Good day, and thank you for standing by. Welcome to the H World Q4 and Full-Year 2025 Earnings Conference Call. Please be advised today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Ivy. Please go ahead.

Thank you. Good morning, and good evening, everyone. Thanks for joining us today. Welcome to H World Group 2025 Fourth Quarter and Full-Year Earnings Conference Call. Joining us today is our Founder and Executive Chairman, Mr. Ji Qi; our CEO, Mr. Jin Hui; our CFO, Ms. Chen Hui; and our CSO, Ms. Jihong. 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 provisions 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 the SEC. H World Group does not undertake any obligation 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 earlier today. 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.hld.com. With that, now I will hand over the call to our CEO, Mr. Jin Hui, to discuss our business performance in the fourth quarter and full year of 2025. Mr. Jin, please.

Dear investors and analysts, good day. Thank you for joining H World Group's Fourth Quarter and Full-Year 2025 Earnings Call. First, I'd like to share some observations on the overall travel market. Demand for travel is gradually shifting from discretionary demand to necessity for Chinese consumers. Data from railway, aviation and tourism all indicate a steadily growing travel demand in China. The number of trips as well as consumer spending continues rising as people increasingly pursue a better life. As China's transportation network improves, accommodation needs quickly expanded from major cities to county-level markets, making the lower-tier city a new growth engine for tourism consumption. Strong demand for personal leisure and experiential consumption, together with booming tourism events, exhibitions and sports competitions are driving the diversification and quality upgrades of accommodation needs. However, China's hotel industry still faces oversupply of low-quality and homogeneous products, while high-quality value-for-money supply remains insufficient. Therefore, supply-side reform will remain the main theme of future industry development, and this will undoubtedly bring tremendous growth opportunities for the leading domestic branded hotel groups like H World. While focusing on our core business and driving high-quality growth, we also actively fulfill our social responsibilities to achieve a coordinated development of corporate value and social value. We focus on economy and mid-scale segments, which serve the mass market. We developed good value-for-money products to provide consumers with safe, cozy and affordable accommodation. Leveraging our brand value and supply chain capability, we revitalized idle assets, enhanced urban supporting services and boosted asset-operation efficiency. In addition, we keep expanding into the lower-tier cities and rural areas, filling the gap in quality accommodation in those markets. We create stable employment opportunities, drive the development of the surrounding industries and boost the local night economy. Looking ahead, we will continue deepening our roots in the China market, pursuing high-quality growth and delivering service excellence with a brand-led approach to reshape China's hotel industry. In 2025, H World remained committed to brand-led high-quality development, and we delivered solid business results across network expansion, profitability, brand building and membership ecosystem development. We are pleased to see that supported by refined revenue management, enhanced sales and marketing capabilities and ongoing upgrades of our products and services, we kept occupancy rate stable while driving ADR recovery quarter-by-quarter. For the fourth quarter, we achieved positive year-over-year RevPAR growth for the first time since the second quarter of 2024. Our full year 2025 ADR remained largely flat year-over-year. By breaking through in new cities and regions and further penetrating the lower-tier cities, we achieved another year of high-quality network expansion. Driven by a 16.2% year-over-year increase in the number of rooms in operation, our Group hotel GMV grew 16.4% year-over-year to RMB 108.1 billion. Meanwhile, along with our network expansion and the continuous enhancement of the H-Reward membership program, room nights sold to members rose 21.5% year-over-year, exceeding 245 million in 2025. More importantly, our asset-light managed and franchise business delivered solid growth in its hotel network, revenue as well as profit. Our full-year 2025 Group M&F revenue rose 23.1% year-over-year to RMB 11.7 billion. The Group M&F Gross Operating Profit increased by 20.8% year-over-year to RMB 7.6 billion. In terms of hotel network expansion, we remain steadfast in focusing on the economy and midscale hotel segments to serve the mass market and strengthening our core brand competitiveness. By continuously upgrading our core products and enhancing our service excellence with a customer-centric principle, we improved the operational quality of our hotel portfolio and strengthened our brand value, which helped the group to achieve long-term sustainable growth. By the end of 2025, the proportion of new versions of the three core limited-service brands, namely HanTing, JI and Orange, has increased further. To further expand our footprint in the lower-tier markets, advance HanTing brand purification and meet the diversified travel needs of consumers, we have launched the HanTing Inn brand. HanTing Inn strikes a perfect balance between cost effectiveness and quality. We have rolled out innovative room types such as multi-bedrooms and family rooms, catering to growing scenarios such as family trips and group travel and filling in the missing piece in the economy hotel market. In addition, we have integrated smart services such as self-check-in and self-service laundry facilities, balancing guest experience and operational efficiency. Also, HanTing plays a vital role in HanTing brand purification, helping accelerate brand and product upgrades to deliver a better lodging experience for our guests. Supported by our light, fast, economical, profitable renovation model, HanTing Inn offers franchisees who operate older HanTing hotels another great option, which has light refurbishment, quick construction, low cost and certain profitability. Meanwhile, for our upper midscale segment, we stick to our multi-brand approach. Backed by clear brand positioning and value propositions, we are steadily pushing forward the development of four key brands in the segment, which are Intercity, Grand Ji, Crystal and Mercure. As of end 2025, the number of our upper-midscale hotels in operation and in pipeline exceeded 1,639, up 17.6% year-over-year. Among them, our core brand, Intercity, hit the milestone of over 100 operating hotels. With its clear brand positioning, exceptional product quality and strong operational performance, Intercity has become one of the core growth drivers for our upper-midscale segment. We always focus on strengthening our direct sales capabilities through the H-Reward membership program, which are vital to our sustainable long-term business growth. As we expand our hotel network to cover more cities, our membership base and the room nights booked by members both achieved robust growth. Meanwhile, we are also proactively exploring cooperation with new sales and marketing channels such as short-video platforms to boost our presence in the inbound travel market, to further broaden customer acquisition scenarios and to enhance membership-conversion efficiency. Lastly, looking ahead into 2026, H World will continue to pursue brand-led, high-quality growth, keep strengthening our sales and marketing capabilities and embrace tech innovation with a more open and proactive mindset to leverage technology to underpin our hotel operations. At the same time, we will continue to enhance customer experience and to improve operational efficiency and investment returns for franchisees, steadily working our way to our strategic goal of 2,000 cities and 20,000 hotels. All above concludes the 2025 operational update for Legacy-Huazhu. Now, I will hand over the call to our CSO, Ms. Jihong, to give an update on Legacy-DH.

