Chinese hotel giant Huazhu Group reports 22.3% growth in 2018 revenue
03/15/2019|9:04:59 AM|Huazhu

Huazhu Group, a leading and fast-growing multi-brand hotel group in China, announced its unaudited financial results for the fourth quarter and full year ended December 31, 2018.

Financial results

Hotel turnover for Huazhu hotels increased by 23% in 2018, driven by both hotel network expansion and RevPAR growth. The hotel network expanded by 13% to 4,230 hotels in operation as of December 31, 2018. The blended RevPAR grew by 10% in 2018.

Net revenues increased 20.6% year-over-year to RMB2,683.3 million (USD390.3 million) for the fourth quarter, and increased 22.3% to RMB10,063.4 million (USD1,463.7 million) for the full year of 2018, exceeded the high-end of revenue guidance previously announced of 18% to 22%.

EBITDA (non-GAAP) for the fourth quarter of 2018 was negative RMB45.2 million (USD6.6 million), compared with RMB445.8 million for the fourth quarter of 2017. EBITDA (non-GAAP) for the full year of 2018 was RMB2,271.9 million (USD330.4 million), compared with RMB2,349.2 million for 2017.

Net loss attributable to Huazhu Group Limited was RMB418.5 million (USD60.9 million) for the fourth quarter of 2018, compared with net income attributable to Huazhu Group Limited of RMB225.7 million in the fourth quarter of 2017 and RMB667.8 million in the previous quarter. Net income attributable to Huazhu Group Limited was RMB716.2 million (USD104.2 million) for the full year of 2018, compared with RMB1,228.3 million for the full year of 2017.

The Company provided guidance year-over-year net revenues growth of 13% to 15% for Q1 2019 and net revenues growth of 15% to 17% for the full year 2019.

The Company anticipates the gross opening of 800-900 hotels in 2019, about 75% of which are midscale and upscale hotels.

Fourth quarter operational Hhighlights

During the fourth quarter of 2018, Huazhu opened 214 hotels, including 9 leased (“leased-and-operated”) hotels and 205 manachised (“franchised-and-managed”) hotels and franchised hotels.

The Company closed a total of 39 hotels, which included 8 leased hotels and 31 manachised and franchised hotels, during the fourth quarter of 2018. 

The ADR was RMB230 in the fourth quarter of 2018, compared with RMB211 in the fourth quarter of 2017 and RMB239 in the previous quarter. The year-over-year increase of 9.2% was due to both an increase in ADR of the mature hotels, as well as an increase in the proportion of mid- and up-scale hotels with higher ADR in the Company’s brand mix. The sequential decrease resulted mainly from seasonality.

The occupancy rate for all hotels in operation was 85.2% in the fourth quarter of 2018, compared with 86.0% in the fourth quarter of 2017 and 90.7% in the previous quarter. The year-over-year decrease of 0.9 percentage point was due to the soft macro economy and a dilutive impact from newly-opened hotels. The sequential decrease resulted mainly from seasonality.

Blended RevPAR was RMB196 in the fourth quarter of 2018, compared with RMB181 in the fourth quarter of 2017 and RMB217 in the previous quarter. The year-over-year increase of 8.1% was attributable to higher ADR. The sequential decrease resulted mainly from seasonality.

For all hotels which had been in operation for at least 18 months, the same-hotel RevPAR was RMB189 for the fourth quarter of 2018, representing a 3.9% increase from RMB182 for the fourth quarter of 2017, with a 4.9% increase in ADR and a 0.8-percentage-point decrease in occupancy rate. The economy hotels registered a 4.1% same-hotel RevPAR improvement. The midscale and upscale hotels registered a 3.7% same-hotel RevPAR improvement.

Operational highlights of full-year 2018

For the full year of 2018, the company opened 53 leased hotels and 670 manachised hotels and franchised hotels, and closed 25 leased hotels and 214 manachised and franchised hotels. As of December 31, 2018, the Company had 699 leased hotels, 3,309 manachised hotels, and 222 franchised hotels in operation in 403 cities. The number of hotel rooms in operation totaled 422,747, an increase of 11.3% from a year ago.

As of December 31, 2018, the Company had a total number of 1,105 hotels contracted or under construction, including 42 leased hotels and 1,063 manachised and franchised hotels. The pipeline represented 26.1% of the number of hotels in operation as end of 2018.

For the full year of 2018, the ADR for all hotels in operation was RMB226, increasing 11.2% year-over-year from RMB203 in 2017. The occupancy rate for all hotels in operation was 87.3%, compared with 88.3% in 2017. As a result, the blended RevPAR for all hotels in operation was RMB197 in 2018, a 10.0% increase from RMB180 in 2017.

The same-hotel RevPAR was RMB189 in 2018, a 5.5% increase from RMB179 in 2017, with a 6.3% increase in ADR and a 0.6-percentage-point decrease in occupancy rate. In 2018, the economy hotels and the midscale and upscale hotels posted an increase of 5.6% and 5.2% in same-hotel RevPAR, respectively.

As of December 31, 2018, the Company’s loyalty program had approximately 122 million members, who contributed approximately 76% of room nights sold during the full year of 2018 and approximately 86% of room nights were sold through the Company’s own direct channels.

Net revenues from leased and owned hotels for the fourth quarter of 2018 were RMB1,942.2 million (USD282.5 million), representing a 13.2% year-over-year increase and a 5.4% sequential decrease.

Net revenues from manachised and franchised hotels for the fourth quarter of 2018 were RMB703.0 million (USD102.2 million), representing a 41.8% year-over-year increase and a 0.5% sequential increase.

For the full year of 2018, net revenues from leased and owned hotels were RMB7,470.5 million (USD1,086.5 million), representing a 17.9% year-over-year increase.

For the full year of 2018, net revenues from manachised and franchised hotels were RMB2,527.0 million (USD367.5 million), representing a 36.6% year-over-year increase. It accounts for 25.1% of net revenues, compared to 22.5% of net revenues for the full year of 2017.

Other revenues represent revenues generated from businesses other than the hotel operation, which mainly include revenues from the provision of IT products and services to hotels and from Huazhu mall, totaling RMB38.1 million (USD5.5 million) in the fourth quarter of 2018, compared to RMB13.0 million in the fourth quarter of 2017 and RMB15.8 million in the previous quarter.

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