H World Group Aktie

Good day, and thank you for standing by. Welcome to the H World Q2 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Ivy Luo. Please go ahead.

Thank you, operator. Good evening, and good morning, everyone. Thanks for joining us today. Welcome to Hold Group 2026 Second Quarter and First Half Earnings Conference Call. Joining us today is our Founder and Executive Chairman, Mr. Ji Qi; our CEO, Mr. Jin Hui; our CFO, Mr. Arthur Yu. Following our 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 provision of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may 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 online 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.hworld.com.

With that, now I will hand over the call to our CEO, Mr. Jin Hui to discuss our business performance in the second quarter of 2026. Mr. Jin, please.

[Interpreted] dear investors and analysts, good day. Thanks for joining us today. Welcome to H World Group's Second Quarter 2026 Earnings Conference Call.

During the first half of 2026, domestic culture and tourism travel in China maintained steady growth. According to the Ministry of Culture and Tourism, domestic resident trips reached RMB 3.5 billion in the first half representing a 5.4% year-over-year increase. As visa-free policy for multiple countries continue to take effect, inbound tourism gained strong momentum bringing new growth opportunities to China's lodging industry. On the consumption structure front, the growth of total domestic travel spending moderated up 2% year-over-year to RMB 3.2 trillion in the first half. This reflects new consumption characteristics among travelers, which are more frequent trips with more prudent spending decisions.

Recently, the government issued a plan to build China into a nation's strong in tourism during the 15th 5-year plan period, which laid out 2030 targets, including annual domestic resident trips exceeding RMB 8.3 billion with total consumption reaching RMB 7.7 trillion. and inbound tourist arrivals reaching 190 million with total spending exceeding USD 150 billion. The plan also outlined adjustments to the tourism regional layout and a greater supply of high-quality culture and tourism-related products. We believe the travel-related industry supply chain has great long-term growth potential. Moving forward, H1 Group will keep leveraging our multi-brand portfolio, hotel operation expertise and digital capabilities to steadily expand our brand network and capture accommodation demand brought by travelers.

Facing the current industry opportunities and challenges, H World remains committed to do the right thing for the long term. We focus on the mass market and lodging segment and emphasize high-quality development. On hotel network, we continue expanding into lower-tier cities, while at the same time, securing those prime locations in the core cities, continuously optimizing our existing hotel footprint. In the second quarter, we achieved high-quality network expansion through regional breakthroughs and lower-tier city penetration backed by a 7% year-over-year increase in the number of rooms in operation. The group's hotel GMV grew 13.2% year-over-year to RMB 30.5 billion. Room nights booked by members also achieved steady growth. More importantly, the group asset light manachised and franchise business deliver robust growth across scale, revenue and profit.

In the second quarter, manachised and franchise revenue increased 25.2% year-over-year to RMB 3.6 billion and gross operating profit grew 18.5% year-over-year to RMB 2.2 billion. With industry competition rational lighting, China achieved a 2.6% year-over-year increase in ADR in the second quarter, which was backed by our continuous product and service upgrades, revenue management and integrated marketing capabilities. This marked our fourth consecutive quarters of positive ADR growth. The ADR improvement food a 1.1% year-over-year increase in RevPAR in the same period.

We continue to steadily expand our high-quality hotel network and enhance our nationwide network presence. As of end June, we had 13,417 hotels in operation in China. Our hotel brands and the products continue to gain strong favor and recognition from franchisees and we maintain a solid signing momentum. As of end June, hotels and pipeline increased both year-over-year and quarter-over-quarter, reached 3,054. Our hotels in operation and in pipeline cover 1,468 cities in China, and we are matching towards our goal of 20,000 hotels in 2,000 cities. While expanding the lower-tier market, we also continue optimizing hotel footprint in core cities and prime commercial districts. We believe that with H World strengthened product competencies and brand new plants, we can achieve further breakthrough in China's core existing markets.

We focus on the economy and mid-scale segment activating the mass market and continuously strengthening the core competitiveness of our flagship brands. With the upgrades of HanTing and [indiscernible], we are pleased to see that the new version hotels delivered meaningful improvement in RevPAR and gained broader recognition from guests and franchisees. With the rollout of [indiscernible], we are further solidifying our leading position in the economy and mid-scale lodging markets. In the recently released Hotel 2025 global rankings for single branded room counts, JI Hotel leap from the #4 place globally to the top spot with Hunting closely following in the second place. This marks the first time Chinese hotel brands have claimed the top 2 positions on this list and underscores the effectiveness of our brand strategy.

In addition, our core mid-scale brand, Orange Hotel, climbed to 26 places globally, representing another notable milestone in our brand net expansion. We view this scale leadership as a milestone to date, and we will continue to adhere to high-quality development, focusing on product refinement and continuous iteration to improve product quality and services to better serve defy lodging demand. Looking ahead, our limited service Golden Triangle brands, namely HanTing, Ji and Orange, we will continue to unleash strong market competitiveness and serve as a key growth engine for the group 20,000 hotel in 2,000 city strategies.

Besides deepening our core mass market brand and network expansion, our upper mid-scale segment has all been making steady progress. We stick to our multi-brand strategy with distinct brand positioning and value proposition and pushing ahead with our development strategy centered on 4 flagship brands. Intercity, Grand Ji, Crystal and Mercure. As of end June, H World China upper midscale brand and 1,738 hotels in operation and in pipeline, up 13.4% year-over-year.

On the marketing front, we have always centered our strategy on our age Rewards membership program. We firmly believe that our membership program and the direct sales capability are the core competitive advantages underpinning the group's long-term sustainable growth as our hotel network expanded to more cities Rewards membership base and room nights booked by members have both achieved steady growth. In addition, to upgrade members should benefit and enhance our guest experiences. We are refining our membership centric operation, deepening cross-industry partnership and expanding diversified loyalty point consumption scenarios for our members. At the same time, we are accelerating our award international presence, optimizing our H World app to capture more inbound travel demand and empower global membership services. Going forward, we will further strengthen brand building, broaden customer acquisition channels and continuously optimizing membership benefits to enhance member conversion and strengthen member loyalty.

In addition to focusing on our internal operational management and driving steady business expansion across the group, we are also committed to proactively fulfilling our social responsibility. I would like to share 3 key areas. Firstly, it will boost local employment and create job opportunities. the continuous expansion of our hotel network enables us to recruit more employees on an ongoing basis. As of end June, the total number of employees of the group exceeded 20,000. In addition, we continue to refine our internal talent development program, providing employees with clear career paths. Secondly, we pursue energy-saving management of our hotels and have rolled out multiple initiatives. We share proven energy saving management solutions with our franchisees to help them cut border and electricity costs and secure better operating returns. Thirdly, our social welfare initiatives supported by the group's charity foundation we have launched a wide range of public welfare programs to give back to the society through educational assistance post disaster support and other initiatives.

Going forward, H World continue to push forward the social responsibility initiatives, balancing business growth with social commitment and upholding our corporate mission to guests, franchisees, employees and the wider community.

Next, let's go over our operational performance in the international market. In the second quarter, HWI's blended WebPar was affected by the Middle East conflict as well as our Southeastern Asia expansion, which were still in the ramp-up period. In the second quarter, HWI's RevPAR decreased 3.8% year-over-year with ADR up 0.9% and occupancy rate down 3.5 percentage points. Nevertheless, our Europe business delivered a solid performance. The European cement RevPAR grew 1.1% year-over-year in the second quarter, driven by an improvement in both ADR and occupancy. Going forward, we will continue to optimize HWI's operational efficiency in Europe and push forward our strategic layout in Asia Pacific market.

This concludes the business update for the second quarter of 2026. I will now hand over the call to our CFO, Mr. Arthur Yu, for financial performance for the quarter.

