Huazhu Group Limited Reports First Quarter of 2019 Financial Results Nasdaq:HTHT

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SHANGHAI, China, May22, 2019(GLOBE NEWSWIRE) -- Huazhu Group Limited (NASDAQ: HTHT) ('Huazhu' or the 'Company'), a leading and fast-growing multi-brand hotel group in China, today announced its unaudited financial results for the first quarter ended March 31, 2019.

First Quarter of 2019 Operational Highlights

During the first quarter of 2019, Huazhu opened 226 hotels, including 11 leased ('leased-and-operated') hotels and 215 manachised ('franchised-and-managed') hotels and franchised hotels.
The Company closed a total of 60 hotels, including 12 leased hotels and 48 manachised and franchised hotels, during the first quarter of 2019. This was mainly due to:

Property related issues, including rezoning and expiry of leases, which resulted in the closure of 22 hotels.
Operating losses from hotels located mainly in selected 3rd or lower tier cities which resulted in the closure of 18 hotels.
The Company's strategic focus to upgrade the quality of the product and service. The Company closed 10 hotels for brand upgrade and business model change purposes; and permanently removed 10 hotels from its network for their non-compliance with the brand and operating standards. These hotels were mainly under HanTing and Hi Inn brands. By removing hotels of lower quality, the Company is able to provide a more consistent customer experience, which will help enhance both the brands and future profitability.

'We had a record-breaking hotels gross opening in the first quarter with an average of 2.5 hotels every day. We will continue our fast expansion in 2019, particularly for the mid- and up-scale brands, supported by a record-high hotel pipeline of 1,311. In the first quarter of 2019, our mid- and up-scale room count increased by 45% year-over-year, accounting for approximately 40% in total rooms in operation. With 82% of our pipeline hotel rooms under the mid- and upscale brands, revenue contribution from this segment will continue to increase,' commented Ms. Jenny Zhang, Chief Executive Officer of Huazhu Group.

'In addition, we will continue to invest in our brands, hotel developments and IT capabilities. We believe these investments will strengthen our positions in the market and fuel our continuing future growth,' added Ms Zhang.

1 Hotel turnover, refers to total transaction value of room and non-room revenues from Huazhu hotels (i.e., leased and operate, manachised and franchised hotels).

2 The conversion of Renminbi ('RMB') into United States dollars ('US$') is based on the exchange rate of US$1.00=RMB6.7112 on March 29, 2019 as set forth in H.10 statistical release of the U.S. Federal Reserve Board.

First Quarter of 2019 Financial Results

(RMB in millions) Q1 2018 Q1 2019 Revenues: Leased and owned hotels 1,576 1,706 Manachised and franchised hotels 509 663 Others 6 18 Net revenues 2,091 2,387 Net revenues for the first quarter of 2019 were RMB2.4 billion (US$356 million), representing a 14.2% year-over-year increase, primarily attributable to our hotel network expansion and RevPAR growth.

Net revenues from leased and owned hotels for the first quarter of 2019 were RMB1.7 billion (US$254 million), representing an 8.2% year-over-year increase.

Net revenues from manachised and franchised hotels for the first quarter of 2019 were RMB663 million (US$99 million), representing a 30.3% year-over-year increase. It accounted for 27.8% of the Company's net revenues in the first quarter of 2019, up from 24.3% a year ago.

(RMB in millions) Q1 2018 Q1 2019 Operating costs and expenses: Hotel operating costs 1,506 1,735 Other operating costs 3 7 Selling and marketing expenses 66 77 General and administrative expenses 159 206 Pre-opening expenses 75 104 Total operating costs and expenses 1,809 2,129 Hotel operating costs for the first quarter of 2019 were RMB1.7 billion (US$257 million), compared to RMB1.5 billion in the first quarter of 2018, representing a 15.2% year-over-year increase. Total hotel operating costs excluding share-based compensation expenses (non-GAAP) for the first quarter of 2019 were RMB1.7 billion (US$256 million), representing 72.4% of net revenues, compared to 71.8% for the first quarter in 2018. The higher hotel operating costs mainly reflected the increase in our hotel network (rentals, hotel headcounts, utilities and consumables, etc.).

