Huazhu Group Limited Announces Leverage Covenant Waiver for Existing Syndication Loan and Preliminary Results for Hotel Operations in the First Quarter of 2020

23/04/2020
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SHANGHAI, China, April 23, 2020 (GLOBE NEWSWIRE) -- Huazhu Group Limited (NASDAQ: HTHT) (“Huazhu”, “we” or “our”), a world-leading hotel group, today announced leverage covenant waiver for existing syndication loan and preliminary results for hotel operations in the first quarter ended March 31, 2020. Upon the completion of Deutsche Hospitality (“DH”) on January 2, 2020, we added 5 new hotel brands, including Steigenberger Hotels & Resorts, Maxx by Steigenberger, Jaz in the City, Intercity Hotel and Zleep Hotel. In this press release, we provide separate operating results for Legacy-Huazhu and Legacy-DH.

Leverage Covenant Waiver for Existing Syndication Loan
On April 17, 2020, our syndication banks approved to release Huazhu from the original six-month-tested financial covenants for a period up to June 30, 2021, subject to the satisfaction of certain amended covenants. The 3-year syndication loan consists of USD500 million and EUR440 million, due in December 2022. The amended covenants mainly include: (1) minimum EBITDA requirement of RMB1 billion for the second half of 2020; (2) net asset value should be more than zero; and (3) no cash dividend during the waiver period.

COVID-19 Impact in Q1 2020
China, where COVID-19 first started to have an impact in late January, has experienced steadily improving trends. Domestic travel is gradually rebuilding with eased travel restrictions and national policy for resuming production and work. The number of our temporarily closed hotels declined from the peak of 2,310 hotels in mid-February down to 369 hotels as of March 31, 2020. During Q1 2020, the governmental authorities requisitioned accumulatively 610 Huazhu hotels (2 million room nights, 12% of which were from our leased hotels) at various locations and periods for medical support workers and quarantine purposes. As of March 31, 2020, Huazhu had 374 hotels under governmental requisition.

Since the COVID-19 outbreak in Europe in March, DH has temporarily closed its hotels. 85 DH hotels were temporarily closed as of March 31, 2020, including 49 leased hotels and 36 manachised and franchised hotels.

Excluding the addition of DH, net revenues for Q1 2020 are expected to decline 45% to 47% (not fully reflecting the revenues from our hotels under governmental requisition) year-over-year. We don’t recognize the revenues from our hotels under governmental requisition until the settlement from governmental authorities. Including the revenue contribution from DH, net revenues for Q1 2020 are expected to decline 14% to 16% year-over-year.

Heading into Q2 2020, more business and leisure travel demand continues to recover in China. We are now accelerating new hotel openings and signings of new franchisees to help us keep on track toward our 2020 growth target.

Operating Results: Legacy-Huazhu

　 Number of hotels 　 Number of rooms
　 Opened 
in Q1 2020		 Closed (1)
in Q1 2020		 Net added
in Q1 2020		 As of 
March 31, 2020		 　 As of 
March 31, 2020
　 　
Leased and owned hotels 10 (9 ) 1 689   88,355
Manachised and franchised hotels 286 (67 ) 219 5,149   464,007
Total 296 (76 ) 220 5,838   552,362
 
(1)  The reasons for hotel closures mainly include non-compliance to brand standards, operating losses, and property-related issues. In Q1 2020, we had 14 hotels closed for brand upgrade and business model change purposes


　 As of March 31, 2020
　 Number of hotels Unopened hotels in pipeline
Economy hotels 3,992 1,128
Leased and owned hotels 460 6
Manachised and franchised hotels 3,532 1,122
Midscale and upscale hotels 1,846 1,206
Leased and owned hotels 229 29
Manachised and franchised hotels 1,617 1,177
Total 5,838 2,334
     