Thank you, Jin Hui. Good evening, and good morning to everyone. Now let's walk through our Q2 financial highlights. In the second quarter, our group revenue grew 10.8% year-over-year to RMB 7.1 billion. This was primarily driven by our China business. In the quarter, our China revenue increased 14.9% year-over-year to RMB 5.9 billion, supported by a steady and high-quality network expansion as well as continued RevPAR recovery. Our international business revenue decreasing 5.8% year-over-year to RMB 1.3 billion, which was due to the closure of leased hotels and therefore, a decline in lease revenue. We are happy to report that our group recorded another quarter of strong profit growth.

Adjusted EBITDA increased 20% year-over-year to RMB 2.7 billion with adjusted EBITDA margin expanding 3 percentage points year-over-year to 38.3%. The margin improvement was attributable to a growing profit contribution from our asset-light business coupled with well-controlled G&A expenses. In the second quarter, total operating cost increased 7.4% year-over-year, slower than our revenue growth as we became more asset-light. SG&A expenses in the quarter rose 6.1% year-over-year, which was also slower than our revenue growth, reflecting our cost management capabilities.

Adjusted net income grew 26.9% year-over-year to RMB 1.7 billion, with the adjusted net income margin improved 3 percentage points to 24%. Supported by ongoing high-quality asset-light network expansion and improved RevPAR performance. Our MNF business revenue grew a solid 24.2% year-over-year to RMB 3.6 billion. MNS gross operating profit increased 18.5% year-over-year to RMB 2.2 billion. Lastly, on shareholder returns. We are very pleased to announce that we completed our 2024 shareholder return 1 year ahead of our plan. We are committed to returning to our shareholders which will continue to be supported by our healthy operating cash flow and strong balance sheet. We, therefore, announced that the Board has approved another 3-year shareholder return plan with an aggregated amount of USD 2.5 billion effective from today. It's the first distribution under this new shareholder return plan.

The Board has also approved an ordinary cash dividend of approximately USD 275 million. With that, we conclude our financial review for the second quarter of 2026.

With that, we are ready to take your questions. Operator, please open the line for Q&A.

[Operator Instructions] We will take our first question and the question comes from Lydia Ling from Citi.

[Interpreted] Congratulations on the solid results in the second quarter. My question is mainly on the RevPAR trend. So into third quarter, we observed a volatile or travel demand affected by the extreme weather, especially during this peak summer season. So could you share the repo performance during the summer holiday and also into second half base growth are relatively higher? So what's our management latest expectation on the third quarter and also full year RevPAR trend?

[Interpreted] I will translate first. So thank you for your question. This is Jin Hui. I will answer this question. So currently, China's leisure travel demand is still steadily growing. We firmly believe that in China, consumers have treat leisure travel at one of the necessities. This has been very clear after the COVID reopening. Secondly, the government is very supportive of the culture and tourism travel. In the first half this year, we do see multiple regional government introducing spring holiday. And in early August, we also saw government encouraging public service to take holidays. And thirdly, around this round of leisure travel trends, we do see new scenarios and new customers emerging. For example, family trips, traveled by silver hairs travel by self-driving that has also -- those both have been performing very strong. Of course, inbound travel has also brought us increasing demand especially in those core cities in the Tier 1 and Tier 2 city.

So yes, as you mentioned, I mean , we do see several regions being negatively affected by the severe weather and it impacted operational results. In some of the markets for the first half of the summer holiday, the performance was below expectation. Also, on the other hand, we -- I do think that this is also partially affected by the spring holiday. In August, so far, we do see the overall trend recovering considering all the uncertainties in the macro environment, we maintain a cautiously optimistic view for the overall cement. For the full year of 2026, we maintain our view for the overall RevPAR unchanged.

Your next question comes from Dan Chee from Morgan Stanley.

[Interpreted] This is Dan from Morgan Stanley. I have 2 questions. My first question is on hotel opening. We saw growth opening in first was 1,035 hotels, although on track with Mr. King's reassurance on full year target of 2,200 to 2,300 it is 20% below first half last year. Is there any structural change in the contribution of the 2 halves in the year seasonality-wise? That was my first question.

My second question is about economy segment upgrade. Hunting product, we see that is now more than 55% version 3.5 and above. Can the management share some progress made on the latest addition of 4.0 and hunting in such as quantity or operating improvements?

[Interpreted] Thank you, Dan, for your questions. So on the overall new hotel network expansion, in the second quarter, we opened 498 hotels. The number of openings that should be in line with our plan and our expectation. And more importantly, if you look at the new signings, we also achieved solid new findings in the second quarter. at end of June, the number of hotels in our pipeline actually increased both quarter-over-quarter and year-over-year. And we always emphasize that for H World. What we want to achieve is not just a very simple quantity growth, but quality improvement. So we do have higher requirements for our new signings and new openings.

In the next few years, we will continue our sustainable, high-quality growth strategy unchanged. And for the full year of 2026, we maintain our full year opening guidance. Yes. In the first half, the opening number was impacted by the base as well as by the supply team. But I do think it's just normal volatility and there is no change in our overall opening plan.

Your second question, I'm very happy to share with you that our HanTing 4.0 version have recognized or have achieved both market and franchisees recognition. The new version of HanTing, the bankcard performance is meaningfully better than the older version. And after we rolled out [indiscernible], the number of hotels of [indiscernible] operation and in pipeline actually quickly exceeded [ 200 ]. The overall development is actually better than our expectation. The operational performance of the HanTing [indiscernible] operation is also very strong. I think both on the 2 points that I mentioned above actually shows you that too has very strong capability in high-quality development and in the economy hotel segment and we have -- we are very strong in executing.

Going forward, we will continue to upgrade our HanTing older version of hotel to go through the overall hunting hotels portfolio to improve the overall hotel portfolio quality. Meanwhile, we will also to -- with the HanTing product, we also provide the product that's available for those smaller properties for them to open under our HanTing brand. To conclude, I think under the overall economy segment, would have very big growth potential to capture the market.

The next question comes from the line of [indiscernible]

[Interpreted]. The company now has more than 1,700 of mid-scale hotel properties, also your view on this year's supply-demand balance in the upper midscale hotel segment? Will you speed up expansion? Also [indiscernible] had opened in Hangzhou, Guangzhou and Wuhan. Could you give...

Operator?

Hello. We still have the participant connected. I believe the signal was cut. Are you able to repeat your questions, please?

[Interpreted] The company has more than 1,700 upper midscale hotel properties, what's your view on this year's supply-demand balance in the upper midscale hotel segment. We will speed up expansion. Also [indiscernible] has opened in Hangzhou, Guangzhou and Wuhan. Could you give more color on its operating performance on the development road map?

[Interpreted] Let me answer your questions related to the upper midscale segment. Yes, upper midscale segment is one of H World core strategic area, and we continue to put into the brand building as well as overall development in the segment. For the upper medical market in China, we do see good development opportunities. We actually see opportunities from 2 fronts. One is that the optimal segment actually have opportunities from consumption upgrade. While at the same time, it also takes some of the demand from those traditional upscale hotels. And for H World, we will continue to insist on our multi-brand strategy.

We will be building on our Grand Ji, on Crystal or Intercity as well as Mercure. We will be using this 4-quarter flagship rent to achieve best development and market share gain in the upper midscale segment. Currently, for the Intercity hotel, it has been going very strongly, and we are very confident on the future growth for this spread. And you mentioned the Grand Ji. For the Grand Ji, we have been gradually signing and opening some hotels. As of now, the number of Grand Ji in pipeline have already exceeded 20 hotels. At this moment, we'll be really focusing on building Grand Ji at those very prime locations.

We are still refining the overall business model. So we'll be relatively cautious by developing the quantity of it. But we are very positive what Grand Ji has already achieved in terms of the customer reputation, the brand reputation and the product model. In the future, we believe Grand Ji has very big growth potential, and we are very optimistic on it. We are very confident that Grand Ji will become a flagship in China's optimal segment, and we're really working hard on that.

Your next question comes from Ronald Leung from Bank of America.

