Huazhu Group, a leading and fast-growing multi-brand hotel group in China, today announced its unaudited financial results for first quarter ended March 31, 2019.
First Quarter of 2019 Operational Highlights
The company had a total of 4,396 hotels or 439,614 hotel rooms in operation as of March 31, 2019.
During the first quarter of 2019, Huazhu opened 226 hotels, including 11 leased (“leased-and-operated”) hotels and 215 manachised (“franchised-and-managed”) hotels and franchised hotels.
The Company closed a total of 60 hotels, including 12 leased hotels and 48 manachised and franchised hotels, during the first quarter of 2019.
As of March 31, 2019, the Company had 698 leased hotels, 3,470 manachised hotels, and 228 franchised hotels in operation in 404 cities. The number of hotels in operation increased 15% from a year ago.
As of March 31, 2019, the Company had a total number of 1,311 hotels contracted or under construction, including 50 leased hotels and 1,261 manachised and franchised hotels. The pipeline represented 30% of the number of hotels in operation as end of Q1 2019 compared to 19% a year ago.
The ADR, which is defined as the average daily rate for all hotels in operation, was RMB221 in the first quarter of 2019, compared with RMB207 in the first quarter of 2018. The year-over-year increase of 6.9% was due to both an increase in ADR of the mature hotels, as well as an increase in the proportion of midscale and upscale hotels with higher ADR in the Company’s brand mix.
The occupancy rate for all hotels in operation was 80.6% in the first quarter of 2019, compared with 83.7% in the first quarter of 2018. The year-over-year decrease of 3.1 percentage points was mainly due to the softness in macro economy.
RevPAR, defined as revenue per available room for all hotels in operation, was RMB178 in the first quarter of 2019, compared with RMB173 in the first quarter of 2018. The year-over-year increase of 2.9% was attributable to higher ADR.
For all hotels which had been in operation for at least 18 months, the same-hotel RevPAR was RMB176 for the first quarter of 2019, representing a 0.4% decrease year-over-year, with a 2.9% increase in ADR and a 2.8-percentage-point decrease in occupancy rate. Excluding hotel rooms under renovation for product upgrade, the normalized same-hotel RevPAR would have been flat.
As of March 31, 2019, Huazhu’s loyalty program had approximately 126 million members, who contributed approximately 76% of room nights sold during the first quarter of 2019 and approximately 84% of room nights were sold through Huazhu’s own direct channels.
First Quarter of 2019 Financial Results
Hotel turnover increased 17% year-over-year to RMB7.2 billion for the first quarter of 2019.
Net revenues for the first quarter of 2019 were RMB2.4 billion (US$356 million), representing a 14.2% year-over-year increase, primarily attributable to our hotel network expansion and RevPAR growth.
Net revenues from leased and owned hotels for the first quarter of 2019 were RMB1.7 billion (US$254 million), representing an 8.2% year-over-year increase.
Net revenues from manachised and franchised hotel for the first quarter of 2019 were RMB1.7 billion (US$257 million), compared to RMB1.5 billion in the first quarter of 2018, representing a 15.2% year-over-year increase. Total hotel operating costs excluding share-based compensation expenses (non-GAAP) for the first quarter of 2019 were RMB1.7 billion (US$256 million), representing 72.4% of net revenues, compared to 71.8% for the first quarter in 2018. The higher hotel operating costs mainly reflected the increase in our hotel network (rentals, hotel headcounts, utilities and consumables, etc.).
Income from operations for the first quarter of 2019 was RMB264 million (US$40 million; 11.1% on net revenue), compared to RMB306 million (14.7% on net revenue) in the first quarter of 2018. Excluding our investments to expand our development teams, upscale brand hotels, and IT capabilities, the pro-forma operating income for the first quarter of 2019 would have been RMB352 million (14.7% on net revenue).
Other income, net for the first quarter of 2019 was RMB65 million (US$10 million), compared to other expense, net of RMB9 million for the first quarter of 2018. Other income for the first quarter of 2019 was mainly related to gain from disposal on marketable securities.
Net income attributable to Huazhu Group Limited for the first quarter of 2019 was RMB106 million (US$16 million), compared to net income attributable to Huazhu Group Limited of RMB129 million in the first quarter of 2018. Excluding share-based compensation expenses and the unrealized gains (losses) from fair value changes of equity securities, adjusted net income attributable to Huazhu Group Limited (non-GAAP) for the first quarter of 2019 was RMB222 million (US$33 million), compared to RMB282 million in the first quarter of 2018.
EBITDA (non-GAAP) for the first quarter of 2019 was RMB412 million (US$62 million), compared with RMB406 million in the first quarter of 2018. Excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities, adjusted EBITDA (non-GAAP) for the first quarter of 2019 was RMB528 million (US$79 million, 22.1% on net revenue), compared with RMB559 million (26.7% on net revenue) for the first quarter of 2018. The pro forma adjusted EBITDA (non-GAAP) would have been RMB610 million (25.5% on net revenue) after considering the impact of our investments in development teams, upscale brands hotel and IT capabilities mentioned above.
Operating cash inflow for the first quarter of 2019 was RMB147 million (US$22 million). Investing cash outflow for the first quarter was RMB378 million (US$56 million). Financing cash outflow for the first quarter was RMB194 million (US$29 million).
As of March 31, 2019, the Company had a total loan balance of RMB10.0 billion (US$1.5 billion) and the unutilized credit facility available to the Company was RMB1.9 billion.
Guidance
In the second quarter of 2019, the Company expects net revenues to grow 13% to 15% year-over-year.
The Company revised the gross opening target of 800-900 hotels to 1,100-1,200 hotels, and hotel closure to 200-250 in 2019.
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