Good day and thank you for standing by. Welcome to the H-World Q2 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 this session, you will need to press star 1, 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1, 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ivy Luo. Please go ahead.

Thank you, Operator. Good evening and good morning, everyone. Thanks for joining us today. Welcome to H-World Group 2026 Second Quarter and First Half Earnings Conference Call. Joining us today is our founder and executive chairman, Mr. Qi Ji, our CEO, Mr. Jin Hui, our CFO, Mr. Arthur Yu. 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 SEC. 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 release that was distributed earlier 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 second quarter of 2026. Mr. Jin, please. Dear investors and analysts, good day.

Thanks for joining us today. Welcome to HLO Group's second quarter 2026 earnings conference call. In the first half of the year of 2026, the demand for travel documents for domestic travel is rising. According to the Ministry of Culture and Tourism, in the first half of the year, the number of domestic residents traveling is up to 34.6 billion people, which is 5.4% earlier than before. As the multi-nation policy continues to fall, the number of tourists entering the country is rising, which brings a new increase in domestic accommodation. In terms of consumption structure, the total cost of domestic travel in the same period of time has slowed down. During the first half of 2026, domestic culture and tourism travel in China maintained steady growth. According to the Ministry of Culture and Tourism,

Domestic resident trips reached 3.5 billion in the first half, representing a 5.4% year-over-year increase. As visa-free policies for multiple countries continue to take effect, inbound tourism gained strong momentum, bringing new growth opportunities to China's lodging industry. On the consumption structural front, the growth of total domestic travel spending moderated, up 2% year-over-year to RMB 3.2 trillion in the first half. This reflects new consumption characteristics among travelers, which are more frequent trips with more prudent standing decisions.

Recently, the Ministry of Culture, Tourism, and National Development of China has made it clear that the goal of 2030 is to reach 8.3 billion domestic residents per year. The total cost is 7.7 trillion yuan. The number of visitors is 1.9 billion, and the total consumption is more than $1.5 billion. This plan also mentions that we will adjust the layout of the cultural heritage area in the future, and increase the quality of high-quality cultural heritage products. We believe that cultural heritage and travel-related industrial chains will have a significant growth potential in the long term. In the future, Huazhou will continue to use our multi-brand layout, offline store operation experience and digitalization capabilities,

Recently, the government issued a plan to build China into a nation strong in tourism during the 15th five-year plan period, which laid out 2030 targets, including annual domestic resident trips exceeding 8.3 billion, with total consumption reaching RMB 7.7 trillion. and inbound tourist arrivals reaching 190 million with total spending exceeding US dollar 150 billion. The plan also outlined adjustments to the tourism regional layout and the greater supply of high quality culture and tourism related products. We believe the travel related industry supply chain has great long-term growth potential. Moving forward, Eight World Group will keep leveraging our multi-brand portfolio, hotel operation expertise, and digital capabilities to steadily expand our brand network and capture accommodation demand brought by travelers.

At the same time, the group has achieved high-quality network expansion through regional breakthrough and low-end city penetration. With 12.7% increase in revenue and housing, the group's hotel population has increased by 13.2% to 30.5 billion yuan. The number of members of Huazhou Club members and the number of members who are scheduled to be employed have all achieved steady growth. What is more important is that the joint business of the group's green assets, whether in terms of size, income, or profits, has achieved strong growth. In the second quarter of 2026, the joint income increased by 25.2% to 36.0% and the net profit increased by 18.5% to 22.0%.

Facing the current industry opportunities and challenges, Agewell remains committed to do the right thing for the long term. We focus on the mass market lodging segment and emphasize high quality development. Our hotel network, we continue expanding to lower tier cities, while at the same time securing those prime locations in the core cities, continuously optimizing our existing hotel footprint. In the second quarter, We achieved high-quality network expansion through regional breakthroughs and lower-tier city penetration. Backed by a 12.7% year-over-year increase in the number of rooms in operation, the group's hotel GMV grew 13.2% year-over-year to RMB 30.5 billion. Room nights booked by members also achieved steady growth. More importantly, the group assets like Manage Highs and Franchise Business deliver robust growth across scale, revenue, and profit. In the second quarter, Manage Highs and Franchise Revenue increased 25.2% year-over-year to RMB $3.6 billion, and Gross Operating Profit grew 18.5% year-over-year to RMB $2.2 billion.

