H World Group (NASDAQ: HTHT), formerly known as Huazhu Group (NASDAQ:HTHT), marked a significant achievement in their second quarter earnings call by announcing the opening of their 10,000th hotel in China. The company highlighted robust growth strategies, including a focus on lower-tier cities which has created ample growth opportunities and solidified their expertise in the Chinese market.
Despite a slight decline in Legacy-Huazhu's Revenue per Available Room (RevPAR), the company reported resilient travel demand in China, with a substantial increase in room nights sold. The second quarter also saw an impressive year-over-year increase in hotel turnover and total revenue for the group.
Key Takeaways
- H World Group opened their 10,000th hotel in China, signaling a strong presence in the market.
- The company's focus on lower-tier cities has led to significant growth opportunities.
- Legacy-Huazhu's RevPAR was down 2% year-over-year, but travel demand in China remains resilient.
- Room nights sold in China increased by approximately 21% year-over-year.
- The company is committed to an asset-light model and plans to reward shareholders through dividends and share buybacks.
- Expansion efforts are ongoing, with 567 new hotels opened and 101 closed during the quarter.
- Financial performance showed a 15% year-over-year increase in hotel turnover and an 11% increase in total revenue.
Company Outlook
- H World Group aims to reach 20,000 hotels in 2,000 cities as part of their growth strategy.
- The company expects revenue to grow between 2% to 5% in the third quarter of 2024.
- Plans to open more than 2,200 hotels in the current year, emphasizing quality over scale.
- The globalization strategy is progressing, with a focus on Europe, Asia, and Africa.
Bearish Highlights
- Legacy-Huazhu's RevPAR declined by 2% year-over-year, indicating some challenges in the market.
- The company acknowledges a lack of high-quality supply in the Chinese hotel market.
Bullish Highlights
- The company reported a 31% year-over-year increase in the number of hotels in operation.
- The hotel pipeline grew by 61% year-over-year, indicating strong future growth potential.
- Direct B2B business and the number of active corporate clients saw significant year-over-year growth.
Misses
- Despite overall positive financial results, the slight decline in RevPAR indicates room for improvement in optimizing rates and occupancy.
Q&A Highlights
- Management discussed the importance of supply chain in maintaining high-quality growth.
- They expressed confidence in long-term RevPAR growth, citing positive correlation with GDP growth and inflation.
- The company is undergoing a transformation to an asset-light model, which is expected to improve margins through product and service upgrades.
In the face of a challenging macroeconomic environment, H World Group has managed to maintain a trajectory of expansion and financial growth. The company's strategic focus on high-quality supply and service excellence is designed to keep them competitive in a market with sufficient supply but lacking in premium options. The management's confidence in the long-term growth of RevPAR, supported by macroeconomic factors, underscores their commitment to an asset-light model that promises improved efficiency and cost control. As they continue to leverage their brand for expansion into new markets such as the Middle East and Asia Pacific, H World Group is poised for further success in the coming quarters.
InvestingPro Insights
As H World Group (NASDAQ: HTHT) celebrates the opening of its 10,000th hotel and outlines strategies for future growth, recent data from InvestingPro offers valuable insights into the company's financial health and market position.
InvestingPro Data shows an impressive Revenue Growth of 44.82% over the last twelve months as of Q1 2024, signaling a robust expansion in the company's operations. This is further supported by a Gross Profit Margin of 35.26%, which suggests that the company is not only increasing its revenue but also maintaining profitability.
An InvestingPro Tip highlights that H World Group is a Prominent player in the Hotels, Restaurants & Leisure industry, which aligns with the company's strategic focus and successful expansion in the Chinese market. Additionally, H World Group's management has been Aggressively buying back shares, as noted in another InvestingPro Tip, demonstrating confidence in the company's valuation and a commitment to delivering shareholder value.
For readers interested in deeper analysis, InvestingPro has over 10 additional tips on H World Group, offering a comprehensive look at the company's strategic moves and financial metrics. These tips and data points provide a clearer picture of H World Group's market position and could be pivotal for investors considering the company's stock. Visit InvestingPro for a detailed analysis: https://www.investing.com/pro/HTHT.
Full transcript - Huazhu Group Ltd (HTHT) Q2 2024:
Operator: Good day and thank you for standing by. Welcome to H World Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. It is now my pleasure to hand you over to the Senior IR Director of the Company, Mr. Jason Chen. Please go ahead.
