Net profit surges 70%, capital remains indifferent! What's happening with Huazhu | Financial Report Observation

Ask AI · Why does the imbalance in Huazhu’s store structure raise concerns among investors?

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4% of directly operated stores contributed 12.9 billion yuan in revenue, while 96% of franchise stores generated 11.7 billion yuan. The revenue structure shows a significant contrast with the store structure, highlighting structural issues in store operations.

Reporter Miao Ye from China Real Estate News | Beijing

A stellar performance often reflects one side of the business world, but it is usually accompanied by underlying concerns.

On March 18, Huazhu Group (01179.HK) released its financial results for Q4 and the full year of 2025. For the entire year, the group’s hotel revenue reached 108.1 billion yuan, with total income of 25.307 billion yuan, a 5.93% increase year-over-year; net profit attributable to the parent company was 5.08 billion yuan, up 66.7%; and 2,444 new stores were opened, setting a new record.

This performance broke Huazhu Group’s trend of “revenue growth without profit growth” in 2024.

After the earnings release, Huazhu Group outlined its 2026 development plan, expecting revenue growth of 2% to 6%, with plans to open 2,200 to 2,300 hotels throughout the year. Meanwhile, CEO Jin Hui reaffirmed the goal of opening 20,000 stores by 2030.

However, after this “best-ever” performance report, the capital market responded negatively. On the day of the earnings release, Huazhu Group’s U.S. stocks fell 3.78%; the next day, Hong Kong stocks closed at HKD 40.46 per share, down 4.12%, drawing attention.

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Scale expansion is unbalanced

A deeper analysis of Huazhu Group’s 2025 annual report reveals underlying structural operational issues behind its scale expansion. By the end of 2025, the group’s global hotels in operation exceeded 12,800, maintaining its position as the fourth-largest hotel group worldwide. However, the store structure is unbalanced—only 573 owned and leased hotels (directly operated stores), accounting for just 4% of total stores; management franchise and licensing stores account for as much as 96%, with a light-asset model becoming the main driver of expansion.

The contrast between revenue structure and store structure is even more pronounced: directly operated stores, which make up only 4%, contributed 12.9 billion yuan in revenue; while franchise and licensing stores, accounting for 96%, generated only 11.7 billion yuan in the same period. This imbalance highlights deep-seated weaknesses in the group’s store operations. During the earnings call, Huazhu management openly acknowledged this issue, stating that “the continued exit of directly operated hotels will directly impact absolute profit and overall profit margins.”

Operational pressures are also significant. As a core indicator in the hotel industry, Huazhu’s overall occupancy rate in 2025 was only 80%, down 1.2 percentage points year-over-year; although the average daily rate (ADR) increased slightly by 0.2% to 290 yuan, this marginal increase was insufficient to offset the losses from declining occupancy. Some franchisees claiming to operate Huazhu’s Huazhu Seasons hotels reported on social media that recent dense store layouts and nearby new openings have led to significant drops in occupancy and revenue, reflecting industry oversupply and competitive pressure.

The average revenue per available room (RevPAR), a key indicator of hotel performance, more directly shows Huazhu’s operational difficulties. Due to oversupply and weak business travel demand, Huazhu’s RevPAR in the first three quarters of 2025 was under pressure, even declining in single digits; only in the fourth quarter, aided by product upgrades and revenue management optimization, did RevPAR grow by 1.8% year-over-year. Overall for the year, Huazhu’s RevPAR was 232 yuan, a slight decrease of 1.3% year-over-year, unable to escape the downward trend.

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A heavy stone pressing down

Looking ahead to 2026, Huazhu management repeatedly mentioned being “cautiously optimistic” during the earnings call. Jin Hui admitted that due to macroeconomic uncertainties, the rapid increase in hotel supply over the past two years, and weak demand for business travel, the company remains cautious about the short-term industry outlook.

CITIC Securities also believes that hotel business travel demand is directly related to economic prosperity. If the macro environment remains weak, business travel demand will decline, putting pressure on occupancy rates and further affecting room prices, which could become a heavy burden for Huazhu Group.

In contrast, fellow hotel chain giant Atour (ATAT) performed relatively well. JPMorgan analysts forecast that Atour’s RevPAR for Q1 2026 and the full year 2026 will grow by 2% and 3% respectively, higher than previous estimates of 1% and 2%. JPMorgan analysts believe this guidance indicates that Atour’s RevPAR growth in 2026 will be in the low to mid single digits, better than expected, highlighting the competitive pressure Huazhu faces.

Duty Editor: Su Zhiyong

Chief Editor: Ma Lin, Wen Hongmei