Under the positive influence of the industry competition environment, Huazhou China relied on product service to replace and upgrade, to refine revenue management and comprehensive image ability to increase. In the second quarter, ADR grew by 2.6%. The growth of ADR in four consecutive quarters has been achieved. ADR growth also led to a 1.1% increase in the second quarter RERPA.

With industry competition rationalizing, H4China achieved a 2.6% year-over-year increase in ADR in the second quarter, which was backed by our continuous product and service upgrades, revenue management, and integrated marketing capabilities. This marked our fourth consecutive quarter of positive ADR growth. The ADR improvement viewed a 1.1% year-over-year increase in RASPAR in the same period.

We steadily promote high-quality network expansion and continue to improve city layout. As of the end of the second quarter, China's Zainin Hotel has reached 13,417 hotels. Our hotel brand and products continue to receive high recognition and recognition from customers. The company signed a contract to show stability. As of the end of June, the hotel in the pipeline has been compared and improved. We have 3,054 hotels in China. Our hotel in Zanyin has covered 1,468 towns and cities. We will continue to sell to the 2.0 target of thousands of stores. At the same time as setting up a low-end lower-end market, we continue to optimize the core city's high-quality shopping malls. We believe that with the continuous product strength and brand performance of Yi Tuohua, we can build a high-end store

We continue to steadily expand our high-quality hotel network and enhance our nationwide network presence. As of end June, we had 13,417 hotels in operation in China. Our hotel brands and products continue to gain strong favor and recognition from franchisees, and we maintain a solid signing momentum. As of end June, hotels in pipeline increased both year-over-year and quarter-over-quarter, reached 3,054. Our hotels in operation and in pipeline cover 1,468 cities in China, and we are matching towards our goal of 20,000 hotels in 2,000 cities. While expanding the lower tier market, we also continue optimizing hotel footprint In core cities and prime commercial districts, we believe that with age will strengthen product competencies and brand influence, we can achieve further breakthrough in China's core existing markets.

In the layout of the brand party, the group focuses on the national economy and the central hotel track, deepening the general consumer market, and continuing to strengthen the main brand and core competitiveness. We are very happy to see that the new version of RealPak has achieved a significant improvement. At the same time, it has also gained the wide recognition of consumers and business owners. Following the rapid development of new products in Hanting, the Group has also improved its own leading advantage in the economy and the middle and high-end housing market. Hotels of Xinxin Liu has been certified by our brand in a global hotel brand scale in 2025.

Please continue to stand by.

Your conference will resume shortly. We have the signed back. Please resume. Okay, let's continue.

Okay, so Hanting and Quanji became the first Chinese hotel brand to receive a hotel list. In addition, Zhongdao, Zulip Hotel, Jizhi Hotel ranked 26th in the world as a group brand. The 600 million bright Li Chengbei, which has expanded in size, but we think that the scale is just a stage result. The following group will continue to insist on high-quality development, promote product polishing, and continue to update and upgrade to improve product quality and service, and better meet the demand for diversified accommodation for consumers. We focus on the economy and the mid-scale segments, deeply cultivating the mass market and continuously strengthening the core competitiveness of our flagship brands. With the upgrades of Hanting and GE,

We are pleased to see that the new version hotels delivered meaningful improvement in VASPAR and gained broader recognitions from guests and franchisees. With the rollout of Han Ting Ying, we are further solidifying our leading position in the economy and mid-scale lodging markets. In the recently released Hotels 2025 global rankings for single-brand room counts, Ji Hotel leaped from the number four place globally to the top spot, with Hanqing closely following in the second place. This marks the first time Chinese hotel brands have claimed the top two positions on this list and underscores the effectiveness of our brand strategy. In addition, our core mid-scale brand Orange Hotel climbed to 26th place globally, representing another notable milestone in our brand-led expansion. We view this scale leadership as a milestone to date, and we will continue to adhere to high-quality development, focusing on product refinement and continuous iteration to improve product quality and services to better serve diversified lodging demands. Looking ahead, our limited-service Golden Triangle brands, namely Hanting, and Orange will continue to unleash strong market competitiveness and serve as a key growth engine for the Group's 20,000 hotel in 2,000 city strategy.

