H World’s RevPar and hotel opening progress remain on track; Goldman Sachs maintains Buy

Overview

Based on discussions with H World’s management during the Goldman Sachs APAC Consumer & Leisure Corporate Day, this report assesses the company’s 2Q26 RevPar performance, hotel expansion, supply chain operations, margins, Deutsche Hospitality’s overseas business, and capital return program. Goldman Sachs maintains its Buy rating on H World Group’s ADRs and H-shares.

Core views

The core view is that H World’s Mainland China RevPar remains resilient despite adverse weather, elevated airfares, and weak air traffic, supporting the achievability of its full-year guidance for flat to modestly positive RevPar growth; hotel additions and signings are in line with full-year targets, with leading chain brands continuing to gain share in the industry; a higher franchise mix and procurement scale benefits should support margin expansion; and valuation is near the low end, while shareholder returns enhance investment appeal.

Analysis framework

The report primarily analyzes management interviews, industry supply and RevPar tracking, air traffic and airfare indicators, valuation multiples, and an SOTP target price framework, comparing H World’s operating metrics with full-year guidance, industry supply and demand, and peer valuations.

Methodology notes

• Valuation methodsSOTP

  Sum-of-the-parts valuation

  Goldman Sachs’ 12-month target prices are based on an SOTP methodology, applying 14x FY26E EV/EBITDA to the core hotel business and valuing other investments at book value.

• Factor analysisGS Factor Profile

  Comparison of growth, financial returns, valuation multiples, and composite percentiles

  This framework provides investment context for individual stocks by comparing indicators such as growth, financial returns, and valuation multiples against Goldman Sachs-covered stocks and industry peers.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• H WORLD GROUP LTD (HTHT.O / 1179.HK)

  Core company covered in the report; Goldman Sachs maintains a Buy rating.

  Strengths

  RevPar performance exceeded some third-party expectations, hotel additions are on track, the asset-light franchise model is improving the revenue mix, and valuation and shareholder returns are attractive.

  Weaknesses

  The year-over-year comparison base will rise in 2H26, travel consumption demand remains uncertain, and Deutsche Hospitality still needs to achieve core net profit breakeven.

  Comparison

  Goldman Sachs views H World as a leading chain hotel operator in China, benefiting from value-oriented consumption, industry consolidation, and increasing chain penetration.

  Risks

  Macroeconomic weakness, RevPar growth below expectations, insufficient financing channels for franchisees, slower-than-expected recovery in consumption and travel demand, dilutive acquisitions, and Deutsche Hospitality operating performance below expectations.

• Deutsche Hospitality

  H World’s overseas upscale hotel brand, contributing 20+% of Group revenue.

  Strengths

  Management indicated that cost pressures from rising oil prices remain manageable and maintained its FY26 core net profit breakeven target.

  Weaknesses

  The overseas business remains exposed to cost pressures and the risk of cash drag.

  Comparison

  Compared with the asset-light franchise business in Mainland China, Deutsche Hospitality’s contribution to Group margin improvement depends more on cost control and operational recovery.

  Risks

  Operating performance below expectations or cash consumption above expectations.

Key data

• FY26 gross hotel addition target2,200-2,300Year-to-date new signings and openings are in line with the full-year target, with approximately half of new openings located in tier-three and lower-tier cities.
• Supply chain procurement cost reductionDown 30+% over the past 2-3 yearsThe company has optimized procurement costs through scale benefits, with 80-90% of franchise hotels’ consumables purchased through the centralized procurement platform.
• Capital return programAggregate US$2bn for FY24-26Approximately two-thirds had been utilized by the end of FY25, and the remaining capacity is expected to be fully used before the end of FY26.
• Share price performance-16% over the past 3 monthsThe pullback was primarily driven by market concerns over slowing travel demand and its impact on RevPar.
• Valuation9x EV/EBITDAGoldman Sachs believes the current valuation is near the low end, while implying a 6.8% free cash flow yield and a 5.7% dividend yield.
• Target price and upsideHTHT US$63.00 / 48.7%; 1179.HK HK$49.00 / 45.9%The target price horizon is 12 months.

Impact & implications

If RevPar remains resilient, franchise expansion progresses as planned, and industry chain penetration continues to increase, H World is likely to benefit from industry consolidation and drive margin expansion through an improved asset-light business mix. The capital return program and a potential new return plan could strengthen shareholder return support, although weak travel demand may still affect the pace of valuation recovery.

Risks

• A weaker-than-expected macro environment leading to slower-than-expected RevPar growth.
• Weaker-than-expected financing channels in China resulting in fewer-than-expected new hotels opened by franchisees.
• A slower-than-expected recovery in Chinese consumption and travel demand.
• Risk of dilutive acquisitions.
• Deutsche Hospitality operating performance below expectations, resulting in cash drag.

What to watch

• RevPar performance in 2H26 against a higher year-over-year comparison base.
• Progress toward the full-year target of 2,200-2,300 gross hotel additions.
• Ramp-up and returns of newly opened hotels in tier-three and lower-tier cities.
• Utilization of the remaining capacity under the US$2bn FY24-26 capital return program and whether a new capital return plan is announced during the year.
• Whether Deutsche Hospitality achieves its FY26 core net profit breakeven target.
• The impact of oil prices, airfares, and air traffic on travel demand.