Document and Entity Information
Document and Entity Information | 12 Months Ended |
Dec. 31, 2018shares | |
Document and Entity Information | |
Entity Registrant Name | Huazhu Group Ltd |
Entity Central Index Key | 0001483994 |
Document Type | 20-F |
Document Period End Date | Dec. 31, 2018 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Entity Well-known Seasoned Issuer | Yes |
Entity Voluntary Filers | No |
Entity Current Reporting Status | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 293,501,124 |
Document Fiscal Year Focus | 2018 |
Document Fiscal Period Focus | FY |
Trading Symbol | htht |
Entity Shell Company | false |
Entity Emerging Growth Company | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS ¥ in Millions, $ in Millions | Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) |
Current assets: | |||
Cash and cash equivalents | $ 620 | ¥ 4,262 | ¥ 3,475 |
Restricted cash | 91 | 622 | 481 |
Equity securities with readily determinable fair value | 13 | 89 | 130 |
Accounts receivable, net of allowance of RMB10 and RMB17 as of December 31, 2017 and 2018, respectively | 28 | 195 | 163 |
Loan receivables | 14 | 94 | 381 |
Amounts due from related parties | 25 | 176 | 118 |
Prepaid rent | 139 | 955 | 660 |
Inventories | 6 | 41 | 24 |
Other current assets | 78 | 540 | 329 |
Total current assets | 1,014 | 6,974 | 5,761 |
Property and equipment, net | 730 | 5,018 | 4,523 |
Intangible assets, net | 267 | 1,834 | 1,644 |
Land use rights, net | 32 | 220 | 140 |
Long-term investments, including marketable securities measured at fair value of RMB907 and RMB4,022 as of December 31, 2017 and 2018, respectively | 895 | 6,152 | 2,362 |
Goodwill | 383 | 2,630 | 2,265 |
Loan receivables | 27 | 189 | 42 |
Other assets | 69 | 471 | 365 |
Deferred tax assets | 73 | 505 | 406 |
Total assets | 3,490 | 23,993 | 17,508 |
Current liabilities: | |||
Short-term debt | 138 | 948 | 131 |
Accounts payable | 129 | 890 | 766 |
Amounts due to related parties | 11 | 75 | 37 |
Salary and welfare payables | 76 | 521 | 427 |
Deferred revenue | 146 | 1,005 | 943 |
Accrued expenses and other current liabilities | 233 | 1,607 | 1,249 |
Dividends payable | 96 | 658 | |
Income tax payable | 39 | 265 | 218 |
Total current liabilities | 868 | 5,969 | 3,771 |
Long-term debt | 1,282 | 8,812 | 4,922 |
Deferred rent | 219 | 1,507 | 1,380 |
Deferred revenue | 67 | 458 | 398 |
Other long-term liabilities | 66 | 453 | 381 |
Deferred tax liabilities | 69 | 475 | 422 |
Total liabilities | 2,571 | 17,674 | 11,274 |
Commitments and contingencies (Note 20) | |||
Equity: | |||
Ordinary shares (US$0.0001 par value per share; 8,000,000,000 shares authorized; 294,040,234 and 296,597,888 shares issued as of December 31, 2017 and 2018, and 280,518,358 and 283,076,012 shares outstanding as of December 31, 2017 and 2018, respectively) | 0 | 0 | 0 |
Treasury shares (3,096,764 and 3,096,764 shares as of December 31 2017 and 2018, respectively) | (16) | (107) | (107) |
Additional paid-in capital | 540 | 3,713 | 3,624 |
Retained earnings | 380 | 2,610 | 2,513 |
Accumulated other comprehensive income (loss) | (6) | (42) | 168 |
Total Huazhu Group Limited shareholders' equity | 898 | 6,174 | 6,198 |
Noncontrolling interest | 21 | 145 | 36 |
Total equity | 919 | 6,319 | 6,234 |
Total liabilities and equity | $ 3,490 | ¥ 23,993 | ¥ 17,508 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) ¥ in Millions | Dec. 31, 2018CNY (¥)shares | Dec. 31, 2017CNY (¥)shares |
CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, allowance | ¥ | ¥ 17 | ¥ 10 |
Long-term investments, marketable securities measured at fair value | ¥ | ¥ 4,022 | ¥ 907 |
Ordinary shares, shares authorized | 8,000,000,000 | 8,000,000,000 |
Ordinary shares, shares issued | 296,597,888 | 294,040,234 |
Ordinary shares, shares outstanding | 283,076,012 | 280,518,358 |
Treasury stock, shares | 3,096,764 | 3,096,764 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ¥ in Millions, $ in Millions | 12 Months Ended | |||
Dec. 31, 2018USD ($)$ / sharesshares | Dec. 31, 2018CNY (¥)¥ / sharesshares | Dec. 31, 2017CNY (¥)¥ / sharesshares | Dec. 31, 2016CNY (¥)¥ / sharesshares | |
Revenues: | ||||
Total revenues | $ 1,464 | ¥ 10,063 | ¥ 8,229 | ¥ 6,689 |
Less: Business tax and related taxes | 116 | |||
Net revenues | 1,464 | 10,063 | 8,229 | 6,573 |
Operating costs and expenses: | ||||
Hotel operating costs | 942 | 6,476 | 5,675 | 4,934 |
Other operating costs | 2 | 15 | 17 | 8 |
Selling and marketing expenses | 50 | 348 | 285 | 209 |
General and administrative expenses | 124 | 851 | 691 | 492 |
Pre-opening expenses | 37 | 255 | 206 | 72 |
Total operating costs and expenses | 1,155 | 7,945 | 6,874 | 5,715 |
Other operating income (expenses), net | 32 | 226 | 71 | (17) |
Income from operations | 341 | 2,344 | 1,426 | 841 |
Interest income | 21 | 148 | 113 | 67 |
Interest expense | 35 | 244 | 87 | 11 |
Other income, net | 30 | 203 | 128 | 134 |
Unrealized gains (losses) from fair value changes of equity securities | (133) | (914) | 35 | |
Foreign exchange gain (loss) | (21) | (144) | (18) | 16 |
Income before income taxes | 203 | 1,393 | 1,597 | 1,047 |
Income tax expense | (83) | (569) | (357) | (279) |
Income (loss) from equity method investments | (14) | (97) | (12) | 6 |
Net income | 106 | 727 | 1,228 | 774 |
Less: net (loss) income attributable to noncontrolling interest | 2 | 11 | 0 | (8) |
Net income attributable to Huazhu Group Limited | 104 | 716 | 1,228 | 782 |
Other comprehensive income | ||||
Unrealized securities holding gains, net of tax of (2), (8) and nil for 2016, 2017 and 2018, respectively | 1 | 16 | ||
Reclassification of realized gains to net income, net of tax | (5) | (68) | ||
Foreign currency translation adjustments, net of tax of nil for 2016, 2017 and 2018, respectively | (25) | (169) | 177 | (13) |
Comprehensive income | 81 | 558 | 1,401 | 709 |
Less: comprehensive (loss) income attributable to the noncontrolling interest | 2 | 11 | 0 | (8) |
Comprehensive income attributable to Huazhu Group Limited | $ 79 | ¥ 547 | ¥ 1,401 | ¥ 717 |
Earnings per share: | ||||
Basic (in RMB and dollars per share) | (per share) | $ 0.37 | ¥ 2.54 | ¥ 4.40 | ¥ 2.84 |
Diluted (in RMB and dollars per share) | (per share) | $ 0.36 | ¥ 2.49 | ¥ 4.21 | ¥ 2.76 |
Weighted average number of shares used in computation: | ||||
Basic (in shares) | shares | 281,717,485 | 281,717,485 | 279,272,140 | 275,139,070 |
Diluted (in shares) | shares | 303,605,809 | 303,605,809 | 293,073,978 | 282,889,494 |
Leased and owned hotels | ||||
Revenues: | ||||
Total revenues | $ 1,087 | ¥ 7,470 | ¥ 6,338 | ¥ 5,239 |
Manachised and franchised hotels | ||||
Revenues: | ||||
Total revenues | 368 | 2,527 | 1,851 | 1,419 |
Other revenues | ||||
Revenues: | ||||
Total revenues | $ 9 | ¥ 66 | ¥ 40 | ¥ 31 |
CONSOLIDATED STATEMENTS OF CO_2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - CNY (¥) ¥ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||
Unrealized securities holding gains (losses), tax | ¥ 0 | ¥ (8) | ¥ (2) |
Foreign currency translation adjustments, tax | ¥ 0 | ¥ 0 | ¥ 0 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY ¥ in Millions, $ in Millions | Ordinary SharesCNY (¥)shares | Treasury SharesCNY (¥)shares | Additional Paid-in CapitalCNY (¥) | Retained EarningsCNY (¥) | Accumulated Other Comprehensive (Loss) IncomeCNY (¥) | Noncontrolling InterestCNY (¥) | USD ($)shares | CNY (¥)shares |
Increase (Decrease) in Stockholders' Equity | ||||||||
Cumulative effect of the adoption of ASU | ASU 2014-09 | ¥ (209) | ¥ (209) | ||||||
Balance at Dec. 31, 2015 | ¥ 0 | ¥ (107) | ¥ 2,470 | 1,007 | ¥ 60 | ¥ 11 | ¥ 3,441 | |
Balance issued (in shares) at Dec. 31, 2015 | shares | 253,978,323 | |||||||
Balance outstanding (in shares) at Dec. 31, 2015 | shares | 250,881,559 | 250,881,559 | ||||||
Treasury shares, balance (in shares) at Dec. 31, 2015 | shares | 3,096,764 | |||||||
Increase (Decrease) in Stockholders' Equity | ||||||||
Issuance of ordinary shares upon exercise of options and vesting of restricted stocks | ¥ 0 | 11 | ¥ 11 | |||||
Issuance of ordinary shares upon exercise of options and vesting of restricted stocks (in shares) | shares | 2,505,264 | 2,505,264 | 2,505,264 | |||||
Issuance of ordinary shares for acquisition | ¥ 0 | 1,143 | ¥ 1,143 | |||||
Issuance of ordinary shares for acquisition (in shares) | shares | 24,895,543 | 24,895,543 | 24,895,543 | |||||
Share-based compensation | 55 | ¥ 55 | ||||||
Excess tax benefit from share-based compensation | 19 | 19 | ||||||
Net income | 782 | (8) | 774 | |||||
Unrealized securities holding gains, net of tax | 16 | 16 | ||||||
Reclassification of realized gains to net income, net of tax | (68) | (68) | ||||||
Dividends paid to noncontrolling interest holders | (4) | (4) | ||||||
Capital contribution from noncontrolling interest holders | 1 | 45 | 46 | |||||
Disposal of noncontrolling interest for deconsolidation | (27) | (27) | ||||||
Foreign currency translation adjustments | (13) | (13) | ||||||
Balance at Dec. 31, 2016 | ¥ 0 | ¥ (107) | 3,699 | 1,580 | (5) | 17 | ¥ 5,184 | |
Balance issued (in shares) at Dec. 31, 2016 | shares | 281,379,130 | |||||||
Balance outstanding (in shares) at Dec. 31, 2016 | shares | 278,282,366 | 278,282,366 | ||||||
Treasury shares, balance (in shares) at Dec. 31, 2016 | shares | 3,096,764 | |||||||
Increase (Decrease) in Stockholders' Equity | ||||||||
Issuance of ordinary shares upon exercise of options and vesting of restricted stocks | ¥ 0 | 9 | ¥ 9 | |||||
Issuance of ordinary shares upon exercise of options and vesting of restricted stocks (in shares) | shares | 2,235,992 | 2,235,992 | 2,235,992 | |||||
Share-based compensation | 66 | ¥ 66 | ||||||
Issuance of ordinary shares under ADS lending arrangement | ¥ 0 | 0 | ||||||
Issuance of ordinary shares under ADS lending arrangement (in shares) | shares | 10,425,112 | |||||||
Capped Call options in connection with issuance of convertible senior notes | (177) | (177) | ||||||
ADS lending arrangement in connection with issuance of convertible senior notes | 27 | 27 | ||||||
Noncontrolling interest recognized in connection with acquisitions | 4 | 4 | ||||||
Net income | 1,228 | 0 | 1,228 | |||||
Cash dividends declared/paid | (295) | (295) | ||||||
Unrealized securities holding gains, net of tax | 1 | 1 | ||||||
Reclassification of realized gains to net income, net of tax | (5) | (5) | ||||||
Dividends paid to noncontrolling interest holders | (3) | (3) | ||||||
Capital contribution from noncontrolling interest holders | 26 | 26 | ||||||
Disposal of noncontrolling interest for deconsolidation | (4) | (4) | ||||||
Noncontrolling interest recognized from partial disposal | 0 | 0 | ||||||
Acquisition of noncontrolling interest | 0 | (4) | (4) | |||||
Foreign currency translation adjustments | 177 | 177 | ||||||
Balance at Dec. 31, 2017 | ¥ 0 | ¥ (107) | 3,624 | 2,513 | 168 | 36 | ¥ 6,234 | |
Balance issued (in shares) at Dec. 31, 2017 | shares | 294,040,234 | 294,040,234 | 294,040,234 | |||||
Balance outstanding (in shares) at Dec. 31, 2017 | shares | 280,518,358 | 280,518,358 | ||||||
Treasury shares, balance (in shares) at Dec. 31, 2017 | shares | 3,096,764 | 3,096,764 | 3,096,764 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||||
Cumulative effect of the adoption of ASU | ASU 2016-01 | 41 | (41) | ||||||
Issuance of ordinary shares upon exercise of options and vesting of restricted stocks | ¥ 0 | 14 | ¥ 14 | |||||
Issuance of ordinary shares upon exercise of options and vesting of restricted stocks (in shares) | shares | 2,557,654 | 2,557,654 | 2,557,654 | |||||
Share-based compensation | 83 | ¥ 83 | ||||||
Noncontrolling interest recognized in connection with acquisitions | 150 | 150 | ||||||
Net income | 716 | 11 | $ 106 | 727 | ||||
Cash dividends declared/paid | (660) | (660) | ||||||
Dividends paid to noncontrolling interest holders | (5) | (5) | ||||||
Capital contribution from noncontrolling interest holders | 29 | 29 | ||||||
Acquisition of noncontrolling interest | (8) | (76) | (84) | |||||
Foreign currency translation adjustments | (169) | (25) | (169) | |||||
Balance at Dec. 31, 2018 | ¥ 0 | ¥ (107) | ¥ 3,713 | ¥ 2,610 | ¥ (42) | ¥ 145 | $ 919 | ¥ 6,319 |
Balance issued (in shares) at Dec. 31, 2018 | shares | 296,597,888 | 296,597,888 | 296,597,888 | |||||
Balance outstanding (in shares) at Dec. 31, 2018 | shares | 283,076,012 | 283,076,012 | ||||||
Treasury shares, balance (in shares) at Dec. 31, 2018 | shares | 3,096,764 | 3,096,764 | 3,096,764 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS ¥ in Millions, $ in Millions | 12 Months Ended | |||
Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | |
Operating activities: | ||||
Net income | $ 106 | ¥ 727 | ¥ 1,228 | ¥ 774 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Share-based compensation | 12 | 83 | 66 | 55 |
Depreciation and amortization | 130 | 891 | 789 | 695 |
Amortization of issuance cost of convertible senior notes | 4 | 28 | 3 | |
Deferred taxes | (13) | (91) | (79) | 26 |
Bad debt expenses | 1 | 10 | 2 | 1 |
Deferred rent | 20 | 140 | 209 | 103 |
Loss from disposal of property and equipment | 0 | 0 | 13 | 9 |
Impairment loss | 5 | 35 | 169 | 154 |
Loss (Income) from equity method investments, net of dividends | 23 | 157 | 12 | (6) |
Investment (income) loss | 147 | 1,009 | (160) | (117) |
Changes in operating assets and liabilities, net of effect of acquisitions: | ||||
Accounts receivable | (5) | (36) | 4 | (46) |
Prepaid rent | (41) | (283) | (189) | (25) |
Inventories | (2) | (14) | 3 | 4 |
Amounts due from related parties | (5) | (32) | (31) | (9) |
Other current assets | (8) | (56) | (76) | (41) |
Other assets | (5) | (32) | (54) | (5) |
Accounts payable | 2 | 11 | 8 | 59 |
Amounts due to related parties | 6 | 38 | 3 | 7 |
Salary and welfare payables | 13 | 91 | 133 | 61 |
Deferred revenue | 17 | 114 | 26 | 27 |
