H World's 2024 Profit Hit By International Business

Ladies and gentlemen, buckle up! We're diving into the world of H World Group, a titan in the global hotel industry, and the challenges it faced in 2024. The company's Q4 and full-year 2024 financial results are out, and they paint a picture of mixed performance. Revenue is up, but net income took a nosedive, and the culprit? International business woes.



Let's break it down. H World's total hotel network reached an impressive 11,147 hotels with 1,088,218 rooms in operation as of December 31, 2024. Revenue increased 7.8% year-over-year to RMB6.0 billion (US$825 million) in Q4 2024, surpassing previous guidance. Full-year revenue grew 9.2% to RMB23.9 billion. But here's the kicker: net income declined to RMB49 million in Q4 2024 from RMB743 million in Q4 2023. Ouch!

The international business segment, Legacy-DH, was a significant contributor to this decline. Restructuring costs, foreign exchange losses, and increased withholding taxes all took a toll. The same-hotel RevPAR decline of 6.7% in Legacy-Huazhu properties, despite maintaining a healthy 80% occupancy rate, also signaled operational challenges.

But don't count H World out just yet! The company is planning several strategic adjustments and corrective measures in 2025 to mitigate the negative impact of its international business on profitability. One key measure is the continued expansion of its asset-light model, which involves increasing the number of manachised and franchised hotels. This model allows H World to collect fees from franchisees without the need for significant capital investment. For instance, manachised and franchised revenue grew by 24% year-over-year in 2024 and now represents 39.8% of total revenue, up from 35.2% in 2023. This shift is expected to continue, with forward guidance projecting a more robust 17-21% increase in manachised and franchised revenue in 2025.

Additionally, H World is focusing on cost reduction and efficiency improvement in its international operations. The company plans to open approximately 2,300 hotels while closing around 600, which will help in optimizing the hotel network and reducing operational costs. This strategic move is part of the company's broader plan to enhance hotel operations and focus on high-quality, disciplined growth. The company's CEO, Jin Hui, emphasized the importance of implementing an asset-light strategy, pursuing high-quality hotel network growth, strengthening brand positioning, and enhancing sales capability centered around the H Reward membership program. This approach is expected to drive long-term value and deliver consistent, sustainable performance.



So, what's the bottom line? H World Group faced significant challenges in 2024, but the company is taking decisive action to turn things around. The international business segment may have been a drag on profitability, but H World's strategic adjustments and corrective measures in 2025 could pave the way for a brighter future. Stay tuned, folks! This story is far from over.