Thank you, Jin Hui. We are very happy to report that in 2025, we achieved a successful business turnaround for our Legacy-DH business. We achieved a record level of adjusted EBITDA of around RMB 500 million. This is a significant improvement compared to the loss situation last year. The strong performance confirms the successful execution of our business-transformation plan. Hotel business cannot achieve profitability without revenue enhancement. Our RevPAR continued to grow and achieved an 8.2% increase year-on-year in 2025. Despite a challenging market environment, Legacy-DH succeeded in stabilizing like-for-like hotel revenues. We adjusted the revenue management strategy for different categories of our hotels and worked relentlessly on property-level sales performance improvement. Through disciplined efficiency programs, we significantly reduced the DH cost base and streamlined the operations, following a successful restructuring of headquarters and reduction of administrative costs at the end of 2024 and early 2025. The management team continued to implement ongoing cost-optimization measures across personnel, external services, and supply chain throughout the organization. At the same time, with numerous restructuring efforts ongoing, we have been able to maintain organizational and operational stability, ensuring a solid foundation for sustainable future performance. The most important measure we successfully undertook in 2025 was the optimization of our hotel portfolio. We renegotiated lease terms of many hotels, exited several loss-making properties, and transformed a portfolio of leased hotels into an asset-light structure. This portfolio restructuring significantly enhanced our profitability and improved resilience of our business. As everybody remembers, H World acquired Deutsche Hospitality shortly before the COVID breakout. Our business faced an unprecedented challenging environment. We did not give up. Instead, we started our transformation journey and brought our expertise globally. This shows the resilience of H World Group. Going forward, in 2026, we will continue to build on the momentum and enhance our performance. Continuous improvement of commercial and operational effectiveness across brands is our first priority. We are undertaking concrete measures to improve our marketing and sales across different target markets and adjust our revenue management strategy for different segments. At the same time, we will further leverage synergies from integration with H World Group. We are working on closer integration from different aspects, such as supply chain, design and construction, technology and loyalty program. In 2026, we're expecting to see more benefits from these synergies on the operational level. Another strategic initiative we will continue to undertake in 2026 is to sharpen our brand positioning. For example, we're developing Intercity next generation to make it more guest-friendly and operationally efficient. With the new brand proposition, we expect to roll out our business model to the market and accelerate growth of our network together with our partners across the region in the years to come. With this, I conclude the discussion on Legacy-DH business. I will turn to our CFO, Ms. Chen Hui, for financial performance review.