Accrued expenses and other current liabilities | 20 | 140 | 278 | 225 |
Income tax payable | 7 | 48 | 45 | 64 |
Other long-term liabilities | 10 | 71 | 51 | 51 |
Net cash provided by operating activities | 444 | 3,049 | 2,453 | 2,066 |
Investing activities: | ||||
Purchases of property and equipment for hotels in operation and headquarters | (82) | (568) | (405) | (296) |
Purchases of property and equipment for hotels under development | (80) | (547) | (414) | (207) |
Purchases of intangibles | (1) | (4) | (8) | (14) |
Purchases of land use rights | (11) | (76) | ||
Amount received as a result of government zoning | 1 | 7 | 3 | 2 |
Acquisitions, net of cash received | (72) | (496) | (3,746) | 132 |
Proceeds from disposal of subsidiary and branch, net of cash disposed | 1 | 8 | 14 | (21) |
Purchases of long-term investments | (721) | (4,959) | (1,328) | (293) |
Proceeds from maturity/sale and return of long-term investments | 26 | 177 | 128 | 15 |
Payment for shareholder loan to equity investees | (1) | (7) | (113) | (39) |
Collection of shareholder loan from equity investees | 120 | 9 | ||
Purchases of short-term investments | (96) | |||
Proceeds from maturity/sale of short-term investments | 526 | |||
Payment for the origination of loan receivables | (46) | (313) | (446) | (36) |
Proceeds from collection of loan receivables | 63 | 433 | 56 | 46 |
Net cash provided by (used in) investing activities | (923) | (6,345) | (6,235) | (176) |
Financing activities: | ||||
Net proceeds from issuance of ordinary shares upon exercise of options | 2 | 14 | 9 | 12 |
Proceeds from short-term bank borrowings | 135 | 928 | 137 | 282 |
Repayment of short-term bank borrowings | (19) | (128) | (295) | (333) |
Proceeds from long-term bank borrowings | 622 | 4,275 | 3,633 | |
Repayment of long-term bank borrowings | (116) | (799) | (1,651) | |
Funds advanced from noncontrolling interest holders | 5 | 36 | 84 | 12 |
Repayment of funds advanced from noncontrolling interest holders | (1) | (8) | (9) | (1) |
Acquisitions of noncontrolling interest | (12) | (84) | (4) | (4) |
Proceeds from amounts due to related parties | 15 | 103 | ||
Repayment of amounts due to related parties | (16) | (113) | ||
Contribution from noncontrolling interest holders | 4 | 29 | 26 | 46 |
Dividends paid to noncontrolling interest holders | (1) | (5) | (3) | (4) |
Dividends paid | (306) | (276) | ||
Proceeds from issuance of convertible senior notes, net of issuance cost and capped call option | 2,925 | |||
Debt financing costs paid | (10) | |||
Proceeds from ADS lending | 0 | |||
Net cash (used in) provided by financing activities | 618 | 4,248 | 4,536 | (266) |
Effect of exchange rate changes on cash and cash equivalents, and restricted cash | (3) | (24) | (34) | 14 |
Net increase in cash and cash equivalents, and restricted cash | 136 | 928 | 720 | 1,638 |
Cash, cash equivalents and restricted cash at the beginning of the year | 575 | 3,956 | 3,236 | 1,598 |
Cash, cash equivalents and restricted cash at the end of the year | 711 | 4,884 | 3,956 | 3,236 |
Supplemental disclosure of cash flow information: | ||||
Interest paid, net of amounts capitalized | 35 | 239 | 187 | 9 |
Income taxes paid | 89 | 613 | 380 | 184 |
Supplemental schedule of non-cash investing and financing activities: | ||||
Purchases of property and equipment included in payables | 100 | 688 | 613 | 453 |
Consideration payable for business acquisition | 6 | 40 | 118 | 173 |
Purchase of intangible assets included in payables | 1 | 5 | 6 | 7 |
Reimbursement of government zoning included in receivables | ¥ 2 | 3 | ||
Issuance of ordinary shares for acquisition of AccorHotels (Note 3) | ¥ 1,144 | |||
Cash dividends declared in payables | $ 96 | ¥ 658 |
ORGANIZATION AND PRINCIPAL ACTI
ORGANIZATION AND PRINCIPAL ACTIVITIES | 12 Months Ended |
Dec. 31, 2018 | |
ORGANIZATION AND PRINCIPAL ACTIVITIES | |
ORGANIZATION AND PRINCIPAL ACTIVITIES | HUAZHU GROUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 and 2018 (Renminbi in thousands, except share data and per share data, unless otherwise stated) 1. ORGANIZATION AND PRINCIPAL ACTIVITIES Huazhu Group Limited (the “Company”) was incorporated in the Cayman Islands under the laws of the Cayman Islands on January 4, 2007. The principal business activities of the Company and its subsidiaries and variable interest entities (the “Group”) are to develop leased and owned, manachised and franchised hotels under the “Joya Hotel”, “Crystal Orange”, “Blossom Hill”, “Manxin Hotel”, “Orange Hotel Select”, “Orange Hotel”, “JI Hotel”, “Starway Hotel”, “HanTing Hotel”, “HanTing Premium”, “Elan Hotel” and “Hi Inn” brands in the People’s Republic of China (“PRC”). The Group 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. Leased and owned hotels The Group leases hotel properties from property owners or purchases properties directly and is responsible for all aspects of hotel operations and management, including hiring, training and supervising the managers and employees required to operate the hotels. In addition, the Group is responsible for hotel development and customization to conform to the standards of the Group brands at the beginning of the lease or the construction, as well as repairs and maintenance, operating expenses and management of properties over the term of the lease or the land and building certificate. Under the lease arrangements, the Group typically receives rental holidays of two to six months and pays rent on a quarterly or biannual basis. Rent is typically subject to the fixed escalations of three to five percent every three to five years. The Group recognizes rental expense on a straight-line basis over the lease term. As of December 31, 2017 and 2018, the Group had 671 and 699 leased and owned hotels in operation, respectively. Manachised and franchised hotels Typically the Group enters into certain franchise and management arrangements with franchisees for which the Group is responsible for providing branding, quality assurance, training, reservation, hiring and appointing of the hotel general manager and various other support services relating to the hotel renovation and operation. Those hotels are classified as manachised hotels. Under typical franchise and management agreements, the franchisee is required to pay an initial franchise fee and ongoing franchise and management service fees, the majority of which are equal to a certain percentage of the revenues of the hotel. The franchisee is responsible for the costs of hotel development, renovation and the costs of its operations. The term of the franchise and management agreements are typically eight to ten years and are renewable upon mutual agreement between the Group and the franchisee. The Group also has some franchised hotels in which cases the Group does not provide a hotel general manager. As of December 31, 2017 and 2018, the Group had 2,874 and 3,309 manachised hotels in operation and 201 and 222 franchised hotels in operation, respectively. |
SUMMARY OF PRINCIPAL ACCOUNTING
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2018 | |
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES | |
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES | 2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES Basis of presentation The consolidated financial statements of the Group have been prepared in accordance with the accounting principles generally accepted in the United States of America (“US GAAP”). Basis of consolidation The consolidated financial statements include the financial statements of the Company, its majority-owned subsidiaries and consolidated variable interest entities (the “VIEs”). All intercompany transactions and balances are eliminated on consolidation. Variable Interest Entities The Group evaluates the need to consolidate certain variable interest entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. The Company is deemed as the primary beneficiary of and consolidates variable interest entities when the Company has the power to direct the activities that most significantly impact the economic success of the entities and effectively assumes the obligation to absorb losses and has the rights to receive benefits that are potentially significant to the entities. As of December 31, 2017 and 2018, the Group consolidated two and six entities under VIE model, and the assets and liabilities of the consolidated VIEs are immaterial to the Group's consolidated financial statements. The Group evaluates its business activities and arrangements with the entities that operate the manachised and franchised hotels and the funds that it serves as general partner or fund manager to identify potential variable interest entities. Generally, these entities that operate the manachised and franchised hotels qualify for the business scope exception, therefore consolidation is not appropriate under the variable interest entity consolidation guidance. For the disclosure of significant non-consolidated variable interest entities, see Note7 Investments. Use of estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Group bases its estimates on historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant accounting estimates reflected in the Group’s consolidated financial statements include the useful lives and impairment of property and equipment and intangible assets, valuation allowance of deferred tax assets, purchase price allocation, impairment of goodwill, fair value measurement and impairment of investments, share-based compensation, estimates involved in the accounting for its customer loyalty program, and contingent liabilities. Cash and cash equivalents Cash and cash equivalents consist of cash on hand and demand deposits, which are unrestricted as to withdrawal and use, and which have original maturities of three months or less when purchased. Restricted cash Restricted cash mainly represents deposits used as security against borrowings and deposits restricted due to contract disputes or lawsuit. Investments Investments represent equity-method investments, equity investments with readily determinable fair values, equity investments without readily determinable fair values and available-for-sale debt securities. The Group accounts for equity investment in entities with significant influence under equity-method accounting. Under this method, the Group’s pro rata share of income (loss) from investment is recognized in the consolidated statements of comprehensive income. Dividends received reduce the carrying amount of the investment. When the Group’s share of loss in an equity-method investee equals or exceeds its carrying value of the investment in that entity, the Group continues to report its share of equity method losses in the statements of comprehensive income to the extent and as an adjustment to the carrying amount of its other investments in the investee. Equity-method investment is reviewed for impairment by assessing if the decline in market value of the investment below the carrying value is other-than-temporary. In making this determination, factors are evaluated in determining whether a loss in value should be recognized. These include consideration of the intent and ability of the Group to hold investment and the ability of the investee to sustain an earnings capacity, justifying the carrying amount of the investment. Impairment losses are recognized in other expense when a decline in value is deemed to be other-than- temporary. Investments in equity securities that have readily determinable fair values (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) are measured at fair value, with unrealized gains and losses from fair value changes recognized in net income in the consolidated statements of comprehensive income. Investments in equity securities without readily determinable fair values are measured at cost minus impairment adjusted by observable price changes in orderly transactions for the identical or a similar investment of the same issuer. These investments are measured at fair value on a nonrecurring basis when there are events or changes in circumstances that may have a significant adverse effect. An impairment loss is recognized in the consolidated statements of comprehensive income equal to the amount by which the carrying value exceeds the fair value of the investment. Prior to the fiscal year of 2018, these investments were accounted for using the cost method of accounting, measured at cost less other-than-temporary impairment. Debt securities that the company has no intent to hold till maturity or may sell the security in response to the changes in economic conditions are classified as available-for-sale debt securities. Available-for-sale debt securities are reported at fair value, with unrealized gains and losses (other than impairment losses) recognized in accumulated other comprehensive income or loss. Realized gains and losses on debt securities are recognized in the net income in the consolidated statements of comprehensive income. The Group monitors its investments for other-than-temporary impairment by considering factors including, but not limited to, current economic and market conditions, the operating performance of the companies including current earnings trends and other company-specific information. As a result of the impairment analysis, the Group recorded an impairment of RMB3, nil and nil in 2016, 2017 and 2018, respectively. Accounts receivable, net of allowance Accounts receivable mainly consist of franchise fee receivables, amounts due from corporate customers, travel agents, hotel guests and credit card receivables, which are recognized and carried at the original invoice amount less an allowance for doubtful accounts. The Group establishes an allowance for doubtful accounts primarily based on the age of the receivables and factors