Selling and marketing expenses for the first quarter of 2019 were RMB77 million (US$12 million), compared to RMB66 million in the first quarter of 2018. Selling and marketing expenses excluding share-based compensation expenses (non-GAAP) for the first quarter of 2019 were RMB76 million (US$12 million), or 3.2% of net revenues, compared to 3.0% for the first quarter of 2018. The year-over-year increase was mainly related to expansion in sales and marketing team, increased bank charges for online payments, and higher commission fees to online travel agencies.

General and administrative expenses for the first quarter of 2019 were RMB206 million (US$31 million), compared to RMB159 million in the first quarter of 2018. General and administrative expenses excluding share-based compensation expenses (non-GAAP) for the first quarter of 2019 were RMB189 million (US$28 million), representing 7.9% of net revenues, compared with 7.1% of net revenues in the first quarter of 2018. The year-over-year increase was mainly due to our investments to expand our hotel development teams, upscale brands and IT capabilities.

Pre-opening expenses for the first quarter of 2019 were RMB104 million (US$16 million), representing a 38.7% year-over-year increase, mainly related to upscale brand hotels.

Other operating income, net for the first quarter of 2019 were RMB6 million (US$1 million) mainly related to subsidy income, compared to RMB24 million in the first quarter of 2018. The year-over-year variance was mainly due to timing of receipts of such subsidy income.

Income from operations for the first quarter of 2019 was RMB264 million (US$40 million; 11.1% on net revenue), compared to RMB306 million (14.7% on net revenue) in the first quarter of 2018. Excluding our investments to expand our development teams, upscale brand hotels, and IT capabilities, the pro-forma operating income for the first quarter of 2019 would have been RMB352 million (14.7% on net revenue).

Other income, net for the first quarter of 2019 was RMB65 million (US$10 million), compared to other expense, net of RMB9 million for the first quarter of 2018. Other income for the first quarter of 2019 was mainly related to gain from disposal on marketable securities.

Unrealized losses from fair value changes of equity securities for the first quarter of 2019 was RMB90 million (US$13 million), compared to RMB136 million in the first quarter of 2018. These unrealized losses were mainly related to lower market price of our investments in Accor at each quarter end.

Net income attributable to Huazhu Group Limited for the first quarter of 2019 was RMB106 million (US$16 million), compared to net income attributable to Huazhu Group Limited of RMB129 million in the first quarter of 2018. Excluding share-based compensation expenses and the unrealized gains (losses) from fair value changes of equity securities, adjusted net income attributable to Huazhu Group Limited (non-GAAP) for the first quarter of 2019 was RMB222 million (US$33 million), compared to RMB282 million in the first quarter of 2018.

Basic and diluted earnings per share/ADS. For the first quarter of 2019, basic earnings per share were RMB0.37 (US$0.06) and diluted earnings per share were RMB0.36 (US$0.05). For the first quarter of 2019, excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities, adjusted basic earnings per share (non-GAAP) were RMB0.79 (US$0.12) and adjusted diluted earnings per share (non-GAAP) were RMB0.76 (US$0.11).

EBITDA (non-GAAP) for the first quarter of 2019 was RMB412 million (US$62 million), compared with RMB406 million in the first quarter of 2018. Excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities, adjusted EBITDA (non-GAAP) for the first quarter of 2019 was RMB528 million (US$79 million, 22.1% on net revenue), compared with RMB559 million (26.7% on net revenue) for the first quarter of 2018. The pro forma adjusted EBITDA (non-GAAP) would have been RMB610 million (25.5% on net revenue) after considering the impact of our investments in development teams, upscale brands hotel and IT capabilities mentioned above.

