China Lodging Group (HTHT.US) Q Earnings Call August 17, 2017

Transcription

1 China Lodging Group (HTHT.US) Q Earnings Call August 17, 2017

2 Agenda Lodging Landscape in China Strategy Review Operational and Financial Review Q & A Appendix 1

3 Strong Demand: Domestic Travel Remains ROBUST and Grows FASTER than Disposable Income Disposable Income per capita Domestic Travel Expenditures (USD) (in RMB billions) 2,309 2,627 3,003 3,296 3,383 +2% 3,452 1,931 2,271 2,628 3,031 3, % 3, Source: China National Tourism Administration 2

4 Net Addition of Branded Hotel Supply Slowed Down Since 2016 # of Branded Hotels 30,000 25,000 5,106 6,000 5,000 20,000 15,000 10,000 5, ,648 2,669 2,803 2,610 2,194 24,150 21,481 1,363 16, ,727 9,924 7,314 3,757 5, E 4,000 3,000 2,000 1,000 0 # of branded hotels Net Addition Source: Inntie, China National Tourism Administration 3

5 Favorable Supply-Demand Relationship Drives Same-hotel RevPAR Growth Same-hotel RevPAR Growth For hotels in operation for at least 18 months All hotels Non-Shanghai hotels 12% 11% 12% 11% 7% 7% 2% 3% -2% -1% 3% 4% 10% 7% 5% 6% 7% 8% 5% 5% 2% 1% 0% 1% 1% -1% 0% 0% 8.3% 5.8% -3% -5% -4% -3% -3%-0.3% -1.2% 0.5% 2.5% 10Q1 10Q3 11Q1 11Q3 12Q1 12Q3 13Q1 13Q3 14Q1 14Q3 15Q1 15Q3 16Q1 16Q3 17Q1 Same-hotel ADR Growth (2011, outside of Shanghai 7% 5% 3%3%3%3% 3% 3% 3% 3% 3% 2% 0% 1% 0% 0% 0% 0% 0.8% 1.6% 1% -1% -0.7% 0.4% 1.8% 3% Same-hotel Occupancy Change 3% 4%5% 4% 4.5% 2% 3.3% 1% 0% 0.2% 0.7% -2% -2% -2%-2% -1% -2% -0.9%-0.4% -4% -3%-3%-5% -3% -3% -7% 11Q1 11Q4 12Q3 13Q2 14Q1 14Q4 15Q3 16Q2 17Q1 11Q1 11Q4 12Q3 13Q2 14Q1 14Q4 15Q3 16Q2 17Q1 * Normalized for Shanghai Expo 4

6 Chinese Consumers Purchase Power Fuels Long-Term Hotel ADR Growth Unit: US$ Comparison of Consumer Product Price Between China and US Item Brand Brand Diff. Economy Hotel ADR Midscale Hotel ADR x x Chinese Hotel ADRs are Significantly UNDER-PRICED vs. Other Consumer Products McMeal x Running Shoe x Movie Ticket x Source: Company estimates 5

7 Market Outlook in China: Midscale Boom and Economy & Midscale Consolidation China independent China chained US independent US chained Luxury Upscale Consumption upgrade drives midscale boom Midscale Economy&Midscale chained hotel % continue to grow Economy 100,000 30,000 Number of Hotels Source: Inntie, STR, Company estimates 6

8 Optimistic Blended RevPAR Growth Prospect Driven by ADR Grwoth and Mix Upgrade Quarterly Blended RevPAR Year-over-Year Growth (Q1 14-Q2 17) 9.8% 14.0% -2.0%-1.5% -1.0% -4.6% -3.3% -2.3% -6.2% -5.3% 1.1% 1.1% 3.2%5.7% Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 7

9 Agenda Lodging Landscape in China Strategy Review Operational and Financial Review Q & A Appendix 8

10 Strategic Focus for 2017 Upgrade for Economy Hotels Multi-brand Strategy - Fast Expansion of Midscale Hotels Continuous Growth in Same-hotel RevPAR 9

11 HanTing Same-hotel RevPAR Growth Accelerated to 8.0% in Q % 8.0% -5.8% -5.4% -4.4% -4.9% -2.3% -3.3% -0.9% 1.1% 62% room inventory under HanTing brand(q2 17) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 10

12 Upgraded Quality in HanTing is Well Received by Guests Cleanliness Rating 80% of guests surveyed indicated that their booking preferences are influenced by the cleanliness ratings Guests may reward housekeepers for quality service with their membership points 11