[Interpreted] Let me translate my question into English. My question is related to the membership system. Could management comment on the latest breakdown in terms of the customer acquisition channel. Also could management comment on the strategy in terms of optimizing the membership system?

[Interpreted] Sorry, let me answer the questions related to our members. Yes, member is one of our core strategy for Hot operation, and it's also one of our core competitive advantages. Right now, the overall member -- the increase of the members as well as the member contribution in the booking is in line with our expectations. Of course, as we are entering into more markets, for example, leisure market, the inbound market as well as lower-tier cities market, H World members do need to need some time to grab those traffic from those new markets for us. But meanwhile, the OTA contribution is actually quite stable at around 20% to 25%.

We do believe that when we enter these new markets, we do need OTA support, especially for inbound and lower-tier cities. And related to the overall strategy and the future strategic operations for at H World members, I will conclude it in 3 areas. Firstly, as for the H World members, we do emphasize the best benefit for our members. This one is one of the key strategies for us. This includes the best price includes breakfast and et cetera. And going forward, we are also doing more work on innovation. For example, recently, we actually launched the family card under our H1 membership and actually received quite good feedback from the market.

So secondly, on the cross-industry partnership. You may have already noted that last year, we actually partnered with EB. And this year, we're partnering with multiple airline companies as well as new energy vehicle companies really to work with those multiple business sectors. This will -- the cross-industry partnership will also be one of our important strategy. Lastly is our international or overseas member development. In the second quarter, we deepened our cooperation with Accor on the membership partnership. On the one hand, it's really to take more -- to capture more inbound demand. And also it allows Chinese consumers to be able to -- or Chinese travelers to able to stay in a course hotel when they go upward. So we are really working on that. So to conclude on the 3.1 is on the membership operation. Secondly, it's on the cross-industry partnership and certainly, it's on the international development for H World. Thank you.

Your next question comes from Simon Cheung from Goldman Sachs.

[Interpreted] So my question is in relation to the EBITDA margin trend over the last couple of quarters, they have seen a nice 3%, 4% margin expansion in China, but yet in overseas market, the margins, they see some slugs or slippage. Wondering whether management do have any guidance going into the second half and also for the full year.

[Interpreted] This is Arthur. I will answer your questions. So on the overall margin front as the group continued to push forward our SMI strategy. In the mid- to long term, we do expect company's adjusted EBITDA margin to continue to expand. On the SG&A front, we have been making really good delivery in the quarter. This is supported by our very mature and development cost control system. But at the same time, we are also very clear that in order for to achieve long-term sustainable growth, we have to make necessary strategic investments. For example, in the talent development in technology and AI in our H World membership building, a brand building, et cetera. So in those kind of those areas, we'll be making reasons and long-term and effective investments.

So for the outlook of our second half profitability and cost will remain very stable. On our international business, yes, our international business was in some way impacted by the Middle East conflict. For our HWI in the Middle East and in Egypt, we have more than 20 hotels. They are all monetized in franchise hotels. So they have limited impact actually on our HWI's revenue and profit. Despite the impact of Middle East conflict on the traffic and the overall operational cost, for H World, we are actually doing more cost control for HWI. So by doing that, the overall impact of the Middle East is actually controllable. So for the full year, we maintain our goal of achieving positive profit for our HWI business.

Thank you. This concludes today's question-and-answer session. I'll now hand the call back to Ivy Luo for closing remarks.

Thank you, everyone, for taking your time with us today. This will conclude today's call, and we look forward to seeing you in the upcoming quarter. Goodbye.

This concludes today's conference call. Thank you for participating. You may now disconnect.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good day, and thank you for standing by. Welcome to H World First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I'll now hand the conference over to your first speaker today, Ms. Ivy Luo, Head of Investor Relations. Please go ahead.

Thank you, operator. Good morning and good evening, everyone. Thanks for joining us today. Welcome to H World's First Quarter 2026 Earnings Conference Call. Joining us today is our Founder and Executive Chairman, Mr. Ji Qi; our CEO, Mr. Jin Hui; our CFO, Mr. Arthur Yu; our COO, Mr. Chen Hui; and our CFO, Ms. Junrui Yu. Following our 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 provision 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 early 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.hworld.com.

With that, now I will hand over the call to our CEO, Mr. Jin Hui to discuss our business performance in the first quarter of 2026. Mr. Jin, please.

[Interpreted] Dear investors and analysts, good day. Thank you for joining H World's First Quarter 2026 Earnings Call. In 2026, China's domestic traveled demand in the solid momentum. The overall railway in aviation cross-region traffic, number of trips as well as tourism spending rose steadily. We also saw several regions rolling out spring breaks this year. Those spring breaks right before or after Qingming festival and May Day holidays enable Chinese consumers to enjoy 5 to 8 days of vacation, which effectively help balancing our passenger flows in between peak and off-peak periods. Meanwhile, a further step-up in the implementation of Viva policy has fueled the continued growth of inbound tourism which serve as an additional growth engine of China's hospitality industry. .

We think structurally, there is still a mismatch between the hotel supply and the consumer demand in China. Therefore, pushing forward supply side reform and hotel network optimization will remain a key strategic world. This is closely aligned with the 15 5-year plan guideline on deepening supply-side structural reform and revitalizing existing resources. Meanwhile, backed by our strong brand reputation, proven operational expertise and digitalization advantages, we aim to further expand our market share, deliver sustainable, high-quality growth and fulfill our mission of redo China's hotel industry.

As we enter 2026, H World remain committed to brand-led quality development, and we achieved solid business results across network expansion, brand building, membership ecosystem development and profitability. By breaking through into new cities and regions and deepening penetration in the lower-tier cities, we delivered another quarter of strong network expansion, driven by a 14.1% year-over-year increase in the number of rooms in operations, our group hotel GMV grew 17.4% year-over-year to RMB 26.4 billion. Night booked by members increased 10.7% year-over-year to 60 million.

Our asset-light monetized and franchise business registered another quarter of solid growth in its hotel network revenue as well as profit. Our first quarter '26 group M&F revenue rose 20.3% year-over-year to RMB 3.0 billion, and group M&F gross operating profit increased by 20.7% year-over-year to RMB 1.9 billion.

As market competition became more rational and healthier, H World China achieved 4.5% year-over-year increase in ADR, which was also supported by our continuous product upgrades and revenue management optimization. The ADR expansion drove a 3.0% year-over-year growth in the blended RevPAR, which represents a sequential improvement from the fourth quarter 2025.

We remain focused on serving the mass market using our economy and midscale hotels and solidifying the competencies of our core brands. The continuous upgrade of HanTing and JI Hotel, together with the launch of Hi Inn have further strengthened our competitiveness in the economy and midscale hotel market, reinforcing H World's absolute leadership in China's mass market hospitality segment.

We steadily expect hotel network and enhancing geographic coverage. By the end of first quarter, HWC hotel operation totaled 13,095 and we have another 2,865 hotels in the pipeline. Our city coverage increased to 1,461 cities across China. We are moving steadily towards our strategic goal of 2,000 cities, 20,000 hotels. While expanding into lower-tier cities, we are also optimizing and refining our hotel portfolio in the Tier 1 and 2 cities especially in those core business districts in the top-tier cities. We believe our premium product quality and the strong brand power will enable us to recapture opportunities in the mature Tier 1, 2 cities market.

Aside from strengthening our core mass market brands and optimizing hotel coverage, we are also making steady headway in the upper midscale segment. We are adopting our multi-brand strategy with clear brand positioning and value propositions, we are steadily pushing forward the development of our 4 key upper-midscale brands, namely Intercity, Grand Ji, Crystal and Mercure. At the end of first quarter, the number of our upper-midscale hotels in operation and in pipeline reached 1,658, up 14.4% year-over-year.

We always insist on strengthening our direct sales capability through H-Reward membership program which we believe is vital to our sustainable long-term development. As our hotel network covers more cities, our membership base and room night booked by members also achieved robust growth. Going forward, we will further strengthen brand building, diversified customer acquisition scenarios and enhanced member benefits and member stickiness. .

