China Lodging Group (HTHT.US) Investor Presentation November 2016

China Lodging Group (HTHT.US) Investor Presentation November 2016 Agenda Our Vision Who We Are Lodging Landscape in China Strategic Focus Appendi...
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China Lodging Group (HTHT.US) Investor Presentation November 2016

Agenda

Our Vision

Who We Are Lodging Landscape in China

Strategic Focus Appendix

1

Our Vision

We will build a world-class, great enterprise 成为世界级的伟大企业

Big

Good Quality

Profitable

Today 3,000 hotels

Today Value for money

Today

Goal

Goal

Goal

10,000 hotels

The most preferred choice for any budget

Recognized as hotel group with strong profit growth worldwide

Leading profitability in Chinese hotel industry

2

Who We Are: Leader in Chinese Hotel Market Founded in 2005

12 brands 3,198 hotels

322,785 rooms 365 cities

As of 9/30/2016

3

Visionary, Experienced Leadership Team •

Qi Ji Founder, Executive Chairman

Successful serial entrepreneur



Founder, Executive Chairman of China Lodging Group (“HTHT”)



Co-founder and former CEO of Home Inns (“HMIN”)



Co-founder, former CEO and President of Ctrip.com (“CTRP”)



M.S. and B.S. from Shanghai Jiao Tong University



Ownership: ~ 27% of outstanding shares



Joined the Company in 2007, served as President,CFO, CSO



Over 15 years of finance and consulting experience, serving as Thailand CFO for Eli Lilly before joining



M.B.A from Harvard Business School

Jenny Zhang CEO 4

China Lodging Remains a Leader in Terms of Room Growth Company

Room Growth in 2015

Shanghai Jin Jiang

213,020

China Lodging Group

68,888

Marriott International

44,565

Hilton Worldwide

38,715

IHG

34,073

AccorHotels

29,221

Wyndham Hotel Group

17,216

Starwood Hotels & Resorts

15,742

Choice Hotels

7,484

Best Western Hotels & Resorts

-9,933

Estimated Room Growth in 2016

53,500

*Note: Shanghai Jin Jiang acquired Louvre Hotel Group (+90K rooms) and Plateno Hotel Group (+210K rooms) in 2014 and 2015, respectively. Source: Hotels magazine, company reports. 5

Significant Growth Since IPO Growth in Total Revenues

Growth in Hotel Count 2,763 CAGR: 44%

639 2011

1,035

1

(in RMB millions)

CAGR: 27%

1,995

1,425 2,386

3,419

4,421 550

5,265 743

6,111 1,124

350

213

2012

2013

2014

2015

2,173

3,069

3,871

4,522

4,987

2011

2012

2013

2014

2015

Leased Hotels Manachised and franchised Hotels

Growth in Net Income

Growth in EBITDA (in RMB millions)

CAGR: 36% 842 377

2011

1,272

(in RMB millions)

CAGR: 40%

970

563 115 2012

2013

2014

2015

2011

437

280

307

2013

2014

175

2012

1. Total revenues include revenues from leased hotels and revenues from manachised/franchised hotels. CAGR for revenues from leased hotels=23%; CAGR for revenues from manachised/franchised hotels=52%

2015

6

Market Cap Increase Since IPO

4X 7

Agenda

Our Vision

Who We Are Lodging Landscape in China

Strategic Focus Appendix

8

Chinese Disposal Income Continues to GROW despite Slower GDP Growth GDP Growth

Disposable Income per capita (USD)

9.5%

CAGR: 11%

3,296

3,383

3,003 2,627

7.7%

7.7%

2,309

7.3% 6.9%

2011

2012

2013

Source: China National Bureau of Statistics

2014

2015

2011

2012

2013

2014

2015

9

HUGE Working Population in China

5.3 X 146

770.4 million

Source: China National Bureau of Statistics, Goldman Sachs Research

VS.

million

10

Growing spending on “Fun” by Urban Mass Population Annual Income per capita Movers & Shakers

1.4 Million

$500,000

Urban Middle

146 Million

$11,773

Urban Mass

236 Million

$5,858

% of Personal Spending on “Fun”

China

Expenditure on “Fun” things 9.2% Vs.

Rural Workers

387 Million

$2,000

U.S.