Cash flow. Operating cash inflow for the first quarter of 2019 was RMB147 million (US$22 million). Investing cash outflow for the first quarter was RMB378 million (US$56 million). Financing cash outflow for the first quarter was RMB194 million (US$29 million)

Cash and cash equivalents and Restricted cash. As of March 31, 2019, the Company had a total balance of cash, cash equivalents and restricted cash of RMB4.5 billion (US$664 million).

Debt financing. As of March 31, 2019, the Company had a total loan balance of RMB10.0 billion (US$1.5 billion) and the unutilized credit facility available to the Company was RMB1.9 billion.

Adoption of New Lease Accounting Standards
The Company adopted Accounting Standards Update 2016-02, Leases (Topic 842) utilizing the optional transition approach allowed under ASU 2018-11 and applying the package of practical expedients beginning January 1, 2019. By applying ASU 2016-02 at the adoption date, as opposed to at the beginning of the earliest period presented, the reporting for periods prior to January 1, 2019 will continue to be reported in accordance with Leases (Topic 840).

As a result of adoption, the Company recognized operating lease right-of-use assets of RMB19.0 billion and related operating lease liabilities of RMB19.5 billion for operating leases on January 1, 2019. The Company reclassified from assets and liabilities RMB0.5 billion net to operating lease right-of-use assets. The adoption of ASU 2016-02 did not materially affect the consolidated statements of income or consolidated statements of cash flows and had no impact on the debt covenant compliance under the current agreements.

Guidance
In the second quarter of 2019, the Company expects net revenues to grow 13% to 15% year-over-year.

The Company revised the gross opening target of 800-900 hotels to 1,100-1,200 hotels, and hotel closure to 200-250 in 2019.

The above forecast reflects the Company's current and preliminary view, which is subject to change.

Conference Call
Huazhu's management will host a conference call at 9 p.m. ET, Wednesday, May 22, 2019 (or 9 a.m. on Thursday, May 23, 2019 in the Shanghai/Hong Kong time zone) following the announcement. To participate in the event by telephone, please dial +1 (845) 675 0438 (for callers in the US), +86 400 120 0654 (for callers in China Mainland), +852 3018 6776 (for callers in Hong Kong) or +65 6713 5440 (for callers outside of the US, China Mainland, and Hong Kong) and enter pass code 7554067. Please dial in approximately 10 minutes before the scheduled time of the call.

A recording of the conference call will be available after the conclusion of the conference call through May 30, 2019. Please dial +1 (855) 452 5696 (for callers in the US) or +61 2 9003 4211 (for callers outside the US) and entering pass code 7554067.

The conference call will also be webcast live over the Internet and can be accessed by all interested parties at the Company's Web site,http://ir.huazhu.com .

Use of Non-GAAP Financial Measures
To supplement the Company's unaudited consolidated financial results presented in accordance with U.S. GAAP, the Company uses the following non-GAAP measures defined as non-GAAP financial measures by the SEC: hotel operating costs excluding share-based compensation expenses; general and administrative expenses excluding share-based compensation expenses; selling and marketing expenses excluding share-based compensation expenses; adjusted income from operations excluding share-based compensation expenses; adjusted net income attributable to Huazhu Group Limited excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities; adjusted basic and diluted earnings per share/ADS excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities; EBITDA; and adjusted EBITDA excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the table captioned 'Reconciliations of GAAP and non-GAAP results' set forth at the end of this release. The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding Company performance by excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities that may not be indicative of Company operating performance. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing Company performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to the Company's historical performance. The Company believes these non-GAAP financial measures are also useful to investors in allowing for greater transparency with respect to supplemental information used regularly by Company management in financial and operational decision-making. A limitation of using non-GAAP financial measures excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities is that share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities have been and will continue to be significant and recurring in the Company's business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.

