Key Takeaways:
H World Group Ltd. reported an 11.1% rise in first-quarter revenue to RMB 6.0 billion, though net profit fell 8.6% as the hotel giant aggressively expands its network across China.
"In the first quarter, we opened 537 new hotels in China, well on track to meet our full-year gross opening target of approximately 2,200 to 2,300 hotels," Jin Hui, CEO of H World, said in a statement.
The company's revenue growth was overshadowed by a decline in net income to RMB 817 million from RMB 894 million a year earlier, according to its unaudited financial results. The group’s asset-light manachised and franchised business saw revenue grow 20.3% to RMB 3.0 billion, now accounting for half of total revenue.
The results highlight a trade-off between scale and profitability, as rising operating costs and losses from its international arm weigh on the bottom line. Investors will watch if the asset-light shift can improve margins as the company pushes deeper into lower-tier cities.
The bulk of H World's performance was driven by its China operations, branded as HWC, which saw revenue climb 12.4% year-over-year to RMB 5.0 billion. This was fueled by a 3.0% increase in revenue per available room (RevPAR) to RMB 214, supported by a 4.8% increase in the average daily rate (ADR). However, the occupancy rate in China slipped slightly to 75.1% from 76.2% in the same period last year.
The company continued its rapid expansion within the mainland, opening 537 new hotels while closing 177, bringing its total HWC network to 13,095 hotels.
The international segment, HWI, showed signs of improvement but remains a drag on overall profitability. HWI revenue increased 5.1% to RMB 972 million, and its adjusted EBITDA loss narrowed to RMB 56 million from a loss of RMB 78 million in the first quarter of 2025.
RevPAR for the international business grew 5.0% to USD 80, driven by gains in both occupancy and average daily rates. The company is also expanding its presence in the Asia-Pacific region, with a new JI Hotel opening in Vientiane, Laos, during the quarter.
The decline in net profit despite strong top-line growth points to the costs associated with H World's rapid expansion and integration of its international assets. The company's strategy of pursuing an asset-light model appears to be a key focus, with franchised hotels driving revenue growth. The continued losses in the international segment, however, remain a key area for investors to monitor. The company's ability to control costs while expanding its footprint will be critical to improving profitability in the coming quarters.
This article is for informational purposes only and does not constitute investment advice.