Besides deepening our core mass market brand and network expansion, our upper mid-scale segment has also been making steady progress.

We stick to our multi-brand strategy with distinct brand positioning and value proposition, and push ahead with our development strategy centered on four flagship brands, Intercity, Renji, Crystal, and Mercure. As of end June, HW China's upper mid-scale brands and the 1,738 hotels in operation and in pipeline, up 13.4% year over year.

In terms of sales, we have always insisted on Huazhou Club as the core. We believe that the member system and the performance ability are important core businesses that can continue to develop for a long time. With our hotel network covering more cities, Huazhou Club's member body and member experience have achieved steady growth. In addition, for upgrading member rights, upgrading user experience, the group continues to Jihong He, Yu Ida, Dong Li Jihong He, Yu Ida, Dong Li

On the marketing front, we have always centered our strategy on our age rewards membership program. We firmly believe that our membership program and the direct sales capability are the core competitive advantages underpinning the group's long-term sustainable growth. As our hotel network expands to more cities, age rewards membership base and room nights booked by members have both achieved steady growth. In addition, to upgrade membership benefits and enhance our guest experiences, we are refining our membership-centric operations, deepening cross-industry partnerships, and expanding diversified loyalty points consumption scenarios for our members. At the same time, we are accelerating our Age Reward international presence, optimizing our Age Reward app to capture more inbound travel demand, and Empower Global Membership Services. Going forward, we will further strengthen brand building, broaden customer acquisition channels, and continuously optimize the membership benefit to enhance member conversion and strengthen member loyalty.

In the internal management of Shenzhen, promoting group business stability and expansion, we also actively carry out corporate social responsibility. There are mainly three aspects I would like to share with you. The first is to drive local employment and create jobs. With the continuous expansion of our store network, we continue to attract new employees to join. As of the end of June, the total number of employees in the group has exceeded 260,000. In addition, we are also constantly improving the internal talent cultivation mechanism to plan a clear promotion and growth route for employees. Next, we insist on promoting hotel green carpet operation and landing various energy saving measures. We will also give the mature energy management plan to Jiameng, to help the door stores save the cost of water and electricity energy, and thus obtain better business returns. Finally, it is the public interest return aspect. With the help of the Group Public Interest Fund, we have established many public interest projects. Through education, assistance, disaster relief resources, etc., to return to society. In the future, we will continue to promote all kinds of social responsibility work,

In addition to focusing on our internal operational management and driving steady business expansion across the group, we are also committed to proactively fulfilling our social responsibilities. I would like to share three key areas. Firstly, AgeWorld boosts local employment and creates job opportunities. The continuous expansion of our hotel network enables us to recruit more employees on an ongoing basis. As of end June, the total number of employees of the group exceeded 260,000. In addition, we continue to refine our internal talent development program, providing employees with clear career paths. Secondly, we pursue energy saving management of our hotels. and have rolled out multiple initiatives. We share proven energy saving management solutions with our franchisees to help them cut water and electricity costs and secure better operating return. Thirdly, our social welfare initiative. Supported by the group's charity foundation, we have launched a wide range of public welfare programs to give back to the society through educational assistance, post-disaster support and other initiatives Going forward, H-World will continue to push forward the social responsibility initiative, balancing business growth with social commitment, and upholding our corporate mission to guests, franchisees, employees, and the wider community.