17.3%

“Fun” includes travelling, dining out, sports and gaming. Source: China National Bureau of Statistics, Goldman Sachs Research

11

Domestic Travel Market Remains ROBUST

Domestic Travel Expenditures Growth (2007-2015) (in RMB billions)

4,000 3,500 3,000

2,500 2,000 1,500 1,000 500

777

875

1,018

1,258

2007

2008

2009

2010

1,931

2,271

2,628

3,031

3,420

0

2011

2012

2013

2014

2015

Future growth drivers: •

Consumption upgrade



Increasing adoption of annual leave system: 90% 2019

2018

2017

2016 % of HanTing rooms under HanTing 2.0 model and above

21

1

Improved Blended RevPAR YOY Growth HanTing Brand Quarterly Blended RevPAR Year-over-Year Growth (Q1’15-Q3’16)

HanTing 2.0 Rooms as % of Total HanTing Hotel Room Inventories

0.4% -0.4%

30%

-0.4% 24%

-3.9% -4.3%

17%

18%

-6.7% -7.4%

Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 * Normalized for rooms under renovation and upgrade.

Dec'15

Mar'16

Jun'16

Sep'16

22

1

Blended RevPAR Growth Accelerated in Q3 Quarterly Blended RevPAR Year-over-Year Growth (Q1’14-Q3’16)

3.2% 1.1% 1.1% -1.0% -2.0%

-1.5%

-2.3% -3.3% -4.6% -5.3% -6.2%

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

Q2'15

Q3'15

Q4'15

Q1'16

Q2'16

Q3'16

23

1

Q3 RevPAR Increased 3.2% YOY Occupancy Decreased 0.3 point YOY

93%

89%

89% RevPAR Increased 3.2% YOY (RMB)

Q3'14

Q3'15

173

167

173

Q3'16

ADR Increased 3.6% YOY (RMB)

187

188

194

Q3'14

Q3'15

Q3'16

Weight of hotel rooms in 1st- and 2nd-tier cities

Q3'14

Q3'15

Q3'16

Q3’14

Q3’15

Q3’16

77.2%

76.6%

76.6%

Weight of hotel rooms in midscale and upscale segment Q3’14

Q3’15

Q3’16

8.8%

13.6%

17.4%

24

1

Q3 Same-hotel RevPAR Growth Turned Positive with Both Increases in ADR and Occupancy Same-hotel RevPAR Growth For hotels in operation for at least 18 months

All hotels

12% 11%*12%* 7%

11% 7% 7%

4%

3% 1% -4% 2009

10%

6% 8% 3% 4% 5%* 5% -1% 3%* 2%* -2%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2010

Non-Shanghai hotels

7%

5% 2% 1% 0%

-0.3% -3% -1.2% -3% -3%-5% -4%

-1%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2011

2012

0.5%

1% 1% 0% 0%

Q1 Q2 Q3 Q4

Q1 Q2 Q3 Q4

Q1 Q2 Q3

2014

2015

2016

2013

Same-hotel Occupancy Change

Same-hotel ADR Growth

(2011, outside of Shanghai 7% 5% 3% 3% 3%3%

3% 3% 3% 3% 3% 2% 0% 0%0% 1%

1%

0% 0% 0.8% 0.4% -0.7%

-1%

3%

4% 5% 4% 2%

-0.4% -1% -2% -0.9% -2% -2%-2% -3% -3%-3% -3% -4% -5%

-2% -7%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2011

2012

2013

2014

2015

2016

0.2%

0%

1%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2011

2012

2013

2014

2015

2016

* Normalized for Shanghai Expo

25

Continue Fast Expansion with Increasing 2 Focus on Quality Number of Hotels in Operation

Hotel Opening/Closures in 2016

3,198 174

Leased and owned Hotels Manachised Hotels Franchised Hotels

Gross openings Closures

2,763 80

1,995 8 2,399 1,425 25 1,035 54 639

2,067

(75%)

244 174

(18)

(49)

516

295 344

465

2011

2012

611

616

625 (20%)

2013

183

1,376

835

565

171

2014

2015

Q3'16

(87)

(51)

Net openings 226

125

84

132

Q1

Q2

Q3

Q4E

87 hotel closures in Q3’16, mainly due to • Incompliances with the brand and operating standards • Removal of ibis and ibis Styles hotels that have not been incorporated into Huazhu operating platform for fee purpose