To better and more accurately reflect our future development prospects, we have adopted the new HWC and HWI disclosure framework and terminology beginning this quarter, where the economy HWC refers to our operations inside China and HWI includes all overseas hotel business covering Legacy-DH as well as our APAC business.

Now let's go over the operational performance of our HWI business. In the first quarter 2026, HWI achieved a 5.0% year-over-year increase in RevPAR driven by a 1.6% increase in ADR and 2.1% improvement in occupancy rate.

As you may have noticed, aside from our DH business, H-Reward International has also made initial progress and breakthroughs in the Asia Pacific market. Leveraging the development opportunities under the belt and road initiatives, that we are accelerating our strategic layout across APAC. With Singapore assets operational hub, HWI is expanding its footprint into key Southeast Asia market, including [indiscernible] To date, we have opened 6 hotels across Southeast Asia. By rolling out brand ranging from HanTing JI Hotel, Intercity and MAX, we have built covering economy, mid-scale and upper mid-scale segments, tapering to diverse get travel needs. .

We opened our first overseas HanTing Hotel in late 2025, featuring our latest HanTing 4.0 version the hotel seems in the very prime center business district of Ho Chi Minh City, Vietnam. The hotel posted strong operational results with nearly RMB 500 RevPAR in the third quarter. It's also worth mentioning that this property was invested by one of our large domestic franchisees, which shows our franchisee acknowledgment and confidence in our brand power and operational capabilities. This quarter, our first overseas JI 5.0 officially opened in Vientiane, the capital of Laos, located in a prime area of the city, the hotel continues the signature design language rooted in Eastern culture, representing the overseas expansion of one of H World's Eastern culture brand.

We believe our standardized branded hotel products, systematic and digitalized operation capabilities and supply chain advantages will enable us to empower our overseas hotels. Moving forward, we aim to build solid brand influence in Asia Pacific region, while accumulating local operational expertise in the Southeast Asian market.

This concludes the business update for the first quarter of 2026. I will now hand over the call to our CFO, Ms. Arthur Yu for financial performance for the quarter.

Thank you, Jin Hui. Good evening and good morning to everyone. Before we get into the details of our quarterly financial performance, I'd like to quickly highlight one accounting update first. Starting this quarter, we have renamed our operating segments to HWC and HWI, replacing the previous Legacy-Huazhu and Legacy-DH segment. Additionally, we made a minor business realignment between HWC and HWI effective 2026. For consistency and comparability, we have restated prior period figures to align with our current segment presentation.

Now let's walk through our quarter 1 financial highlights. Group revenue grew 11.1% year-over-year to RMB 6.0 billion. Within this, HWC revenue increased 12.4% year-over-year to RMB 5.0 billion, primarily driven by steady hotel network expansion and continued RevPAR recovery. HWI revenue rose 5.1% year-over-year in quarter 1, 2026, partially benefited by favorable foreign exchange rate.

On profitability, group adjusted EBITDA was up 24.2% year-over-year to RMB 1.9 billion, with the margin expanding 3.3 percentage points year-over-year to 31.0%. The strong EBITDA growth and margin improvement were mainly attributable to a growing profit contribution from our asset-light business.

Adjusted net income grew 38.6% year-over-year to RMB 1.1 billion with the adjusted net income margin improving 3.5 percentage points to 17.9%.

Next, on our asset-light M&F business, supported by ongoing high-quality asset-light network expansion and improved RevPAR performance. Our M&F business revenue grew a solid 20.3% year-over-year, increased 20.7% year-over-year to RMB 1.9 billion with a growth operating margin of 63.6% for the quarter.

Let's now turn to our cash flow and liquidity position. We generated RMB 233 million in operating cash flow during quarter 1. As of quarter end, the group holds RMB 15.8% -- RMB 15.8 billion in cash and cash equivalents, with a net cash position of RMB 9.6 billion on our balance sheet.

Our healthy operating cash flow and strong balance sheet provides solid support for future shareholder return arrangements. Which concludes our financial review for the first quarter of 2026.

We are ready to take your questions. Operator, please open the line for Q&A.

[Operator Instructions] We will now take our first question from the line of Dan Chee of Morgan Stanley.

[Interpreted] This is Dan from Morgan Stanley. Congratulations on another quarter of strong profit growth. My question is around recent demand and RevPAR trend. First quarter RevPAR for sequential improvement. And Mr. Jin mentioned about the demand balance during the Qingming and also May spring holiday, and several holidays in Q2. So can management share more color, especially on business demand and any impact from energy cost increase? Lastly, any comments on the occupancy stabilization?

[Interpreted] So after reopening, we actually see that for the leisure travel demand, it still has been growing steadily. A couple of reasons behind. I think one is that after reopening the leisure travel and exponential experience behavior is becoming a necessity to Chinese consumers. Secondly, we are also seeing government pushing our supportive policies such as the one that I mentioned during my prepared remarks, the spring breaks that was rolled out in multiple regions and cities this year.

Certainly, we're also seeing a rising demand or an increase in the overall inbound tourism, which is an additional growth driver to overall leisure travel market. Overall, we are seeing that in terms of the number of trips, it is growing steadily after reopening. But probably because of the consumption power, we still see some fluctuations in the overall spending. But to conclude, we do believe that overall leisure travel is still growing steadily.

The rising energy costs, we haven't been observing any impact on the overall travel demand because of the rising energy costs. We think partially, this is also because the popular new energy vehicle in China. So that is also why for the full year 2026, we still maintain our full year back half guidance of slightly.

For H1, we will continue to focus on building our own core competencies, including our hotel brands, including our operational management capability as well as membership. So given that the overall industry supply increase has been slowing down and rationalizing, we maintain cautiously optimistic on our occupancy rate outlook.

We will now take our next question from the line of Ronald Leung of Bank of America.

[Interpreted] Let me translate my question into English. So -- so my question is about the opening and closure outlook for the full year. So what is the latest outlook for the full year opening and closures? And could management also comment about the city coverage in terms of the overall openings?

[Interpreted] I will answer the opening and the city coverage question separately. So on the hotel, HWC we grossly opened 537 hotels, which is at a relatively high low compared to historical performance. Of course, in the first quarter, our net opening is kind of impacted by the late spring festival holiday this year. Overall, the number of gross openings and net openings in the quarter was in line with our overall expectation.

Our hotel opening strategies, we insist on the high-quality development of our hotel network. Since 2 years ago, we already shifted from purely focusing on quantity to focusing a high-quality growth of the hotel network. So under our brand-led high-quality growth strategy, we have high standards and high requirement on the new signings and new openings of the hotel. With that strategy, I'm happy to report that in the first quarter of overall new signings is still at housing high level.

With our healthy timing pace, we maintain our opening guidance for the full year of 2026 unchanged. On the city coverage strategy, we have 2 legs of strategies, which we are implementing at the same time. So firstly, it's still the penetration into lower-tier cities. And secondly, given the current real estate market, the current supply cycle of the real estate market, we are also returning to the Tier 1 and Tier 2 cities. We are grabbing those our emerging opportunities of those high-quality properties in both core and premium district and premium locations. We will be developing our premium hotel product in those Tier 1 and Tier 2 cities.

We are fully confident that H World will be delivering high-quality growth in both the lower tier cities as well as the Tier 1 and 2 cities.

We will now take our next question from the line of Sijie Lin of CICC.

[Interpreted] My question is about the upper midscale business development. For the first -- for the last several quarters, the upper-midscale, especially Intercity achieved quite impressive expansion speed, and we see that Grand Ji opened first hotel and has 12 new signings. So I want to know how the RevPAR performance of upper-midscale compared with economy and mid-scale? And additionally, could you please share the expansion targets and operational focus of the upper-midscale segment, especially the Intercity and Grand Ji in the coming period.