Jason Chen: Thank you, Amber [ph]. Good morning and good evening, everyone. Thanks for joining us today. Welcome to H World Group 2024 second quarter earnings conference call. Joining us today is our Founder and Chairman, Mr. Ji Qi; our CEO, Mr. Jin Hui; and our CFO, Mr. Zou Jun. Following their prepared remarks, management will be available to answer your questions. Before we continue, please note that the discussion today will include forward-looking statements made under the Safe Harbor provision of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the views expressed today. A number of potential risks and uncertainties are outlined in our public filings with SEC. H World Group does not undertake any obligations to update any forward-looking statements, except as required under applicable laws. On the call today, we will also mention adjusted financial measures during the discussion of our performance. Reconciliation of those measures to comparable GAAP information can be found in our earnings release that was distributed yesterday. As a reminder, this conference call is being recorded. The webcast of this conference call, as well as supplementary slide presentation, is available at ir.hworld.com. With that, now I will hand over the call to our CEO, Mr. Jin Hui, to discuss our business performance in the second quarter of 2024. Mr. Jin, please.
Jin Hui: Hello, everyone. Before presenting our second quarter operating performance, please allow me to share a good news with you all. In May, we opened our 10,000th hotel in China. As you can see, this HanTing Hotel is located in Motuo County, Linzhi, Tibet which is the last county in China to have access to highways. After more than 4 years of hard work, since we proposed the goal of 10,000 hotels in 1,000 cities in the end of 2019, we have finally achieved this milestone. More importantly, as our lower-tier cities' penetration strategy continuously progresses, we not only recognize that there are still huge opportunities and growth potentials in the Chinese market but also accumulated a large amount of practical expertise and organizational capabilities. Therefore, we will continue to focus on our service excellence-centric, sustainable quality growth strategy and move towards the next goal of 20,000 hotels in 2,000 cities. Next, let's go through our second quarter operating performance. Please turn to Page 4. Legacy-Huazhu's RevPAR in the second quarter was RMB244, down 2% year-over-year. ADR was RMB296, down 2.9% year-over-year, while occupancy rate was 82.6%, up 0.7 percentage points year-over-year. Despite the relatively weak macro and consumption, the overall travel demand in China remained resilient in the first half of 2024. Data released from airlines, high-speed railways and the Ministry of Culture and Tourism all confirmed this trend. For example, the domestic airline transported 320 million passengers in the first half of this year, up 16.4% year-over-year and 12.4% compared to the same period in 2019. The high-speed railways transported 2.1 billion passengers in the first half which was a record high and represented 18.4% year-over-year increase. In addition, based on the data from the Ministry of Cultural and Tourism, the number of domestic tourists was 2.7 billion in the first half, up 14.3% year-over-year, showing a relatively strong leisure traveling demand. As for our own operating results in the quarter, the total number of room nights sold in China increased by approximately 21% year-over-year during the quarter. While our hotel network expanded rapidly, our occupancy rate still increased by 0.7 percentage points year-over-year. This was in line with the occupancy rate improvement targets set by the company at the beginning of the year and it also reflected the stability of the overall traveling demand. In terms of the ADR, the pent-up demand and the temporary supply shortage right after the reopening last year definitely led to a very high base of ADR, especially in the second and third quarter. We believe that both occupancy rate and ADR should gradually return to a relatively healthy and sustainable growth trend this year and onwards. Of course, we're also proactively taking various measures to improve our ADR and to ensure that we can continuously outperform the industry as well as bringing long-term RevPAR growth potential. Please turn to Page 5. We focus on 3 key areas to achieve RevPAR. Firstly, product upgrades, continuously upgrade our main brand with introduction of new versions to meet customers' changing demand, at the same time, upgrading and renovating old hotels and old products to improve hotel quality. Secondly, the service excellence with the principle of customer-centric, we intend to provide best accommodation experiences for our guests and create value and return for our franchisees which could lead to a win-win ecosystem. And lastly, our membership program. We continuously focus on improvement of our member stickiness and repurchase through constant updating of our H Rewards App. At the same time, we further strengthened our capabilities on direct B2B booking and corporate client customers to capture more business traveling demand. We believe that these 3 aspects could continuously strengthen our core competitive advantages and it drives our long-term sustainable growth. Please turn to Page 6. In the second quarter, we continued to expand our network. During the quarter, we maintained the strong hotel opening momentum since last quarter and opened 567 new hotels. The number of hotel closures in the second quarter was 101. If excluding low-quality economic soft brand and HanTing 1.0 version, we closed only 58 hotels, 28 fewer than the same period last year. Going forward, we will stick to our high-quality growth strategy and continuously remove low-quality hotels from our network to ensure a better quality of our entire hotel portfolio. While we maintain a high speed of new hotel openings, the