H World Group Limited

Good day and thank you for standing by. Welcome to H-World First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. And I'll 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, Ms. Chen Hui, and our CSO, Ms. He Ji Hong. 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 Security 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 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 gap information can be found in our earnings relief 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. Dear investors and analysts, good day. Thank you for joining us for the first quarter of 2026 earnings call. In 2026, China's domestic travel demanded solid momentum.

The overall railway and 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 enabled Chinese consumers to enjoy five to eight days of vacation, which effectively helped balancing out passenger flows in between peak and off-peak periods. Meanwhile, a further step up in the implementation of Visa 3 policy has fueled the continuous growth of inbound tourism, which served as an additional growth engine of China's hospitality industry.

We believe that the Chinese hotel industry is currently in a stage where structural supply and demand are unparalleled. Therefore, the promotion of supply chain reform and quantity improvement in the industry will be the direction of Huazhou's continued development. On the one hand, this is a good response to the policy call for the structural reform of deepening supply chain reform in the 15-year plan. On the other hand, Huazhou also relies on its own brand capacity, operating capacity, and digitalized advantages to further improve the market share.

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 goal. This closely aligns with the 15 five-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.

In terms of hotel network layout, brand construction, member ecosystem construction, and profit performance, we have achieved stable results. In addition to the effective penetration of low-end cities, Huazhou has achieved a high-quality scale expansion in the first quarter. With the same amount of revenue and defense increased by 14.1%, Group GNV growth of 17.4% to 26.4 billion yuan. Huazhou members' planned business volume continues to grow by 1.7%. Members' planned business growth of 10.7%. Group's green asset joint business has achieved the same steady growth of scale, income and profit.

2026年一季度加盟收入同比提升20.3%至30億元, 經營毛利同比增長20.7%至19億元。 As we enter 2026, eight worlds remain committed to brand-led high-quality development, and we achieve 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 operation, our group hotel GMV grew 17.4% year-over-year to RMB 26.4 billion. Site booked by members increased 10.7% year-over-year to 60 million. Our asset-like, managed and franchised business registered another quarter of solid growth in its hotel network revenue as well as profit. Our first quarter 25 group M&F revenue rose 20.3% year-over-year to RMB 3.0 billion, and group M&F growth operating profit increased by 20.7% year-over-year to RMB 1.9 billion.

在市场竞争更加趋利性的背景下, As market competition became more rational and healthier,

Atoll 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 rep part, which represents a sequential improvement from the fourth quarter 2025.

In terms of the brand growth, we insist on the national economic growth and fair hotel market. We will continue to promote high-quality network expansion and continue to improve the city layout. Since the end of the first quarter, Huazhou China's Zainin Hotel has reached 13,095, 2865 hotels in the tunnel, and 1461 towns covered by Zainin and the hotel in the tunnel, and continues to sell to the target of 10,000,000. At the same time as the lower-end low-end cities, we have also simultaneously sorted and perfected the hotel layout of Huazhou in the first and second-tier cities, especially in the core cities, We remain focused on serving the mass market using our economy and mid-scale hotels and solidifying the competencies of our core brands.

The continuous upgrades of Hanqin and G-Hotel, together with the launch of Hanqin Ying, have further strengthened our competitiveness in economy and mid-scale hotel markets, reinforcing HWC's absolute leadership in China's mass market hospitality segment. We're steadily expanding our hotel network and enhancing geographic coverage. By the end of first quarter, HWC hotel operations 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 and 2 cities market.

In addition to the improvement of core mass-produced brands and the improvement of network layout, Huazhou China's mid-high-end segment is also gradually emerging. We insist on a multi-brand strategy. By clearly positioning and pricing the brand, we steadily promote its performance, Aside from strengthening our core mass market brands and optimizing hotel coverage, we're also making steady halfway in the upper mid-scale segment.

We're adopting a multi-brand strategy, With clear brand positioning and value propositions, we're steadily pushing forward the development of our four key upper-mid-scale brands, namely InterCity, Grand G, Crystal, and Mercure. At the end of first quarter, the number of our upper-mid-scale hotels in operation and in pipeline reached 1,658, up 14.4% year-over-year.

在营销方面,我们始终坚持以华驻汇为核心, We believe that the membership system and execution capabilities are long-term capabilities of supporting company business. As our hotel network covers more cities, the membership volume and membership experience of Huazhou Club have achieved steady growth. In the future, we will further strengthen the brand construction, widen the customer scene, and at the same time continuously optimize the membership authority to improve membership conversion and strengthen membership connectivity.