Next, let's look back at the performance of Huazhou International. In the second quarter of 2026, some of the hotels in our region were affected by the Middle East conflict. At the same time, in the development of Southeast Asia, The opening of new stores in new countries is still in its peak stage. This has had a certain impact on our RERPA after the integration of Huazhou International. In the second quarter, Huazhou International's RERPA fell by 3.8% at the same time. Among them, ADR rose by 0.9% at the same time, and the use rate fell by 3.5% at the same time. Although Huazhou International's business is under pressure, the performance of our European business is still good. Next let's go over our operational performance in the international market. In the second quarter

HWI's blended rep part was affected by the Middle East conflict, as well as our South Eastern Asia expansion, which we're still in the ramp up period. In the second quarter, HWI's rep part decreased 3.8% year over year, with ADR up 0.9% and occupancy rate down 3.5 percentage points. Nevertheless, our bureau of business delivered a solid performance, The European segment's rep part grew 1.1% year-over-year in the second quarter, driven by improvements in both ADR and occupancy. Going forward, we will continue to optimize HWI's operational efficiency in Europe and push forward our strategic layout in the Asia-Pacific market.

以上就是华驻2026年二季度业务情况的更新。 下面有请集团CFR阿瑟瑜为大家分享集团二季度的财务情况,有请。

This concludes the business update for the second quarter of 2026. I will now hand over the call to our CFO, Mr. Arthur Yu, for financial performance for the quarter.

Thank you, Jinghui. Good evening and good morning to everyone. Now let's walk through our Q2 financial highlights. In the second quarter, our group revenue grew 10.8% year-over-year, to RMB 7.1 billion. This was primarily driven by our China business. In the quarter, our China revenue increased 14.9% year-over-year to RMB 5.9 billion, supported by a steady and high-quality network expansion as well as continued red-par recovery. Our international business revenue decreasing 5.8% year-over-year to RMB 1.3 billion, which was due to the closure of leased hotels and therefore a decline in leased revenue. We are happy to report that our group recorded another quarter of strong profit growth. Adjusted EBITDA increased 20% year-over-year to RMB 2.7 billion, with adjusted EBITDA margin expanding 3% points year-over-year to 38.3%. The margin improvement was attributable to a growing profit contribution from our iSatellite business coupled with well-controlled GMA expenses. In the second quarter, hotel operating costs increased 7.4% year-over-year, slower than our revenue growth as we became more asset-light. SG&A expenses in the quarter rose 6.1% year-over-year, which was also slower than our revenue growth, reflecting our cost management capabilities. Adjusted net income grew 26.9% year-over-year to RMB 1.7 billion, with the adjusted net income margin improved 3.0% to 24.0%. Supported by ongoing high-quality iSatellite network expansion and improved RevPath performance, our MNF business revenue grow a solid 24.2% year-over-year to RMB 3.6 billion. M&S growth operating profits increased 18.5% year-over-year to RMB 2.2 billion. Lastly, on shareholder returns, we are very pleased to announce that we completed our 2024 shareholder return One year ahead of our plan. We are committed to returning to our shareholders, which will continue to be supported by our healthy operating cash flow and strong balance sheet. We therefore announce that the board has approved another three-year shareholder return plan with an aggregated amount of US dollar 2.5 billion. effective from today. As the first distribution under this new shareholder return plan, the board has also approved an ordinary cash dividend of approximately US dollar 275 million. With that, we conclude our financial review for the second quarter of 2026.

With that, we are ready to take your questions. Operator, please open the line for Q&A.

Thank you. We will now begin the question and answer session. If you wish to ask a question, you will need to press star 1, 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1, 1 again. We will take our first question. And the question comes from Lydia Ling from Citi. Please go ahead. Your line is open.

Hello, Ms. Guan. Thank you for giving me the opportunity to ask a question. I am Lydia from Huazi. First of all, congratulations to the company for achieving a bright performance in the second quarter. My question is mainly about the wrapper. Since the third quarter, we have seen some uncertainties in the extreme weather. Can you share with us the overall performance of the wrapper in the current quarter? This is Lydia from Citi, and congratulations on the thorough results in the second quarter. My question is mainly on the rep trend. So into third quarter, we observed a volatile travel demand affected by the extreme weather, especially during this peak summer season. So could you share the red part performance during the summer holiday and also into second half, base goals are relative higher. So what's management latest expectation on the third quarter and also full year red part trend?