26

58% of Our Newly Opened Hotels are CONVERTED from Other Hotels

2

For 9M’16

28% From new building

58% 14%

• Taking shares from others rather than adding new capacity

From old hotel

From non hotel, old building

27

Centralized and Innovative Operating Platform to support GROWTH Proprietary Cloud-based HPMS

Customer Mobile Apps

• • • •

Booking; Room selection Self-check in Mobile payment

• • •

Real time room inventory Real-time room status Real-time Yield management

Mobile E-Room Service Apps

• • •

Installed on every hotel • staffs mobile Real time room status • reporting Hotel staffs resource • management

3

Centralized Operating Support

Online procurement market place Hotel opening management system Centralized sharedservices 28

Best Price Guarantee for Members through Online Booking in Direct Channels

3

Launched since November 11, 2016 (“Singles Day”) • Guaranteed best price through mobile app or wechat booking; • Commit to refund 2X on the price difference 29

BETTER Operator’s Economics

69 88% 79%

million members

For Q3 2016

direct booking

room nights contributed by members 30

REDUCED Staff-to-Room Ratio

0.25 0.18

In 2010

Now

31

INCREASING Operating Cash Flow Generation to Finance Our Expansion

(in RMB millions)

CAGR: 32%

1,750 1,454

1,070 716 459

2011

2012

2013

2014

2015

32

Agenda

Our Vision

Who We Are Lodging Landscape in China

Strategic Focus Appendix

33

Same-Hotel Operational Data by Segment

Economy hotels Leased hotels Manachised and franchised hotels Midscale and upscale hotels Leased hotels Manachised and franchised hotels Total

Number of hotels in operation Same-hotel RevPAR As of For the quarter ended December 31, December 31, 2014 2015 2014 2015 1,491 1,491 152 145 510 510 156 147 981 981 149 143 121 121 224 241 58 58 245 276 63 63 195 196 1,612 1,612 158 154

Economy hotels Leased hotels Manachised and franchised hotels Midscale and upscale hotels Leased hotels Manachised and franchised hotels Total

Number of hotels in operation Same-hotel RevPAR As of For the quarter ended March 31, March 31, 2015 2016 2015 2016 1,637 1,637 136 133 518 518 138 135 1,119 1,119 134 132 146 146 203 221 66 66 225 252 80 80 178 184 1,783 1,783 142 142

Economy hotels Leased hotels Manachised and franchised hotels Midscale and upscale hotels Leased hotels Manachised and franchised hotels Total

Number of hotels in operation Same-hotel RevPAR As of For the quarter ended June 30, June 30, 2015 2016 2015 2016 1,739 1,739 152 148 522 522 159 152 1,217 1,217 149 146 160 160 230 250 68 68 263 292 92 92 195 204 1,899 1,899 161 159

Economy hotels Leased hotels Manachised and franchised hotels Midscale and upscale hotels Leased hotels Manachised and franchised hotels Total

Number of hotels in operation Same-hotel RevPAR As of For the quarter ended September 30, September 30, 2015 2016 2015 2016 1,868 1,868 161 160 518 518 167 165 1,350 1,350 159 157 182 182 245 263 70 70 285 311 112 112 207 218 2,050 2,050 171 172

yoy change -4.6% -5.3% -4.2% 7.8% 12.5% 0.4% -2.9%

Same-hotel ADR For the quarter ended December 31, 2014 2015 169 167 175 173 166 163 270 282 291 308 240 245 178 178

yoy change -1.9% -2.1% -1.8% 8.8% 12.1% 3.4% -0.3%

Same-hotel ADR For the quarter ended March 31, 2015 2016 160 160 165 165 158 157 256 269 276 293 232 237 169 171

yoy change -3.0% -4.1% -2.4% 8.6% 11.2% 4.6% -1.2%

Same-hotel ADR For the quarter ended June 30, 2015 2016 172 168 179 177 168 164 281 290 310 322 248 251 183 181

yoy change -0.8% -0.9% -0.8% 7.5% 8.9% 5.7% 0.5%

Same-hotel ADR For the quarter ended September 30, 2015 2016 177 175 184 183 173 171 284 299 317 339 250 259 188 189

