H World Group Sees Declining Revenue From Leased Hotels, Adjusted EPS Misses Estimate

H World Group Limited HTHT shares are trading lower on Tuesday after the company reported worse-than-expected third-quarter results.

Adjusted earnings per ADS of 61 cents, missing the analyst consensus of 69 cents.

Quarterly sales of $918 million missed the street view of $933.86 million.

Revenue rose by 2.4% year-over-year, within the previously forecasted guidance of an increase of 2% to 5% for the third quarter of 2024.

Revenue from the Legacy-Huazhu segment grew by 1% year-over-year, aligning with the previously announced 1% to 4% guidance, while revenue from the Legacy-DH segment saw an 8.9% year-over-year increase.

As of Sept. 30, 10,845 hotels and over one million hotel rooms were in operation.

In the third quarter, revenue from leased and owned hotels was $526 million, representing a decline of 4.8% year-over-year and a 0.2% quarter-over-quarter increase. 

Revenue from manachised and franchised hotels in the quarter was $371 million, representing a 14.7% year-over-year growth.

Hotel turnover increased 10.7% year-over-year in the third quarter. Adjusted EBITDA reached $300 million in the quarter.

As of Sept. 30, 2024, the company had cash and cash equivalents of $1 billion and restricted cash of $98 million.

Outlook: For the fourth quarter, the company anticipates revenue growth of 1%–5%, excluding the DH segment.

“This quarter, Legacy-Huazhu’s blended RevPAR declined by 8% year-over-year primarily due to a high ADR base in the same period last year and unfavorable weather. Our occupancy rate remained solid at 85% despite our ongoing rapid hotel network expansion,” Jin Hui, CEO of H World said.

”We aim to expand our presence across all regions and continue penetrating into lower-tier cities in China, thereby reaching more of China’s hotel market with our high-quality hotel products with excellent services,” Jin noted.

“Regarding our business outside China, our Legacy-DH business recorded a 3.7% year-over-year blended RevPAR increase in the third quarter of 2024. We continued focusing on cost reduction in our European business, while at the same time seeking growth opportunities in the Asia-Pacific (APAC) and in the Middle East areas,” he added.

HTHT Price Action: H World Group shares are down 5.89% at $33.10 at publication Tuesday.

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