13 Our Midscale Brands Foot Print Incepted in 2010 Incepted in 2013 Rebranded in 2017 桔子水晶酒店 Crystal Orange Hotel 桔子酒店 精选 Orange Hotel Select Acquired in Strategic Alliance with Accor Acquired in 2012 Rebranded in 2017 New Brands 12

14 Increasing Proportion of Mid and Up Scale Room Inventory Mid and Up Scale Rooms 90,000 24% 25% 57% 80,000 70,000 18% 19% 20% 60,000 50,000 40,000 30,000 11% 15% 60,539 63,442 84,942 15% 10% ~33,800 20,000 10,000 23,481 40,687 5% Q1 2017Q2 0% Pipeline(17Q2) Mid and Up Scale Rooms As % of Total Rooms 13

15 A Robust Pipeline of Midscale Brands % of Rooms of Total Pipeline # of Hotels of Mid-and Up-Scale Pipeline Crystal Orange, 57 JI Hotel, 137 Starway Hotel, 49 Economy, 43% Mid-and- Up Scale, 57% CitiGo, 7 Hanting Plus, 14 Accor- Alliance Brands, 43 Manxin Hotel, 12 Launched or rebranded in

16 Integration of Crystal Orange on Track Strong RevPAR Growth Integrated Direct Booking Same-hotel RevPAR % 342 June'16 June'17 Enriched Talent Pool Mr. Wu Hai s new role as EVP of High- End Product Innovation, in addition to CEO of Crystal Orange Amy Liao, the Chief Architect / Designer of Crystal Orange, expanded her responsibilities to cover more high-end brands 15

17 Increasing Revenue Contribution from Mid and Up Scale Hotels Net Revenues Revenue from Mid-and-Upscale Hotels as % of Net Revenues (in RMB millions) +20.1% 1,989 +3pts 32% 1,657 29% Q2'16 Q2'17 Q2'16 Q2'17 16

18 Agenda Lodging Landscape in China Strategy Review Operational and Financial Review Q & A Appendix 17

19 Continue Fast Expansion with Increasing Focus on Quality Number of Hotels in Operation Leased and owned Hotels Manachised and Franchised Hotels 3,269 3,336 3,541 * Hotel Opening/Closures 2016 Q Q2 Gross openings Closures 2,763 1, , ,995 1,384 2,147 2,645 2,716 2, (18) (49) (87) (22) (77) (231) 272 (67) Q1 2017Q2 Net openings * Q1 Q2 Q3 Q Q1 17Q2 * Including 140 hotels consolidated from Crystal Orange Acquisition 18

20 Strong RevPAR Performance Leads to Improved Pipeline of 600+ Hotels Number of Hotels in Pipeline (Q1 16-Q2 17) * Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 * Includes 57 hotels from Crystal Orange acquisition 19

21 RevPAR Growth Driven by Both ADR + Occupancy Growth ADR Increased 7.9% (RMB) RevPAR Increased 14.0% YOY (RMB) Q2 2016Q2 2017Q2 Occupancy Increased 4.9 points 86% 85% 90% 2015Q2 2016Q2 2017Q2 Weight of hotel rooms in 1 st - and 2 nd -tier cities Q2 15 Q2 16 Q % 76% 77% 2015Q2 2016Q2 2017Q2 Weight of hotel rooms in midscale and upscale segment Q2 15 Q2 16 Q % 16% 24% Figures excluding franchised Starway hotels 20

22 Net Revenues Increased 20.1% in 17Q2, or 12.9% Excluding Crystal Orange, beating our Q2 Guidance Net Revenues Net Revenues from Leased and Owned Hotels (in RMB millions) 12.9% yoy growth, excluding Crystal Orange (in RMB millions) 1,543 1,989 1,303 1,657 Q2'16 Q2'17 Net Revenues from Manachised and Franchised Hotels (in RMB millions) Q2'16 Q2' Net Manachised and Franchised Hotels Revenue as % of Net Revenues Q2 16 Q % 21.9% Q2'16 Q2'17 21

23 Operating Margin Expanded by 6.4 Pts Income from Operations as % of Net Revenues 22.3% 6.4% 15.9% Q2'16 Q2'17 Hotel operating costs and other operating costs as % of net revenues 73.5% Pre-opening expenses as % of net revenues SG&A Expenses and other operating income as % of net revenues 5.7% 1.4% 2.1% 67.8% 9.7% 7.6% 0.8% 2.2% Q2'16 Q2'17 Q2'16 Q2'17 Q2'16 Q2'17 22