We always insist on strengthening our direct sales capabilities through each 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 life booked by members also achieve robust growth. Going forward, we'll further strengthen brand building, diversify customer acquisition scenarios, and enhance 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 acronym HWC refers to our operations inside China, and HWI includes all overseas hotel business covering less VH, as well as our APAC business.

接下來我們就回顧一下華柱國際業務表現。 2026年一季度,華柱服務器RELPA同比提升5%, Now let's go over the operational performance of our HWI business.

In the first quarter of 2026, HWI achieved a 5.0% year-over-year increase in VAPAR, driven by a 1.6% increase in ADR and a 2.1% improvement in occupancy rate.

As you may have noticed, in addition to BH's business, Huazhou International has also made initial arrangements and breakthroughs in the Asia-Pacific market in order to build a one-by-one regional cooperation development opportunity. Huazhou International continues to increase the strategic layout of the Asia-Pacific region. Currently, we use Singapore as a operating hub to extend to Laos, Vietnam, Cambodia, and other Southeast Asian key markets. Currently, the Group operates six hotels in Southeast Asia. As you may have noticed, aside from our DH business, H-World International has also made initial progress and breakthroughs in the Asia-Pacific market.

Leveraging the development opportunities under the Belt and Road Initiative, we are accelerating our strategic layout across APAC. With Singapore as its operational hub, HWI is expanding its footprint into key Southeast Asia markets, including Vietnam, Laos, and Cambodia. To date, we have opened six hotels across Southeast Asia. By rolling out brands ranging from Hanting, G-Hotel, to Intercity and Max, we have built a full range of brands, covering economy, mid-scale, and upper mid-scale segments, catering to diverse guest travel needs.

At the end of 2025, we will officially launch our first overseas Hanting project. The project uses the product system of Hanting 4.0, located in the core business district of Dijun, Hu Ziming City, Vietnam. China has achieved a bright business performance in the year of 2026, reaching nearly RMB500 per quarter. It is worth mentioning that the Chinese market has a domestic quality head, Jia Meng Shao, which has fully reflected Jia Meng Shao's full trust and high recognition of Huazhou's brand power and operating capability. At the beginning of this year, all five stores in China, including overseas stores, also officially landed in the capital of Lao Wo. We opened our first overseas Hanting Hotel in late 2025.

Featuring our latest Hanting 4.0 version, the hotel sits in the very prime center business district of Ho Chi Minh City, Vietnam. The hotel posted strong operational results with a nearly RMB 500 rep part in the first quarter. It's also worth mentioning that this property was invested by one of our large domestic franchisees, which shows our franchisees' acknowledgement and confidence in our brand power and operational capabilities. This quarter, our first overseas G5.0 officially opened in Vientiane, the capital of Laos. Located in a prime area of the city, the hotel continues G's signature design language rooted in Eastern culture, representing the overseas expansion of one of H4's Eastern culture brands.

我们相信华族的标准化品牌体系,数字化运营能力与供应链优势可以很好的赋能海外门店。 我们目标打造华族在亚太市场的品牌市门,同时

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 the 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, Mr. Arthur Yu, financial performance for the quarter.

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 Huazhou and legacy DH segments. 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 one 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 REFPA recovery. HWI revenue rose 5.1% year-over-year in Q1 2026. partially financed by favorable foreign exchange rates. 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 improvements 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 iSatellite M&S business, supported by ongoing high-quality iSatellite network expansion and improved RISPA performance, our M&S 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 one. As of quarter end, the group holds 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 provide solid support for future shareholder return arrangements. This concludes our financial review. for the first quarter of 2026.

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

As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. One moment for our first question. We will now take our first question from the line of Dan Chi of Morgan Stanley. Please ask your question, Dan. Your line is open.

各位管理層,大家晚上好。 我是大摩的分析師Dan,徐憲達。 很高興又看到一個季度歷任的優異增長的公司。 我的问题是关于最近这个REFPAR还有需求的趋势 就一季度我们看到需求是环比得到提升的 就3%的一个REFPAR的增长 然后刚刚金总也提到了二季度以来的春假和节假日的这些错峰的旅游 那么想问一问能不能向我们分享多一点最近的这个情况 特别是商旅的一些趋势就是除了休闲之外 还有就是能源上涨之后呢 有没有看到有一些 Thank you, management. This is Dan from Morgan Stanley. Congratulations on another quarter of strong profit growth. My question is around recent demand and RevPath trend. First quarter, RevPath saw sequential improvement, and Mr. Jing mentioned about the demand balance during the Qingming and also May spring holiday, and several holidays in Q2. So can management share more colors, especially on business demand, and any impact from energy cost increase? Lastly, any comments on the occupancy stabilization? Thank you.