 
All hotels (excluding hotels under requisition)  
　 For the quarter ended 　  
　 March 31, December 31, March 31, yoy  
　 2019  2019  2020  change  
Average daily room rate (in RMB) 　 　 　 　  
Leased and owned hotels 258   277   211   -18.4%    
Manachised and franchised hotels 211   223   184   -12.8%    
Blended 221   232   189   -14.6%    
Occupancy rate (as a percentage) 　 　 　 　  
Leased and owned hotels 83.6%   84.7%   40.3%   -43.3p.p.    
Manachised and franchised hotels 79.8%   81.6%   39.4%   -40.4p.p.    
Blended 80.6%   82.2%   39.6%   -41.0p.p.    
RevPAR (in RMB) 　 　 　 　  
Leased and owned hotels 216   235   85   -60.6%    
Manachised and franchised hotels 169   182   73   -56.9%    
Blended 178   191   75   -58.1%    
                   


Operational hotels (excluding ①hotels under requisition, ②hotels temporarily closed)
　 For the quarter ended 　
　 March 31, December 31, March 31, yoy
　 2019  2019  2020  change
Average daily room rate (in RMB) 　 　 　 　
Leased and owned hotels 258   277   211   -18.4%  
Manachised and franchised hotels 211   223   184   -12.8%  
Blended 221   232   189   -14.6%  
Occupancy rate (as a percentage) 　 　 　 　
Leased and owned hotels 83.6%   84.7%   43.8%   -39.8p.p.  
Manachised and franchised hotels 79.8%   81.6%   47.4%   -32.5p.p.  
Blended 80.6%   82.2%   46.7%   -33.9p.p.  
RevPAR (in RMB) 　 　 　 　
Leased and owned hotels 216   235   92   -57.2%  
Manachised and franchised hotels 169   182   87   -48.3%  
Blended 178   191   88   -50.5%  
                 


Same-hotel operational data by class                
Mature hotels in operation for more than 18 months (excluding hotels under requisition)
  Number of hotels Same-hotel RevPAR Same-hotel ADR Same-hotel Occupancy
  As of
 For the quarter ended 
 yoy
 For the quarter ended 
 yoy
 For the quarter ended
 yoy
  March 31, March 31, change  March 31, change  March 31,   change
  2019 2020 2019 2020   2019 2020   2019   2020     (p.p.)
Economy hotels 2,421  2,421  155  76 -50.6 %  179  150 -16.2 % 86.3 % 50.9 % -35.4
Leased and owned hotels 411  411  173  78 -55.2 %  197  160 -18.8 % 87.8 % 48.5 % -39.3
Manachised and franchised hotels 2,010  2,010  150  76 -49.2 %  174  147 -15.4 % 85.9 % 51.6 % -34.3
Midscale and upscale hotels  850  850  247  108 -56.2 %  320  259 -18.9 % 77.3 % 41.7 % -35.5
Leased and owned hotels 173  173  299  112 -62.7 %  378  291 -23.1 % 79.1 % 38.3 % -40.8
Manachised and franchised hotels 677  677  229  107 -53.4 %  299  248 -17.0 % 76.6 % 43.0 % -33.6
Total 3,271  3,271  184  87 -52.8 %  220  180 -17.9 % 83.5 % 48.0 % -35.5
                               


Operating Results: Legacy-DH

　 Number of hotels 　 Number of
rooms		 　 Unopened hotels
in pipeline
　 Opened 
in Q1 2020		 Closed
in Q1 2020		 Net added
in Q1 2020		 As of 
March 31, 2020		 　

　		 As of 
March 31, 2020		 　

　		 As of
March 31, 2020
　
Leased hotels 3 (2 ) 1   67   12,327   28
Manachised and franchised hotels 2 (7 ) (5 ) 48   10,799   13
Total 5 (9 ) (4 ) 115   23,126   41
                     
　
   
　 For the quarter ended 　  
　 March 31, December 31, March 31, yoy  
　 2019 2019 2020 change  
Average daily room rate (in EUR)          
Leased hotels 104   105   97   -6.9 %  
Manachised and franchised hotels 83   88   80   -4.4 %  
Blended 95   97   89   -5.9 %  
Occupancy rate (as a percentage)          
Leased hotels 64.8 % 72.8 % 52.6 % -12.2p.p.  
Manachised and franchised hotels 58.6 % 65.0 % 50.4 % -8.2p.p.  
Blended 61.9 % 69.1 % 51.7 % -10.3p.p.  
RevPAR (in EUR)          
Leased hotels 67   76   51   -24.4 %  
Manachised and franchised hotels 49   57   40   -17.7 %  
Blended 59   67   46   -21.6 %  
                   

DH hotels by region

  Number of hotels
  As of March 31, 2020
  All Leased Manachised and franchised
Europe 93 67 26
-Germany 70 51 19
North Africa 17 0 17
Asia 5 0 5
Total 115 67 48
       


Hotel Portfolio by Brand
Huazhu has realigned our brands for accelerated quality growth. During 2020: (1) we have reclassified our Ibis hotels as economy hotels; (2) we have consolidated HanTing Premium to HanTing; and (3) we have consolidated Grand Madison to Madison.

