H World rolls out red carpet for shareholders with new $2.5 billion return plan

China’s leading hotel group raised its full-year outlook after posting stronger-than-expected second-quarter results, as it added two new brands to its domestic portfolio

Key Takeaways:

• H World’s revenue rose 10.8% in the second quarter, topping analyst forecasts, as it raised its full-year guidance for the second straight quarter
• The hotel operator unveiled a new three-year, $2.5 billion shareholder return plan, after largely completing its previous $2 billion program ahead of schedule

By Teri Yu

Investors are continuing to find a warm reception at H World Group Ltd. (1179.HK; HTHT.US), one of China’s leading hotel operators.

The company, parent company of the Hanting and Ji brands, and the China partner to French hotel giant Accor (AC.PA), delivered one of its strongest quarters in years in its latest financial results released on Monday. That report showed its profitability accelerated on the back of its multi-year pivot towards a “manchised” model of managing hotels for other property owners, along with more traditional franchising, which require far less capital than traditional hotel ownership.

But investors were probably most impressed by the company’s unveiling of a massive $2.5 billion new shareholder return plan, sparking a rally that saw the company’s U.S.-listed stock jump 11.4% on Monday after the announcement. We’ll return to that shortly, after looking at H World’s latest financial metrics.

Its revenue for the three months to June rose 10.8% year-on-year to 7.1 billion yuan ($1.1 billion), ahead of the $983 million average analyst estimate compiled by Zacks Investment Research. Revpar for its China hotels, one of the most widely watched industry metrics that combines room prices and occupancy rates, rose slightly to 238 yuan from 235 yuan a year earlier, in the latest signal that China’s hotel industry is starting to rebound from a period of sluggishness.

The company’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), a widely watched profitability measure, climbed 20.0% to 2.7 billion yuan in the latest quarter, while its net income rose 2.1% to 1.58 billion yuan, more than double the previous quarter’s 817 million yuan and also up from 1.54 billion yuan a year earlier.

The star of the show continued to be H World’s manachised and franchised businesses, which see the company collect fees for management services, reservations and support systems and use of its brand. M&F revenue jumped 25.2% to 3.6 billion yuan, making up more than half of the company’s total, up from 44.6% a year earlier. That shift is also boosting H World’s profitability, as its operating margin rose to 31.1% from 27.8% a year earlier.

“During the second quarter, we delivered another quarter of Revpar expansion,” CEO Jin Hui said in the earnings statement. “Looking ahead, we will continue to pursue ‘brand-led’ high-quality hotel network expansion, backed by our H Rewards membership program and technology development.”

China’s hotel industry initially boomed in 2023 after the end of the pandemic, as people engaged in “revenge travel” after two years of tight restrictions. That rebound later lost momentum amid growing consumer caution with China’s slowing economy, but H World’s new report provides the latest evidence that the situation has stabilized and is starting to rebound again.

Buoyed by the momentum, H World lifted its full-year 2026 revenue growth guidance to a range of 4% to 8%, up from a previous 2% to 6%, and raised its M&F revenue growth target to 16% to 20% from 12% to 16%. That marked the company’s second guidance upgrade this year.

Paying it forward

As its business gained momentum, the big news for investors was what H World is doing with its growing cash reserve, which rose to 14.2 billion yuan by the end of June from 10.4 billion yuan at the end of last year. The company’s board approved a new three-year shareholder return plan worth up to $2.5 billion, effective immediately, alongside an ordinary dividend of $0.87 per American depositary share (ADS), worth about $275 million.

The new plan, combined with H World’s previous three-year, $2 billion return program, launched in July 2024, is equal to nearly a third of the company’s market cap of about $14 billion. The company had already returned most funds from the earlier plan to shareholders through dividends and buybacks by the time the second quarter closed, as its franchise-heavy model threw off large amounts of cash.

The company’s debt level is also quite low, totaling about 4.2 billion yuan at the end of June, leaving H World with net cash of 10.2 billion yuan – providing enough firepower to fund both the new payout plan and continued expansion of its hotel pipeline.

Away from the balance sheet, H World used the first half of the year to add to its growing shelf of brands, following a strategy seen by many of the world’s top players seeking to cater to a wide range of market segments. It launched Hanting Express, an addition to its flagship Hanting economy family built around flexible, multi-occupancy rooms for families and groups of friends – a play for a broader slice of budget travelers. It also introduced Grand Ji, a more upscale spinoff of the popular Ji Hotel brand aimed at travelers willing to pay for a more elevated stay while keeping Ji’s contemporary Chinese design themes.

The new brands arrived as H World continued to expand its footprint, opening 498 new hotels in China during the quarter against 176 closures. The company said it remains “firmly on track” to hit its full-year target of 2,200 to 2,300 gross openings. Its pipeline of unopened hotels rose to 3,089 globally, up from both the prior quarter and a year earlier.

Overseas still finding its footing

H World’s international arm, which runs hotels outside China under brands including Steigenberger and IntercityHotel, was the one soft spot in the company’s latest report. Revenue for that business slipped 5.8% to 1.3 billion yuan during the quarter, as the unit absorbed some disruption tied to the Middle East conflict and continued investing in newer, lower-rate Southeast Asian markets. CEO Jin reassured investors by pointing out the company’s direct exposure to the international market is limited and that cost discipline should help the international unit ride out the turbulence.

For the first half of the year, H World’s revenue rose 11% to 13.1 billion yuan, with adjusted EBITDA up to 4.6 billion yuan from 3.8 billion yuan a year earlier. The higher guidance, accelerating cash returns and broadening brand lineup all suggest that H World is entering a new phase in China’s rebounding hotel sector, building on its strength as one of the industry’s leading operators.

The Bamboo Works offers a wide-ranging mix of coverage on U.S.- and Hong Kong-listed Chinese companies, including some sponsored content. For additional queries, including questions on individual articles, please contact us by clicking here

To subscribe to Bamboo Works free weekly newsletter, click here