ChinaTravelNews, Ritesh Gupta – H World, a multi-brand hotel group, has highlighted that the performance of its direct sales channel stood out in the first quarter (Q1) of 2023.
Speaking during the company’s Q1 earnings call, Jin Hui, CEO of H World, highlighted the significance of the direct sales channel for the hotel group, and said, “Our H World app and H World mini-program daily active users (DAU) increased by two times and three times, respectively, in the first quarter of this year, compared to the same period in 2019.”
As per the information provided by H World, the daily active user base (DAU) of H World app was around 489,000 in Q1 of 2019, and this has risen to 1,013,000 by the end of March this year. On the other hand, DAU of H World mini-program has grown from 144,000 in Q1 of 2019 to 436,000 by Q1 of this year.
Hui also stated that direct bookings through H World CRS (central reservation system) has increased from 47% in Q1 of 2019 to 62% during the January-March period of this year. “It is worth noting that our CRS contribution includes booking through our own channels only and excludes contribution from OTAs (online travel agencies) and other third-party distribution platforms,” said Hui.
The team at H World asserts that one of its strengths is its proprietary technology infrastructure, and features modularized applications, including a cloud-based property management system (PMS) and centralized reservation, procurement and revenue management systems. The company’s loyalty initiative, H Rewards, too, is going strong. It had more than 199 million members at the end of last year. H World also counts on the same as a platform that paves way for targeted marketing campaigns and sustain a high percentage of direct sales.
Revenue increased 67.1% year-over-year to RMB 4.5 billion (US$652 million) in Q1 of 2023, surpassing the revenue guidance previously announced of a 61% to 65% increase compared to the Q1 of 2022. Revenue from the Legacy-Huazhu segment in Q1 increased 58.0% year-over-year, exceeding the revenue guidance previously announced of a 53% to 57% increase.
The group attributed the growth in revenue generation for its Legacy-Huazhu - pent up demand; continued product upgrade; market penetration and synergy through regional offices.
Expansion
H World’s hotel network consisted of 6,789 hotels at the end of 2020. This figure shot up to 8,543 hotels as of December 31, 2022, representing a CAGR of 12.2%.
At the end of the January-March period of 2023, H World’s worldwide hotel network in operation totaled 8,592 hotels and 820,099 rooms, including 128 hotels from DH.
The group mainly uses the manachise and franchise models to expand its network in a less capital-intensive manner.
During Q1 this year, Legacy-Huazhu business opened 262 hotels.
For its Legacy-Huazhu business, H World mentioned that tier-3 and below cities accounted for 37% of the properties (out of a total of 7868 hotels) at the end of Q1 in 2022, whereas this has grown to 39% out of 8464 hotels at the end of Q1 of 2023.
The total percentage of hotels has come down in tier-2 cities (from 43% to 42%) and tier-1 cities (from 20% to 19%) for the same comparison. The team mentioned that there are “growth opportunities” in tier-3 and below cities. Looking at the overall number of hotels that are in operation and in the pipeline, H World shared that its city coverage has risen from 1089 in Q1 of 2022 to 1132 this year, and is projected to cross 2000 in the future.
The group now operates a portfolio of over 20 hotel brands.
Other than focus on expanding in lower-tier cities, H World also emphasised on its decision to establish itself further in the mid-scale (launched Orange Hotel 3.0 version, complements JI brand) and upper mid-scale segments (worked on InterCity Hotels, mainly targeted new generation business travellers). For InterCity, H World is attempting to ensure that it is not the case of introducing a German brand in China, rather the objective is to blend European feature plus local aspects keeping in mind customer behaviour in China. At the end of March this year, H World had five operational hotels and 10 hotels of Intercity Hotel in the pipeline in China.
In the luxury category, the hotel company has 11 operational hotels of Steigenberger Hotels & Resorts and three in pipeline in China.
H World has carved out a series of industry-first digitalization initiatives to optimize its hotels’ operational efficiency and cost structure and operate “smart” hotels. Also, owing to its digital transformation initiative, the “Easy” series, the group stated that this has increased the speed and efficiency of hotels’ entire business processes, from the moment a reservation is made until a guest checks out.
