities. It not only broadens employment channels for local residents, but also promotes local economic development. It is understood that Huazhu and its franchisees currently provide more than 180,000 jobs, 98% of which are front-line store employees.
As it continues to penetrate the sinking market, Huazhu also caters to the current trend of consumers pursuing the ultimate cost-effectiveness, upgrading and evolving hotels to reduce costs and increase efficiency. For example, Hi Inn under Huazhu was upgraded in the second quarter. With "sleep well and spend less" as its brand purpose, it gathers customers' core accommodation needs of a good sleep and a good bath, and builds a universal hotel Guest rooms and efficient and convenient self-service to achieve the ultimate cost-effective price. In order to achieve efficient operations, Hiyou has innovatively created a trinity digital operation system of "guest self-service + digital front desk + employee mobility" to ensure the brand's "ultimate cost performance".
Picture: The fully self-service front desk in Hi Inn Hotel
Overseas tourists entering China may not have expected that the smart robot door-to-door service they experienced in Huazhu hotels may look cool, but the operating cost is not high. , digital and automated operations actually help reduce costs and increase efficiency to create "ultimate cost performance."
In the face of uncertainty, everyone is saving money, but high-quality mass products always have strong vitality, so we still want to make quality products and products that are suitable for the most people.
The valuation is at a low point, and the international business has turned around.
Combined with the strong net profit growth momentum in the second quarter report, the value of Huazhu Group is highlighted in the context of the recent general pressure on Chinese concept stocks - from the valuation multiple In terms of indicators, Huazhu Group is already lower than the industry average. In particular, Huazhu's international business turned a loss into a profit in the second quarter, and the asset-light strategic transformation has begun to show results, which is expected to further help the group increase profits in the future.
Huazhu Group also reiterated its generous dividend plan in its second quarter report: it will distribute a total of US$200 million in cash dividends in the first half of 2024, equivalent to a dividend of US$0.063 per ordinary share, and a dividend per American depositary share (ads). $0.63. According to the three-year shareholder return plan released by Huazhu Group in July 2024, the company can provide shareholders with dividends of up to US$2 billion in the next three years. The board of directors has the right to declare and pay ordinary dividends every half year, and every financial year The total annual dividend shall not be less than 60% of the company's net profit for that year. On August 21, Huazhu Group’s five-year ads share repurchase plan also officially came into effect, with the total repurchase amount up to US$1 billion.
The low-valuation and high-dividend sector is currently the most favored by prudent investors in the capital market. Huazhu recently announced that it will increase returns to shareholders by strengthening dividends and buybacks, which is conducive to gaining recognition from long-term capital.
Huazhu will launch supply chain upgrades and chassis reengineering in 2024 around the three core keywords of cost, quality and efficiency. At the performance conference, Jin Hui particularly emphasized that will see significant improvements in cost leadership and supply chain efficiency in the second half of the year, which will ensure the steady advancement of the "Thousands of Cities and Tens of Stores 2.0 Strategy" and provide guarantee for the next stage of high-quality development. We are very confident in the long-term growth of revpar, especially Huazhu, which has established advantages in brand, product, organization, technology, and traffic in China, and remains optimistic about the Chinese market in the long term.
The supply of high-quality hotels is still scarce in the market. Huazhu always adheres to high quality and excellent service as its guide, hoping to maintain its unique competitiveness in a fully competitive market environment.
In 2024, China's travel and tourism market will continue to recover. In the first half of the year, cross-regional personnel movement increased by 7.4% year-on-year. The number of passengers transported by railways nationwide increased by 18.4% year-on-year to 2.096 billion passengers, and the number of passengers transported by civil aviation increased by 23.5% year-on-year to 350 million passengers.The surge in overseas tourists has also injected new growth momentum into the hotel industry, and the National Immigration Administration predicts that the popularity of foreigners visiting China will continue to increase in the second half of the year.
Morgan Stanley recently released a research report, raising Huazhu Group’s revenue forecasts for fiscal 2024 and 2025 by 3% and 2% respectively, and its earnings per share forecasts were raised by 6% each. JPMorgan Chase research report predicts that the company's revenue from Q2 to Q4 in 2024 will increase by 10% year-on-year, and its adjusted net profit will increase by more than 10% annually. It is believed that Huazhu's operating performance can continue to outperform the industry in the next few years. Caitong Securities released a research report stating that Huazhu has outstanding advantages in brand, operation, and membership. The company's store openings are expected to accelerate in 2024 and add operating performance advantages, and the full-year performance is expected to continue to be realized.