感谢。 谢谢提问。 我是金辉,我来回答这个问题。 Currently, the demand for travel and leisure in China is still growing. What we are very confident about is that Chinese consumers have already seen travel and leisure as their top priority. This has been very clear after the pandemic. On the other hand, the government is very encouraging to support cultural travel. In the first half of this year, the spring holidays in various places were launched, and the civil servants launched in early August The third one, of course, there is no doubt that we have seen a lot of new leisure tourism in this round. Customers and scenes, family tourism, hair oil, self-driving oil, performance is also very strong. Of course, entry-level tourism has also brought a very large increase in the market, especially for the core cities of the first and second lines. In July, it was indeed affected by

I will translate first. So thank you for your question. This is Jinghui. I will answer this question. So currently China's leisure travel demand is still steadily growing. We firmly believe that in China, consumers have treated leisure travel as one of the necessities. This has been very clear after the COVID reopening. Secondly, the government is very supportive of the culture and the tourism travel. In the first half this year, we do see multiple regional governments introducing spring holidays. And in early August, we also saw government encouraging public servants to take holidays. And certainly, around this round of leisure travel trend, we do see new scenarios and new customers emerging. For example, family trips, travel by silver hares, travel by self-driving. Those both have been performing very strong. Of course, inbound travel has also brought us increasing demand, especially in those core cities in the Tier 1 and Tier 2 cities.

In July, there were some The extreme weather in the region has indeed had a great impact on the economy, which has led to the performance of some of the market's top half of the period. Of course, I think it was also affected by some of the spring and summer holidays. But in August, the overall trend is warm. Considering the change and uncertainty of the entire external environment, we still have a cautious and optimistic attitude towards the overall demand.

So yes, as you mentioned, in July, we do see several regions being negatively affected by the severe weather, and it impacted operational results. In some of the markets, for the first half of the summer holiday, the performance was below expectation. Also on the other hand, I do think that this is also partially affected by the spring holiday. In August, so far, we do see the overall trend recovering. Considering all the uncertainties in the macro environment, we maintain a cautiously optimistic view for the overall demand. For the full year of 2026, we maintain our Thank you. Thank you.

We will take our next question. Your next question comes from Danqi from Morgan Stanley. Please go ahead. Your line is open.

Good evening, everyone. I'm Dan from Danmo. I have two questions. The first one is about opening stores. In the first half of China, we saw that there were 1,035 stores opening. President Jin just mentioned that we will firmly sell to 2,200 to 2,300 stores all year round. This is very clear. My question is, from a seasonal perspective, there were nearly 1,300 stores opened in the first half of last year, accounting for a relatively large number of stores in the whole year. In the first half of last year, is there any structural change in the opening time? My second question is about the economy of economic hotels. We just saw that the Hanting 3.5 or above version of Hanting has reached 55%. This year, This is Dan from Morgan Stanley. I have two questions. My first question is on hotel opening. We saw growth opening in first half 26. was 1,035 hotels. Although on track with Mr. Jing's reassurance on full-year target of 2.2 to 2.3 thousand, it is 20% below first half last year. Is there any structural change in the contribution of the two halves in a year seasonality-wise? That was my first question. My second question is about economy segment upgrade. Thank you for your question. Let me answer it.

First of all, I would like to talk about the opening of Huazhou in the second quarter. Huazhou opened 498 new stores in the second quarter. The number of stores is basically in line with the company's plans and expectations. The contractual performance of the second quarter is also very stable. Since the end of June, the hotel in Huazhou has improved significantly. In this process, Huazhou, I want to emphasize a point very much, Huazhou is not only emphasizing the development of the scale, but also hopes to make a substantial improvement. We have proposed higher requirements for the current new contract and new open-air stores, and we will insist on this high-quality development strategy for the next few years. As for the whole, we should say Thank you Dan for your questions. So on the overall new hotel network expansion,

In the second quarter, we opened 498 hotels. The number of openings is actually in line with our plan and our expectation. And more importantly, if you look at the new signings, we also achieved solid new signings in the second quarter. At the end of June, the number of hotels in our pipeline actually increased both quarter over quarter and year over year. and we always emphasize that for HVOT, what we wanna achieve is not just very simple quantity growth, but quality improvement. So we do have higher requirement for our new signings and the new openings. In the next few years, we will continue our sustainable high quality growth strategy unchanged. And for the four year of 2026, We maintain our four-year opening guidance. Yes, in the first half, the opening number was impacted by the base as well as by the supply chain. But I do think it's just normal volatility, and there's no change in our overall opening plan. Thank you.