各位,我是金輝,我來回答這個問題。 After the pandemic, the tourism and leisure market in the Chinese market has been growing very well. I think this is very relevant to the consumer's desire to use tourism as a means of consumption. At the same time, the government has also done a lot of work to promote tourism and consumption. such a job, including the spring holiday I mentioned earlier, etc. At the same time, we are also very happy to continue to see the speed of the entry market. So in general, in the Chinese tourism market, the number of people continues to show a steady growth trend. Of course, because consumption is not 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 experiential experience behavior is becoming a necessity to Chinese consumers. Secondly, we are also seeing government pushing out 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. Thirdly, we are also seeing a rising or an increase in the overall inbound tourism, which was an additional growth driver to the 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 spendings. But to conclude, we do believe that overall leisure travel is still growing steadily.

能源上涨目前没有对国内的出行造成非常明显的影响。 我想这和中国新能源汽车的快速普及也有很大的关系。 这个非常明确,刚才Dan问到了能源的问题。 我们没有看到对出行市场明显的负面。 所以我们保持了对二六年全年华族热化威震的目标。

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 four-year 2026, we still maintain our four-year red card guidance of a slight increase.

For H-World, we will continue to focus on building our own core competencies.

including our hotel brand, 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.

Thank you. We will now take our next question from the line of Ronald Leung of Bank of America. Please ask your question, Ronald. Your line is open.

Good evening, everyone. I am Ronald from the U.S. Stock Exchange. My question is about opening and closing. We see that the opening of the first quarter is still in good rhythm. Let me translate my question into English. So my question is about the opening and closures 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?

Thank you. I will answer the opening and the city coverage question separately.

So on the hotel opening, At HWC, we grossly opened 537 hotels, which is at a relatively high level 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.

In terms of strategy, I would like to reiterate the idea of Huazhou's plan again. It is about high-quality development. Since two years ago, Huazhou has simply sought to grow in size and transformed into a high-quality, brand-leading development strategy. We insist on continuing to improve the quality requirements of our signing and opening stores. In this big picture, I am very happy to share with you

Our hotel opening strategies, we insist on the high-quality development of our hotel network. Since two 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 requirements on the new signings and new openings. With that strategy, I'm happy to report that in the first quarter of overall new signings, it's still at a healthy and high level.

保持来华的签约的节奏下,我们华驻维持2026年的全年的开关店指标指引不变。

With our healthy timing pace, we maintain our opening guidance for the full year of 2026 and change.

关于开业城市布局的规划上, 法治目前采取的是两手抓两条腿走路的方式。 一方面我们继续保持对下层市场的这样一个渗透。 我们基于目前, On the city coverage strategy, we have two lines of strategy 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 emerging opportunities of those high-quality properties in those core and premium districts and premium locations. We will be developing our premium hotel products in those Tier 1 and Tier 2 cities. We are fully confident that H4 will be delivering high-quality growth in both the lower tier cities as well as the tier 1 and 2 cities. Thank you.

Thank you. We will now take our next question from the line of Si Jie Lin of CICC. Please ask your question, Si Jie.

My question is about the development of this medium-high-end business. We have seen that the opening and signing of medium-high-end, especially in the past period, is very good, including the full-time official, and the first-hand shop has also started operating, and then there are 12 contracts. Thank you, management. My question is about the upper mid-scale business development. For the last several quarters, Upper Mid-Scale, especially InterCity, achieved quite impressive expansion speed. And we see that Grand G opened first hotel and has 12 new signings. So I want to know how's the RevPod performance of Upper Mid-Scale compared with Economy and Mid-Scale. And additionally, could you please share the expansion targets and operational focus of the Upper Mid-Scale segment, especially the InterCity and Grand G in the coming period? Thank you.

Thank you. Let me answer this question. China's high-end brick market is a very important part of Huazhou's future strategic layout, and it is also Huazhou's strategic center. I am very happy to see that Huazhou is better than China's high-end brick market in terms of brand and operational capability.

The upper mid-skill segment is a core strategic part of our overall H4 strategy. We are actually very happy to see that in the first quarter, the overall VAT power recovery in the upper mid-skill segment is actually slightly better than our economy and mid-skill. This showcases our growing brand power. and product quality in the upper mid-scale segment.