yoy change -1.2% -0.9% -1.5% 4.7% 5.8% 2.4% 0.0%

Same-hotel Occupancy For the quarter ended December 31, 2014 2015 90% 87% 89% 85% 90% 87% 83% 85% 84% 90% 81% 80% 89% 86%

yoy change -3.1% -4.0% -2.5% 2.4% 5.3% -1.6% -2.6%

yoy change -0.4% 0.0% -0.5% 5.0% 6.3% 2.2% 0.8%

Same-hotel Occupancy For the quarter ended March 31, 2015 2016 85% 83% 84% 82% 85% 84% 79% 82% 82% 86% 77% 78% 84% 83%

yoy change -1.3% -1.8% -1.1% 2.8% 4.4% 0.9% -0.9%

yoy change -1.9% -1.6% -2.0% 2.9% 3.8% 0.9% -0.7%

Same-hotel Occupancy For the quarter ended June 30, 2015 2016 89% 88% 88% 86% 89% 89% 82% 86% 85% 91% 79% 81% 88% 88%

yoy change -1.0% -2.3% -0.3% 4.5% 6.1% 2.8% -0.4%

yoy change -0.8% -0.5% -0.9% 5.5% 6.9% 3.7% 0.4%

Same-hotel Occupancy For the quarter ended September 30, 2015 2016 91% 91% 91% 90% 92% 92% 86% 88% 90% 92% 83% 84% 91% 91%

yoy change 0.0% -0.3% 0.1% 1.6% 1.6% 1.6% 0.2%

34

Hotel Breakdown by Brands Economy hotels HanTing Hotel Leased hotels Manachised hotels Franchised hotels Hi Inn Leased hotels Manachised hotels Franchised hotels Elan Hotel Manachised hotels Franchised hotels ibis Hotel Leased and owned hotels Manachised hotels Franchised hotels Midscale hotels and upscale hotels JI Hotel Leased hotels Manachised hotels Franchised hotels Starway Hotel Leased hotels Manachised hotels Franchised hotels Joya Hotel Leased hotels Manachised hotels Manxin Hotels & Resorts Leased hotels Manachised hotels ibis Styles Hotel Manachised hotels Franchised hotels Mercure Hotel Leased hotels Manachised hotels Franchised hotels Novotel Hotel Manachised hotels Franchised hotels Grand Mercure Hotel Franchised hotels Total

Number of Hotels in Operation As of As of As of As of 12/31/2013 12/31/2014 12/31/2015 3/31/2016 1,309 1,819 2,453 2,642 1,226 1,648 2,003 2,059 473 502 495 493 753 1,146 1,508 1,566 83 41 42

158 41 117 13 13

116 68 48 20 46 1 20 25 1 1 1 1

302 38 251 13 148 128 20

176 117 62 55

310 186 75 111

55 3 44 8 3 2 1 1 1

118 4 67 47 3 2 1 2 1 1

1 1

1,425

1,995

2,763

332 38 264 30 169 142 27 82 12 9 61 347 202 77 125

As of 6/30/2016 2,726 2,105 492 1,613

123 3 71 49 4 2 2 2 1 1 6 2 4 8 1 6 1 1 1

358 37 285 36 180 149 31 83 13 13 57 388 229 78 149 2 136 3 84 49 5 2 3 2 1 1 6 2 4 8 1 6 1 1 1

1 1 2,989

1 1 3,114

As of 9/30/2016 2,771 2,149 492 1,656 1 373 36 293 44 179 146 33 70 13 14 43 427 256 78 176 2 141 2 94 45 5 2 3 3 3 8 5 3 11 2 8 1 2 1 1 1 1 3,198

35

Room Breakdown by Brands Economy hotels HanTing Hotel Leased hotels Manachised hotels Franchised hotels Hi Inn Leased hotels Manachised hotels Franchised hotels Elan Hotel Manachised hotels Franchised hotels ibis Hotel Leased and owned hotels Manachised hotels Franchised hotels Midscale hotels and upscale hotels JI Hotel Leased hotels Manachised hotels Franchised hotels Starway Hotel Leased hotels Manachised hotels Franchised hotels Joya Hotel Leased hotels Manachised hotels Manxin Hotels & Resorts Leased hotels Manachised hotels ibis Styles Hotel Manachised hotels Franchised hotels Mercure Hotel Leased hotels Manachised hotels Franchised hotels Novotel Hotel Manachised hotels Franchised hotels Grand Mercure Hotel Franchised hotels Total