24 Core Financials Growth Remains Strong (in RMB millions) Core Financials* Growth EBITDA Net Income 450 (Margin 27%) 665 (Margin 33%) 210 (Margin 13%) 352 (Margin 18%) 2016Q2 2017Q2 2016Q2 2017Q2 Note: * excluding investment gain of 106m in Q2 16 and 38m in Q

25 Strong Cash Balances Support Capital Investments and Acquisitions Abundant Funding Resource for Expansion (in RMB millions) Free cash flow = RMB 642 m 3,633 (4,041) 985 (343) (489) * 3,235 3,469 2,980 2,980 Cash and cash equivalents at 12/31/16 Net Cash from Operations Capex for maintainance and new developments Cash from financing (acquisition loan for Cystal Orange) Cash for investing (mainly acquistion of Crystal Orange) Others Cash and cash equivalents at 6/30/17 Note: *Mainly consist of 467m increase in restricted cash 24

26 Guidance Huazhu Huazhu + Crystal Orange Period Q3 17 FY 2017 Q3 17 FY 2017 Net Revenues Growth 13%-16% 12%-15% (Up from 10-13%) 30%-34% 23%-26% No. of Gross Opening * * Excluded 138 hotels consolidated from Crystal Orange acquisition 25

27 Agenda Lodging Landscape in China Strategy Review Operational and Financial Review Q & A Appendix 26

28 Agenda Lodging Landscape in China Strategy Review Operational and Financial Review Q & A Appendix 27

29 (in RMB millions) Adjustments Between Organic and Reported Financials Revenue EBITDA Net Income 1,657 1, * ,657 1, Q2 2017Q2 2016Q2 2017Q2 2016Q2 2017Q2 Organic Crystal Orange Investment Gain Note: *14m consolidated from Crystal Orange, -10m acquisition loan interest expense 28

30 Same-Hotel Operational Data by Segment Number of hotels in operation Same-hotel RevPAR Same-hotel ADR Same-hotel Occupancy As of For the quarter ended For the quarter ended For the quarter ended September 30, September 30, September 30, September 30, yoy change yoy change Economy hotels 1,868 1, % % 91% 91% Leased hotels % % 91% 90% Manachised and franchised hotels 1,350 1, % % 92% 92% Midscale and upscale hotels % % 86% 88% Leased hotels % % 90% 92% Manachised and franchised hotels % % 83% 84% Total 2,050 2, % % 91% 91% Number of hotels in operation Same-hotel RevPAR Same-hotel ADR Same-hotel Occupancy As of For the quarter ended For the quarter ended For the quarter ended December 31, December 31, December 31, December 31, yoy change yoy change Economy hotels 1,999 1, % % 87% 87% Leased hotels % % 86% 86% Manachised and franchised hotels 1,488 1, % % 87% 88% Midscale and upscale hotels % % 84% 85% Leased hotels % % 90% 90% Manachised and franchised hotels % % 79% 81% Total 2,205 2, % % 86% 87% Number of hotels in operation Same-hotel RevPAR Same-hotel ADR Same-hotel Occupancy As of For the quarter ended For the quarter ended For the quarter ended March 31, March 31, March 31, March 31, yoy change yoy change Economy hotels 2,144 2, % % 84% 87% Leased hotels % % 83% 87% Manachised and franchised hotels 1,641 1, % % 84% 87% Midscale and upscale hotels % % 81% 82% Leased hotels % % 86% 86% Manachised and franchised hotels % % 76% 79% Total 2,380 2, % % 83% 87% Number of hotels in operation Same-hotel RevPAR Same-hotel ADR Same-hotel Occupancy As of For the quarter ended For the quarter ended For the quarter ended June 30, June 30, June 30, June 30, yoy change yoy change Economy hotels 2,250 2, % % 88% 93% Leased hotels % % 87% 92% Manachised and franchised hotels 1,752 1, % % 89% 94% Midscale and upscale hotels % % 86% 89% Leased hotels % % 91% 93% Manachised and franchised hotels % % 82% 86% Total 2,513 2, % % 88% 93% 29

