Strategic depth behind the third-quarter report of H World Group Limited Sponsored ADR (01179, HTHT.US): Why dare to "redo" the hotel industry?

In the year 2025, when the hotel industry in China experienced structural adjustments, the value of a financial report lies not only in recording the past, but also in verifying the anti-cyclical ability and strategic foresight of the business model. On November 17, H World Group Limited Sponsored ADR (01179, HTHT.US) released its third-quarter performance for 2025. Against the backdrop of overall industry pressure, H World Group Limited Sponsored ADR still delivered impressive results: during the period, the group's revenue reached 7 billion yuan, an increase of 8.1% year-on-year, far exceeding the previously disclosed revenue growth upper limit; adjusted net profit was 1.52 billion yuan, an increase of 10.8% year-on-year; and adjusted EBITDA reached 2.5 billion yuan, an increase of 18.9% year-on-year. Meanwhile, this year marks the 20th anniversary of the establishment of H World Group Limited Sponsored ADR, and the Chinese hotel industry is currently facing both opportunities and anxieties in a "red ocean". This "dual excellence in scale and quality" financial report not only confirms the business resilience of H World Group Limited Sponsored ADR, but also reveals its core logic of "high-quality supply" through cycles, making market expectations for its "premium certainty" more clear. Growing against the trend in the third quarter, the franchise model becomes the core engine. Against the backdrop of the industry's overall slowing recovery pace, H World Group Limited Sponsored ADR's third-quarter financial data showed overall upward trends, demonstrating strong profit resilience. During the reporting period, the group's hotel revenue increased by 17.5% year-on-year to 30.6 billion yuan, with revenue, adjusted EBITDA, and adjusted net profit all showing significant growth. This performance broke the common rule of profit pressure for enterprises during industry adjustments and validated H World Group Limited Sponsored ADR's profit model's ability to traverse cycles. It is understood that this profit growth is not dependent on a single business but comes from the combination of "brand empowerment + diversified layout". Among them, in the third quarter, the group's management, franchise, and franchise operation revenue increased by 27.2% year-on-year to 3.3 billion yuan, becoming one of the core engines driving overall revenue growth. Behind this achievement is the resonance between H World Group Limited Sponsored ADR's diversified product matrix and franchise cooperation business, as well as the high recognition of its brand value and management model by franchisees. From a scale perspective, H World Group Limited Sponsored ADR's third-quarter expansion demonstrates a distinct "lean growth" feature. Data shows that during the period, the group's operating hotel and operating room numbers both achieved stable growth of 17.1% and 17.3% year-on-year, respectively. In the third quarter, 749 new hotels were opened in China, setting a new quarterly high for the year, with 2,727 hotels in the pipeline. More valuable is that while expanding in scale, H World Group Limited Sponsored ADR's single-store operating efficiency maintains a healthy level, with all three core operating indicators showing impressive performance during the reporting period: ADR stabilized year-on-year and achieved a turnaround, OCC continued to maintain a high level of 84.1%, significantly higher than similar brands, and RevPAR remained basically flat year-on-year. The overall steady upward trajectory of the three core operating indicators is a direct reflection of the synergistic efforts of H World Group Limited Sponsored ADR's brand appeal, member traffic value, and operational empowerment system. Against the backdrop of overall industry demand fluctuations, it confirms the market competitiveness of H World Group Limited Sponsored ADR's hotels - even in the case of increased supply, it can still maintain single-store profitability through stable customer sources. This growth model of "expanding scale without diluting single-store profitability" not only ensures a return on investment for franchisees but also provides a clear expectation of sustainable profitability for the capital market. Recently, Morgan Stanley released a research report, raising the target price of H World Group Limited Sponsored ADR to $47 and expecting its third-quarter performance to exceed expectations. The report points out that H World Group Limited Sponsored ADR is expected to show a positive RevPAR trend and operating leverage benefits, while also raising its RevPAR and earnings per share forecasts for 2025 to 2027. The institution believes that H World Group Limited Sponsored ADR has stronger resilience and growth certainty in the industry recovery. In addition, CICC also maintains a "outperform the industry" rating and a $48 target price for H World Group Limited Sponsored ADR, believing that the company is expected to continue to benefit from RevPAR improvement and achieve profit growth. This also represents the