Number of rooms in operation As of As of As of As of 12/31/2013 12/31/2014 12/31/2015 3/31/2016 138,576 185,959 238,156 257,171 130,747 172,341 205,577 209,319 54,154 57,306 57,277 56,681 76,593 115,035 148,300 152,638 7,829 4,422 3,407

12,551 3,895 8,656 1,067 1,067

21,340 3,698 16,725 917 11,239 9,837 1,402

14,303 9,106 6,891 2,215

23,996 17,052 10,260 6,792

40,687 27,559 13,195 14,364

4,959 131 2,222 2,606 141 141

6,321 451 4,939 931 515 315 200 108 108

12,138 604 7,183 4,351 515 315 200 236 108 128

97 97

239 239

152,879

209,955

278,843

22,934 3,575 17,482 1,877 12,843 11,009 1,834 12,075 2,330 1,824 7,921 47,257 29,751 13,498 16,253

As of 6/30/2016 263,207 213,481 56,461 157,020

12,852 517 7,743 4,592 671 315 356 236 108 128 1,257 729 528 1,993 239 1,476 278 306 306

24,144 3,429 18,552 2,163 13,338 11,216 2,122 12,244 2,562 2,339 7,343 51,604 32,934 13,488 19,297 149 13,760 517 8,785 4,458 934 326 608 229 101 128 1,257 729 528 1,993 239 1,476 278 306 306

191 191 304,428

191 191 314,811

As of 9/30/2016 266,554 217,825 56,494 161,267 64 25,194 3,412 19,011 2,771 13,261 10,935 2,326 10,274 2,562 2,198 5,514 56,231 36,062 13,504 22,409 149 13,463 386 9,101 3,976 945 337 608 203 203 1,392 973 419 3,295 463 2,554 278 680 306 374 191 191 322,785

36

Revenue Growth in Line with Expectation Revenue from Midscale and Upscale Hotels as % of Net Revenues

Net Revenues (in RMB millions)

+10.9%

+4pts 1,774

28%

1,600 24%

Q3'15

Q3'16

Q3'15

Q3'16

37

Increasing Proportion of Midscale and Upscale Hotels Number of Midscale and Upscale Hotels as % of VS.

In pipeline

Net new openings

50%

(midscale)

(economy)

45%

39% 40%

27%

17%

Per hotel

35%

# of Rooms

1.4x

30%

RevPAR

1.4x

25%

Revenue

2.0x

EBIT

2.7x

20% 15%

11%

10% 5% 0%

2014

2015

9M'16

Pipeline (Sep'16)

38

Net Revenues Increased 10.9% In Line with Guidance of 10%-12.5% Net Revenues from Leased and Owned Hotels

Net Revenues (in RMB millions)

(in RMB millions)

1,390

1,774 1,299

1,600 Q3'15

Q3'16

Net Revenues from Manachised and Franchised Hotels (in RMB millions)

373 Q3'15

Q3'16

301

Manachised and Franchised Hotels Revenue as % of Net Revenues Q3’15

Q3’16

18.8%

21.0%

Q3'15

Q3'16

39

Adjusted Operating Margin Increased by 2.0 Pts Adjusted Income from Operations (1) as % of Net Revenues  2.0% 20.4%

18.4%

Q3'15

Adj. hotel operating costs (1) and other operating costs as % of net revenues

Q3'16

Pre-opening expenses as % of net revenues

Adj. SG&A Expenses (1) and other operating income as % of net revenues

 0.8%

 2.3%

 1.1%

72.7% 70.4%

7.2% 1.7%

Q3'15

(1)

Q3'16

Q3'15

8.3%

0.9% Q3'16

Q3'15

Q3'16

Excluding share-based compensation expenses.

40

Capital Allocation Supported by Continuing Strong Cash Flow Generation Abundant Funding Resource for Expansion (in RMB millions)

(114)

30

620

2,466

Cash and cash equivalents at 6/30/16

3,002

Free cash flow = RMB506 m

Net Cash from Operations

Capex for maintainance and new developments

Others

Cash and cash equivalents at 9/30/16

41

Guidance

• Expect Q4’16 net revenues to grow

9% to 11% year-over-year • Project 2016 full year net revenues to grow

12.7%-13.3%

42