[Interpreted] The upper-midscale segment is a core strategic part of our overall H World strategy. We are actually very happy to see that in the first quarter, the overall RevPAR recovery in the upper-midscale segment is actually slightly better than our economy and midscale. This showcases our growing brand power and product quality in the upper-midscale segment. .

We adopt a multi-brand strategy in the upper-midscale segment. So namely, is the Intercity, Grand Ji, Mercure and Crystal. Overall, the total network growth in the upper-midscale is quite solid. But when we're breaking down into single brand, we do see that some of the brands still need further improvement in its overall brand power. With upper-midscale strategy, we are returning to and refocusing back to the Tier 1 and Tier 2 cities to opening flagship stores in those core districts.

At the initial phase development, H World has been spending a lot of time setting the overall brand strategy as well as the design. So we have very clear value proposition for each of our upper-midscale product. Of course, at the initial phase, you are always going to face some of the challenges. But we are very confident that in the longer term, our H World upper-midscale brand will be leading in the upper-midscale segment.

We will now take our next question from [indiscernible] of Citics.

[Interpreted] I translate my question in English. I'm [indiscernible] from Citics. Against the backdrop of fluctuating business and lateral gas mix and the increasing regulation across hotel industry, can you share the current breakdown of our customer source channels and your outlook going forward as well as the company's plans and strategies for membership marketing?

[Interpreted] Overall, our CIS as well as some of the other key metrics of our memberships have been performing quite stable. Even under the case that we've been expanding our overall network rapidly last year and opened over 500 new hotels this year. The overall CIS contribution to -- and the membership booking has been quite stable.

But at the same time, we are also observing some of the emerging trends, including the leisure travel as well as the overall increase in the inbound tourism. So how to capture those emerging traffic and the new type of consumers is one of the very important topic for H World and for our H World membership.

You may have noticed that at H World, we have been bringing in some of the new talents into the company. And we are also working with leading -- some of the leading AI companies to develop new selling marketing strategies as well as to some of the new strategy and initiatives in member conversion. And improving our capabilities in the corporate B2B channel, we are using our membership to leading corporate business travelers. We do believe that this is also showcased the improving membership capability of H World.

We will now take our next question from the line of Leah Pan of Goldman Sachs.

[Interpreted] So please allow me to translate my question into English. This is Leah from Goldman Sachs. I have a question on company's international strategy. And I think you mentioned on the business that in up in the Southeast Asia market, including the Malaysia and the entry into Cambodia with the brand hotel under Schneckenburg. So can you please share with us essentially in your Southeast Asia market and the growing target over the next few years?

And also, given companies business exposure in the Middle Eastern market, how do you see the impact from the ongoing Middle East crisis to -- on the current business and as well as the global expansion strategy?

[Interpreted] So you do see that as a first step, we successfully own hotels in Vietnam, in Laos and in Cambodia. This gives us very strong confidence that H World products management, supply chain as well as members can actually empower the hotel operation in the overseas market. So going forward, we are going to step up in the overall investment in the Southeast Asia market in terms of the network expansion, the size as well as the pace of expansion. We do think that overall, the Southeast Asia is a brand-new market that provides new opportunities to H World.

So this is also answer the second quarter related to the Middle East conflicts. Based on our first quarter results, we see very limited impact from the Middle East conflicts to our H World International. We -- in the Middle East, our HWI only have 10 manachised franchise hotels, and it has manageable and nonmaterial contribution to the revenue as well as profit.

And on the overall increase in the energy cost, we are taking efforts in controlling the increase and managing the increase in overall energy. So, so far, we think the impact of the rising energy costs are still manageable. But of course, there are still uncertainties in how the overall situation in the Middle East is going to evolve. So we will keep a close eye on the overall development there.

We will now take our next question from the line of Lydia Ling of Citi.

[Interpreted] Lydia from Citi. So my question would be on the profitability. So in first quarter, we continue to see the margin improvement and further optimization in the cost ratios. So what would be your outlook for the full year margin trend? If by region, in China, asset-light strategy continues to push forward, so what would be the upside from current high level. And we see the international part of the loss actually narrowed on year basis in first quarter. So what would be your target for the OCs profitability on a full year basis?

[Interpreted] And first quarter EBITDA, there are several things that we are doing to improve the overall EBITDA performance. So firstly, it's our asset-light strategy. As we continue pushing forward asset-light strategy, we are confident that for our H World business, the adjusted EBITDA margin will continue to improve steadily.

Secondly, also on the overall lease and owned business, we are also improving the performance of this segment by revenue management as well as cost control, including the negotiation of rental reduction.

On the overseas business, HWI especially for DH, we continue to push forward the cost reduction initiatives. We are actually looking into each item in the overall cost structure to improve the overall efficiency in the first quarter this year, and we will continue to pushing forward the cost reduction initiatives in DH.

I would like to add that aside from the cost control and cost reduction, H World is also making some investments in key areas such as digitalization, technology and AI development as well as our overall H-Reward membership building the promotion and the marketing of our core brands. For example, in the first quarter, we launched our HanTing product.

So based on the overall budget and overall planning, we do need to make necessary investment. But of course, we will be looking at the overall ROI of those investments. On a full year basis, we will have control on the cost, but we also make necessary investment to -- for our long-term sustainable growth.

We'll take the last question.

Certainly. Our last question today comes from the line of Xin Chen of UBS.

[Interpreted] Let me translate to English. This is Xin Chen from UBS. My question is on dividends. Could the management please share the 2026 shareholder return plan with us.

[Interpreted] Thank you, Xin Chen. So as you can see from our presentation, H World have a very strong balance sheet as well as stable cash flow. And going forward, as we continue pushing forward the asset-light strategy and those cost reduction initiatives, we will maintain our shareholder return plan in place. Going forward, if there's anything new, we will update with the market in time. But overall for the -- overall direction is that we will be using our own cash flow to return to the shareholders. Thank you.

That's the end of the question-and-answer session. I'd now like to turn the conference back to Ms. Ivy Luo for closing comments.

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

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good day, and thank you for standing by. Welcome to the H World Q4 and Full-Year 2025 Earnings Conference Call. [Operator Instructions] 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.

[Interpreted] Dear investors and analysts, good day. Thank you for joining H1's Fourth Quarter and Full-Year of 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 [ self-pleasure ] 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, enhance urban supporting services and boost 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 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 redo China's hotel industry. In 2025, H World remain 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 2024. Our full year 2025 ADR remained largely flat year-over-year. By breaking through in new cities and regions and further penetrating in 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 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 monetized 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 3 core limited-service brands, namely HanTing, JI and Orange has raised 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 brand. HanTing strikes a perfect balance between cost effectiveness and quality. We have rolled out innovative room types such as multi-bedrooms and family rooms, catering the 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 facility, 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 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 4 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 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 night booked by members both achieved robust growth. Meanwhile, we are also proactively exploring cooperation with new sales and marketing channels such as [indiscernible] self-media 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 power our underground 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, 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 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 hotel 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 the 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 asset-light structure.

This portfolio restructuring significantly enhanced our profitability and improved resilience of our business. As everybody -- everyone remembers, H World acquired Deutsche Hospitality shortly before COVID breakout. Our business was strong into 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 benefit from these synergies on 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 in 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 manachised and franchise business. In 2025, powered by the network expansion of manachised hotels, our manachised and franchise revenue increased by a robust 23.1% year-over-year to RMB 11.7 billion.

And manachised franchise gross operating profit rose by 20.8% year-over-year to RMB 7.6 billion. Profit contribution from our manachised 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 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 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 USD 2 billion 3-year Total Shareholder Return Plan. We have now completed over 75% of this 3-year plan, and we are committed to continuously returning 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 manachised 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.

[Operator Instructions] Our first question today is from Dan Chee from Morgan Stanley.

[Interpreted] The first question. I would like to congratulations to Arthur's 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?

[Interpreted] Thank you, Dan, for your question. Firstly, I want to -- I would like to take this opportunity to thank Ms. 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 achievement that we've made in the past 20 years, we also take the opportunity to look ahead. We had a vision that we want to create Huazhu -- create a 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, professional talent to bring those really 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.