　 As of March 31, 2020
　 Hotels Rooms Unopened hotels
　 in operation in pipeline
Economy hotels 4,004 336,004 1,138
HanTing Hotel 2,630 245,171 503
Hi Inn 464 26,956 130
Elan Hotel 713 42,375 424
Ibis Hotel 185 20,254 71
Zleep Hotel 12 1,248 10
Midscale and upscale hotels 1,949 239,484 1,237
Ibis Styles Hotel 59 7,120 33
Starway Hotel 367 31,616 281
JI Hotel 885 111,205 469
Orange Hotel 255 29,199 164
Crystal Orange Hotel 95 12,760 63
Manxin Hotel 52 4,702 35
Madison Hotel 15 1,933 28
Mercure Hotel 71 12,733 81
Novotel Hotel 9 2,818 13
Joya Hotel 8 1,407 4
Blossom Hill Hotels & Resorts 24 832 25
Grand Mercure Hotel 6 1,281 10
Steigenberger Hotels & Resorts 50 11,909 8
Intercity Hotel 42 7,537 19
Maxx by Steigenberger 5 777 1
Jaz in the City 2 424 2
Other partner hotels 4 1,231 1
Total 5,953 575,488 2,375


About Huazhu Group Limited
Originated in China, Huazhu Group Limited is a world-leading hotel operator and franchisor. As of March 31, 2020, Huazhu operated 5,953 hotels with 575,488 rooms in operation in 15 countries. Huazhu’s brands include Hi Inn, Elan Hotel, HanTing Hotel, JI Hotel, Starway Hotel, Orange Hotel, Crystal Orange Hotel, Manxin Hotel, Madison Hotel, Joya Hotel, and Blossom Hill Hotels & Resorts. Upon the completion of Deutsche Hospitality acquisition on January 2, 2020, Huazhu added 5 brands to our portfolio, including Steigenberger Hotels & Resorts, Maxx by Steigenberger, Jaz in the City, Intercity Hotel and Zleep Hotel. In addition, Huazhu also has the rights as master franchisee for Mercure, Ibis and Ibis Styles, and co-development rights for Grand Mercure and Novotel, in the pan-China region.

Huazhu’s business includes leased and owned, manachised and franchised models. Under the lease and ownership model, Huazhu directly operates hotels typically located on leased or owned properties. Under the manachise model, Huazhu manages manachised hotels through the on-site hotel managers Huazhu appoints and collects fees from franchisees. Under the franchise model, Huazhu provides training, reservations and support services to the franchised hotels, and collects fees from franchisees but does not appoint on-site hotel managers. Huazhu applies a consistent standard and platform across all of its hotels. As of March 31, 2020, Huazhu operates 17 percent of its hotel rooms under lease and ownership model, and 83 percent under manachise and franchise models.

For more information, please visit Huazhu’s website: http://ir.huazhu.com.

Safe Harbor Statement Under the U.S. Private Securities Litigation Reform Act of 1995: The information in this release contains forward-looking statements which involve risks and uncertainties. Such factors and risks include our anticipated growth strategies; our future results of operations and financial condition; the economic conditions; the regulatory environment; our ability to attract and retain customers and leverage our brands; trends and competition in the lodging industry; the expected growth of demand for lodging; and other factors and risks detailed in our filings with the U.S. Securities and Exchange Commission. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements, which may be identified by terminology such as “may,” “should,” “will,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “forecast,” “project” or “continue,” the negative of such terms or other comparable terminology. Readers should not rely on forward-looking statements as predictions of future events or results.

Huazhu undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law. 

Contact Information
Huazhu Investor Relations
Tel: 86 (21) 6195 9561
Email: ir@huazhu.com
http://ir.huazhu.com

Source: Huazhu Group Limited

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