surrounding the credit risk of specific customers. Loan receivables Loan receivables are measured at amortized cost with interest accrued based on the contract rate. The Group classified loan receivables as long-term or short-term investments according to their contractual maturity or expected holding time. The Group evaluates the credit risk associated with the loans, and estimates the cash flow expected to be collected over the life of loans on an individual basis based on the Group’s past experiences, the borrowers’ financial position, their financial performance and their ability to continue to generate sufficient cash flows. A valuation allowance will be established for the loans unable to collect. No valuation allowance has been recorded in 2016, 2017 or 2018 based on the result of the assessment. The Group entered into entrusted loan agreements with certain franchisees with the typical terms to be two to three years and annual interest rates ranging from 8.0% to 8.5%, and with other un-related third-parties with the annual interest rates ranging from 6% to 12%. Inventories Inventories mainly consist of small appliances, bedding and daily consumables. Small appliances and bedding for new hotels opened are stated at cost, less accumulated amortization, and are amortized over their estimated useful lives, generally one year, from the time they are put into use. Daily consumables and beddings replacement are expensed when used. Property and equipment, net Property and equipment, net are stated at cost less accumulated depreciation and amortization. The renovations, betterments and interest cost incurred during construction are capitalized. Depreciation and amortization of property and equipment is provided using the straight line method over their expected useful lives. The expected useful lives are as follows: Leasehold improvements Shorter of the lease term or their estimated useful lives Buildings 20-40 years Furniture, fixtures and equipment 3-10 years Motor vehicles 5 years Construction in progress represents leasehold improvements and property under construction or being installed and is stated at cost. Cost comprises original cost of property and equipment, installation, construction and other direct costs. Construction in progress is transferred to leasehold improvements and depreciation commences when the asset is ready for its intended use. Expenditures for repairs and maintenance are expensed as incurred. Gain or loss on disposal of property and equipment, if any, is recognized in the consolidated statements of comprehensive income as the difference between the net sales proceeds and the carrying amount of the underlying asset. Intangible assets, net and unfavorable lease Intangible assets consist primarily of brand name, master brand agreement, non-compete agreements, franchise agreements and favorable leases acquired in business combinations and purchased software. Intangible assets acquired through business combinations are recognized as assets separate from goodwill if they satisfy either the “contractual-legal” or “separability” criterion. Intangible assets, including brand name, master brand agreement, non-compete agreements, franchise agreements and favorable lease agreements acquired from business combination are recognized and measured at fair value upon acquisition. Non-compete agreements, franchise agreements and favorable lease agreements are amortized over the expected useful life, remaining franchise contract terms and remaining operating lease terms respectively. Unfavorable lease agreements from business combination transactions are recognized as other long-term liabilities and are amortized over the remaining operating lease terms. Purchased software is stated at cost less accumulated amortization. Brand name is considered to have an indefinite life. Master brand agreement, acquired in Accor acquisition (Note 3), granted the Group certain franchise rights with initial term of 70 years, and can be renewed without substantial obstacles. As a result, the useful life is determined to be indefinite. The Group evaluates the brand name and master brand agreement each reporting period to determine whether events and circumstances continue to support an indefinite useful life. Impairment is tested annually or more frequently if events or changes in circumstances indicate that it might be impaired. The Group measures the impairment by comparing the fair value of brand name and master brand agreement with its carrying amount. If the carrying amount of brand name and master brand agreement exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess. The Group measures the fair value of the brand name under the relief-from-royalty method, the master brand agreement under the multi-period excess earnings method. Management performs its annual brand name and master brand agreement impairment test on November 30. Land use rights Land use rights, which are all located in PRC, are recorded at cost and amortized on a straight-line basis over the remaining term of the land certificates, between 30 to 50 years. Amortization expense of land use rights for the years ended December 31, 2016, 2017 and 2018 amounted to RMB4, RMB5 and RMB5, respectively. Impairment of long-lived assets The Group evaluates its long-lived assets and finite lived intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When these events occur, the Group measures impairment by comparing the carrying amount of the assets to future undiscounted net cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Group recognizes an impairment loss equal to the difference between the carrying amount and fair value of these assets. The Group performed a recoverability test of its long-lived assets associated with certain hotels due to the continued underperformance relative to the projected operating results, of which the carrying amount of the property and equipment exceed the future undiscounted net cash flows, and recognized an impairment loss of RMB151, RMB169 and RMB35 during the years ended December 31, 2016, 2017 and 2018, respectively. Fair value of the property and equipment was determined by the Group based on the income approach using the discounted cash flow associated with the underlying assets, which incorporated certain assumptions including projected hotels’ revenue, growth rates and projected operating costs based on current economic condition, expectation of management and projected trends of current operating results. Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the identifiable assets less liabilities acquired. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. The Group completes a two-step goodwill impairment test. The first step compares the fair values of each reporting unit to its carrying amount, including goodwill. A reporting unit is identified as a component for which discrete financial information is available and is regularly reviewed by management. All the acquired business has been migrated to the Group’s business, and the Group's management regularly reviews operation data including industrial metrics of revenue per available room, occupancy rate, and number of hotels by scale/brand, rather than discrete financial information for the purpose of performance evaluation and resource allocation at brand level. The Company concluded that it had only one reporting unit, and therefore the goodwill impairment testing was performed on consolidation level. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only performed for purposes of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or liabilities. An impairment loss is recognized in general and administrative expenses for any excess in the carrying value of goodwill over the implied fair value of goodwill. Management performs its annual goodwill impairment test on November 30. The Group had not recognized any goodwill impairment for years ended December 31, 2016, 2017 and 2018. Revenue recognition Revenue are primarily derived from products and services in leased and owned hotels, contracts of manachised and franchised hotels with third-party franchisees as well as activities other than the operation of hotel businesses. Leased and owned hotel revenues Leased and owned hotel revenues are primarily derived from the rental of rooms, food and beverage sales and other ancillary goods and services, including but not limited to souvenir, laundry, parking and conference reservation. Each of these products and services represents an individual performance obligation and, in exchange for these services, the Group receives fixed amounts based on published rates or negotiated contracts. Payment is due in full at the time when the services are rendered or the goods are provided. Room rental revenue is recognized on a daily basis when rooms are occupied. Food and beverage revenue and other goods and services revenue are recognized when they have been delivered or rendered to the guests as the respective performance obligations are satisfied. Manachised and franchised hotel revenues The manachised and franchised agreement contains the following promised services: · Intellectual Property ("IP") license grant the right to access the Group’s hotel system IP, including brand names. · Pre-opening services include providing services (e.g., install IT information system and provide access to purchase platform, help to obtain operational qualification, and help to recruit and train employees) to the franchisees to assist in preparing for the hotel opening. · System maintenance services include providing standardization hotel property management system (PMS), central reservation system (CRS) and other internet related services. · Hotel management services include providing day-to-day management services of the hotels for the franchisees. The promises to provide pre-opening services and system maintenance services are not distinct performance obligation because they are attendant to the license of IP. Therefore, the promises to provide pre-opening services and system maintenance services are combined with the license of IP to form a single performance obligation. Hotel management services forms a single distinct performance obligation. Manachised and franchised hotel revenues are derived from franchise agreements where the franchisees are primarily required to pay (i) an initial one-time franchise fee, and (ii) continuing franchise fees, which mainly consist of (a) on-going management and franchise service fees, (b) central reservation system usage fees, system maintenance and support fees and (c) reimbursements for hotel manager fees. Initial one-time franchise fee, is typically fixed and collected upfront and recognized as revenue over the term of the franchise contract. The Group does not consider this advance consideration to include a significant financing component, since it is used to protect the Group from the franchisees failing to adequately complete some or all of its obligations under the contract. These fees are typically collected upfront and are recognized as revenue over the term of the franchise contract. On-going management and franchise service fees are generally calculated as a certain percentage of the room revenues of the franchised hotel. Generally, management and franchise service fees are due and payable on a monthly basis as services are provided and revenue is recognized over time as services are rendered. Central reservation system usage fees, other system maintenance and support fees are typically billed and collected monthly along with base management and franchise fees, and revenue is generally recognized as services are provided. Reimbursements for hotel manager fees , which cover the manachised hotel managers’ payroll, social welfare benefits and certain other out-of-pocket expenses that the Group incurs on behalf of the manachised hotels. The reimbursements are recognized over time within revenues for the reimbursement of costs incurred on behalf of manachised hotels. Other Revenues Other revenues are derived from activities other than the operation of hotel businesses, which mainly include revenues from Hua Zhu mall and the provision of IT products and services to hotels. Revenues from Hua Zhu mall are commissions charged from suppliers for goods sold through the platform and are recognized upon delivery of goods to end customers when its suppliers’ obligation is fulfilled. Revenues from IT products are recognized when goods are delivered and revenues from IT services are recognized when services are rendered. Loyalty Program Under the loyalty program the Group administers, members earn loyalty points that can be redeemed for future products and services. Points earned by loyalty program members represent a material right to free or discounted goods or services in the future. The loyalty program has one performance obligation that consists of marketing and managing the program and arranging for award redemptions by members. The Group is responsible for arranging for the redemption of points, but the Group does not directly fulfill the redemption obligation except at leased and owned hotels. Therefore, the Group is the agent with respect to this performance obligation for manachised and franchised hotels, and is the principal with respect to leased and owned hotels. For leased and owned hotels, a portion of the leased and owned revenues is deferred until a member redeems points. The amount of revenue the Group recognize upon point redemption is impacted by the estimate of the “breakage” for points that members will never redeem in the Group's owned and leased hotels. For manachised and franchised hotels, the portion of revenue deferred by manachised and franchised hotels are collected by the Group which will be refunded upon redemption of points at manachised and franchised