The Company believes that EBITDA is a useful financial metric to assess the operating and financial performance before the impact of investing and financing transactions and income taxes, given the significant investments that the Company has made in leasehold improvements, depreciation and amortization expense that comprise a significant portion of the Company's cost structure. In addition, the Company believes that EBITDA is widely used by other companies in the lodging industry and may be used by investors as a measure of financial performance. The Company believes that EBITDA will provide investors with a useful tool for comparability between periods because it eliminates depreciation and amortization expense attributable to capital expenditures. The Company also uses adjusted EBITDA, which is defined as EBITDA before share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities, to assess operating results of the hotels in operation. The Company believes that the exclusion of share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities helps facilitate year-on-year comparison of the results of operations as the share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities may not be indicative of Company operating performance.
The Company believes that unrealized gains and losses from changes in fair value of equity securities are generally meaningless in understanding our reported results or evaluating our economic performance of our businesses. These gains and losses have caused and will continue to cause significant volatility in periodic earnings.

Therefore, the Company believes adjusted EBITDA more closely reflects the performance capability of hotels. The presentation of EBITDA and adjusted EBITDA should not be construed as an indication that the Company's future results will be unaffected by other charges and gains considered to be outside the ordinary course of business.

The use of EBITDA and adjusted EBITDA has certain limitations. Depreciation and amortization expense for various long-term assets (including land use rights), income tax, interest expense and interest income have been and will be incurred and are not reflected in the presentation of EBITDA. Share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities have been and will be incurred and are not reflected in the presentation of adjusted EBITDA. Each of these items should also be considered in the overall evaluation of the results. The Company compensates for these limitations by providing the relevant disclosure of the depreciation and amortization, interest income, interest expense, income tax expense, share-based compensation expenses, and unrealized gains (losses) from fair value changes of equity securities and other relevant items both in the reconciliations to the U.S. GAAP financial measures and in the consolidated financial statements, all of which should be considered when evaluating the performance of the Company.

The terms EBITDA and adjusted EBITDA are not defined under U.S. GAAP, and neither EBITDA nor adjusted EBITDA is a measure of net income, operating income, operating performance or liquidity presented in accordance with U.S. GAAP. When assessing the operating and financial performance, investors should not consider these data in isolation or as a substitute for the Company's net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP. In addition, the Company's EBITDA or adjusted EBITDA may not be comparable to EBITDA or adjusted EBITDA or similarly titled measures utilized by other companies since such other companies may not calculate EBITDA or adjusted EBITDA in the same manner as the Company does.

Reconciliations of the Company's non-GAAP financial measures, including EBITDA and adjusted EBITDA, to the consolidated statement of operations information are included at the end of this press release.

About Huazhu Group Limited
Huazhu Group Limited is a leading hotel operator and franchisor in China. As of March 31, 2019, the Company had 4,396 hotels or 439,614 rooms in operation. With a primary focus on economy and midscale hotel segments, Huazhu's brands include Hi Inn, Elan Hotel, HanTing Hotel, HanTing Premium Hotel, JI Hotel, Starway Hotel, Manxin Hotel, Joya Hotel, Crystal Orange Hotel, Orange Hotel Select, Orange Hotel and Blossom Hill. The Company also has the rights as master franchisee for Mercure, Ibis and Ibis Styles, and co-development rights for Grand Mercure and Novotel, in Pan-China region.

The Company's business includes leased and owned, manachised and franchised models. Under the lease and ownership model, the Company directly operates hotels typically located on leased or owned properties. Under the manachise model, the Company manages manachised hotels through the on-site hotel managers it appoints and collects fees from franchisees. Under the franchise model, the Company 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 applies a consistent standard and platform across all of its hotels. As of March 31, 2019, Huazhu Group operates 20 percent of its hotel rooms under lease and ownership model, 80 percent under manachise and franchise models.

For more information, please visit the Company's website:http://ir.huazhu.com .

