$HTHT.US In this Q2 earnings report, what’s most worth paying attention to isn’t just the 10.8% revenue growth, but the 25.2% increase in management and franchise hotel revenue, which drives a clear improvement in operating margin. However, RevPAR for mature stores in Huazhu China still declined year over year, and overseas business has not fully recovered. So this is not a report you can look at only for total revenue and the number of new openings.
First, look at the core data
Huazhu Q2 revenue was RMB 7.121 billion, up 10.8% year over year; hotel transaction value reached RMB 30.5 billion, up 13.2%. Operating profit was RMB 2.218 billion, up 24.1%; operating margin rose to 31.1%, higher than 27.8% in the same period last year. Net profit attributable to shareholders was RMB 1.577 billion, up 2.1%; adjusted EBITDA was RMB 2.725 billion, up 20.0%. Profit margin improved faster than revenue growth. The core reason is that the revenue mix continued to shift toward a light-asset model.
Management and franchise business becomes the main incremental contributor
In Q2, revenue from management and franchised hotel business was RMB 3.586 billion, up 25.2%, and its revenue share increased to 50.4%; revenue from leased and owned hotels declined 4.9% year over year to RMB 3.233 billion. The franchise and management business does not need to bear significant rent and property costs, and it has higher operating leverage during expansion. Huazhu’s margin improvement this quarter is fundamentally not only due to a rebound in hotel demand, but also related to a higher share of light-asset income.
China Huazhu’s continued new-store expansion is still driving revenue growth
Huazhu China’s Q2 revenue was RMB 5.876 billion, up 14.9% year over year, and hotel transaction value grew 15.3% year over year. Composite ADR was RMB 298, up 2.6%; composite RevPAR was RMB 238, up 1.1%. However, RevPAR for mature stores was RMB 233, down 3.0% year over year, mainly due to a decline in occupancy rates at mature properties. In other words, growth at the group level is driven more by new store openings and network expansion, while demand for mature hotels has not fully returned to a stronger growth state yet.
Overseas business still faces pressure
Overseas business—HWI—Q2 revenue was RMB 1.253 billion, down 5.8% year over year; hotel transaction value fell 9.4% year over year. Using fixed exchange rates, composite RevPAR was USD 98, down 3.8% year over year, and occupancy was down 3.5 percentage points year over year. The company mentioned that the Middle East situation and new market ramp-ups in Southeast Asia are still ongoing, affecting overseas operations. Notably, after adjustments, HWI’s adjusted EBITDA turned from a loss in Q1 to a profit of RMB 131 million in Q2, indicating improving cost efficiency, but a recovery in overseas demand still needs more time to be validated.
The hotel network continues to expand rapidly
As of the end of June, Huazhu Global had 13,539 hotels in operation, with more than 1.33 million rooms. In China alone, in Q2 it opened 498 new hotels and closed 176, for a net increase of 322; its pipeline of hotels not yet opened reached 3,089. The number of openings and the size of the pipeline determine the foundation for Huazhu’s mid-term revenue expansion, but it also means that investors should keep an eye on the pace at which new stores ramp up, and whether aggressive high-speed openings will continue to dilute same-store performance of mature properties.
Guidance raised and stronger signals for shareholder returns
The company raised its full-year 2026 group revenue growth guidance to 4%–8%, and also raised the growth guidance for management and franchised hotel revenue to 16%–20%. At the same time, the board approved a three-year shareholder return plan with a total size of USD 2.5 billion, and announced approximately USD 275 million in ordinary-share cash dividends, corresponding to USD 0.87 per ADS. As of the end of Q2, the company had net cash of about RMB 10.2 billion, providing some financial foundation for expansion, dividends, and share repurchases.
What should we look at next
The most important thing going forward isn’t just whether the number of hotels can keep increasing, but three indicators: whether mature-store RevPAR can stop declining and rebound; whether management and franchise revenue can keep growing faster than overall revenue; and whether overseas business can move from profitability recovery further into revenue recovery. Huazhu’s light-asset expansion logic still holds, but the quality of same-store operations and the pace of overseas recovery determine the real value of growth.
In one sentence: Huazhu’s strengths in Q2 are that high growth in franchise and management businesses drives margin improvement and supports an upward revision to full-year guidance. The areas that still need to be verified are the pressure on RevPAR at mature stores in China and the recovery pace of the overseas business.
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