Detailed narrative
China Travel Demand and Policy Support
China's domestic travel demand maintained solid momentum in Q1 FY26, supported by steady growth in railway and aviation traffic, and tourism spending. Government policies, such as regional spring breaks and visa-free policies, further fueled leisure travel and inbound tourism. Despite some fluctuations in spending power, the overall leisure travel market continues to grow steadily, with no observed impact from rising energy costs due to the popularity of new energy vehicles.
Network Expansion and Optimization Strategy
H World China (HWC) achieved strong network expansion, with a 14.1% YoY increase in rooms in operation and 537 gross hotel openings in Q1. The company is pursuing a dual strategy: deepening penetration in lower-tier cities and returning to Tier 1 and 2 cities to capture high-quality properties in core business districts.
This approach aims to optimize the hotel portfolio and leverage premium product quality and brand power in mature markets, while maintaining a high-quality growth focus over pure quantity.
Upper Midscale Segment Development
The upper-midscale segment is a core strategic focus, demonstrating slightly better RevPAR recovery than economy and midscale segments in Q1 FY26. H World employs a multi-brand strategy with Intercity, Grand Ji, Mercure, and Crystal. While the segment shows solid network growth, some individual brands require further improvement in brand power.
The strategy involves opening flagship stores in core districts of Tier 1 and 2 cities, with confidence in long-term leadership in this segment.
Membership and Digitalization Initiatives
The H-Reward membership program remains vital for sustainable long-term development, with stable CRS contribution and membership bookings despite rapid network expansion. The company is focusing on capturing emerging traffic from leisure travel and inbound tourism by bringing in new talent, collaborating with AI companies for marketing strategies, and enhancing member conversion.
Efforts are also underway to improve capabilities in the corporate B2B channel, leveraging membership for business travelers.
International Expansion and Performance (HWI)
H World International (HWI) achieved initial breakthroughs in the Asia Pacific market, opening 6 hotels across Southeast Asia (Vietnam, Laos, Cambodia) with brands like HanTing, JI Hotel, Intercity, and MAXX. The first overseas HanTing Hotel in Ho Chi Minh City posted strong RevPAR of nearly RMB 500.
HWI plans to step up investment and expansion in Southeast Asia, viewing it as a new market opportunity. The Middle East conflict has had limited and non-material impact on HWI's business, with only 10 manachised-franchise hotels in the region.
Profitability and Cost Management
Group adjusted EBITDA margin expanded by 3.3 percentage points to 31.0% in Q1 FY26, driven by the asset-light strategy and improved performance in lease and owned businesses through revenue management and cost control. HWI is also implementing cost reduction initiatives, particularly for DH.
While controlling costs, H World is making necessary investments in digitalization, technology, AI development, and core brand building, such as the HanTing product launch, with a focus on ROI for long-term sustainable growth.
Shareholder Return Philosophy
H World Group maintains a strong balance sheet and stable cash flow, which supports its shareholder return arrangements. The company intends to continue using its own cash flow to return to shareholders, with the asset-light strategy and cost reduction initiatives expected to further strengthen this capability. Any new developments regarding the shareholder return plan will be updated to the market in due course⏳.