hotels. The estimated breakage for points earned in manachised and franchised hotels are recognized as manachised and franchised revenue for each period. The Group estimates breakage based on the Group's historical experience and expectations of future member behavior and will true up the estimated breakage at end of each period. Membership fees from the Group’s customer loyalty program are earned and recognized on a straight-line basis over the expected membership duration of the different membership levels. Such duration is estimated based on the Group’s and management’s experience and is adjusted on a periodic basis to reflect changes in membership retention. The membership duration is estimated to be two to five years which reflects the expected membership retention. Revenues recognized from membership fees were RMB145, RMB160 and RMB192 for the years ended December 31, 2016, 2017 and 2018, respectively, which amount were included in revenues from leased and owned hotel or revenues from manachised and franchised hotels depending on the type of hotels the membership was sold at. Contract Balances The Group's payments from customers are based on the billing terms established in contracts. Customer billings are classified as accounts receivable when the Group's right to consideration is unconditional. If the right to consideration is conditional on future performance under the contract, the balance is classified as a contract asset. Payments received in advance of performance under the contract are classified as current or non-current contract liabilities on the Group's consolidated balance sheets and are recognized as revenue as the Group performs under the contract. PRC Value-Added Taxes and surcharges Starting from May 2016, the accommodation services of the Group are subject to 6% of Value-Added Taxes. The Group is subject to education surtax and urban maintenance and construction tax, on the services provided in the PRC. Advertising and promotional expenses Advertising related expenses, including promotion expenses and production costs of marketing materials, are charged to the consolidated statements of comprehensive income as incurred, and amounted to RMB65, RMB91 and RMB103 for the years ended December 31, 2016, 2017 and 2018, respectively. Government grants Government grants represent cash received by the Group in the PRC from local governments as incentives for investing in certain local districts, and are typically granted based on the amount of investments the Group made as well as income generated by the Group in such districts. Such subsidies allow the Group full discretion to utilize the funds and are used by the Group for general corporate purposes. The local governments have final discretion as to whether the Group has met all criteria to be entitled to the subsidies. Normally, the Group does not receive written confirmation from local governments indicating the approval of the cash subsidy before cash is received, and therefore cash subsidies are recognized when received and when all the conditions for their receipts have been satisfied. Government grants recognized were RMB83, RMB55 and RMB106 for the years ended December 31, 2016, 2017 and 2018, respectively, which were recorded as other operating income. Leases A lease of which substantially all the benefits and risks incidental to ownership remain with the lessor is classified as an operating lease. All leases of the Group are currently classified as operating leases. When a lease contains rent holidays or requires fixed escalations of the minimum lease payments, the Group records the total rental expense on a straight-line basis over the initial lease term and the difference between the straight-line rental expense and cash payment under the lease is recorded as deferred rent. As of December 31, 2017 and 2018, deferred rent of RMB50 and RMB71 were recorded as other current liabilities and RMB1,380 and RMB1,507 were recorded as long-term liabilities, respectively. Income taxes Current income taxes are provided for in accordance with the relevant statutory tax laws and regulations. Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. Net operating losses are carried forward and credited by applying enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of the Group, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. Foreign currency translation The reporting currency of the Group is the Renminbi (“RMB”). The functional currency of the Company is the United States dollar (“US dollar”). Monetary assets and liabilities denominated in currencies other than the functional currency are translated into functional currency at the rates of exchange ruling at the balance sheet date. Transactions in currencies other than the functional currency during the year are converted into the functional currency at the applicable rates of exchange prevailing on the day transactions occurred. Transaction gains and losses are recognized in the statements of comprehensive income. Assets and liabilities are translated into RMB at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange rates and revenues, expenses, gains and losses are translated using the average rate for the year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of comprehensive income. The financial records of the Group’s subsidiaries are maintained in local currencies, which are the functional currencies. Comprehensive income Comprehensive income includes all changes in equity except for those resulting from investments by owners and distributions to owners and is comprised of net income, foreign-currency translation adjustments and unrealized securities holding gains (losses) recognized before the adoption of ASU No. 2016-01. Concentration of credit risk Financial instruments that potentially expose the Group to concentration of credit risk consist primarily of cash and cash equivalents, restricted cash, short-term and long-term investments, loan receivables, amount due from related parties and accounts receivable. All of the Group’s cash and cash equivalents and restricted cash are held with financial institutions that Group management believes to be high credit quality. In addition, the Group’s investment policy limits its exposure to concentrations of credit risk and the Group’s short-term and long-term investments consist of equity investments in listing and private companies. The Group’s loan receivables are lent to entities with high credit quality. The Group conducts credit evaluations on its group and agency customers and generally does not require collateral or other security from such customers. The Group periodically evaluates the creditworthiness of the existing customers in determining an allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers. Fair value The Group defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. The established fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs may be used to measure fair value include: Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The Group’s financial instruments include cash and cash equivalent, restricted cash, loan receivables current and non-current portion, receivables, payables, short-term debts, long-term debts. The carrying amounts of these short-term financial instruments approximates their fair value due to their short-term nature. The long-term debts and long-term loan receivables approximate their fair values, because the bearing interest rate approximates market interest rate, and market interest rates have not fluctuated significantly since the commencement of loan contracts signed. When available, the Group uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Group measures fair value using valuation techniques that use, when possible, current market-based or independently sourced market parameters, such as interest rates. As of December 31, 2017 and 2018, information about inputs into the fair value measurements of the Group’s assets and liabilities that are measured at fair value on a recurring basis in periods subsequent to their initial recognition is as follows: Fair Value Measurements at Reporting Date Using Quoted Prices in Active Significant Markets for Identical S |
ACQUISITIONS
ACQUISITIONS | 12 Months Ended |
Dec. 31, 2018 | |
ACQUISITIONS | |
ACQUISITIONS | 3. ACQUISITIONS (i) In January 2016, the Group completed the transaction of strategic alliance with AccorHotels (“Accor”). Pursuant to the master purchase agreement, the Group acquired 100% equity interest of certain wholly-owned subsidiaries of Accor engaged in the business of owning, leasing, franchising, operating and managing hotels under Accor brands in the midscale and economy market in the PRC, Taiwan and Mongolia, as well as a non-controlling stake of 28% for Accor Luxury and Upscale hotel operating platform, held by AAPC Hotel Management Limited (“AAPC LUB”) in Greater China. The total consideration consists of consideration amounted to RMB1,144, which was measured at the market price of the 24,895,543 ordinary shares on the issuance date and cash consideration of RMB120. The net revenue and net income of the acquiree included in the consolidated statements of operations for the year ended December 31, 2016 were RMB153 and RMB64, respectively. The following is a summary of the fair values of the assets acquired and liabilities assumed: 2016 Amortization Period Current assets 207 Property and equipment 311 5-30 years Favorable leases 3 remaining lease terms Master brand agreement 192 Land use rights 150 remaining contracts terms Long-term investments 418 Goodwill 63 Other noncurrent assets 2 Current liabilities (39) Deferred tax liabilities (43) Total 1,264 (ii) On May 25, 2017, the Group completed the acquisition of 100% of the equity interest of Crystal Orange Hotel Holdings Limited (the “Crystal Orange”) engaged in the business of owning, leasing, franchising, operating and managing hotels under Crystal Orange brands in the midscale market in the PRC, with an aggregated consideration in cash of approximately RMB3,765. The net revenue and net income of the acquiree included in the consolidated statements of operations for the year ended December 31, 2017 were RMB777 and RMB100, respectively. The following table summarizes unaudited pro forma results of operation for the years ended December 31, 2016 and 2017 assuming that the acquisition occurred as of January 1, 2016. The pro forma results have been prepared for comparative purpose only based on management’s best estimate and do not purport to be indicative of the results of operations which actually would have resulted had the acquisition occurred as of January 1, 2016. Years Ended December 31, 2016 2017 Pro forma net revenue 7,508 8,630 Pro forma net income 835 1,267 The Group incurred transaction cost of RMB46 for the acquisition, which was expensed in 2017. In addition, Crystal Orange incurred certain costs directly attributable to the business combination including RMB256 related to the consultation services agreements and option cancellation agreement. These expenses are non-recurring in nature, and were eliminated from the calculation of pro forma net income above. The following is a summary of the fair values of the assets acquired and liabilities assumed: 2017 Amortization Period Current assets 137 Property and equipment 842 3-20 years Favorable leases 91 remaining lease terms Franchise agreement 58 remaining contract terms Brand Name 1,142 indefinite life Goodwill 2,093 Other noncurrent assets 131 Current liabilities (222) Noncurrent liabilities (180) Deferred tax liabilities (323) Noncontrolling interest (4) Total 3,765 (iii) In August, 2018, the Group completed the acquisition of 83% equity interest of Blossom Hill Hotel Investment Management (Kunshan) Co., Ltd. (the "Blossom Hill"). Blossom Hill was engaged in the business of owning, leasing, franchising, operating and managing hotels under Blossom Hill brand in the upscale market in the PRC. The aggregated consideration RMB536 consisted of RMB463 cash consideration transferred and RMB73 implied fair value of the 11% equity interest originally owned by the Group. The previously held 11% equity interest that was accounted for using cost method was remeasured to fair value on the acquisition date, resulting in a gain of RMB13 recognized in investment income. The net revenue and net loss of the acquiree included in the consolidated statements of operations for the year ended December 31, 2018 were RMB30 and RMB15, respectively. The following table summarizes unaudited pro forma results of operation for the years ended December 31, 2017 and 2018 assuming that the acquisition occurred as of January 1, 2017. The pro forma results have been prepared for comparative purpose only based on management's best estimate and do not purport to be indicative of the results of operations which actually would have resulted had the acquisition occurred as of January 1, 2017. Years Ended December 31, 2017 2018 Pro forma net revenue 8,331 10,124 Pro forma net income 1,214 701 The transaction cost for the acquisition was immaterial. The following is a summary of the fair values of the assets acquired and liabilities assumed: 2018 Amortization Period Current assets 84 Property and equipment 187 3-20 years Favorable leases 7 remaining lease terms Unfavorable leases (1) remaining lease terms Franchise agreement 25 remaining contract terms Brand name 170 indefinite life Goodwill 365 Land use rights 10 Deferred tax assets 12 Current liabilities (105) Noncurrent liabilities (18) Deferred tax liabilities (50) Noncontrolling interest (150) Total 536 In August 2018, the Group purchased 11% noncontrolling interest from several minority shareholders for total cash consideration of RMB73. The purchase of the noncontrolling interest is treated as an equity transaction. As of December 31, 2018, the Group owns 94% equity interest of Blossom Hill in total. (iv) During the years ended December 31, 2016, 2017 and 2018, the Group acquired two individual hotels, two individual hotels, and two individual hotels for total cash consideration of RMB3, nil and RMB7, respectively. The business acquisitions were accounted for under purchase accounting. The assets and liabilities of these acquired hotels were immaterial to the consolidated financial statements. Goodwill was recognized as a result of expected synergies from combining operations of the Group and acquired business and other intangible assets that don’t qualify for separate recognition. Goodwill is not amortized and is not deductible for tax purposes. In accordance with ASC 350, the Group assigned and assessed goodwill for impairment at the reporting unit level. All the acquired business has been migrated to the Group’s business. The Group concluded that it had only one reporting unit. Accordingly, goodwill is allocated to one single reporting unit. |