number of hotels in the pipeline at the end of second quarter reached a record high of 3,266, continuously demonstrating our strong brand power and attractiveness to our franchisees. Our strategic focus on economy and middle-scale hotels for serving the mass market continuously to be the key driver of our hotel network expansion. Please turn to Page 7. As of the second quarter 2024, economy and the middle-scale hotels accounted for 92%, 82% and 89% of our hotels in operation, hotels in pipeline and hotel openings, respectively. As we mentioned earlier, consistent product upgrades is one of the important drivers of our continued RevPAR outperformance compared to the industry. And it is also the key factors for us to achieve industry-leading, high-quality growth. Taking our core brand in Limited Service segment as an example. Please turn to Page 8. The proportion of HanTing 3.5 and above version in operation continued increasing, reached 36.3% in the second quarter of 2024, representing an increase of 6.5 percentage points compared to the end of last year. Please turn to Page 9. For our JI Hotels in operation, the proportion of JI Hotel 4.0 and above increased from 30% in 2020 to 65.7% in the end of 2023 and further increased to 71.2% in the second quarter of this year. Please turn to Page 10. The proportion of our latest LOHAS version rapidly increased from 58.4% of the Orange Hotel in pipeline in 2023 to more than 90% in the second quarter of this year. In conclusion, the products and brand power of each of our key brands have been further strengthening through continuously product upgrade. In terms of our regional expansion, we keep penetrating into lower-tier cities. Please turn to Page 11. At the end of second quarter 2024, 41% of the hotel in operation were located in Tier 3 and below cities, up 2 percentage points year-over-year. The proportion of pipeline hotels in third tier and below cities reached 54%. Although the proportion was slightly lower than the same period in 2023, the absolute number still recorded double-digit growth year-over-year. The increase in the proportion of pipeline in first-tier cities is mainly due to acceleration of new signings of our upper-middle segment as well as faster penetration in Southern China. The number of cities coverage reached to 1,328 cities at the end of this quarter, about 132 cities added compared to the same period last year. With company's continuous penetration into the lower-tier cities and the consumption trend of the customers continuously seeking for more value-for-money products, we further explored and developed the economy and budget hotel markets. Please turn to Page 12. In the second quarter, we repositioned our HI Inn brand and redesigned its product. The new HI Inn 6.0 version is positioned as ultimate value for money, with brand core value of sleep well and spend less that focus on customers' core accommodation needs of good sleeping and showering. It offers customers a global standard of accommodation experiences by providing standardized hotel rooms and convenient and high-efficient self-service with automatically good value for money pricing. In order to achieve high operational efficiency in a hotel and achieve its brand positioning of ultimate value for money, HI Inn innovatively created a 3-in-1 digital operational system which combines guest self-service, digital front desk and a mobile stuff. All-in-all, HI Inn will become a strong supplement to our HanTing and Ni Hao brand to further help our lower-tier cities' penetration strategy and strengthen and solidify our leading position in the economy and budget hotel market. Additionally, our upper-mid segment development continued progressing in the second quarter. Please turn to Page 13. At the end of second quarter 2024, the number of upper-mid hotels in operation reached 738 hotels, up 31% year-over-year and 8% quarter-over-quarter. And the number of hotels in pipeline reached 509 hotels, up 61% year-over-year and 18% quarter-over-quarter. In the second quarter, the sequential growth rate of both the number of hotels in operation and hotels in pipeline accelerated compared to the previous quarter, demonstrating that our upper-mid brands are increasingly gaining recognition among customers and franchisees. Affected by the macro economy, the overall business travel market is still recovering relatively slowly. Nevertheless, we managed to offset some shortages from the individual business traveling demand by rapidly growing our direct B2B business. This is also the key factors for us to achieve resilient occupancy rate. Please turn to Page 14. In the second quarter of 2024, the number of room nights booked directly via our B2B platform exceeded 6 million, up 31% year-over-year and 26% quarter-over-quarter. The number of active corporate clients exceeded 3,600, up 47% year-over-year and 36% quarter-over-quarter. Now we are moving to our overseas business. Please turn to Page 15. DH RevPAR in the second quarter was EUR 82, up 4.5% year-over-year, driven by 2.7% increase in ADR to EUR 120 and 1.2 percentage point increase in occupancy rate to 68.3%. In June, our DH's hotel in Germany performed well benefited from the Euro Cup. Please turn to Page 16 for our globalization strategy. As of the second quarter 2024, about 53% of the hotels in operation were located in Germany. In terms of the hotels in pipeline, only 39% of the hotels are in Germany and the remaining are in other European countries, Asia and Africa, each accounted for 36%, 18% and 7%, respectively. Among them, the proportion of pipeline hotels in Asia has increased meaningfully compared to the proportion of hotels in operation, achieved some periodic results and was in line with our strategy that was set at the year beginning. All above concludes our second quarter 2024 business update. Now I will hand over the call to our CFO, Mr. Zou Jun, to discuss our regional and financial performance during the quarter.
