Huazhu Stock Continues to Slide in After-Market Despite Strong Results

The hotel operator said it opened 311 hotels and closed 42 during the second quarter and is now operating 4,665 hotels.

Belinda Zhou
    Aug 21, 2019 2:00 PM  PT
Huazhu Stock Continues to Slide in After-Market Despite Strong Results
author: Belinda Zhou   

Huazhu Group Ltd. (NYSE: HTHT) announced a two-digit increase in revenue in the second quarter, but investors were unimpressed, sending the shares in the hotel operator tumbling an additional 5 percent in after-hours trading Wednesday.

Huazhu reported in a statement after markets closed that its revenue in the three months through June jumped more than 13 percent to $417 million from the corresponding period of 2018. Its net income was $89 million, or 30 cents per American depositary share, representing an increase of 81 percent year-over-year.

Despite the results, shares in the company dropped to $30.02 apiece in the evening after it closed 4 percent below yesterday's close, at $31.68 per ADS. 

The Shanghai-based hotel operator said in a statement today that the number of its hotels in operation reached a historical high of 4,665 with about 463,000 rooms in total. It opened 311 hotels, including 8 leased hotels and 303 manachised and franchised hotels.

"Thanks to the remarkable performance of our Huazhu employees and strong brand portfolio, our rapid hotel expansion continued despite a softening economy," Jenny Zhang, the chief executive officer of Huazhu, said in the statement.

Huazhu's business can be classified under leased and owned, manachised and franchised models. For the lease and ownership model, Huazhu directly operates hotels. For the second type, the company appoints on-site hotel managers and collects fees. Under the franchise model, Huazhu provides training, reservation and support services to the franchised hotels and collects fees from franchisees but does not appoint on-site hotel managers. 

The company closed 42 hotels during the second quarter as it aimed to upgrade product and service quality, it said.

"For the upscale segment, next year, we will open four Joya hotels in the central business districts of Shanghai, Hangzhou and Chengdu, with an oriental-style design tailored for our business travelers," Zhang added.

Looking ahead, the company said it expects net revenues in the third quarter to grow between 9 and 11 percent year-over-year. For the full year, Huazhu adjusted its expected revenue growth range to between 10 and 12 percent.

Huazhu also announced today that it plans to repurchase up to $750 million of its shares over the next five years.