REVENUE FROM CONTRACTS WITH CUS
REVENUE FROM CONTRACTS WITH CUSTOMERS | 12 Months Ended |
Dec. 31, 2018 | |
REVENUE FROM CONTRACT WITH CUSTOMERS | |
REVENUE FROM CONTRACT WITH CUSTOMERS | 4. REVENUE FROM CONTRACTS WITH CUSTOMERS Disaggregated Revenues The following tables present our revenues disaggregated by the nature of the product or service: Years Ended December 31, 2016 2017 2018 Room revenues 4,781 5,842 6,894 Food and beverage revenues 218 249 304 Others 240 247 272 Leased and owned hotels revenue 5,239 6,338 7,470 Initial one-time franchise fee 56 59 79 On-going management and service fees 589 759 983 Central reservation system usage fees, other system maintenance and support fees 308 436 630 Reimbursements for hotel manager fees 321 371 455 Other fees 145 226 380 Manachised and franchised hotels revenue 1,419 1,851 2,527 Other revenues 31 40 66 Total revenues 6,689 8,229 10,063 Contract Balances Our contract assets are insignificant at December 31, 2017 and December 31, 2018. As of December 31, 2017 2018 Current contract liabilities 943 1,005 Long-term contract liabilities 398 458 Total contract liabilities 1,341 1,463 The contract liabilities balances above, as of December 31, 2017 and 2018 were comprised of the following: As of December 31, 2017 2018 Initial fees received from franchisees owners 553 674 Cash received for membership fees and not recognized as revenue 305 357 Advances received from customers 425 374 Deferred revenue related to the loyalty program 58 58 Total 1,341 1,463 We recognized revenues that were previously deferred as contract liabilities of RMB445 and RMB468 during the years ended December 31, 2017 and 2018, respectively. Revenue Allocated to Remaining Performance Obligations Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. As of December 31,2018, we had RMB58 of deferred revenues related to unsatisfied performance obligations under HUAZHU Rewards that will be recognized as revenues when the points are redeemed, which we estimate will occur over the next two years. We had RMB674 of deferred revenues related to initial fees received from franchisees owners are expected to be recognized as revenues over the remaining contract periods over one to ten years. Additionally, we had RMB357 of deferred revenues related to membership fees that are expected to be recognized as revenues over the remaining membership life, which is estimated to be one to five years. We also had RMB374 of deferred revenues related to advances received from customers, which are expected to be recognized as revenues in future periods over the terms of the related contracts. We did not estimate revenues expected to be recognized related to our unsatisfied performance for the following: · Revenues related to on-going management and franchise service fees, as they are considered sales-based royalty fees. · Revenues related to central reservation system usage fees, other system maintenance and support fees, and reimbursement for hotel manager fee, as the related revenues from the satisfaction of these performance obligations is recognized when the Group is entitled to invoice the amount. |
PROPERTY AND EQUIPMENT, NET
PROPERTY AND EQUIPMENT, NET | 12 Months Ended |
Dec. 31, 2018 | |
PROPERTY AND EQUIPMENT, NET | |
PROPERTY AND EQUIPMENT, NET | 5. PROPERTY AND EQUIPMENT, NET Property and equipment, net consist of the following: As of December 31, 2017 2018 Cost: Buildings 247 247 Leasehold improvements 6,453 7,389 Furniture, fixtures and equipment 1,034 1,162 Motor vehicles 1 1 7,735 8,799 Less: Accumulated depreciation (3,707) (4,344) 4,028 4,455 Construction in progress 495 563 Property and equipment, net 4,523 5,018 Depreciation expense was RMB674, RMB753 and RMB847 for the years ended December 31, 2016, 2017 and 2018, respectively. The Group occasionally demolishes certain leased hotels due to local government zoning requirements, which typically results in receiving compensation from the government. |
INTANGIBLE ASSETS, NET AND UNFA
INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE | 12 Months Ended |
Dec. 31, 2018 | |
INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE | |
INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE | 6. INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE Intangible assets, net consist of the following: As of December 31, 2017 2018 Intangible assets with indefinite life: Brand name (Note 3) 1,170 1,340 Master brand agreement (Note 3) 192 192 Intangible assets with definite life: Franchise agreements 70 95 Non-compete agreement Favorable lease agreements 256 278 Purchased software 65 69 Total 1,753 1,974 Less: Accumulated amortization (109) (140) Total 1,644 1,834 Unfavorable lease As of December 31, 2017 2018 Unfavorable lease agreements 4 3 Less: Accumulated amortization (3) (2) Unfavorable lease agreements, net 1 1 The values of favorable lease agreements were determined based on the estimated present value of the amount the Group has avoided paying as a result of entering into the lease agreements. Unfavorable lease agreements were determined based on the estimated present value of the acquired lease that exceeded market prices and are recognized as other long-term liabilities. The value of favorable and unfavorable lease agreements is amortized using the straight-line method over the remaining lease term. Amortization expense of intangible assets for the years ended December 31, 2016, 2017 and 2018 amounted to RMB17, RMB31 and RMB39, respectively. The annual estimated amortization expense for the above intangible assets and unfavorable lease excluding brand name and master brand agreement for the following years is as follows: Amortization for Amortization for Intangible Assets Unfavorable Lease Net Amortization 2019 37 0 37 2020 35 0 35 2021 34 0 34 2022 32 0 32 2023 30 0 30 Thereafter 134 1 133 Total 302 1 301 |
INVESTMENTS
INVESTMENTS | 12 Months Ended |
Dec. 31, 2018 | |
INVESTMENTS. | |
INVESTMENTS | 7. INVESTMENTS The investments as of December 31, 2017 and 2018 were as follows: As of December 31, 2017 2018 Equity securities with readily determinable fair values: Accor 780 3,816 Other marketable securities 257 295 Equity securities without readily determinable fair values: OYO 66 66 Mobike 67 — BJ GOOAGOO/GOOAGOO 60 — Blossom Hill (Note 3) 60 — Other equity securities without readily determinable fair values 103 113 Equity-method investments: AAPC LUB 478 461 Hotel related funds 56 503 Shared office management entities 148 111 China Young 41 34 Cjia/Cjia Group — 298 China Hospitality JV — 117 BJ GOOAGOO/GOOAGOO — 52 Other investments 30 55 Available-for-sale debt securities: Cjia/Cjia Group 246 220 CREATER 100 100 Total 2,492 6,241 Equity securities with readily determinable fair values: In 2017 and 2018, the Group purchased 2,309,981 and 10,782,131 ordinary shares of Accor, a hotel group listed in Paris stock exchange, from open market. As of December 31, 2018, the Group accumulatively hold 13,092,112 shares of Accor, which accounts for less than 5% of Accor’ total outstanding shares where the Group does not have the ability to significantly influence the operations of this entity. In 2018, along with the adoption of ASU 2016-01, the Group recognized unrealized losses from fair value changes of Accor of RMB794. At December 31, 2017 and December 31, 2018, the Group had RMB257 and RMB295, respectively, of other marketable securities, which represent investments in entities in hospitality or related industries where the Group do not have the ability to significantly influence the operations of these entities. In 2018, the Group recognized unrealized losses from fair value changes of other marketable securities of RMB120. Equity securities without readily determinable fair values: In September 2017, the Group purchased approximately 1% equity interest of Oravel Stays Private limited (“OYO”), an India leading hospitality company. The Group accounted the investment as equity securities without readily determinable fair values since the Group does not have the ability to exert significant influence over OYO. In January 2017, the Group purchased 1,316,205 preferred shares and invested in convertible notes with principal amount of US$5.0 million and interest rate of 8% of Mobike Ltd. (“Mobike”), a Chinese bike-sharing company. As of December 31, 2017, the Group had less than 1% equity interest of Mobike. The Group accounted the investment at cost method prior to 2018. Along with the adoption of ASC 2016-01, the Group accounted it as equity securities without readily determinable fair values. In 2018, the Group disposed all the Mobike preferred shares and recognized a gain of RMB55. Other equity securities without readily determinable fair values included several insignificant investments in certain privately-held companies. Equity-method investments : In January 2016, the Group acquired approximately 28% equity interest in AAPC LUB (Note 3). The Group accounted for the investment in AAPC LUB under equity-method as the Group has the ability to exert significant influence. The Group recognized investment income of RMB31 and RMB43 in income (loss) from equity method investments in 2017 and 2018, respectively. In 2018, the Group received cash dividend from AAPC LUB of RMB60 which was recognized as a return on investment. As of December 31, 2017 and 2018, the Group had RMB56 and RMB503, respectively, of investments in hotel related funds. Those funds were VIEs and were managed by or power shared with un-related third-parties. However, the Group determined that they were not the primary beneficiary of those VIEs since the Group did not have the power to direct the activities of these VIEs that most significantly impacted its economic performance. The Group accounted for the investment under equity-method. The Group recognized investment loss of nil and RMB28 in income (loss) from equity method investments in 2017 and 2018, respectively. The maximum potential financial statement loss the Group could incur if the investment funds were to default on all of their obligations is the loss of value of the interests in such investments of RMB503 that the Group holds as of December 31, 2018. In 2016, the Group sold its subsidiary, Chengjia Hotel Management Co., Ltd. to Chengjia (Shanghai) Apartment Management Co., Limited (“Cjia”), the Group's equity investee. As a result, the Group recognized a gain of RMB50 in other income in 2016. As of December 31, 2016, the Group had approximately 23% equity interest of Cjia and a sixty-month convertible note with original value of RMB52. In 2017, the Group invested in Cjia for convertible notes totaled RMB200. With the injection from an unrelated investor to Cjia, the Group recognized gain on deemed disposal of RMB40 in other income in 2017. As of December 31, 2017, the Group had approximately 17% equity interest and three convertible notes with original value totaled RMB252 of Cjia. The Group accounted for the equity investment in Cjia under equity-method as the Group has the ability to exert significant influence. The convertible notes are recorded as available-for-sale debt securities. In 2018, Cjia completed its restructuring, and accordingly the Company's equity interest of 17% in Cjia was transformed to be the Group's equity interest of 17% in China Cjia Group Limited (“Cjia Group”). In addition, the Group made further investment in preferred shares of Cjia Group of US$45 million in 2018. Meanwhile, the convertible notes of Cjia could be replaced by converted notes of Cjia Group in the next four years. The Group recognized investment loss of RMB25, RMB33 and RMB38 in income (loss) from equity method investments in 2016, 2017 and 2018, respectively. Loss from equity method investments reduced the cost of equity-method investment to zero and further adjusted the carrying amount of convertible notes and preferred shares. In 2018, the Group partnered with an unrelated third party investor to form China Hospitality JV, Ltd. (“China Hospitality JV”), of which the Group holds 20% equity interest. The business of China Hospitality JV was to acquire and operate two hotel properties. As of December 31, 2018, the Group had approximately 20% equity interest of China Hospitality JV. The Group accounted for the investment in China Hospitality JV under equity-method as the Group has the ability to exert significant influence. The Group recognized investment loss of RMB11 in income (loss) from equity method investments in 2018. In 2014, the Group purchased approximately 8% equity interest in Beijing GOOAGOO Technology Service Co., Ltd. (“BJ GOOAGOO”), a high-tech service provider for Offline-To-Online data processing and platform operation. After restructuring of BJ GOOAGOO and further investment of the Group in 2015 and 2016, as of December 31, 2017, the Group had approximately 19% equity interest of in Gooagoo Group Holdings Limited (“GOOAGOO”). The Group accounted for the investment as equity securities without readily determinable fair values since the Group does not have the ability to exert significant influence over those companies. In 2018, the Group further invested in GOOAGOO. As of December 31, 2018, the Group had approximately 41% equity interest of in GOOAGOO and reclassified GOOAGOO from equity securities without readily determinable fair values to equity-method investments as the Group has the ability to exert significant influence through the increased voting power. The Group recognized investment loss of RMB14 in income (loss) from equity method investments in 2018. Other investments included several insignificant equity investments in certain privately-held companies. Available-for-sale debt securities: In September 2017, the Group invested in Shanghai CREATER Industrial Co., Ltd. (“CREATER”), a staged office space company in China, for two-year convertible notes amounted RMB100 with an interest rate of 10% per year. The convertible notes with equity pledge are convertible upon satisfaction of certain conditions or at the option of the Group to ordinary shares in the last month before the expiration. The convertible notes are recorded as available-for-sale debt securities. |