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: The information in this release contains forward-looking statements which involve risks and uncertainties, including statements regarding the Company's capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements, which may be identified by terminology such as 'may,' 'should,' 'will,' 'expect,' 'plan,' 'intend,' 'anticipate,' 'believe,' 'estimate,' 'predict,' 'potential,' 'forecast,' 'project,' or 'continue,' the negative of such terms or other comparable terminology. Readers should not rely on forward-looking statements as predictions of future events or results. Any or all of the Company's forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions, risks and uncertainties and other factors which could cause actual events or results to be materially different from those expressed or implied in the forward-looking statements. In evaluating these statements, readers should consider various factors, including the anticipated growth strategies of the Company, the future results of operations and financial condition of the Company, the economic conditions of China, the regulatory environment in China, the Company's ability to attract customers and leverage its brands, trends and competition in the lodging industry, the expected growth of the lodging market in China and other factors and risks outlined in the Company's filings with the Securities and Exchange Commission, including its annual report on Form 20-F and other filings. These factors may cause the Company's actual results to differ materially from any forward-looking statement. In addition, new factors emerge from time to time and it is not possible for the Company to predict all factors that may cause actual results to differ materially from those contained in any forward-looking statements. Any projections in this release are based on limited information currently available to the Company, which is subject to change. This release also contains statements or projections that are based upon information available to the public, as well as other information from sources which the Company believes to be reliable, but it is not guaranteed by the Company to be accurate, nor does the Company purport it to be complete. The Company disclaims any obligation to publicly update any forward-looking statements to reflect events or circumstances after the date of this document, except as required by applicable law.

---Financial Tables and Operational Data Follow—

Huazhu Group Limited Unaudited Condensed Consolidated Balance Sheets December 31, 2018 March 31, 2019
RMB RMB US$ (in millions) ASSETS Current assets: Cash and cash equivalents 4,262 3,840 572 Restricted cash 622 617 92 Short-term investments 89 84 12 Accounts receivable, net 195 226 34 Loan receivables 94 165 25 Amounts due from related parties 176 224 33 Prepaid rent 955 - - Inventories 41 41 6 Other current assets 540 536 80 Total current assets 6,974 5,733 854 Property and equipment, net 5,018 5,108 761 Intangible assets, net 1,834 1,665 248 Operating lease right-of-use assets - 20,533 3,060 Land use rights, net 220 218 33 Long-term investments 6,152 5,747 856 Goodwill 2,630 2,657 396 Loan receivables 189 235 35 Other assets 471 498 74 Deferred tax assets 505 497 74 Total assets 23,993 42,891 6,391 LIABILITIES AND EQUITY Current liabilities: Short-term debt 948 1,437 215 Accounts payable 890 788 117 Amounts due to related parties 75 81 12 Salary and welfare payables 521 354 53 Deferred revenue 1,005 1,082 161 Operating lease liabilities, current - 2,819 420 Accrued expenses and other current liabilities 1,607 1,538 229 Dividends payable 658 - - Income tax payable 265 82 12 Total current liabilities 5,969 8,181 1,219 Long-term debt 8,812 8,583 1,279 Deferred rent 1,507 - - Operating lease liabilities, noncurrent - 18,175 2,708 Deferred revenue 458 450 67 Other long-term liabilities 453 474 71 Deferred tax liabilities 475 482 72 Total liabilities 17,674 36,345 5,416 Equity: Ordinary shares 0 0 0 Treasury shares (107 ) (107 ) (16 ) Additional paid-in capital 3,713 3,743 558 Retained earnings 2,610 2,716 405 Accumulated other comprehensive (loss) income (42 ) 51 7 Total Huazhu Group Limited shareholders' equity 6,174 6,403 954 Noncontrolling interest 145 143 21 Total equity 6,319 6,546 975 Total liabilities and equity 23,993 42,891 6,391

