Huazhu said that it would continue its “exploration” in the upscale segment with its Joya and Blossom House brands, as well as Steigenberger and Intercity.
The company reported that revpar was at 65% of 2019 levels, as its domestic market recovered, with co-president Jin Hui “cautiously optimistic”.
Ji Qi, founder, executive chairman & CEO, Huazhu said: “In the fight against COVID-19 pandemic, Huazhu worked hard to take good care of our customers and employees, to keep our hotels open, and to provide support to our franchisees. Thanks to our persistence and outperformance, an increasing number of franchisees are now joining Huazhu family. From March through June, the number of new signings of hotels has increased compared to the same period of last year.
“Market consolidation will accelerate and Huazhu has prepared to expand share after the crisis. For the next three years, we expect to penetrate into additional lower-tier cities in China where customers’ brand awareness and demand for quality have risen.”
The group said that occupancy rate had been improving steadily from March through early June, when the company's hotels in China reached 83%. Since 11 June, more Covid-19 cases were discovered in Beijing, and Beijing has re-instituted strict travel restrictions to curb the spread. However, Huazhu commented: “The Chinese government is more experienced and more prepared this time, and is more capable of preventing a nationwide spread of Covid-19.”
At Deutsche Hospitality, as at the end of March, 74% hotels were closed with the company observing as “initial recovery” in operations since May. As of 27 June 79% of hotels had resumed operations. The company secured €45m from banks in Germany to bolster cash.
Occupancy for legacy Huazhu properties was 39.6% in the first quarter, compared to 80.6% in the first quarter of 2019. ADR was Y189, against Y221 in 2019, with revpar of Y75, compared to Y178 .
In the second quarter Huazhu forecast net revenues falling by 32% to 34% year-over-year or 35% to 37% if excluding the addition of Deutsche Hospitality. The group expected revpar to climb to 84% of 2019 revpar levels by the fourth quarter.
The group saw its pipeline grow from 2,262 properties in the same period last year to 2,324 properties as of May, 50% of which were economy and 39% are midscale.
In line with the rest of the sector, it had put into place a number of cost and cashflow mitigation strategies, including reducing and deferring rental payments and reducing or postponing capital expenditure. During the outbreak it set up a centralised command centre, supported by 18 regional sub-command centres, which coordinated efforts across the group.
Insight: Fans of guessing the shape of the recovery - which is all of us - will be thrilled to note that we have a new option, with CEO Ji Qi describing “a swoosh shape”. There was no mention of whether this recovery had already been trademarked by a well-known shoe manufacturer.
But while we’re Just Do-ing It, prior to All This Huazhu had made its move into Europe with Deutsche Hospitality and, given the supportive state of the German government towards the hospitality sector during the pandemic, it must be feeling that it made the correct choice.
With the keel on its way back to even we watch to see where in Europe it will use its heft to expand, with the region behind China on the recovery swoosh. Huazhu continues to count Accor as a shareholder, but could come up against it when expanding its pipeline. All’s fair in love and war?