[Interpreted] Let me ask my question in English. So regarding the 2026 revenue guidance, so 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 the business and leisure travel?

[Interpreted] Thank you, Rona. So, in the past 3 months, we have observed that the China's hotel industry trend is actually recovering. On the demand side, we have been observing that actually in the past 1 to 2 years, the leisure travel has been growing really steadily, and also the inbound travel is recovering and coming back. So overall, demand is growing for leisure, especially.

And for business travel demand, we have also seen that the business activity and business travel has bottomed and also going on to an upward trend, especially in the Tier 1 and Tier 2 cities. So for 2026, we are cautiously optimistic on the overall RevPAR performance. And for the management and for the company, we do have the target that to deliver a flat to slightly year-over-year increase for the full year 2026 RevPAR.

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

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

[Interpreted] Thank you, Simon, and I will answer your question on the development. So as you can see, in 2025, we achieved a record high in the hotel gross openings, exceeding 2,400 hotels. Actually, in 2023, we already adjusted our overall growth and development strategies of high-quality sustainable growth. So what we are pursuing is not just the simple quantity, but also high quality standard of the hotel network. So in 2026, while under this high-quality standard, we still expect to expand our hotel network and maintain the overall openings at a high level. And we guided to open 2,200 to 2,300 new hotels in 2026. This actually reflects our strategy of high-quality sustainable growth. And we are still very confident that to achieve our 2,000 hotel target, this strategic goal by 2023 -- 2030.

[Interpreted] And on your question on Hanting Inn, I would like to share some thoughts on this Hanting Inn brand, Hanting Inn product. So we always think that the economic sector is the core in China's consumer market, and this is also the core market for H World. What we want to achieve is that we want to achieve full coverage of high market share in this economy sector.

[Interpreted] We are seeing more and more high-quality properties that can be built into our HanTing brand. So now you can see that for our HanTing branded hotels, the quality of it is much higher and the standard is also much higher compared to a couple of years ago. So with this, we introduced Hanting Inn, which can help us to cover and serve the overall mass market. We want to stress that Hanting Inn and HanTing, together, they are one brand and HanTing will help us to cover the smart market in China. And HanTing actually takes a very important role in upgrade and replace the older HanTing product and to further purify our HanTing brand.

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

[Interpreted] 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 questions. Yes, we achieved a turnaround of DH business in 2025. However, our efforts to improve business does not stop here, right? So our reorganization, efficiency improvement, cost control will still remain as part of the ongoing management. And we're also looking into our portfolio restructuring as well. We continue our effort in rental reduction, lease renegotiation, look into possibilities to exit loss-making properties and also possibility to negotiate a much, much better portfolio asset portfolio, right? So now that our business is stabilized, we are also indeed starting to look at development to expand our hotel network.

We have much more confidence now in managing international hotels. And we believe into the service and select-service hotels have really a lot of potential in overseas markets. So now that we are developing different business models, so we will have efficient, for example, next-generation Intercity and Zleep for 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 markets. But at the same time, we'll also explore, for example, Middle East, North Africa, where we already have good basis. So the Legacy-DH business, in a nutshell, is expected to remain profitable in the years to come.

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

[Interpreted] Our shareholder return in 2025 achieved USD 760 million, exceeding 100% of Adjusted Net Profit and has completed over 75% of USD 2 billion 3-year Shareholder Return Plan. So what's our plan for the shareholder return in the upcoming years?

[Interpreted] This is Hui. I'll answer your question on the shareholder return. So benefiting from our asset-light strategy and our high-quality growth, on H World, we have generated very strong and stable cash flow, as well as we have a high-quality and very healthy balance sheet. So going forward, we will -- we are committed to continue to return to shareholders through either dividend or share repurchase. Thank you.

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

[Interpreted] I have questions on the upper-midscale hotel segment and which we saw like the further step of the development in 2025. So what's your plan for this year or the longer term? And do you plan to have more aggressive or accelerate expansion in this segment?

[Interpreted] Thank you, Lydia. I will take your question on the upper-midscale segment. So the upper and upper-midscale sector is one of H World's strategic focus. So we have been focusing on this upper-midscale market in the past 2 years, and we will continue to do so going into the future. So our strategy in the upper-midscale segment is to focus on the Tier 1 and Tier 2 cities, and we were developing this segment using a multi-brand strategy, which I think is different from the other companies.

So we have 4 key brands in this segment, which are Grand Ji, Intercity, Crystal and Mercure. As you can see that these 4 brands, they actually -- they all have different target market and they have different specialties, so which covers Grand Ji, which really presents the Oriental aesthetics, and we also have the more Western design like the Intercity and the French-style Mercure. So for the -- using this multi-brand strategy, we really want to chasing ahead into -- in this segment. We will continue to upgrade and enhance our products and services. Our goal and our target is to -- in the upper-midscale sector, we also want to become a leading brand by 2030. So upper-midscale sector will be one of our core strategic focus going into the future.

[Interpreted] And also to add on, as you can already see that for the intercity over the past 2 years, it has become a very attractive and compelling brand in the upper-midscale sector, whether it's in terms of its brand value, its product, its service excellence or its RevPAR. And we have also introduced the Grand Ji Hotel, and we really welcome you guys to -- looking to Grand Ji, which is going to have its grand opening in April 1.

We -- it has a piloting phase already, but it hasn't really officially launched, and we officially opened the Grand Ji in April 1. We are confident that with our 4 core brands in the upper-midscale sector, which all have its different taste and target market, we can become a leading company in the upper-midscale sector. And we are also confident that each of our 4 key brands, they will become the leader in their own niche market. 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. And this will conclude 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 are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good day, and thank you for standing by. Welcome to H World Quarter 3, 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the call over to your first speaker today, Mr. Jason Chen. Thank you. Please go ahead.

Thank you. Good morning, and good evening, everyone. Thanks for joining us today. Welcome to H World Group 2025 Third Quarter Earnings Conference Call. Joining us today is our Founder and Chairman, Mr. Ji Qi; our CEO, Mr. Jin Hui; our CFO, Ms. Chen Hui; and our CSO, Ms. He 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 provision 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 obligations 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. Reconciliations 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.hworld.com.

With that, now I will hand over the call to our CEO, Mr. Jin Hui, to discuss our business performance in the third quarter of 2025. Mr. Jin, please.

[Interpreted] I believe many of you have noticed that 2 weeks ago, on the occasion of H World's 20th anniversary, we successfully held a partner conference being 20 years young forging ahead. Therefore, before diving into our third quarter performance review, I'd like to take a few minutes to once again share some of our thoughts on the long-term outlook of China's hotel industry and us.

In summary, we believe H World has great long-term growth potential by deeply rooted in China market. Currently, we can observe that while the industry supply is relatively ample, high-quality supply is in noticeable shortage. Compared to the mature U.S. market, China still has low hotel trend penetration and the industry remains fragmented. As a unified large singular market similar to the U.S. but with an even larger population base, the increase in churn ratio and the phase-out of low-quality supply will inevitably become a long-term trend.

More importantly, the demand for travel is gradually shifting from discretionary demand to necessity for Chinese consumers nowadays. China has the best infrastructure worldwide with extensive high-speed rail and highway network coverage. This has made traveling much easier and more convenient, facilitating the penetration of accommodation needs from major cities to country-level markets. Additionally, Chinese consumers are beginning to redefine consumption concepts and oriental aesthetics. We can see a substantial increase in the consumer desire in seeking sales pressure, which further drives the growth of experiential consumption such as tourism, exhibitions, concerts, and sports events.

Apparently, the current supply quality in China's hotel industry is unable to fully meet consumers' increasingly upgraded and diversified demand. Therefore, supply side reform will be the main theme of the future industry development and this will undoubtedly bring tremendous growth opportunities for domestic branded hotels like us. As the leading players in China's hotel industry, we will continue deepening our roots in the China market, pursuing high-quality growth and delivering service excellence with a brand-led approach to reduce industry with centering on high quality and efficiency. We are full of confidence in the future development of China's hotel industry.