由于华柱采取的是多品牌农高端的发展策略, 我们四个品牌分别是城际,大关,水晶和美居。 就规模来讲,整体规模增长不错, 但是单一品牌的品牌势能还不足。 所以我们今年调整了开发策略,更聚焦在一二线核心城市,核心商圈,去进一步树立我们这些品牌的旗舰店,进而来尽快提升四个品牌在中国消费者市场的品牌影响力。 We adopt a multi-brand strategy in the upper-mid-scale segment, namely the intercity, grantee, mature, and crystal.

Overall, the total network growth in the Upper Mid-Scale is quite solid. But when we're breaking down into single brands, we do see that some of the brands still need further improvement in overall brand power.

Upper Mid-Scale strategy.

We are returning to and refocusing back to the Tier 1 and Tier 2 cities. to opening flagship stores in those core districts.

我们的确花了很多时间在早期打磨四大品牌的不同产品,不同定位。 我们希望形成四个品牌非常鲜明的市场定位和差异化。 四个品牌在其中的阶段,对于华洲来讲也是巨大挑战, 但我坚信从长远来看,

At the initial stage of development, Aceworld 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-mid-scale product. Of course, at the initial stage, you are always going to face some of the challenges, but we are very confident that in the longer term, our age world upper mid-scale brands will be leading in the upper mid-scale segment. Thank you.

Thank you. We will now take our next question from Ziwei Liu of Citix. Please ask your question, Ziwei. Your line is open.

Hello, I am Liu Jiwei from Zhongxin Securities.

I would like to ask a question about membership. On the one hand, we are seeing that the demand for business and leisure customers is fluctuating. On the other hand, the OTA industry is under supervision. Under this background, how is the channel ratio of our customers now? Including from long-term prospects, I translate my question in English. Hi, management. I'm Jiwei from Citix. Against the backdrop of fluctuating business and narrow gas mix and increasing regulation across OTA 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? Thank you.

Let me answer this question. Overall, the proportion of CIS, especially our key indicators, is relatively stable. Overall, our CRS as well as some of the other key metrics of our membership 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 CRF contribution and the membership booking has been quite stable.

的确我们看到一些新的变化, 由于中国市场,休闲,旅游,入境等一些新型的客户越来越多, 对华族会而言,

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 inbound tourism. So how to capture those emerging traffic and the new type of consumers is one of the very important topics. for H-World and for our H-World membership.

I think everyone is also concerned that Huazhou will continue to introduce some new core teams, including us and the leading AI companies in the industry to develop individualization and new members. These actions have shown Huazhou's firm investment in Huazhou.

You may have noticed that at Hworld we have been bringing in some of the new talents into the company and we are also working with some of the leading AI companies to develop new selling marketing strategies as well as to solve the new strategy and initiatives in member conversion.

and improving our capability in the corporate B2B channel.

We are using our membership corporate business travelers. We do believe that this also showcases the improving membership capability of H-World. Thank you.

Thank you. We will now take our next question from the line of Leah Pan of Goldman Sachs. Please ask your question, Leah. Your line is open.

Thank you for the opportunity to ask me a question. My name is Liya Panjianong. I have a question about the expansion strategy of the company overseas. The management team has just mentioned that they will continue to recommend the recent deployment in Southeast Asia, including the signing of Malaysia's full-scale E9DN and entering the Jiamuzai market. May I ask the management team to share in detail what progress we have made in these areas and what will happen in the coming years? And so please allow me to translate my question into English. Thanks, Madison, for taking my question. This is Leah from . And I have a question on companies' international strategy. And I think you mentioned on the recent stepping up in the Southeast Asian market. including the signing of G-Hotels in Malaysia and the entry into Cambodia with the brands G-Hotel and Schneckenberg. So, could you please share with us more about the expansion strategy in your Southeast Asia market and the growing targets over the next few years? And also, given companies' business exposure in the Middle East market, how do you see the impact from the ongoing Middle East crisis to your current business and FOF's global expansion strategy? Thank you.

Hello, I am Jin Hui. I will answer the first question about the strategy and strategy of Southeast Asia. Indeed, in the first stage, we successfully opened our store in Vietnam and Laos. This proved that China's brand, China's supply chain, and China's member advantage can all help us to open our store in Southeast Asia. Therefore, based on such an ability, So you do see that as a first step, we successfully opened hotels in Vietnam, in Laos, and in Cambodia.

This gives us very strong confidence that H-World's products, management, supply chain, as well as members can actually empower the hotel operation in the overseas market. Going forward, we are going to step up in the overall investment in the Southeast Asian market in terms of the network expansion, the size, as well as the pace of the expansion. We do think that overall the Southeast Asia is a brand new market that provides new opportunities to H-World.