Regarding the second question about Han Ting, I would also like to share it with everyone. First of all, the Hanting 4.0 version has been recognized by the market and developers. The software of the new version of the store is much higher than that of the old version. After the release of the Hanting Express, it has quickly exceeded 200 people in the camp and the hall. The development speed is better than expected. The business performance of the store is very good. These two points have proved the ability of Huazhou We will continue to upgrade the old and old Hanting store version and improve the organization of Hanting brands. At the same time, we will also provide sufficient product solutions for the lower market and small businesses. In short, in this field, Huazhou will

Our second question, I'm very happy to share with you that our Hanqin 4.0 version has achieved both market and franchisee recognition. The new version of Hanqin, the red card performance is meaningfully better than the older version. and after we rolled out Han Ting Ying, the number of hotels of Han Ting Ying in operation and in pipeline actually quickly exceeded 200. The overall development is actually better than our expectation. The operational performance of those Han Ting Ying that's in operation is also very strong. I think both on the two points that I mentioned above, actually shows you that Huazhou has very strong capability in high quality development in the economy hotel segment. And we're very strong in executing. Going forward, we will continue to upgrade our Hanqing's older version of hotel to go through the overall Hanqing hotel's portfolio to improve the overall hotel portfolio quality. Meanwhile, we will also, with the Hanqin product, we also provide the product that's available for those smaller properties for them to open under our Hanqin brand. To conclude, I think under the overall economy segment, each world has very big growth potential to capture the market. Thank you.

Thank you. We will take our next question. The next question comes from the line of Yuel Lu from CITI CS. Please go ahead. Your line is open.

Hello, Mr. Manager.

I am Liu Jiwei from Central Stock Exchange. I would like to ask a question about the medium-high end. Jin Hui also mentioned that we currently have more than 1,700 pop-up stores. What kind of observations does the company have on the supply of the entire high-end hotel market this year, including whether it will further accelerate the layout on the high-end store side? At the same time, we observed that there are some stores in Hangzhou, Guangzhou and Wuhan. I will translate my question. I'm Ji Wei from Citix. The company now has more than 1,700 upper-mid-scale hotel properties. What's your view on this year's supply-demand balance in the upper-mid-scale hotel segment? Will you speed up expansion? Also, Ji Grand has opened in Hangzhou, Guangzhou, and Wuhan.

Operator?

Hello, we still have the participant connected. I believe the signal was cut. Yu-Wao Liu, are you able to repeat your questions, please?

Hello, can you hear me? Yes. Then let me ask my question again. My question is mainly about... You can speak English, you can speak Chinese. Okay. I'm Jiwei from Citix. The company has more than 1,700 after-miscue hotel properties. What's your view on this year's supply-demand balance in the upper-mid-scale hotel segment? Reviews speed up expansion. Also, G-Grant has opened in Hangzhou, Guangzhou, and Wuhan. Could you give more color on its operating performance on the development roadmap?

Okay. Let me answer some questions about the high-end hotels. Indeed, Huazhou...

We will continue to invest in brand development and development capabilities.

China's high-end hotel market is still developing well, because on the one hand, it meets the market demand for increased consumption, and on the other hand, it also achieves high-end hotels' So there are two opportunities for historical development at the same time. Therefore, Huazhou will continue to maintain our performance in China, Australia, China, China, Australia, China, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia, China, Australia We are very confident in our results and we have achieved very good performance in both business and business performance. At the same time, I mentioned about the DaGuan brand. I am very happy that we have signed and opened some stores in China continuously, and even more than 20 channels. At present, we still maintain DaGuan as a landmark in the city, We are still in a critical stage of development, but we are very optimistic about DaGuan's customer reputation and product model. We believe that in the future, there will be a very huge development space in China. So we are very confident about this.