Zou Jun: Thank you, Jin Hui. Good morning and good evening to everyone. Let's go through our operational and financial review for the second quarter of 2024. Now please turn to Page 18. As Mr. Jin Hui mentioned, we reached a remarkable milestone during the second quarter of 2024. The number of hotels in operation for both the group and Legacy-Huazhu stood at 10,000 and the overall number of rooms increased 19% year-over-year to over 1 million as of the second quarter this year compared with over 840,000 a year ago. Hotel turnover for the second quarter of 2024 was RMB23.4 billion, representing a 15% year-over-year increase, of which Legacy-Huazhu's hotel turnover grew 16% year-over-year to RMB21.3 billion. Now please turn to Page 19. In the second quarter of 2024, our total revenue for the group increased 11% year-over-year to RMB6.1 billion, at the high end of our previously announced guidance of 7% to 11% year-over-year growth. Revenue from Legacy-Huazhu grew 11% year-over-year to RMB4.8 billion, also reaching a high end of our guidance for the segment. And the growth was driven primarily by our strong new hotel openings. Legacy-DH revenue rose 12% year-over-year to RMB1.3 billion, attributable to both business recovery and hotel network expansion. Next page, please. We are committed to grow under the asset line model, expanding our hotel network using manachised and franchised hotels. As a result, revenue from our manachised and franchised hotels continued rising. In the second quarter of 2024, manachised and franchised hotels contributed to 48%, or nearly half of our Legacy-Huazhu revenue, up from 42% a year ago. We expect this trend to continue as we become more and more asset light. This should lead to a gradual margin expansion for the business as well as to help us to become more resilient with these economy and industry headwinds. Now please turn to Page 21. Hotel operating costs was RMB3.7 billion in the second quarter of 2024, up 7% year-over-year. The increase was primarily driven by rising staff costs from our continued network expansion. The year-over-year increase in hotel operating costs was meaningfully lower than our revenue growth, thanks to our asset-light strategy. Preopening costs maintained at a low level as we continue moving towards asset-light model and stay selective on opening leased and owned hotels. SG&A expenses were RMB919 million in the second quarter of 2024, up 24% year-over-year. The year-over-year increase was attributable to head count normalization as well as a rise in share-based compensation to secure and reward our core employees for a sustainable long-term business growth. Income from operations in the quarter reached RMB1.6 billion, representing a 14% year-over-year increase, driven primarily by the strong network expansion of our manachised and franchised hotels as well as further business recovery of DH. Now please turn to Page 22 for our profitability and cash flow during the quarter. In the second quarter of 2024, our adjusted EBITDA increased 15% year-over-year to RMB2 billion. And by segment, Legacy-Huazhu's adjusted EBITDA grew 14% year-over-year to RMB1.9 billion, with adjusted EBITDA margin expanded 1% to 39.5%, thanks to our continued business growth, asset-light strategy as well as our cost-saving initiatives on nonpersonnel-related expenses. Our DH business generated RMB131 million adjusted EBITDA, turning profitable from a loss position in the previous quarter and representing a year-over-year growth of 35%. Our group's adjusted net income was RMB1.3 billion in the second quarter of 2024, up 17% year-over-year. Operating cash flow for the quarter was flattish year-over-year at RMB2.2 billion. Now turn to Page 23 for our liquidity position. As of end of June 2024, the group had RMB9.9 billion cash, cash equivalent, restricted cash and time deposits and was in a solid net cash position of RMB4.3 billion. Including time deposits, we also have RMB3.1 billion unutilized bank facility as of end of our second quarter. Please turn to Page 24 now for shareholder returns. As we become more asset-light and cash-rich, we are committed to reward our shareholders through dividend and buybacks. Last month, we announced a 3-year shareholder return plan with an aggregate amount of up to US$2 billion. This includes semi-annual ordinary dividends of no less than 60% of the net income this year as well as special dividend and share buybacks. Concurrently, the Board approved a 5-year share repurchase program with an aggregate amount up to US$1 billion, effective from August 21 which is today. Next page, please. Under the new shareholder term plan, the Board declared a US$200 million interim cash dividend for the first half of 2024. We also continued buyback shares and have bought back roughly US$143 million worth of shares from the market as of July year-to-date. Lastly, Page 26 on guidance. For the third quarter of 2024, we expect our revenue to grow between 2% to 5% compared to third quarter of last year or 1% to 4% excluding DH. To reflect our strong hotel opening momentum, we revised up our full year growth hotel opening target to over 2,200 hotels, up from the previous guidance of around 1,800 hotels. With that, we are ready to take your questions. Operator, please open the line for Q&A.