31 Hotel Breakdown by Brands Hotel breakdown by brand Number of Hotels in Operation As of As of As of As of As of As of 12/31/ /31/ /31/ /31/2016 3/31/2017 6/30/2017 Economy hotels 1,309 1,819 2,453 2,741 2,852 2,893 HanTing Hotel 1,226 1,648 2,003 2,181 2,203 2,213 Leased hotels Manachised hotels 753 1,146 1,508 1,694 1,723 1,736 Franchised hotels Hi Inn Leased hotels Manachised hotels Franchised hotels Elan Hotel Manachised hotels Franchised hotels ibis Hotel Leased and owned hotels Manachised hotels Franchised hotels Orange Regular 10 Leased hotels 8 Manachised hotels 1 Franchised hotels 1 Midscale hotels and upscale hotels JI Hotel Leased hotels Manachised hotels Franchised hotels Starway Hotel Leased hotels Manachised hotels Franchised hotels Joya Hotel Leased hotels Manachised hotels Manxin Hotels & Resorts Leased hotels Manachised hotels Franchised hotels 1 ibis Styles Hotel Manachised hotels Franchised hotels Mercure Hotel Leased hotels Manachised hotels Franchised hotels Novotel Hotel Manachised hotels Franchised hotels Grand Mercure Hotel Leased hotels 1 1 Franchised hotels Orange Selected 90 Leased hotels 42 Manachised hotels 32 Franchised hotels 16 Crystal Orange 40 Leased hotels 19 Manachised hotels 13 Franchised hotels 8 Total 1,425 1,995 2,763 3,198 3,336 3,541 30

32 Room Breakdown by Brands Hotel breakdown by brand As of As of As of As of As of As of 3/31/2016 6/30/2016 9/30/ /31/2016 3/31/2017 6/30/2017 Economy hotels 245, , , , , ,588 HanTing Hotel 209, , , , , ,719 Leased hotels 56,681 56,461 56,494 56,491 55,443 54,591 Manachised hotels 152, , , , , ,750 Franchised hotels Hi Inn 22,934 24,144 25,194 25,600 26,129 26,186 Leased hotels 3,575 3,429 3,412 3,411 3,349 3,031 Manachised hotels 17,482 18,552 19,011 19,361 19,947 20,267 Franchised hotels 1,877 2,163 2,771 2,828 2,833 2,888 Elan Hotel 12,843 13,338 13,261 13,800 13,655 14,349 Manachised hotels 11,009 11,216 10,935 11,121 11,082 11,880 Franchised hotels 1,834 2,122 2,326 2,679 2,573 2,469 ibis Hotel 12,075 12,244 10,274 10,251 10,615 11,280 Leased and owned hot 2,330 2,562 2,562 2,725 2,842 Manachised hotels 1,824 2,339 2,198 1,753 2,329 Franchised hotels 7,921 7,343 5,514 6,137 6,109 Orange Regular 1,054 Leased hotels 891 Manachised hotels 85 Franchised hotels 78 Midscale hotels and ups 47,066 51,413 55,666 60,348 62,892 84,942 JI Hotel 29,751 32,934 36,062 39,664 42,306 45,368 Leased hotels 13,498 13,488 13,504 14,314 14,745 14,905 Manachised hotels 16,253 19,297 22,409 25,201 27,287 30,189 Franchised hotels Starway Hotel 12,852 13,760 13,463 13,206 12,798 14,325 Leased hotels Manachised hotels 7,743 8,785 9,101 9,577 9,240 10,793 Franchised hotels 4,592 4,458 3,976 3,243 3,172 3,146 Joya Hotel ,131 1,131 1,131 Leased hotels Manachised hotels Manxin Hotels & Resorts Leased hotels Manachised hotels Franchised hotels 62 ibis Styles Hotel 1,257 1,257 1,392 1,614 1,618 1,617 Manachised hotels ,010 1,010 Franchised hotels Mercure Hotel 1,993 1,993 3,295 4,026 4,180 4,446 Leased hotels Manachised hotels 1,476 1,476 2,554 3,420 3,672 Franchised hotels Novotel Hotel Manachised hotels Franchised hotels Grand Mercure Hotel Manachised hotels Franchised hotels Orange Selected 10,992 Leased hotels 5,431 Manachised hotels 3,699 Franchised hotels 1,862 Crystal Orange 5,284 Leased hotels 2,587 Manachised hotels 1,713 Franchised hotels 984 Total 292, , , , , ,530 31

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