Let me answer your questions related to the upper mid-scale segment. Yes, upper mid-scale segment is one of H-word core strategic area, and we continue to put effort into the brand building as well as the overall development in this segment. For the upper mid-scale market in China, we do see good development opportunities. We actually see opportunities from two fronts. One is that the upper mid-scale segment actually has opportunities from consumption upgrades. Well, at the same time, it also takes some of the demand from those traditional upscale hotels. And for each vote, we will continue to insist on our multi-brand strategy. We will be building on our brand G. Crystal, InterCity, as well as Mercure. We will be using this four core flagship brand to achieve fast development and market share gain in the upper mid-scale segment. Currently, for the InterCity Hotel, it has been growing very strongly, and we are very confident on the future growth for this brand. And you mentioned the Grand G. For the grantee, we have been gradually signing and opening some of the hotels. As of now, the number of grantee in pipeline have already exceeded 20 hotels. At this moment, we'll be really focusing on building grantee at those very prime locations. We are still refining the overall business model, so we'll be relatively cautious like developing the quantity of it. But we are very positive on what Grand G has already achieved in terms of the customer reputation, the brand reputation, and the product model. In the future, we believe Grand G has very big growth potential, and we are very optimistic on it.

We are very confident that Grand G should become the new standard of Chinese high-end hotels in the future. We are working hard on it.

We are very confident that Grand G will become a flagship in China's upper-mid-scale segment, and we're really working hard on that. Thank you.

Thank you. We will take our next question. Your next question comes from Ronald Leung from Bank of America. Please go ahead. Your line is open.

Good evening, I am Ronald Luck from the Bank of America. I have a question about the member system and some changes in the customer channels. Can you tell us about the recent progress of the member monitoring? And what are the changes in the current customer channels? Can you tell us more about the member system? Let me translate my question into English. Good evening, management. My question is related to the membership system. Could management comment on the latest breakdown in terms of the customer acquisition channel? Also, could management comment on the strategy in terms of optimizing the membership system. Thank you very much.

Okay, let me answer the question about membership. The membership strategy is the core strategy in Huazhou's management. It is also Huazhou's core strategy. The growth of the members of Huazhou is expected to be relatively normal. Of course, In the face of the new leisure market, the entry market, and the lower-level market, these new markets, Huazhou members do need more time and energy to face these new market guests. In response, our OTA ratio is also relatively stable. Currently, it is maintained at 20% to 20%. We think that in the face of some new markets, we still need OTA support, especially in the entry market. and more. For this, I would like to summarize the core strategy of Huazhou's future. The first aspect is about Huazhou's members. The core strategy of Huazhou's members is to use the best of Huazhou's power. Especially when it comes to the best price, breakfast, etc., Let me answer the question related to our members.

Yes, member is one of our core strategy for H-Words operation and it's also one of our core competitive advantages. Right now, the overall member, the increase of the members as well as the member contribution in the booking is in line with our expectations. Of course, as we are entering into more markets, for example, leisure market, the inbound market, as well as those lower tier cities market, H4 membership do need some time to grab those traffic from those new markets for us. But meanwhile, the OTA contribution is actually quite stable at around 20% to 25%. We do believe that when we enter those new markets, we do need OTA support, especially for inbound and lower tier cities. And related to the overall strategy and the future strategic operations for age-reward members, I will conclude it in three areas. Firstly is for the age-reward members, we do emphasize the best benefits for our members. This one is one of the key strategies for us. This includes the best price, Include breakfast and etc. And going forward, we are also doing more work on innovation. For example, recently we actually launched a family cart under our H4 membership. And it actually received quite good feedback from the market.