Huazhu Group Limited Unaudited Condensed Consolidated Statements of Comprehensive Income Quarter Ended March 31, 2018 December 31, 2018 March 31, 2019
RMB RMB RMB US$ (in millions, except share, per share and per ADS data) Revenues: Leased and owned hotels 1,576 1,942 1,706 254 Manachised and franchised hotels 509 703 663 99 Others 6 38 18 3 Net revenues 2,091 2,683 2,387 356 Operating costs and expenses: Hotel operating costs: Rents (564 ) (662 ) (651 ) (97 ) Utilities (126 ) (87 ) (129 ) (19 ) Personnel costs (376 ) (436 ) (446 ) (66 ) Depreciation and amortization (211 ) (223 ) (223 ) (33 ) Consumables, food and beverage (144 ) (179 ) (174 ) (26 ) Others (85 ) (150 ) (112 ) (16 ) Total hotel operating costs (1,506 ) (1,737 ) (1,735 ) (257 ) Other operating costs (3 ) (8 ) (7 ) (1 ) Selling and marketing expenses (66 ) (108 ) (77 ) (12 ) General and administrative expenses (159 ) (269 ) (206 ) (31 ) Pre-opening expenses (75 ) (54 ) (104 ) (16 ) Total operating costs and expenses (1,809 ) (2,176 ) (2,129 ) (317 ) Other operating income (expense), net 24 85 6 1 Income from operations 306 592 264 40 Interest income 34 32 33 5 Interest expense (51 ) (70 ) (77 ) (12 ) Other (expense) income, net (9 ) 1 65 10 Unrealized gains (losses) from fair value changes of equity securities (136 ) (756 ) (90 ) (13 ) Foreign exchange gain (loss) 30 (42 ) (32 ) (5 ) Income (Loss) before income taxes 174 (243 ) 163 25 Income tax expense (44 ) (106 ) (31 ) (5 ) Gain (Loss) from equity method investments (4 ) (64 ) (33 ) (5 ) Net income (loss) 126 (413 ) 99 15 Net (income) loss attributable to noncontrolling interest 3 (6 ) 7 1 Net income (loss) attributable to Huazhu Group Limited 129 (419 ) 106 16 Other comprehensive income Foreign currency translation adjustments, net of tax 125 20 93 14 Comprehensive income (loss) 251 (393 ) 192 29 Comprehensive (income) loss attributable to noncontrolling interest 3 (6 ) 7 1 Comprehensive income (loss) attributable to Huazhu Group Limited 254 (399 ) 199 30 Earnings (Losses) per share/ADS2: Basic 0.46 (1.48 ) 0.37 0.06 Diluted 0.44 (1.48 ) 0.36 0.05 Weighted average number of shares used in computation: Basic 280,700,780 282,500,261 283,251,520 283,251,520 Diluted 293,243,274 282,500,261 293,449,989 293,449,989

2 As of May 25, 2018, the company changed its ADS to its ordinary share ratio from one ADS representing four ordinary shares to one ADS representing one ordinary share. Therefore, the company recalculated earnings per ADS of the first quarter of 2018using the new ratio.