Operator: [Operator Instructions] Our first question comes from the line of Ronald Leung from Bank of America.
Ronald Leung: Ronald from Bank of America. I have 2 questions. So my first question is about the RevPAR expectations. Could you comment about your RevPAR expectations for 3Q 2024 and also for full year 2024? Yes. Okay. This is my first question. My second question is about the investment appetite for franchisees. Could management comment on the current investment appetite for the franchisees? Do you see any signs that the franchisee sentiment may slow down because of the RevPAR decline? So let me translate my questions.
Jin Hui: Okay. Let me answer your questions, firstly, in regards to the RevPAR. So as you may see from the industry number released from the STR, I think July and the several weeks of August, actually, on a year-over-year basis, the RevPAR was around 10% decline on a year-over-year basis. Clearly, that -- we also observed that the macro condition and the hotel consumption, especially the end consumption was relatively weak. But also, last year, the third quarter was a very high base because that was a peak season right after the reopening post the COVID. But as you may know, from the data itself, you can see that our RevPAR performance is always outpaced the industry number. So for the third quarter, we expect that could may decline around mid-single digit year-over-year. But I think this year, the RevPAR should gradually return to a more healthier and sustainable development trend, as we mentioned previously. And also another factor is the supply was increased year-over-year for this year, especially for certain regions, for example, the eastern part of China. But some of the performance -- we also see a different performance in different regions. Like for example, the West part, the central part of China was still quite performing well. We still see a very strong traveling demand in particular regions. But in Eastern part of China, maybe some of the over-temporary oversupply or some of the weak business traveling demand which could be a bit underperforming. But for us, in a longer-term perspective, we remain focused on the mass market. And we think through our strategy and high-quality growth, we remain confident in the longer-term perspective. And for the second question, in terms of the franchisees, as you can see, our pipeline continuously grow despite our high-speed new hotel opening because we insist our key strategy on lower-tier cities penetrations and also the upper mid-segment penetration as well. For next year, we will remain focused on these 2 areas and also through the better product, the better branding that we are confident that the hotel franchisees confidence should remain at the healthier and sustainable level. I want to add one more point. Since 2022, we started our high-quality growth. And this year, we started the service excellence. So for both parts, we want to further strengthening our core competitiveness and to maintain a strong competitive advantage in the industry. So hopefully, that our shareholders or analysts could understand our strategy and our planning. Thank you.
Operator: Our next question comes from the line of Dan Xu from Morgan Stanley.
Dan Xu: Please allow me to translate my question. This is Dan from Morgan Stanley. My question is regarding hotel opening and pipeline and also supply chain building. The management continues to mention about the pipeline increase on top of the rapid network expansion. So my question is about the company's opening capacity, can the management update us on the progress you have made regarding hotel opening, especially we increased the growth opening target from 1,800 hotels to 2,200 hotels? I assume we are signing more than that number in a year and the pipeline right now is over 3,200 hotels. So with more progress made on the supply chain, can we assume this annual opening number to continue to go up? And is there a limit to the number per year?