Thank you, Jihong. Good evening, and good morning, everyone. Let me walk you through our full year 2025 financial overview. In 2025, our group revenue grew 5.9% year-over-year to RMB 25.3 billion, at the high end of our guidance, of which Legacy-Huazhu's revenue rose by 7.9% year-over-year to RMB 20.5 billion. The top-line growth was driven by our high-quality network expansion and stabilized RevPAR performance. Group Adjusted EBITDA increased 24.2% year-over-year to RMB 8.5 billion, with margin improved by 4.9 percentage points year-over-year to 33.5%. The strong profit growth and profit margin expansion were mainly attributable to further enlarged profit contribution from our high-margin asset-light business, as well as the operational improvement and cost savings from Legacy-DH. Adjusted Net Income increased by 32.9% year-over-year to RMB 4.9 billion. Looking into our asset-light managed and franchise business: in 2025, powered by the network expansion of managed hotels, our managed and franchise revenue increased by a robust 23.1% year-over-year to RMB 11.7 billion. Managed and franchise gross operating profit rose by 20.8% year-over-year to RMB 7.6 billion. Profit contribution from our managed and franchise business rose steadily and reached 69% in 2025, representing a 5 percentage point year-over-year increase. In the full year of 2025, we generated RMB 8.4 billion operating cash flow. And at the end of 2025, the group had RMB 15.4 billion cash and cash equivalents and RMB 9.6 billion net cash on the balance sheet. With support of our strong cash flow and a healthy balance sheet, we are glad to declare a USD 400 million cash dividend for the second half of 2025. Together with a USD 250 million interim dividend and around USD 110 million share repurchases, our total shareholder return amounted to around USD 760 million for the full year of 2025. In 2024, we announced a USD 2 billion three-year Total Shareholder Return Plan. We have now completed over 75% of this three-year plan, and we are committed to continuously returning capital to our shareholders. Lastly, our guidance for the full year of 2026: we expect our Group Revenue to grow 2% to 6% year-over-year and 5% to 9% if excluding DH. And we expect our managed and franchise revenue to grow 12% to 16% year-over-year. In terms of unit growth, we are expecting to open 2,200 to 2,300 hotels in 2026 and to close 600 to 700 hotels for the same year. This represents a 12% year-over-year hotel network growth. With that, we conclude our financial review for the full-year of 2025. Today, I will step down as CFO and Mr. Arthur Yu will take the CFO role of H World. I would like to take this opportunity to thank all the investors and analysts for your continued support for H World. I will still be serving as the Chief Compliance Officer of the company. And together with our team, we will ensure stable financial management and a smooth transition. We are certain that Arthur, with his expertise and vision, will help drive our financial strategy and support our growth trajectory. Together, the team will lead H World to its next success. I will now turn the call to Mr. Arthur Yu. Arthur, please.