GOODWILL
GOODWILL | 12 Months Ended |
Dec. 31, 2018 | |
GOODWILL. | |
GOODWILL | 8. GOODWILL The changes in the carrying amount of goodwill for the years ended December 31, 2016, 2017 and 2018 were as follows: Gross Accumulated Net Amount Impairment Loss Amount Balance at January 1, 2016 113 (4) 109 Increase in goodwill related to acquisitions 63 — 63 Balance at December 31, 2016 176 (4) 172 Increase in goodwill related to acquisitions 2,093 — 2,093 Balance at December 31, 2017 2,269 (4) 2,265 Increase in goodwill related to acquisitions 365 — 365 Balance at December 31, 2018 2,634 (4) 2,630 |
DEBT
DEBT | 12 Months Ended |
Dec. 31, 2018 | |
DEBT | |
DEBT | 9. DEBT The short-term and long-term debt as of December 31, 2017 and 2018 were as follows: As of December 31, 2017 2018 Short-term debt: Long-term bank borrowings, current portion 0 0 Short-term bank borrowings 131 948 Total 131 948 Long-term debt: Long-term bank borrowings, non-current portion 1,895 5,603 Convertible senior notes 3,027 3,209 Total 4,922 8,812 Bank borrowings In May 2017, the Group entered into an US$250 million term facility and US$250 million revolving credit facility agreement with several banks. The US$250 million revolving credit facility is available for 35 months after the date of the agreement. The interest rate on the loan is Libor plus 1.75%. There are some financial covenants including interest coverage ratio, leverage and tangible net worth related to this facility and the Group was in compliance as of December 31, 2017 and 2018. The Group had drawn down US$250 million under the term facility agreement in 2017 and repaid nil in 2017 and 2018. For revolving credit facility agreement, the Group had drawn down US$250 million in May 2017 and fully repaid the amount in November 2017. The group had drawn down total US$370 million in succession under the revolving facility agreement and repaid US$120 million in 2018. The weighted average interest rate of borrowings drawn under this agreement was 3.04% and 3.93% for the years ended December 31, 2017 and 2018, respectively. In February 2018, the Group entered into a three-year term facility agreement under which the Group can borrow up to EUR260 million within 30 London business days. The interest rate on the loan for each interest period is the aggregate of the applicable EURIBOR and a spread of 1.70%. The Group had pledged 13,092,112 shares of Accor the Group acquired from open market in 2017 and 2018 as collateral. The loan contains certain financial covenants including debt ratio and the value of pledged shares and the Group was in compliance as of December 31, 2018. The Group had drawn down EUR241 million under the term facility agreement in 2018 and repaid nil. The weighted average interest rate of borrowings drawn under this agreement was 1.70% for the year ended December 31 2018. Convertible Senior Notes due 2022 On November 3, 2017, the Company issued US$475 million of Convertible Senior Notes (“the Notes”). The Notes mature on November 1, 2022 and bear interest at a rate of 0.375% per annum, payable in arrears semi-annually on May 1 and November 1, beginning May 1, 2018. Holders of the Notes have the option to convert their Notes at any time prior to the close of business on the second business day immediately preceding the maturity date. The Notes can be converted into the Company’s ADSs at an initial conversion rate of 5.4869 of the Company’s ADSs per US$1,000 principal amount of the Notes (equivalent to an initial conversion price of US$182.25 per ADS). The conversion rate is subject to adjustment in some events but is not adjusted for any accrued and unpaid interest. In addition, following a make-whole fundamental change (as defined in the Indenture) that occur prior to the maturity date or following the Company’s delivery of a notice of a tax redemption, the Company will increase the conversion rate for a holder who elects to convert its notes in connection with such a corporate event or such tax redemption. The holders may require the Company to repurchase all or portion of the Notes for cash on November 3, 2020, or upon a fundamental change, at a repurchase price equal to 100% of the principal amount, plus accrued and unpaid interest. The Company believes that the likelihood of occurrence of events considered a fundamental change is remote. The conversion option meets the definition of a derivative. However, since the conversion option is considered indexed to the Company’s own stock and classified in stockholders’ equity, the scope exception is met, accordingly the bifurcation of conversion option from the Notes is not required. There is no beneficial conversion feature (“BCF”) attribute to the Notes as the set conversion prices for the Notes are greater than the respective fair values of the ordinary share price at date of issuance. The feature of mandatory redemption upon maturity is clearly and closely related to the debt host and this feature is no need to be bifurcated. Furthermore, the Company concluded that the feature of contingent put options upon tax events or fundamental changes does not need to be considered as an embedded derivative to be bifurcated. Therefore, the Company accounted for the Notes in accordance with ASC 470, as a single instrument under long-term debt. Issuance costs related to the Notes is recorded in consolidated balance sheet as a direct deduction from the principal amount of the Notes, and is amortized over the period from November 3, 2017, the date of issuance, to November 1, 2020, the first put date of the Notes, using the effective interest method. In 2017, proceeds to the Company were RMB3,093 (equivalently US$467 million), net of issuance costs of RMB54 (equivalently US$8 million). ADS Lending Arrangement Concurrent with the offering of the Notes, the Company entered into ADS lending agreements with the affiliates of the initial purchasers of the Notes (“ADS Borrowers”), pursuant to which the Company lent to the ADS Borrowers 2,606,278 ADSs (the “Loaned ADSs”) at a price equal to par, or $0.0004 per ADS (“ADS lending arrangement”). The purpose of the ADS lending arrangements is to facilitate privately negotiated transactions in which the ultimate holders of the Notes may elect to hedge their investment in the related notes. As of December 31, 2017 and 2018, the outstanding number of Loaned ADSs was 2,606,278. The Loaned ADSs must be returned to the Company by the earliest of (a) the maturity date of the Notes, November 1, 2022, (b) upon the Company’s election to terminate the ADS lending agreement at any time after the later of (x) the date on which the entire principal amount of the Notes ceases to be outstanding, and (y) the date on which the entire principal amount of any additional convertible securities that the Company has in writing consented to permit the ADS Borrower to hedge under the ADS lending agreement ceases to be outstanding, in each case, whether as a result of conversion, redemption, repurchase, cancellation or otherwise; and (c) the termination of the ADS lending agreement. The Company is not required to make any payment to the initial purchasers or ADS Borrower upon the return of the Loaned ADSs. The ADS Borrowers do not have the choice or option to pay cash in exchange for the return of the Loaned ADSs. No collateral is required to be posted for the Loaned ADSs. The initial purchasers are required to remit to the Company any dividends paid to the holders of the Loaned ADSs. An ADS Borrower has the ability to vote without restriction. However, the ADS Borrowers have agreed not to vote on the Loaned ADSs. In accordance with FASB ASC Sub-topic 470-20, the Company has accounted for the ADS lending agreement initially at fair value and recognized it as an issuance cost associated with the convertible debt offering. As a result, additional debt issuance costs of RMB26 (equivalently US$4 million) were recorded on the issuance date with a corresponding increase to additional paid-in-capital. This debt issuance costs have also been amortized from the date of issuance to the put date of Notes, using the effective interest method. In accordance with ASC Topic 470-20, although legally issued, the Loaned ADSs are not considered outstanding, and then excluded from basic and diluted earnings per share unless default of the ADS lending arrangement occurs, at which time the Loaned ADSs would be included in the basic and diluted earnings per share calculation. As of December 31, 2018, it is not probable that the ADS Borrower or the counterparty to the ADS lending arrangement will default. Capped Call Options In connection with the issuance of the Notes, the Company has entered into capped call option transactions with some of the initial purchasers or their affiliates (the "Option Counterparties") to reduce the potential dilution to existing shareholders of the Company upon conversion of the Notes. The cap price of the capped call transactions will initially be US$221.31 per ADS, subject to adjustment under the terms of the capped call transactions. The total premium paid by the Company for the capped call transactions was RMB177 (equivalently US$27 million) on the purchased date. The capped call option is classified in stockholders’ equity, recorded at the cost with no subsequent changes in fair value be recorded. |
ACCRUED EXPENSES AND OTHER CURR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 12 Months Ended |
Dec. 31, 2018 | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 10. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES As of December 31, 2017 2018 Payable for business acquisitions 118 39 Liabilites related to customer loyalty program 138 154 Payable to noncontrolling interest holders 87 107 Payable to franchisees 418 698 Other payables 264 351 Accrued rental, utilities and other accrued expenses 174 187 Deferred rent, current 50 71 Total 1,249 1,607 From time to time, the Group receives cash advances from noncontrolling interest holders of hotels that are not wholly owned by the Group. Such advances are non-interest bearing and are payable within one year. Payable to franchisees mainly represents room charges received on behalf of franchisees and are payable within one year. |
HOTEL OPERATING COSTS
HOTEL OPERATING COSTS | 12 Months Ended |
Dec. 31, 2018 | |
HOTEL OPERATING COSTS. | |
HOTEL OPERATING COSTS | 11. HOTEL OPERATING COSTS Hotel operating costs include all direct costs incurred in the operation of the leased and owned hotels, manachised and franchised hotels and consist of the following: Years Ended December 31, 2016 2017 2018 Rents 1,871 2,059 2,406 Utilities 346 366 399 Personnel costs 1,089 1,388 1,663 Depreciation and amortization 677 773 869 Consumable, food and beverage 495 551 673 Others 456 538 466 Total 4,934 5,675 6,476 |
PRE-OPENING EXPENSES
PRE-OPENING EXPENSES | 12 Months Ended |
Dec. 31, 2018 | |
PRE-OPENING EXPENSES | |
PRE-OPENING EXPENSES | 12. PRE-OPENING EXPENSES The Group expenses all costs incurred in connection with start-up activities, including pre-operating costs associated with new hotel facilities and costs incurred with the formation of the subsidiaries, such as organization costs. Pre-opening expenses primarily include rental expenses and employee costs incurred during the hotel pre-opening period. Years Ended December 31, 2016 2017 2018 Rents 67 192 221 Personnel costs 2 6 18 Others 3 8 16 Total 72 206 255 |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2018 | |
SHARE-BASED COMPENSATION | |