Jin Hui: Okay. Let me translate in terms of the supply chain. So supply chain is very important factor for us to maintain our high-quality growth and achieve the 10,000 hotels in 1,000 cities. There are 3 key areas that the supply chain needs to look at. One is the cost leadership, two is the high quality, third is the efficiency. In the second half, we will continuously to improve our supply chain capability by replacing higher-quality suppliers and further improve our efficiency and lower the cost. So that won't be -- supply chain could help us to further accelerate the hotel network expansion and with relatively lower cost and high efficiency. We are very happy to see that we can open more than 2,200 hotels in this year. This has supported our localized strategy in our regional offices and the further improvements on the supply chain capability. However, I want to emphasize one more time that we -- in the future in terms of the hotel network expansion, we will remain insisting on that higher quality is more important than the scale. Okay, that we will further develop the flagship hotels and continuously implementing our high-quality, sustainable growth strategy, especially in the lower-tier cities. As you may see that given that we are doing a lot of flagship hotels, that's a number of rooms per hotel actually increased and in other words, the total number of hotels, the growth is higher than the -- total number of hotel rooms growth is higher number of hotel growth itself. So all in all, that we will remain focused on more quality than scale and implement our high-quality system growth strategy. Thank you.
Operator: Our next question from the line of Simon Cheung from Goldman Sachs.
Simon Cheung: Let me translate the questions. I think there are a lot of concern about hotel supply in the industry, particularly; we have seen the hotel supply has fully recovered to 2019, therefore actually exceeded year-to-date. Wondering how you're seeing the hotel supply in the medium term and how that will impact the industry RevPAR? And correspondingly, how H1 will think about your RevPAR performance? And then the second question I have [indiscernible]. So the second question is related to the impact of the RevPAR now that the guidance seemingly is a bit softer in the second half of the year, how would that impact the margins? So my third question is related to DH. We have seen quite a healthy performance in the second quarter and have seen the hotel additions actually accelerated a bit. Wondering what is some sort of -- whether you have some sort of a long-term target, in particular -- particularly in Asia where you have been -- you have done quite well.
Jin Hui: Let me translate the first answer. So in terms of the market supply, so basically, the hotel market in China is quite relatively mature and there's also a market-driven business. So basically, we believe the supply and demand will always come back to equivalent and also the supply will also affected by the demand movements. Historically, the entire industry benefited from the generational improvements, the economic development and the demand -- rapid demand increasing. Therefore, there is a lot of new suppliers coming into the market. But again, for us, our observation is very clear that there is no lack of the supply but there is a lack of high-quality supply. So that's the reason why we continuously emphasize on the high-quality sustainable growth together with the service excellence. So by doing so, we want to maintain our core competitiveness and provides good supplies and high-quality supplies to the market to gain competitive edge. So this is our views on the demand/supply dynamic for the hotel lodging market in China. And in terms of the long-term RevPAR development trends, we refer to what has been developing in the U.S. market for the last 40 years. It shows a clear trend that the RevPAR in the U.S. is very positively correlated to the GDP growth and inflation but is very positively correlated. So it's affected by the macro indications and the macro performance; so for [indiscernible] perspective. And given we have been established a very strong brand, we have been established a very good product and organizational capability as well as our traffic sources membership programs. Basically, we believe we could be very competitive in the market in a longer-term perspective. Okay. In terms of our DH strategy, there are 3 aspects. Firstly, it's very clear that it's the asset-light transformation. As you may know that historically, we had a lot of leased and owned hotels, now we are doing the asset-light transformation. And secondly, it's continuously on the cost control and efficiency improvement to maintain a healthier and sustainable profitability and cash flow. And thirdly is we want to leverage on DH's good brand and product to develop in Middle East and Asia Pacific.
Zou Jun: So about margin, I think, firstly, of course, you see that there are some short-term RevPAR fluctuation in the market and in business as well but in the long term, we're confident that we'll have a very good RevPAR growth trend and through, let's say, product upgrade, service excellence and membership program upgrade, as Jin Hui mentioned in his presentation and we will continue to outperform the market. And secondly, with our business continuously transferred to an asset-light model, the revenue structure, as I mentioned in my presentation has changed and that will bring a natural, let's see, margin improvement in the long term. And certainly, we started to implement flexible budget and rolling forecast and which will allow us to nimbly respond to market condition change and adjust our spending levels. And fourthly, we are also meticulously measuring our ROI for each big spending. And with all those efforts, we believe, in the long term, we will have a better margin profile. Thank you.
Operator: We have now reached the end of the question-and-answer session. Thank you all very much for your questions. I'll now turn the conference back to the management team for closing comments.
Jason Chen: Thank you everyone for taking your time with us today and we look forward to see you in upcoming quarters. Thank you and bye-bye.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.