Thank you, Hui, for the kind introduction. Hello, everyone, and thank you for joining the call today. It is a privilege to step into the role of CFO at such a pivotal moment for H World. I have long admired the company's resilience and its strong market position. As we look ahead, my priorities will be to build a world-class finance function, maintain rigorous control and investment oversight and ensure transparent and consistent communications with the capital markets. I look forward to getting to know many of you individually in the days ahead. And we are now ready to open the floor for questions.

Our first question today is from Dan Chee from Morgan Stanley. It's a privilege to step into the role of CFO at such a pivotal moment for H World. I have long admired the company's resilience and strong market position. Looking ahead, my priorities will be to build a world-class finance function, maintain rigorous control and investment oversight, and ensure transparent and consistent communication with the capital markets. I look forward to getting to know many of you individually in the days ahead. We are now ready to open the floor for questions.

The first question. I would like to congratulate Arthur on the new role, and we have seen the list of credentials of Arthur's expertise. So for starters, can management share very briefly the direction of Arthur's new role? And what kind of changes shall we expect on our financial and growth strategy?

Thank you, Dan, for your question. Firstly, I want to take this opportunity to thank Ms. Chen Hui for her dedication to the company in the past 20 years. We just had our 20-year anniversary Investor Day last year. We can see that over the 20 years with our founding team, we have built Huazhu into a very successful company. At the conference last year, while we concluded and summarized our achievements that we've made in the past 20 years, we also took the opportunity to look ahead. We had a vision that we want to create H World into a global company, into a world-class company and to work into the world and to become a leading company in China and globally. So with this vision, and as Huazhu is growing really into a hyperscale company, we really need world-class management and professional talent to bring diversified and international talent and skills to our management team. So I welcome Arthur to join H World, and we are certain that Mr. Arthur Yu, with his deep financial management expertise and together with the team, we will lead H World to the next stage and to achieve the next success.

We will now take the next question. Next question is from Ronald Leung from Bank of America.

Let me ask my question in English. So regarding the 2026 revenue guidance, what is the implied RevPAR expectations? And also, could management comment on the overall demand-supply outlook for 2026? How is the supply-growth trend? And also, how is the overall demand for business and leisure travel?

Thank you, Ronald. In the past three months, we have observed that China's hotel industry trend is actually recovering. On the demand side, we have been observing that in the past one to two years, leisure travel has been growing steadily, and inbound travel is recovering and coming back. So overall, demand is growing for leisure, especially. For business travel demand, we have also seen that business activity and business travel has bottomed and is trending upward, especially in Tier 1 and Tier 2 cities. So for 2026, we are cautiously optimistic on the overall RevPAR performance. For the company, we have the target to deliver a flat to slightly positive year-over-year increase for full year 2026 RevPAR.

We will now take the next question. This is from Simon Cheung from Goldman Sachs.

The question is in relation to the hotel opening, the pace of hotel openings last year. The company achieved a lot in terms of growth, exceeding 2,400 store openings last year. Wondering whether you would have any change in the pace or expectation for this year. In particular, we noticed that you have some new hotel brand, for example, the HanTing Inn brand. I'm wondering whether you would have any target for this brand as well.

Thank you, Simon. In 2025, we achieved a record high in hotel gross openings, exceeding 2,400 hotels. Actually, in 2023, we already adjusted our overall growth and development strategy toward high-quality, sustainable growth. What we are pursuing is not just simple quantity, but also high-quality standards for the hotel network. In 2026, while maintaining these high-quality standards, we still expect to expand our hotel network and maintain overall openings at a high level. We guided to open 2,200 to 2,300 new hotels in 2026. This reflects our strategy of high-quality sustainable growth. We are still very confident to achieve our strategic goal of 2,000 cities and 20,000 hotels by 2030. On your question on HanTing Inn, I would like to share some thoughts on this product. We believe the economy sector is the core of China's consumer market, and this is also the core market for H World. We want to achieve full coverage and high market share in this economy sector. We are seeing more and more high-quality properties that can be built into our HanTing brand. For our HanTing branded hotels, the quality and standards are much higher compared to a couple of years ago. With this, we introduced HanTing Inn, which can help us to cover and serve the mass market. I want to stress that HanTing Inn and HanTing together form one family under the HanTing brand, and HanTing Inn will help us to serve the broader market while HanTing will continue to focus on higher-standard offerings. HanTing Inn plays a very important role in upgrading and replacing older HanTing products and further purifying our HanTing brand.