Huazhu Group Limited Unaudited Reconciliation of GAAP and Non-GAAP Results Quarter Ended March 31, 2019 GAAP
Result % of Net
Revenues Share-based
Compensation % of Net
Revenues Non-GAAP
Result % of Net
Revenues RMB RMB RMB (in millions) Hotel operating costs 1,735 72.7 % 8 0.3 % 1,727 72.4 % Other operating costs 7 0.3 % - 0.0 % 7 0.3 % Selling and marketing expenses 77 3.2 % 1 0.0 % 76 3.2 % General and administrative expenses 206 8.6 % 17 0.7 % 189 7.9 % Pre-opening expenses 104 4.4 % - 0.0 % 104 4.4 % Total operating costs and expenses 2,129 89.2 % 26 1.0 % 2,103 88.2 % Income from operations 264 11.1 % 26 1.0 % 290 12.1 % . Quarter Ended March 31, 2019 GAAP
Result % of Net
Revenues Share-based
Compensation % of Net
Revenues Non-GAAP
Result % of Net
Revenues US$ US$ US$ (in millions) Hotel operating costs 257 72.7 % 1 0.3 % 256 72.4 % Other operating costs 1 0.3 % - 0.0 % 1 0.3 % Selling and marketing expenses 12 3.2 % 0 0.0 % 12 3.2 % General and administrative expenses 31 8.6 % 3 0.7 % 28 7.9 % Pre-opening expenses 16 4.4 % - 0.0 % 16 4.4 % Total operating costs and expenses 317 89.2 % 4 1.0 % 313 88.2 % Income from operations 40 11.1 % 4 1.0 % 44 12.1 % Quarter Ended December 31, 2018 GAAP
Result % of Net
Revenues Share-based
Compensation % of Net
Revenues Non-GAAP
Result % of Net
Revenues RMB RMB RMB (in millions) Hotel operating costs 1,737 64.7 % 9 0.3 % 1,728 64.4 % Other operating costs 8 0.3 % - 0.0 % 8 0.3 % Selling and marketing expenses 108 4.0 % 1 0.0 % 107 4.0 % General and administrative expenses 269 10.0 % 17 0.7 % 252 9.3 % Pre-opening expenses 54 2.0 % - 0.0 % 54 2.0 % Total operating costs and expenses 2,176 81.0 % 27 1.0 % 2,149 80.0 % Income from operations 592 22.1 % 27 1.0 % 619 23.1 % Quarter Ended March 31, 2018 GAAP
Result % of Net
Revenues Share-based
Compensation % of Net
Revenues Non-GAAP
Result % of Net
Revenues RMB RMB RMB (in millions) Hotel operating costs 1,506 72.0 % 5 0.2 % 1,501 71.8 % Other operating costs 3 0.1 % - 0.0 % 3 0.1 % Selling and marketing expenses 66 3.1 % 1 0.1 % 65 3.0 % General and administrative expenses 159 7.6 % 11 0.5 % 148 7.1 % Pre-opening expenses 75 3.6 % - 0.0 % 75 3.6 % Total operating costs and expenses 1,809 86.4 % 17 0.8 % 1,792 85.6 % Income from operations 306 14.7 % 17 0.8 % 323 15.5 %

Huazhu Group Limited Unaudited Reconciliation of GAAP and Non-GAAP Results Quarter Ended March 31, 2018 December 31, 2018 March 31, 2019
RMB RMB RMB US$ (in millions, except share, per share and per ADS data) Net income (loss) attributable to Huazhu Group Limited (GAAP) 129 (419 ) 106 16 Share-based compensation expenses 17 27 26 4 Unrealized (gains) losses from fair value changes of equity securities 136 756 90 13 Adjusted net income attributable to Huazhu Group Limited (non-GAAP) 282 364 222 33 Adjusted earnings (losses) per share/ADS (non-GAAP) Basic 1.01 1.29 0.79 0.12 Diluted 0.96 1.23 0.76 0.11 Weighted average number of shares used in computation Basic 280,700,780 282,500,261 283,251,520 283,251,520 Diluted 293,243,274 303,161,652 293,449,989 293,449,989 Quarter Ended March 31, 2018 December 31, 2018 March 31, 2019
RMB RMB RMB US$ (in millions) Net income (loss) attributable to Huazhu Group Limited (GAAP) 129 (419 ) 106 16 Interest income (34 ) (32 ) (33 ) (5 ) Interest expense 51 70 77 12 Income tax expense 44 106 31 5 Depreciation and amortization 216 229 231 34 EBITDA (non-GAAP) 406 (46 ) 412 62 Share-based compensation 17 27 26 4 Unrealized (gains) losses from fair value changes of equity securities 136 756 90 13 Adjusted EBITDA (non-GAAP) 559 737 528 79