SHARE-BASED COMPENSATION | 13. SHARE-BASED COMPENSATION In February 2007, the Group adopted the 2007 Global Share Plan which allows the Group to offer incentive awards to employees, officers, directors and consultants or advisors (the “Participants”). Under the 2007 Global Share Plan, the Group may issue incentive awards to the Participants to purchase not more than 10,000,000 ordinary shares. In June 2007, the Group adopted the 2008 Global Share Plan which allows the Group to offer incentive awards to Participants to purchase up to 3,000,000 ordinary shares. In October 2008, the Group increased the maximum number of incentive awards available under the 2008 Global Share Plan to 7,000,000. In September 2009, the Group adopted the 2009 Share Incentive Plan which allows the Group to offer incentive awards to Participants. Under the 2009 Share Incentive Plan, the Group may issue incentive awards to purchase up to 3,000,000 ordinary shares. In August 2010, the Group increased the maximum number of incentive awards available under the 2009 Share Incentive Plan to 15,000,000. In March 2015, the Group increased the maximum number of incentive awards available under the 2009 Share Incentive Plan to 43,000,000. The 2007 and 2008 Global Share Plans and 2009 Share Incentive Plan (collectively, the “Incentive Award Plans”) contain the same terms and conditions. The incentive awards granted under the Incentive Award Plans typically have a maximum life of ten years and vest in typical ways as listed below: a.) Vest 50% on the second anniversary of the stated vesting commencement date with the remaining 50% vesting ratably over the following two years; b.) Vest over a period of ten years in equal yearly installments; As of December 31, 2018, the Group had granted 24,577,669 options and 23,795,090 nonvested restricted stocks. Share options No share options were granted during the years 2016, 2017 and 2018. The following table summarized the Group’s share option activity under the option plans: Weighted Average Number of Weighted Average Remaining Aggregate Intrinsic Options Exercise Price Contractual Life Value US$ Years US$'million Share options outstanding at January 1, 2018 2,044,724 2.12 Forfeited (32,019) 1.75 Exercised (876,715) 2.42 Share options outstanding at December 31, 2018 1,135,990 1.89 0.91 30 Share options vested or expected to vest at December 31, 2018 1,125,336 1.87 0.89 30 Share options exercisable at December 31, 2018 1,099,720 1.81 0.83 29 As of December 31, 2018, total unrecognized compensation expense related to unvested share-based compensation arrangements was immaterial, which is expected to be recognized over a weighted-average period of 1.10 years. During the years ended December 31, 2016, 2017 and 2018, 684,632, 609,224 and 876,715 options were exercised with an aggregate intrinsic value of RMB41, RMB77 and RMB194 respectively. Nonvested restricted stocks The fair value of nonvested restricted stock with service conditions or performance conditions is based on the fair market value of the underlying ordinary shares on the date of grant. In 2016 and 2018, the Group granted 1,876,975 and 661,973 nonvested restricted stocks, respectively to senior officers and managers, each was in ten tranches with performance conditions. Each tranche is accounted for as a separate award with the same grant date, its own service inception date and requisite service period. The share-based compensation cost is recognized for each vesting tranche during the respective service period based on the estimated performance conditions at the service inception date. The Group reassesses the performance condition at each reporting period for true up. For each tranche, 50% vests on the second anniversary of the vesting commencement date with the remaining 50% vesting ratably over the following two years. The following table summarized the Group’s nonvested restricted stock activity in 2018. Number of Restricted Weighted Average Grant Stocks Fair Value US$ Nonvested restricted stocks outstanding at January 1, 2018 12,492,570 5.86 Granted 1,708,980 27.51 Forfeited (253,323) 8.63 Vested (1,680,939) 5.75 Adjusted for performance conditions (170,672) 4.89 Nonvested restricted stocks outstanding at December 31, 2018 12,096,616 8.89 As of December 31, 2018, there was RMB621 in unrecognized compensation costs, net of estimated forfeitures, related to unvested restricted stocks, which is expected to be recognized over a weighted-average period of 4.18 years. The total fair value of nonvested restricted stocks vested in 2016, 2017 and 2018 was RMB123, RMB274 and RMB183, respectively. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 12 Months Ended |
Dec. 31, 2018 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | 14. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share for the years indicated: Years Ended December 31, 2016 2017 2018 Net income attributable to ordinary shareholders — basic 782 1,228 716 Eliminate the dilutive effect of interest expense of convertible senior notes — 5 40 Net income attributable to ordinary shareholders — diluted 782 1,233 756 Weighted average ordinary shares outstanding — basic 275,139,070 279,272,140 281,717,485 Incremental weighted-average ordinary shares from assumed exercise of share options and nonvested restricted stocks using the treasury stock method 7,750,424 12,202,369 11,463,212 Dilutive effect of convertible senior notes — 1,599,469 10,425,112 Weighted average ordinary shares outstanding — diluted 282,889,494 293,073,978 303,605,809 Basic earnings per share 2.84 4.40 2.54 Diluted earnings per share 2.76 4.21 2.49 For the years ended December 31, 2016, 2017 and 2018, the Group had securities which could potentially dilute basic earnings per share in the future, but which were excluded from the computation of diluted earnings per share as their effects would have been anti-dilutive. Such outstanding securities consist of the following: Years Ended December 31, 2016 2017 2018 Outstanding employee options and nonvested restricted stocks — — 530,009 |
CASH DIVIDEND
CASH DIVIDEND | 12 Months Ended |
Dec. 31, 2018 | |
CASH DIVIDEND | |
CASH DIVIDEND | 15 . Cash Dividend On October 23, 2017, the Group approved and declared a cash dividend of US$0.16 per ordinary share on its outstanding shares as of the close of trading on December 15, 2017. Such dividend of RMB295 was recorded as a reduction against retained earnings, and the dividend of RMB11 attributable to ADS issued under the ADS lending arrangement was recorded as a receivable in other current assets as of December 31, 2017 and had been received in January 2018. On December 13, 2018, the Group approved and declared a cash dividend of US$0.34 per ordinary share on its outstanding shares as of the close of trading on January 2, 2019. Such dividend of RMB658 was recorded as dividends payable as of December 31, 2018, and fully paid in January 2019. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2018 | |
INCOME TAXES | |
INCOME TAXES | 16. INCOME TAXES Cayman Islands Under the current laws of the Cayman Islands, the Company, China Lodging Investment Limited, City Home Group Limited and CLG Special Investments Limited are not subject to tax on income or capital gain. Hong Kong China Lodging Holdings (HK) Limited, Starway Hotels (Hong Kong) Limited, IBIS China Investment Limited, ACL Greater China Limited, TAHM Investment Limited, City Home Investment Limited, Orange Hotel Hong Kong Limited, Huazhu Investment I Limited and Huazhu Investment II Limited are subject to Hong Kong profit tax at a rate of 16.5%. Singapore China Lodging Holdings Singapore Pte. Ltd. is subject to Singapore corporate income tax at a rate of 17% in 2016, 2017 and 2018. No Singapore profit tax has been provided as the Group has not had assessable profit that was earned in or derived from Singapore during the years presented. British Virgin Islands Under the current tax laws of the British Virgin Islands, Crystal Orange Hotel Holdings Limited is not subject to tax on income or capital gain. Seychelles Under the current tax laws of Seychelles, Sheen Step Group Limited is not subject to tax on income or capital gain. PRC Under the Law of the People’s Republic of China on Enterprise Income Tax (“EIT Law”), which was effective from January 1, 2008, domestically-owned enterprises and foreign-invested enterprises are subject to a uniform tax rate of 25%. Hanting Suzhou was entitled to a reduced tax rate of 15% as it was qualified as high and new tech enterprise. The high and new tech enterprise qualification was expired in September, 2017, resulting Hanting Suzhou subject to a uniform tax rate of 25% in 2017 and 2018. Jizhu Information and Technology (Shanghai) Co., Ltd. (“Jizhu Shanghai”), which once called Mengguang Information and Technology (Shanghai) Co., Ltd, is a recognized software development entity located in Shanghai of PRC. Jizhu Shanghai is entitled to a two-year exemption and three-year 50% reduction tax holiday starting from the first profit making year after absorbing all prior years’ tax losses, and has entered into the first tax profitable year in 2014. Therefore, it applied tax exemption from 2014 to 2015, and tax rate of 12.5% from 2016 to 2018. Tax expense (benefit) is comprised of the following: Years Ended December 31, 2016 2017 2018 Current Tax 253 436 660 Deferred Tax 26 (79) (91) Total 279 357 569 A reconciliation between the effective income tax rate and the PRC statutory income tax rate is as follows: Years Ended December 31, 2016 2017 2018 PRC statutory tax rate 25 % 25 % 25 % Tax effect of non-deductible expenses and non-taxable income in determining taxable profit 3 % 1 % 15 % Effect of different tax rate of group entities operating in other jurisdictions (1) % 1 % 4 % Effect of change in valuation allowance 1 % — (1) % Effect of tax holiday (3) % (1) % (3) % Effect of cash dividends 3 % (1) % 5 % Effect of disposal of subsidiary (1) % — 1 % Effect of excess tax benefit of rewards — (3) % (5) % Effective tax rate 27 % 22 % 41 % The aggregate amount and per share effect of the tax holidays are as follows: Years Ended December 31, 2016 2017 2018 Aggregate amount 27 24 31 Per share effect—basic 0.10 0.09 0.11 Per share effect—diluted 0.10 0.08 0.10 The principal components of the Group’s deferred income tax assets and liabilities as of December 31, 2017 and 2018 are as follows: As of December 31, 2017 2018 Deferred tax assets: Net loss carryforward 140 181 Deferred revenue 159 186 Deferred rent 9 5 Long-term assets 130 149 Bad debt provision 4 6 Liabilities related to customer loyalty program 37 37 Accrued payroll 14 16 Other accrued expenses 21 14 Share-based compensation 13 17 Others 2 1 Valuation allowance (123) (107) Total deferred tax assets 406 505 Deferred tax liabilities: Favorable lease, building and land use rights-fair value adjustment 399 447 Capitalized interest 3 3 Unrealized gain for investment 7 7 Others 13 18 Total deferred tax liabilities 422 475 For the years ended December 31, 2017 and 2018, valuation allowance of RMB60 and RMB36 were provided, respectively, RMB3 and nil were added due to acquisition, respectively, RMB47 and RMB43 were reversed, respectively, and RMB8 and RMB9 were written off, respectively. The Group considers positive and negative evidence to determine whether some portion or all of the deferred tax assets will more likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carryforward periods, the Group’s experience with tax attributes expiring unused and tax planning alternatives. Valuation allowances have been established for deferred tax assets based on a more likely than not threshold. The Group’s ability to realize deferred tax assets depends on its ability to generate sufficient taxable income within the carryforward periods provided for in the tax law. As of December 31, 2018, the Group had tax loss carryforwards of RMB722, which will expire between 2019 and 2023 if not used. The Group determines whether or not a tax position is “more-likely-than-not” of being sustained upon audit based solely on the technical merits of the position. At December 31, 2017 and 2018, the Group had recorded liabilities for uncertain tax benefit of approximately RMB26 and RMB14 associated with the interests on intercompany loans, respectively. No interest or penalty expense was recorded for the years ended December 31, 2016, 2017 and 2018. The Group does not anticipate any significant changes to its liability for unrecognized tax benefits within the next 12 months. Years Ended December 31, 2016 2017 2018 Balance at January 1 15 20 26 Addition for tax positions 5 6 (12) Balance at December 31 20 26 14 In accordance with the EIT Law, dividends, which arise from profits of foreign invested enterprises (“FIEs”) earned after January 1, 2008, are subject to a 10% withholding income tax. If there is a favorable tax treaty between mainland China and the jurisdiction of the foreign holding company, the income tax rate may be reduced. For example, holding companies in Hong Kong that are also tax residents in Hong Kong are eligible for a 5% withholding tax on dividends under the Tax Memorandum between China and the Hong Kong Special Administrative Region if the holding company is the beneficial owner of the dividends. Under applicable accounting principles, a deferred tax liability should be recorded for taxable temporary differences attributable to the excess of financial reporting basis over tax basis in a domestic subsidiary. In 2018, the Group revised its dividend policy, and going forward the Group plans to maintain a moderate dividend distribution of approximately US$100 million a year from current year net income starting from 2018. In 2018, to facilitate the Company's declaration of a cash dividend, PRC dividend withholding tax of RMB34 was accrued. As of December 31, 2018, the accrued PRC dividend withholding tax liability ending balance was RMB18. Other than these dividends distributions, the Group intends to indefinitely reinvest the remaining undistributed earnings of the Group’s PRC subsidiaries, and therefore, no additional provision for PRC dividend withholding tax was accrued. According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of income taxes is due to computational errors made by the taxpayer. The statute of limitations will be extended to five years under special circumstances, which are not clearly defined, but an underpayment of income tax liability exceeding RMB0.1 is specifically listed as a special circumstance. In the case of a transfer pricing related adjustment, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion. The Group’s PRC subsidiaries are therefore subject to examination by the PRC tax authorities from 2014 through 2018 on non-transfer pricing matters, and from 2009 through 2018 on transfer pricing matters. |