We will now take the next question. Question is from Xin Chen from UBS.

Let me translate to English. My question is regarding DH. Could management share further details on the asset-light transformation strategy and road map for DH, as well as the targets for future hotel network expansion and financial performance?

Xin, I will take your question. Yes, we achieved a turnaround of the DH business in 2025. However, our efforts to improve the business do not stop here. Our reorganization, efficiency improvement and cost control will remain part of ongoing management. We're also continuing our portfolio restructuring. We are continuing our efforts in rental reduction, lease renegotiation, looking into possibilities to exit loss-making properties and negotiating better asset portfolios. Now that our business is stabilized, we are starting to look at development to expand our hotel network. We have much more confidence now in managing international hotels, and we believe select-service hotels have a lot of potential in overseas markets. We are developing different business models, for example next-generation Intercity and Zleep as the basis of our growth. Of course, we're also looking into possibilities to expand Steigenberger hotels as well. Europe will remain our core international market. At the same time, we'll also explore the Middle East and North Africa, where we already have a good basis. So Legacy-DH is expected to remain profitable in the years to come.

We will now take the next question. This is from Sijie Lin from CICC.

Our shareholder return in 2025 achieved USD 760 million, exceeding 100% of Adjusted Net Profit and has completed over 75% of the USD 2 billion three-year Shareholder Return Plan. So what's our plan for shareholder return in the upcoming years?

This is Hui. I'll answer your question on shareholder return. Benefiting from our asset-light strategy and our high-quality growth, H World has generated very strong and stable cash flow, and we have a healthy balance sheet. Going forward, we are committed to continue returning capital to shareholders through either dividends or share repurchases.

We'll now take our next question. This is from Lydia Ling from Citi.

I have questions on the upper-midscale hotel segment where we saw further development in 2025. What's your plan for this year or the longer term? Do you plan to be more aggressive or accelerate expansion in this segment?

Thank you, Lydia. I will take your question on the upper-midscale segment. The upper-midscale sector is one of H World's strategic focuses. We have been focusing on this sector in the past two years, and we will continue to do so. Our strategy in the upper-midscale segment is to focus on Tier 1 and Tier 2 cities, and we are developing this segment using a multi-brand strategy, which is different from other companies. We have four key brands in this segment: Grand Ji, Intercity, Crystal and Mercure. These four brands have different target markets and different specialties—Grand Ji presents Oriental aesthetics, Intercity has a more Western design, and Mercure has French-style influences. Using this multi-brand strategy, we want to move ahead in this segment. We will continue to upgrade and enhance our products and services. Our goal is to become a leading brand in the upper-midscale sector by 2030. Over the past two years, Intercity has become an attractive and compelling brand in the upper-midscale sector in terms of brand value, product, service excellence and RevPAR. We have also introduced Grand Ji Hotel, which will have its grand opening on April 1. It has been in a pilot phase already, but it hasn't officially launched. We are confident that with our four core brands in the upper-midscale sector, each with its own taste and target market, we can become a leading company in this sector. We are also confident each of our four key brands will become a leader in their respective niche markets. Thank you.

Thank you. I will now hand the conference back to the speakers for any closing remarks. Thank you.

Thank you, everyone, for taking your time with us today. This concludes today's call, and we look forward to seeing you in upcoming quarters. Bye.

Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect. Portions of this transcript that were marked as interpreted were spoken by an interpreter present on the live call.