Hello, I am Arthur Yu Jurei. I would like to answer the second question about the impact of the Middle East war on China. First of all, from the overall results of the first quarter, our impact is relatively limited. On the one hand, Huazhou International has only 10 joint stores in the Middle East, which is still relatively small in terms of income and profits for Huazhou International. On the other hand, the rise in European energy costs, we have reduced this impact through our internal efforts to manage it. Now we see that this impact is relatively controllable. But the overall situation in the Middle East is still uncertain.

所以我们会密切关注事态的进一步的进展,跟市场进行沟通。 So this is also the second question related to the Middle East conflict. Based on our first quarter results, we see very limited impact from the Middle East conflict to our H4 international. In the Middle East, our HWI only has 10 managed hotels. And it has manageable and non-material contribution to the revenue as well as profit. And on the overall increase in the energy cost, we are taking effort in controlling the increase and managing the increase in overall energy. So, so far, we think the impact of dividing energy costs on HWI is 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. Thank you.

Thank you. We will now take our next question from the line of Lydia Ling of Citi. Please ask your question, Lydia. Your line is open.

Hello, I'm Lydia from Huachi. Thank you for the opportunity to ask me a question. My question is about the profit rate. In the first quarter, the company's profit rate has continued to increase, and the cost has continued to improve. How do you look at the trend of the profit rate throughout the year? If you look at it from a regional point of view, China is now at a relatively high level. As the strategy of green assets progresses, how much room for improvement is there? 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, as satellite strategy continues to push forward, so what would be the upside from current high level? And we see the international part, the loss actually narrowed on a year-to-year basis in first quarter. So what would be your target for the overseas profitability on a four-year basis? Thank you.

Thank you, Lida. I'm Arthur Yu-Jun Rui. I'm here to answer this question. First of all, we saw that EBITDA performed very well in the first quarter. We made an impact on three aspects. The first is the strategic promotion of the group's green assets. We are confident that Huazhou's hotel business The EBITDA rate will continue to be stable in the same ratio, such an improvement, mainly brought by the green capital strategy. The second point is our own direct business. Through revenue management and cost management, especially in the reduction of rents, we have done some work that has worked well. It is better to complete such a goal of our cost control, and we have achieved better results.

On first quarter EBITDA, there are several things that we are doing to improve the overall EBITDA performance.

So firstly, it's our asset life strategy. As we continue pushing forward asset life strategy, we are confident that for our H World hotel business, the adjusted EBITDA margin will continue to improve steadily. Secondly, also on the overall lease and own business, We are also improving the performance of this segment by revenue management as well as cost control, including the negotiation of rental reduction.

然后刚才你提到的关于海外的业务, 那我们在我们华驻国际,特别是DH的业务方面, 我们在持续地推进成本降低的这样一个项目。 On the overseas business, HWI, especially for DH, we continue to push forward 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.

最后一点我也想补充一句的是,我们除了做好多成本降低方面的努力,我们其实还在加大一些重点项目上面的投资。 For example, our digitalization and AI construction, Huazhou will upgrade the membership system and promote and promote the brand. For example, we made a quick release of Q1. In these things, we are maintaining a long-term sustainable development idea. Huazhou needs to invest in our own brand, membership system and infrastructure system. I would like to add that aside from the cost control and cost reduction,

H-World is also making some investment in key areas such as digitalization, technology, and AI development, as well as our overall H-World membership building, the promotion and marketing of our core brand. For example, in the first quarter, we launched our Han Tianying 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 four-year basis, we will have control on the cost, but we also make necessary investment for our long-term sustainable growth.

Thank you.

We'll take the last question.

Certainly. Our last question today comes from the line of Sing Chen of UBS. Please ask your question, seeing your line is open.

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

Thank you. Thank you, Chen Xin.

Let me answer this question. From the materials we prepared just now, we can see that Huazhou has a very good asset supply table and a stable cash flow. As we mentioned just now, the green asset strategy we are promoting We will continue to promote our shareholder return on the shareholder return. Thank you, Chunxing.

So as you can see from our presentations, each world has very strong and solid balance sheet as well as stable cash flow. And going forward, as we continue pushing forward the asset line strategy and those cost reduction initiatives, we will maintain our shareholder return plan in place. Going forward, if there's anything 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.

Thank you. That's the end of the question and answer session. I'd now like to turn the conference back to Ms. Ivy Law 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 is conclude the program. You may now disconnect your lines.