After sharing our perspectives on the long-term outlook, now let's turn to our third quarter performance. We are pleased to see early signs of improvement in the overall market condition. On the demand side, data from railway, aviation and the number of tourists indicate that the domestic travel demand continuously to grow steadily with the increasing demand for travel being particularly evident during the National Day and mid-autumn festival holiday period. On the supply side, third-party data shows that the sequential supply growth has stabilized and the year-over-year growth rate has moderated. However, we still need more time to see if this trend is sustainable.

We are glad to report that H World delivered good results across several key metrics in the quarter. In the third quarter, we achieved a year-over-year increase in ADR while maintaining a relatively stable occupancy rate driven by refined revenue management initiatives, including optimizing pricing strategies across flagship hotel, newly opened hotel and a mature hotel as well as refining promotional strategies and enhancing incentive programs. As a result, our RevPAR stayed largely stable compared to the same period last year.

Breaking through in new cities and regions and further penetrating in the lower-tier cities, we achieved another quarter of high-quality network expansion driven by a 17.3% year-over-year increase in the number of rooms in operation. Our group hotel GMV grew by 17.5% year-over-year to RMB 30.6 billion. Meanwhile, along with our network expansion and the continuous enhancement of H Rewards membership program, our membership base exceeded 300 million by the end of third quarter, up 17.3% year-over-year and ranking #1 globally. In addition, room nights sold to the members rose 19.7% compared to the same period of last year, exceeding RMB 66 million and accounting for 74% of the total room nights sold, which is also a leading position in worldwide.

More importantly, our monetized and franchised business delivered strong growth in its hotel network revenue as well as profit. Our third quarter group M&F revenue rose 27.2% year-over-year to RMB 3.3 billion, and the group M&F gross operating profit increased by 28.6% year-over-year to RMB 2.2 billion, contributing over 70% of the group's total gross operating profit.

In terms of hotel network expansion, we remain steadfast in executing our strategic focus on economy and middle scale segments to serve the mass market. This strategic positioning aligns precisely with the current consumer behavior of seeking value for money products and services and can further demonstrate our competitive advantages. By continuously upgrading our core products and enhancing our excellent service with a customer-centric principle, we are enhancing the quality of our hotel portfolio and strengthening our brand positioning to achieve long-term sustainable growth. The new version of HanTing along with our middle-scale brands, Ji Hotel and Orange Hotel, will serve as the key growth engines for our expansion in the lower-tier cities and provides strong foundation for achieving our strategic goal of 20,000 hotels in 2,000 cities.

At the same time, H World has also made rapid breakthrough in the upper-midscale segment. At the end of third quarter, our number of upper-midscale hotels in operation and in pipeline exceeded 1,600, up 25.3% year-over-year. More importantly, to meet the growing consumer demand for quality living or oriental aesthetics and unique experiences, we recently launched a brand-new upper mid-scale brand, Ji Icons during our 20th anniversary. The introduction of Ji Icon further enriched our upper-midscale brand portfolio and help us to achieve comprehensive coverage from oriental to Western brands and from selected service to lifestyle hotel offerings. Ji Icon's brand embodies a combination of subtle understated and elegant oriental aesthetic, enabling a value lift from accommodation functionality to a holistic lifestyle experience.

The success of Ji Hotels has demonstrated Chinese consumers' ethnicity for oriental aesthetics and culture. We are confident that building upon Ji Hotels Foundation, Ji Icon will further deepen the expression of oriental aesthetics and the culture element. Moreover, our group's strong supply chain and modular construction capability as well as our global leading membership and direct sales capability will effectively support our Ji Icons to reach low construction cost, high operational efficiency, and high product quality. We believe Ji Icons will become one of the big driving force to support our penetration in the upper-midscale segment and has the potential to become another world-class brand after HanTing, Ji Hotel, and Orange brand.

We remain focusing on strengthening our direct sales capabilities through H Rewards membership program. Our membership program and direct sales capability are vital to our sustainable long-term business growth. Our membership base has been growing as we expand our hotel network and entering into more cities. By the end of third quarter, H Rewards membership exceeded 300 million and the room nights sold to the members grew 19.7% year-over-year with enlarging portion of contribution to the total room nights sold. Going forward, we will further enhance our membership benefits, expand loyalty points usage scenarios, and explore cross-industry partnership to strengthen member engagement and enhance direct sales capability.

This concludes the business update for H World's Third Quarter 2025. Now I will hand over the call to our CFO, Ms. Chen Hui, to present the group's financial performance for the quarter.

Thank you, Jin Hui. Good evening, and good morning, everyone. Let me walk you through our third quarter financial overview. During the quarter, our group revenue grew 8.1% year-over-year to RMB 7 billion and Legacy-Huazhu revenue grew 10.8% year-over-year to RMB 5.7 billion, both surpassed the high end of our previous guidance. It was mainly driven by better-than-expected RevPAR performance as well as hotel network expansion. Group adjusted EBITDA rose by 18.9% year-over-year to RMB 2.5 billion, with margin improved by 3.3 percentage points year-over-year to 36.1%. The faster adjusted EBITDA growth and margin expansion were mainly contributed to further enlarged profit contribution from our asset-light business. Cost savings from Legacy-DH, partially on the absence of RMB 81 million restructuring costs incurred in the third quarter last year as well as cost optimization efforts from Legacy-Huazhu.

Looking into our asset-light manachised and franchised franchise business. In the third quarter, powered by our high-quality asset-light network expansion and better-than-expected RevPAR performance. Our manachised and franchised business revenue recorded a robust 27.2% year-over-year growth to RMB 3.3 billion. More importantly, manachised and franchised business gross operating profit rose by 28.6% year-over-year to RMB 2.2 billion with a margin of 68% in the third quarter. As a result, gross operating profit contribution from our manachised and franchised business further enlarged to 70% in the third quarter, up 11.1 percentage points year-over-year.

Moving to our cash flow and liquidity position. In the third quarter, we generated RMB 1.7 billion operating cash flow. And at the quarter end, the group had RMB 13.3 billion cash and cash equivalents and RMB 6.6 billion net cash on the balance sheet. Lastly, on our guidance for the fourth quarter of 2025, we expect our group revenue to grow 2% to 6% compared to the same quarter last year and 3% to 7% if excluding DH. The manachised and franchised revenue in the fourth quarter of 2025 is expected to grow in the range of 17% to 21% compared to the fourth quarter last year.

With that, we are ready to take your questions. Operator, please open the line for Q&A.

The first question comes from the line of Dan Chee of Morgan Stanley.

My question is about RevPAR and demand trend. Firstly, on the company's fourth quarter China revenue guidance of 3% to 4% year-on-year growth, what's the implied RevPAR assumption? Can the management share any 2026 outlook for us, especially after seeing third quarter RevPAR decline turns almost flat, especially on the new experiential demand Mr. Jin mentioned versus the original business demand weakness. So which one is driving the RevPAR stabilization?

[Interpreted] So as many of you may notice that in the third quarter, our RevPAR is a bit stabilized. On a year-over-year basis, it's kind of flat. It's not further declining compared to last 2 quarters. And of course, we observed several trends during the quarter. In terms of the demand, obviously, the demand was mainly driven by the leisure travel demand, especially from the tourism activities starting from summer holiday to September and of course, the beginning of the October National Day and mid-autumn festival as well. But on the supply side, as I mentioned before, on a year-over-year basis from the third-party data, we saw the supply growth actually moderated, so it was not growing as fast as before.

So it's becoming a bit moderated, so which brings some of the benefits to the RevPAR stabilization. But more importantly, for us, S1 has been putting a lot of efforts over the last 6 months in terms to further enhance our, for example, the revenue management, as I mentioned in my prepared remarks, in terms of setting a new pricing strategy among different tiers of hotels like flagship new hotels and mature hotels. And therefore, I think -- but looking to the fourth quarter, because we are entering into the low season, there is still some of the uncertainties, so as of now, based on our revenue guidance, it implies our fourth quarter RevPAR, which is somewhere around flattish to slightly positive for the fourth quarter.