general recognition of the capital market for H World Group Limited Sponsored ADR: it not only has short-term performance recovery capabilities but also has constructed a long-term competitive barrier in multiple dimensions such as brand, membership, and operation, with the potential to continuously lead in the industry cycle. The significant advantage of the "high-quality supply system" is evident, building a core capability loop. It is worth noting that the strong growth of the franchise business is a tangible manifestation of H World Group Limited Sponsored ADR's advantage in the "high-quality supply system," which essentially represents the full-chain service value of "brand proliferation + member support + operational empowerment". With the three core systemized capabilities of "brand, member, operation," H World Group Limited Sponsored ADR has not only achieved continuous growth in performance but also established formidable industry competitive barriers, evolving from a traditional hotel operator to a high-value ecological platform enterprise. At the current point in time, H World Group Limited Sponsored ADR's brand matrix exhibits characteristics of "deepening and comprehensive coverage": in the economy and mid-tier markets, the "golden triangle" of Hanting, Ji Hotel, and Orange solidify the foundation of H World Group Limited Sponsored ADR and inject strong momentum into the strategic goal of "1000 cities and 10,000 stores 2.0". Meanwhile, while adhering to the foundation of the economy sector, H World Group Limited Sponsored ADR innovatively launched the Haiyou self-service hotel, restructuring the "low investment, high turnover" model through full digital operation. Furthermore, in the high-end international hotel brand, which has long been monopolized, H World Group Limited Sponsored ADR has made breakthrough progress. In 2024, H World Group Limited Sponsored ADR's high-end and mid-range hotel signing total ranked first in the industry. By the end of the third quarter, H World Group Limited Sponsored ADR's operating and to-be-opened mid-to-high-end stores have successfully exceeded 1,600, a 25.3% year-on-year growth. At the 2025 Partner Conference, H World Group Limited Sponsored ADR launched a brand new mid-to-high-end brand, "Ji Grandview," entering the high-end market with oriental restraint and warmth, embarking on a new journey to build a world-class oriental brand. This brand layout of "strengthening the foundation of the economy and breaking through growth in the mid-to-high-end segment" not only ensures the company's risk resistance but also opens up future growth space, meeting the needs of different consumer groups while providing rich investment choices for franchisees. Membership system, as a key engine for ensuring customer sources and increasing single-store profitability for H World Group Limited Sponsored ADR, also has a global leading advantage. By the end of the third quarter of this year, the "H World Group Limited Sponsored ADR Club" membership has exceeded 300 million, a 17.3% year-on-year growth, with member reservation nights increasing by 19.7% year-on-year to over 66 million nights, accounting for 74%, demonstrating significant high viscosity and high repurchase characteristics. According to the international tourism industry authority Skift, the "H World Group Limited Sponsored ADR Club" has ranked first in the world with 288 million registered members, leading in hotel member loyalty with 243 members corresponding to each room. At the same time, as the core of the "trinity" strategy, the "H World Group Limited Sponsored ADR Club" continues to expand the boundaries of ecological cooperation, forming strategic depth cooperation with Bank of China and China UnionPay at the Eighth CIIE to create a new consumption service ecology in the direction of "finance + accommodation + lifestyle." Previous collaborations with DiDi, Juneyao Airlines, and other enterprises further extend the service scenarios for members, combined with rights protection policies such as "price guarantee," jointly safeguarding the traffic moat of H World Group Limited Sponsored ADR, reducing dependence on OTA platforms, and enhancing single-store profitability space. The operational empowerment system is the core support for brand output and efficient operation of the cooperation model of H World Group Limited Sponsored ADR, which has always adhered to the cooperation concept of "growing the market cake together with franchisees" and providing integrated solutions for franchisees. Different from simply outputting brands, H World Group Limited Sponsored ADR provides full-process support from property selection, product design to digital tools for franchisees, helping to reduce risks and improve efficiency. In actual operation, franchise hotels continue to enjoy the brand premium and member dividends of H World Group Limited Sponsored ADR, with high occupancy rates bringing stable cash flow, cost control, and standardized services further guaranteeing returns, thereby laying the foundation for the release of brand value and the deepening of the cooperation strategy. The ample reserve of to-be-opened