China’s Huazhu Group Reports 19% Growth in Hotel Turnover in Q3

Huazhu Group has revealed a 19 percent year-on-year jump in hotel turnover for the third quarter of 2019, as China’s largest operator of budget inns boosted its portfolio to more than 5,000 locations.

Turnover increased to RMB 10 billion ($1.4 billion), the company announced in its third-quarter financial results, while net revenues jumped 10.4 percent year-on-year to RMB 3.1 billion ($427 million) during the quarter, in line with the investor expectations of 9 to 11 percent.

The announcement came a week after the company said it had agreed to shell out roughly $802 million to acquire Deutsche Hospitality, one of Germany’s best-known luxury hotel chains. That deal followed Huazhu’s first foray abroad in early October, when the world’s fifth largest hotel group by market capitalization opened the Ji Hotel Orchard Singapore.

Hospitality Giant on Growth Spree

Despite its revenue growth, Huazhu’s adjusted EBITDA for the third quarter of 2019 was RMB 898 million, down 34 percent from the same period last year, according to the financial statement. Net income attributable to the parent company was RMB 431 million, a 35 percent slide year-on-year.

Hotel operating costs climbed 10.6 percent to RMB 1.8 billion, while selling and marketing expenses were RMB 113 million, up 24 percent. General and administrative expenses reached RMB 277 million, compared to RMB 233 million in the third quarter of 2018. Pre-opening expenses more than doubled to RMB 126 million, which involved mainly the upscale-brand hotels.

In the third quarter alone, Huazhu opened 548 hotels, including 13 leased and operated hotels and 535 franchised and “manachised” (both franchised and managed) hotels. As of September 30, Huazhu, previously known as China Lodging Group, operated 5,151 hotels in 420 Chinese cities, with hotel rooms totaling more than 504,414, up 23 percent from the previous year.

“By leveraging our brand strength and operational excellence, we aspire to accelerate our growth goal, and establish a global hotel network during the next five years,” said Huazhu founder Ji Qi in the statement.

Taking Aim at Singapore, New York Markets

Huazhu has 1,736 unopened hotels in the pipeline, representing 34 percent of the number of hotels in operation compared to 23 percent a year ago. The group says that in 2020, it expects to boost the gross number of hotels opened to about 1,700, some 75 to 80 percent of which will be midscale and upscale brand properties.

As part of this expansion strategy, Huazhu plans to accelerate its overseas growth by opening four hotels in New York next year. Huazhu’s first property outside China, the Ji Hotel Orchard Singapore, opened at 11 Penang Lane, neighbouring Singapore’s Orchard Road shopping corridor. The 81-room property is managed by The Ascott Ltd, CapitaLand’s hospitality unit.

Huazhu, which has grown from a single Hanting hotel in 2005 to a network of economy hotel chains across China including Joya, Starway and Orange Hotel, says that 45 percent of its total rooms in operation fall under midscale and upscale brands.

The company’s loyalty program H Rewards has grown to about 139 million members, who contributed 76 percent of room nights sold during the third quarter. Eighty-five percent of room nights were sold through Huazhu’s direct channels.