In terms of business demand and leisure demand, of course, there are still some of the macro uncertainties. So to be very frank, the business demand is not that strong yet. But on the other hand, for the leisure demand, it was continuously growing. As I mentioned previously, for the Chinese consumers nowadays, the leisure traveling demand has become -- gradually becoming a necessity instead of discretional demand and especially for some emerging new demand such as concerts, marathon, sports events, and inbound traveler as well. So the leisure remained very strong. In terms of the outlook for the next year, we think it's a bit too early. It still takes time to see whether the stabilization in terms of the RevPAR and the supply-demand equivalent is sustainable. So we will give more color for our fourth quarter earnings. Thank you.

Our next question comes from the line of Sijie Lin of CICC.

My question is about RevPAR breakdown. If we look at ADR and OCC, we see that ADR performed better recently. So trying to understand the reason behind this and the sustainability. Also, if we look at the gap between blended RevPAR and same-hotel RevPAR, the gap remained at similar level with last few quarters. So is there any chance that the gap narrows in the future? And what measures need to be taken?

[Interpreted] In terms of the ADR, of course, for 2025, the improvement of RevPAR has been a very key task for our top management team. And of course, they have been putting a lot of efforts on that. So in terms of ADR, as I mentioned earlier, so we have doing a lot of works on further enhancing our revenue management capability, especially on the pricing for different layer of the hotel and different products. And of course, on the front line, we give a lot of various incentives to our salespeople to further motivate them to do a lot of sales activities.

However, apart from these things we have been doing over the 6 months -- over the last 6 months, actually, the ADR increase in the third quarter is a result from our continuous efforts on the product upgrades, the quality improvements as well as our service excellence because we have been doing these things for many, many years and continuously doing so, and we have more and more recommendations from our customers. So that's why in certain areas or in certain regions, our products and service is definitely in a leading position, which gave us some of the pricing power, which led us to achieve a better ADR for the third quarter.

And in terms of the like-for-like hotel or mature hotels, the gap, we are glad to see the year-over-year decline was narrowed significantly in the third quarter. On one hand, we -- in terms of the pricing, we use a lot of different layer for pricing the different products. Over the last 1.5 years, we opened a lot of high-quality hotels, new hotels in some of Tier 1, Tier 2 cities, which is creating some of the cannibalization to the existing hotels. But through different pricing -- in different pricing strategy for different products, I think we are seeing some of the improvements for our mature hotels. And fourth -- and more importantly, we keep doing a lot of existing hotels upgrades to further improve the hotel quality itself in order to rise -- improve the RevPAR as a whole.

The next question will come from the line of Lydia Ling of Citi.

Lydia from Citi. So I have a question regarding the brand, especially for the newly launched upper-midscale brand, Ji Icons. So could you actually share some -- your plans for this brand and such as your store opening plan and also the store economics like the CapEx and the payback period? And how actually your advantage versus like the current other leading upper-midscale brand in the market? And how is the feedback from the franchisees so far?

[Interpreted] Okay. So in terms of the Ji Icons brand, so obviously, the launch of Ji Icons brand has shown a very strong determination for H World to break through and development in the upper-midscale segment with multi-brand strategy. This trend is very clear. And secondly, based on the current culture confidence or Chinese culture confidence and also the preference from the Chinese consumers on our oriental culture or oriental service as well as oriental lifestyle that also basically support the launch of the Ji Icons brand. And as I said before, Ji Icons is going to definitely become one of the core brands in our upper-midscale segment. And we hope this brand can be the best brand or the best hotel that Chinese customers will like the most. So in terms of the UE, in terms of the CapEx you asked, we hope we can share more information after the first hotels opened. Thank you.

Our next question comes from Simon Cheung of Goldman Sachs.

The question is related to the hotel opening. In the third quarter, they've done very well in terms of hotel opening over 700. And I think in the first 9 months, they opened more than 2,000 hotels. That's on track or even exceeded the 2,300 hotel that they have targeted for the full year. Wondering whether there's any update for that and in particular, also on the new signing as well. And then on the related questions, given the focus and the strong momentum that they have seen in the upscale segments -- upper-midscale segments where they achieved 1,600 hotels secure. And we have seen similarly HanTing, they've done like 5,000 and that Ji Hotel done 4,000. Wondering whether they have any targets for the uppermid-scale in the longer run.

[Interpreted] Benefiting from faster new signings in 2023 and 2024 post COVID as well as further improvements in terms of our supply chain capability, which resulted improvements in conversion ratio from the pipeline to new openings. So we achieved a quite good new openings for the first 9 months, which is slightly more than 2,000. So therefore, for the full year, we could possibly open a bit more than 2,300 hotels as what we guided previously. But again, so we emphasized several times over the last several quarters' earnings call. In terms of the new signings and openings, we will focus more on quality expansion instead only looking for scale. So that the never changed. So we're going to continuously implementing this strategy for high-quality sustainable growth.

In terms of the upper-mid segment, as I said, we have reached 1,600 in both pipeline and the operations, which also achieved a pretty rapid growth. But however, if you look into a longer term, for example, 2030, we're going to still focus on the mass market with the economy and the middle scale. So in terms of the proportion, economy and middle scale going to still contribute the majority. But in terms of the growth rate, we hope our upper mid segment could grow the fastest in the industry and become the leading players in China market by 2030.

Our next question comes from Ronald Leung of Bank of America.

Let me translate my questions in English. So I have two questions. My first question is about cost and margins outlook. The company has achieved very decent margin expansion in the past 2 quarters. Could management share with us the latest outlook on cost control and also margins? My second question is about the membership program. So the overall membership has grown decently to over 300 million by the end of 3Q '25. Could management share an update on the strategy on how to further enhance memberships loyalty and also marketing strategies to improve the conversion rates?

[Interpreted] Okay. So in terms of our members, so definitely, direct sales and membership is one of our core strategy. We are glad to see in terms of the member base as well as the room nights sold to our members continuously to grow. But we think that's still not enough. So that's why we have been doing quite a lot of jobs over the past several months. First of all, we introduced a price guarantee program, which is going to ensure our members to get the best price and service as also the unique experiences at the hotel.

And secondly, we're also trying to fulfill more diversified demand from the leisure travelers and some of the emerging demand, for example, as I mentioned earlier, like sports events, like inbound travelers. So basically, the H Rewards membership program is gradually shifting from only business travelers to fulfill more diversified demand. And thirdly, we are also enhancing our capability to receive more business clients and corporate clients to further enhance our exposures. And lastly, we have been experimenting a lot of cross-industry cooperation with a lot of top-tier vertical players trying to enhance members' experiences and improve their engagement.

Our last question comes from...

[Foreign Language]

Sorry, please go, continue.

[Interpreted] Okay. Let me do the translation. So overall, the adjusted EBITDA margin improvement was mainly because of our asset-light strategy. So obviously, the M&F has higher margin compared to leased and owned. In terms of the cost control, in terms of the hotel operating costs, by leveraging our strong supply chain capability, we continuously to reduce the cost per room night sold. And for our leased and owned hotels, we're continuously seeking for more rental reduction, just trying to improve the profitability level of our leased and owned hotels.

And on SG&A perspective, we're continuously optimizing our mid and back office and headquarter, just trying to control the cost. In terms of sales and marketing, we will based on ROI and do some of necessary investments on, for example, the hotel brand membership as well as the user -- new user acquisition. So as mentioned by Jin Hui, so we have been systematically improved our capability to improve our revenue management so as in the cost control side. So we are also doing a systematic capability improvement. Thank you.

Thank you. We have come to the end of the question-and-answer session. That concludes the conference call for today. Thank you for your participation. You may now disconnect your lines.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]