我想第二条呢,就是展开全面的生态的跨界合作。 Last year, we and DD, this year, we and various aviation companies, including the way of living of new people's cars, in terms of ecological cross-strait, will also become a very important one. The last one, in the second quarter, we will open a comprehensive member cooperation with YaGao to set up the development of entry and overseas members. On the other hand, with more entry requirements, it will also allow more Chinese tourists to travel overseas and live in hotels in Huazhou and Yagao. So to sum up, Huazhou will focus on member operation first, then on the entire ecological cross-border cooperation, and finally on the internationalization of the entire Huazhou. We are fully engaged.

So secondly is the cross-industry partnership. You may have already noticed that last year we actually partnered with DB and this year we're partnering with multiple airline companies as well as new energy vehicle companies to really to work with those multiple business sectors. The cross-industry partnership will also be one of our important strategies. Lastly is our international or overseas member development. In the second quarter, we deepened our cooperation with Accor on the membership partnership. On the one hand, it's really to capture more inbound demand, and also it allows Chinese consumers to be able to, or Chinese travelers, to be able to stay in a course hotel when they go aboard. So we're really working on that. So to conclude, on the 3.1 is on the membership operation. Secondly, it's on the cross-industry partnership. And thirdly, it's on the international development for H4. Thank you.

Thank you. We will take our next question. Your next question comes from Simon Cheng from Goldman Sachs. Please go ahead. Your line is open.

Thank you for sharing with me. I have a small question. In the past few months, your EBITDA margin has risen quite a bit. Every quarter, it has risen about 3 to 4 points. I would like to ask if you have any guidance for the second half of the year and the whole year. On the other hand, abroad, especially in the DHC market, the EBITDA margin seems to have dropped a little bit. So I would like to ask this question. Looking at the past year, what is your opinion abroad? Thank you. So my questions in relation to the EBITDA margin trend. Over the last couple of quarters, they have seen a nice 3%, 4% margin expansion in China, but yet in overseas markets, the margins, they see some sluggish or slippage. Wondering whether management do have any guidance going into second half and also for the full year. Thank you. I appreciate it.

Simon, thank you for your question. I'm Arthur. Let me answer this question. First of all, our company is following the green asset strategy. So in the long term, we still expect the company's overall EBITDA rate to continue to improve steadily. This is the first point. Thank you, Simon. This is Arthur.

I will answer your question. So on the overall margin front, as the group continues to push forward our SMI strategy, in the mid to long term, we do expect companies to adjust their EBITDA margin to continue to expand.

On the other hand, we are doing a better job on the cost control of our SG&A. We have a more complete and mature cost control system.

On the FG&A front, we have been making really good delivery in the quarter. This is supported by our very mature and developed cost control system.

公司也非常清楚地认识到未来长期可持续的发展, 拔注还是需要在做必要的战略的投入, 例如说在人才的培养,科技AI的建设, We are also very clear that in order for H4 to achieve a long-term sustainable growth, we have to make necessary strategic investments. For example, in the talent development,

In technology and AI, in our edge reward membership building, in brand building, etc.

So in those areas, we'll be making reasonable and long-term and effective investments.

So for the outlook of our second half profitability and cost, we will maintain very stable.

The second question is about our overseas business. Because our overseas business has been affected by the Middle East war, we have more than 20 joint stores in the Middle East and Egypt. Its contribution to international income and profit is very limited. On our international business,

Yes, our international business was in some way impacted by the Middle East conflict. For our HWI in the Middle East and in Egypt, we have more than 20 hotels, but they are all managed and franchised hotels. So they have limited impact actually on our HWI's revenue and profit.

Since the Middle East war has a certain impact on our customer flow and cost,

Despite the impact of Middle East conflict on the traffic and the overall operational cost, for HVOT, we are actually doing more cost control for HWI. So by doing that, the overall impact of the Middle East is actually controllable.

From a year-to-year perspective, our goal is to maintain a smooth international year-to-year profit rate.

So for the four years, we maintain our goal of achieving a positive profit for our HWI business. Thank you. Thank you.

This concludes today's question and answer session. I'll now hand the call back to Ivy Luo for closing remarks.

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 quarter. Goodbye.

This concludes today's conference call. Thank you for participating. You may now disconnect.