Huazhu Group Limited Operational Data As of March 31, December 31, March 31, 2018 2018 2019 Total hotels in operation: 3,817 4,230 4,396 Leased and owned hotels 673 699 698 Manachised hotels 2,943 3,309 3,470 Franchised hotels 201 222 228 Total hotel rooms in operation 384,959 422,747 439,614 Leased and owned hotels 85,508 86,787 87,766 Manachised hotels 280,133 314,932 330,568 Franchised hotels 19,318 21,028 21,280 Number of cities 382 403 404 For the quarter ended March 31, December 31, March 31, 2018 2018 2019 Average daily room rate (in RMB) Leased and owned hotels 243 275 258 Manachised hotels 194 216 210 Franchised hotels 228 248 237 Blended 207 230 221 Occupancy rate (as a percentage) Leased and owned hotels 85.6 % 86.7 % 83.6 % Manachised hotels 84.0 % 85.5 % 80.5 % Franchised hotels 69.8 % 74.5 % 68.6 % Blended 83.7 % 85.2 % 80.6 % RevPAR (in RMB) Leased and owned hotels 208 238 216 Manachised hotels 163 185 169 Franchised hotels 159 185 162 Blended 173 196 178 Same-hotel Operational Data: like-for-like performance for leased, manachised and franchised hotels opened for at least 18 months during the current quarter.
As of and for the quarter ended
March 31,
2018 2019 Total 3,189 3,189 Leased and owned hotels 608 608 Manachised and franchised hotels 2,581 2,581 Occupancy rate (as a percentage) 86.1 % 83.4 % Average daily room rate (in RMB) 205 211 RevPAR (in RMB) 176 176 Note: Excluding hotel rooms under renovations for product upgrades, the normalized same-hotel RevPAR growth would be flat (0).

Hotel breakdown by segment As of March 31, 2019
Number of hotels
in operation
Number of rooms
in operation Economy hotels 2,916 262,040 HanTing Hotel 2,303 221,825 Hi Inn 399 25,218 Elan Hotel 207 14,275 Orange Hotel 7 722 Midscale and upscale hotels 1,480 177,574 JI Hotel 611 79,024 Starway Hotel 230 20,189 Joya Hotel 6 1,250 Manxin Hotels & Resorts 28 2,199 HanTing Premium Hotel 91 8,410 Ibis Hotel 149 17,653 Ibis Styles Hotel 37 4,732 Mercure Hotel 45 9,356 Novotel Hotel 7 2,512 Grand Mercure 7 1,452 Orange Select 189 22,576 Crystal Orange 60 7,618 Blossom Hill 20 603 Total 4,396 439,614

Same-hotel operational data by segment Number of hotels
in operation Same-hotel
RevPAR Same-hotel
ADR Same-hotel
Occupancy As of For the quarter ended For the quarter ended For the quarter ended March 31, March 31, yoy
change March 31, yoy
change March 31, yoy
change
(p.p.) 2018 2019 2018 2019 2018 2019 2018 2019 Economy hotels 2,481 2,481 152 152 0.1 % 170 176 3.7 % 89.2 % 86.1 % (3.1 ) Leased hotels 439 439 161 167 4.0 % 181 191 5.4 % 88.8 % 87.7 % (1.1 ) Manachised and franchised hotels 2,042 2,042 149 148 -1.1 % 167 172 3.1 % 89.3 % 85.6 % (3.6 ) Midscale and upscale hotels 708 708 240 237 -1.1 % 306 310 1.3 % 78.4 % 76.5 % (1.9 ) Leased and owned hotels 169 169 295 287 -2.8 % 360 362 0.4 % 81.8 % 79.3 % (2.6 ) Manachised and franchised hotels 539 539 216 216 -0.1 % 281 286 2.0 % 76.9 % 75.3 % (1.6 ) Total 3,189 3,189 176 176 -0.4 % 205 211 2.9 % 86.1 % 83.4 % (2.8 )

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