hotels is a direct recognition of the market value of H World Group Limited Sponsored ADR's operational value. After years of accumulation, H World Group Limited Sponsored ADR has formed a competitive advantage of multi-dimensional synergy: the membership ecosystem provides stable traffic and value increment, the brand matrix achieves full market coverage and breakthroughs in mid-to-high-end segments, while the operational empowerment secures the efficiency and win-win of the high-quality supply system. This structural advantage will redefine the valuation logic of hotel groups and open up long-term growth space from "room operation" to "ecological services." The supply-side reform brings certainty of opportunities, and starting anew after twenty years of accumulation. At a recent Partner Conference of H World Group Limited Sponsored ADR, Founder and Chairman Ji Qiming clearly stated that the biggest opportunity for the Chinese hotel industry lies in "supply-side reform" and proposed five directions: from micro room quantity to medium room quantity, from individual to chain, from star-rated to branded, from big cities to county towns, and from real estate supporting to investment return. This positioning not only fits the current trend of industry integration and upgrading but also provides a broad development space for top-tier companies with systematic capabilities like H World Group Limited Sponsored ADR. From a macro perspective, the current hotel industry is facing operational pressures, but it also brings a window of opportunity for inventory renovation and property acquisition for chain brands. With its brand, traffic, and operational capabilities, H World Group Limited Sponsored ADR can help franchisees achieve property upgrades and operational improvements at low reset costs. In addition, H World Group Limited Sponsored ADR has always upheld the concept of "growing together" and formed a partner relationship with franchisees to "grow the market cake together," which is a manifestation of the company's long-termism. H World Group Limited Sponsored ADR's CEO Jin Hui stated at the performance release conference, "Currently, the supply quality of the hotel industry in China cannot fully meet the increasing demand for consumer upgrades and diversification. The future increase of the chainization rate and the elimination of low-quality supply will be an inevitable long-term trend. Therefore, supply-side reform will be the main theme of the future development of the Chinese hotel industry, which will bring huge growth opportunities and space for local brand chain hotels. As a top player in the industry, H World Group Limited Sponsored ADR will deepen its presence in the Chinese market, adhere to high-quality development, lead with brands, create excellent services, focus on quality and efficiency, and 'redo the Chinese hotel industry.' H World Group Limited Sponsored ADR is full of confidence in the development of the Chinese hotel industry." This statement is based not only on confidence in the company's own capabilities but also on a clear plan for executing H World Group Limited Sponsored ADR's strategy - continuously improving product capabilities to lead the market, increasing the layout strength of mid-to-high-end brands, enriching member ecological cooperation, optimizing the operational empowerment system. The stable customer sources brought by the massive membership system, diverse demands covered by the comprehensive brand matrix, and the expanded franchise system operated by the mature operational empowerment, combined with the industry dividends brought by the supply-side reform, collectively provide a solid foundation for the realization of H World Group Limited Sponsored ADR's long-term vision. At the critical juncture of the 20th anniversary, H World Group Limited Sponsored ADR has presented a satisfactory answer to the capital market with its stable third-quarter performance, with its core value lying not in short-term performance bursts but in the systemic capabilities of "sustainability, replicability, and profitability" accumulated over many years, as well as its resilient growth during industry cycles. For the capital market, the sustainable profit capabilities and clear growth path of H World Group Limited Sponsored ADR make it a long-term investment value; for the franchise ecology, the brand influence, member ecosystem, and operational empowerment of H World Group Limited Sponsored ADR can bring stable investment returns to franchisees; for the industry, H World Group Limited Sponsored ADR's positioning and practice as the "accommodation industry infrastructure" will drive the chainization, branding, and quality upgrading of the entire Chinese hotel industry. In the future, with the continued advancement of supply-side reform and the deep execution of H World Group Limited Sponsored ADR's strategy, this hotel group that has been accumulating for twenty years is poised to achieve high-quality "lean growth" in a new development stage, continuously creating value for the capital market, industry ecology, and industry development, steadily moving towards the next twenty years.