MAINLAND CHINA CONTRIBUTION PLA
MAINLAND CHINA CONTRIBUTION PLAN | 12 Months Ended |
Dec. 31, 2018 | |
MAINLAND CHINA CONTRIBUTION PLAN | |
MAINLAND CHINA CONTRIBUTION PLAN | 17. MAINLAND CHINA CONTRIBUTION PLAN Full time employees of the Group in the PRC participate in a government-mandated defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. PRC labor regulations require the Group to accrue for these benefits based on a certain percentage of the employees’ salaries. The total contribution for such employee benefits were RMB213, RMB264 and RMB321 for the years ended December 31, 2016, 2017 and 2018, respectively. The Group has no ongoing obligation to its employees subsequent to its contributions to the PRC plan. |
RESTRICTED NET ASSETS
RESTRICTED NET ASSETS | 12 Months Ended |
Dec. 31, 2018 | |
RESTRICTED NET ASSETS | |
RESTRICTED NET ASSETS | 18. RESTRICTED NET ASSETS Pursuant to laws applicable to entities incorporated in the PRC, the subsidiaries of the Group in the PRC must make appropriations from after-tax profit to non-distributable reserve funds. These reserve funds include one or more of the following: (i) a general reserve, (ii) an enterprise expansion fund and (iii) a staff bonus and welfare fund. Subject to certain cumulative limits, the general reserve fund requires annual appropriation of 10% of after tax profit (as determined under accounting principles generally accepted in the PRC at each year-end) until the accumulative amount of such reserve fund reaches 50% of their registered capital; the other fund appropriations are at the subsidiaries’ discretion. These reserve funds can only be used for specific purposes of offsetting future losses, enterprise expansion and staff bonus and welfare and are not distributable as cash dividends and amounted to RMB277, RMB379 and RMB502 as of December 31, 2016, 2017 and 2018, respectively. In addition, due to restrictions on the distribution of share capital from the Company’s PRC subsidiaries, the PRC subsidiaries share capital of RMB2,777 at December 31, 2018 is considered restricted. As a result of these PRC laws and regulations, as of December 31, 2018, approximately RMB3,279 is not available for distribution to the Company by its PRC subsidiaries in the form of dividends, loans or advances. |
RELATED PARTY TRANSACTIONS AND
RELATED PARTY TRANSACTIONS AND BALANCES | 12 Months Ended |
Dec. 31, 2018 | |
RELATED PARTY TRANSACTIONS AND BALANCES | |
RELATED PARTY TRANSACTIONS AND BALANCES | 19. RELATED PARTY TRANSACTIONS AND BALANCES Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities. The following entities are considered to be related parties to the Group. The related parties mainly act as service providers and service recipients to the Group. The Group is not obligated to provide any type of financial support to these related parties. Related Party Nature of the Party Relationship with the Group Ctrip.com International, Ltd. (“Ctrip”) Online travel services provider Mr. Qi Ji is a director Sheen Star Group Limited (“Sheen Star”) Investment holding company Equity method investee of the Group, controlled by Mr. Qi Ji Accor Hotels (“Accor”) Hotel Group Shareholder of the Group China Cjia Group Limited (“Cjia Group”) Apartment Management Group Equity method investee of the Group Shanghai CREATER Industrial Co., Ltd. (“CREATER”) Staged office space company Equity method investee of the Group Shenzhen Hanmo Investment Fund Partnership LLP (“Hanmo”) Hotel related fund Equity method investee of the Group China Hospitality JV, Ltd. (“China Hospitality JV”) Property management company Equity method investee of the Group (a) Related party balances Amounts due from related parties were mainly comprised of shareholder loans to Sheen Star, CREATER, Cjia Group, and Hanmo, which are short-term in nature and mainly payable on demand, and receivable for service fee from Accor, service fee and room charges withheld by Ctrip. As of December 31, 2017 2018 Sheen Star 39 44 CREATER 27 40 Ctrip 32 34 Cjia Group 15 23 Hanmo — 22 Accor 2 2 Others 3 11 Total 118 176 Amounts due to related parties were mainly comprised of payables for brand use fee, reservation fee and other service fee to Ctrip, and Accor, and cash received on behalf of Cjia Group and China Hospitality JV, which are short-term in nature and payable on demand. As of December 31, 2017 2018 Ctrip 29 25 China Hospitality JV — 25 Accor 7 8 Cjia Group — 7 Others 1 10 Total 37 75 (b) Related party transactions During the years ended December 31, 2016, 2017 and 2018, significant related party transactions were as follows: Years Ended December 31, 2016 2017 2018 Commission expenses to Ctrip 77 61 Lease expenses to Ctrip — — 18 Brand use fee, reservation fee and other related service fee to Accor 6 11 18 Marketing and training fee from Ctrip 13 24 12 Service fee from Accor 4 8 14 Service fee from China Hospitality JV — — 10 Service fee from Sheen Star — — 2 Goods sold and service provided to Cjia Group 0 8 30 Interest income from Sheen Star 2 — — Interest income from Hanmo — — 7 Interest income from CREATER — — 10 Loan payment to Sheen Star 35 — — Loan payment to Cjia Group — 85 — Loan payment to CREATER — 27 — Loan from Cjia Group — — 103 In 2016, the Group sold its subsidiary Chengjia Hotel Management Co., Ltd. to Cjia for consideration of RMB10. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2018 | |
COMMITMENTS AND CONTINGENCIES. | |
COMMITMENTS AND CONTINGENCIES | 20. COMMITMENTS AND CONTINGENCIES (a) Operating lease commitments The Group has entered into lease agreements for certain hotels which it operates. Such leases are classified as operating leases. Future minimum lease payments under non-cancellable operating lease agreements at December 31, 2018 were as follows: Year Ending December 31, 2019 2,854 2020 2,863 2021 2,777 2022 2,661 2023 2,548 Thereafter 15,669 Total 29,372 (b) Purchase Commitments As of December 31, 2018, the Group’s commitments related to leasehold improvements and installation of equipment for hotel operations was RMB91, which is expected to be incurred within one year. (c) Contingencies The Group is subject to periodic legal or administrative proceedings in the ordinary course of our business. As of December 31, 2016, the Group had several cases outstanding, including lease contract terminations and disputes, and construction contract disputes. The Group believed it was probable that settlement liabilities would be involved, and therefore accrued contingencies of RMB66 in other operating expense based on the terms of contract, laws and regulations and latest negotiation result. For the year ended December 31, 2017, the Group had settled several cases and undergoes new cases. Therefore, the Group reversed contingencies of RMB36 and further accrued RMB11 based on latest negotiation or arbitration result with the remaining accrued contingencies of RMB41. For the year ended December 31, 2018, the Group had settled several cases and undergoes new cases. Therefore, the Group reversed contingencies of RMB25 and further accrued RMB4 based on latest negotiation or arbitration result with the remaining accrued contingencies of RMB20. The Group does not believe that any other currently pending legal or administrative proceeding to which the Group is a party will have a material adverse effect on the financial statements. |
SCHEDULE I FINANCIAL INFORMATIO
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY | 12 Months Ended |
Dec. 31, 2018 | |
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY | |
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY | ADDITIONAL FINANCIAL INFORMATION — FINANCIAL STATEMENTS SCHEDULE I HUAZHU GROUP LIMITED FINANCIAL INFORMATION FOR PARENT COMPANY BALANCE SHEETS As of December 31, 2017 2018 2018 US$'million Assets Current assets: Cash and cash equivalents 557 695 101 Short-term investments 130 89 13 Other current assets 37 29 4 Total current assets 724 813 118 Other assets 33 11 2 Investment in subsidiaries 10,062 13,454 1,957 Long-term investments 780 — — Total assets 11,599 14,278 2,077 Liabilities and equity Current liabilities: Short-term debt 131 — — Dividends payable — 658 96 Amount due to related parties 313 477 69 Accrued expenses and other current liabilities 35 54 8 Total current liabilities 479 1,189 173 Long-term debt 4,922 6,915 1,006 Total liabilities 5,401 8,104 1,179 Equity: Ordinary shares(US$0.0001 par value per share; 8,000,000,000 shares authorized; 294,040,234 and 296,597,888 shares issued as of December 31, 2017 and 2018, and 280,518,358 and 283,076,012 shares outstanding as of December 31, 2017 and 2018, respectively) 0 0 0 Treasury shares (3,096,764 and 3,096,764 shares as of December 31 2017 and 2018, respectively) (107) (107) (16) Additional paid-in capital 3,624 3,713 540 Retained earnings 2,513 2,610 380 Accumulated other comprehensive income (loss) 168 (42) (6) Total equity 6,198 6,174 898 Total liabilities and equity 11,599 14,278 2,077 ADDITIONAL FINANCIAL INFORMATION - FINANCIAL STATEMENTS SCHEDULE I HUAZHU GROUP LIMITED FINANCIAL INFORMATION FOR PARENT COMPANY STATEMENTS OF COMPREHENSIVE INCOME millions, unless otherwise stated) Years Ended December 31, 2016 2017 2018 2018 US$'million Operating costs and expenses: General and administrative expenses 60 69 89 13 Total operating costs and expenses 60 69 89 13 Loss from operations (60) (69) (89) (13) Interest income 0 2 1 0 Interest expense 10 87 198 29 Foreign exchange gain (loss) 15 (14) 17 2 Other income, net 70 7 50 7 Unrealized gain (loss) from fair value changes of equity securities — 35 (45) (6) Income in investment in subsidiaries 767 1,354 980 143 Net income attributable to Huazhu Group Limited 782 1,228 716 104 Other comprehensive income Unrealized securities holding gains (losses), net of tax of (2), (8) and nil for 2016, 2017 and 2018, respectively 16 1 — — Reclassification of realized gains to net income, net of tax (68) (5) — — Foreign currency translation adjustments, net of tax of nil for 2016, 2017 and 2018, respectively (13) 177 (169) (25) Comprehensive income 717 1,401 547 79 ADDITIONAL FINANCIAL INFORMATION - FINANCIAL STATEMENTS SCHEDULE I HUAZHU GROUP LIMITED FINANCIAL INFORMATION FOR PARENT COMPANY STATEMENTS OF CASH FLOWS Years Ended December 31, 2016 2017 2018 2018 US$'million Operating activities: Net income 782 1,228 716 104 Adjustments to reconcile net income to net cash used in operating activities: Share-based compensation 55 66 83 12 Income in investment in subsidiaries (767) (1,354) (980) (143) Investment (income) loss (51) (41) 46 7 Amortization of issuance cost of convertible notes — 3 28 4 Changes in operating assets and liabilities: Other current assets 1 (26) 8 1 Other assets — (33) 21 3 Accrued expenses and other current liabilities (17) 26 18 3 Net cash provided by (used in) operating activities 3 (131) (60) (9) Investing activities: Investment in subsidiaries — (3,250) — — Receipt of investment in subsidiaries 236 — 2,121 309 Purchase of long-term investments (48) (760) (3,782) (550) Proceeds from sale of long-term investments 4 58 — — Purchase of short-term investments — (96) — — Proceeds from sale of short-term investment 337 — — — Net cash provided by (used in) investing activities 529 (4,048) (1,661) (241) Financing activities: Net proceeds from issuance of ordinary shares upon exercise of option 12 9 14 2 Proceeds of advances from subsidiaries 0 90 149 22 Proceeds from short-term bank borrowings 282 136 — — Repayment of short-term bank borrowings (333) (294) (128) (19) Proceeds from long-term bank borrowings — 3,633 2,409 350 Repayment of long-term bank borrowings — (1,651) (786) (114) Proceeds from issuance of convertible senior notes, net of issuance cost and capped call option — 2,925 — — Debt financing costs paid — (10) — — Proceeds from ADS lending — 0 — — Dividends paid (276) (306) — — Net cash (used in) provided by financing activities (315) 4,532 1,658 241 Effect of exchange rate changes on cash and cash equivalents 36 (170) 201 29 Net increase in cash and cash equivalents, and restricted cash 253 183 138 20 Cash, cash equivalents and restricted cash at the beginning of the year 121 374 557 81 Cash, cash equivalents and restricted cash at the end of the year 374 557 695 101 The accompanying notes are an integral part of these consolidated financial statements ADDITIONAL FINANCIAL INFORMATION - FINANCIAL STATEMENTS SCHEDULE I HUAZHU GROUP LIMITED FINANCIAL INFORMATION FOR PARENT COMPANY Note to Schedule I Schedule I has been provided pursuant to the requirements of Rule 12-04(a) and 5-04-(c) of Regulation S-X, which require condensed financial information as to the financial position, change in financial position and results of operations of a parent company as of the same dates and for the same periods for which audited consolidated financial statements have been presented when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year. The condensed financial information has been prepared using the same accounting policies as set out in the accompanying consolidated financial statements except that the equity method has been used to account for investments in its subsidiaries. Such investments in subsidiaries are presented on the balance sheets as investment in subsidiaries and the profit of the subsidiaries is presented as income in investment in subsidiaries. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The footnote disclosures contain supplemental information relating to the operations of the Company and, as such, these statements should be read in conjunction with the notes to the accompanying consolidated financial statements. As of December 31, 2018, there are no material contingencies, mandatory dividend, and significant provision of long-term obligation or guarantee of the Company, except for those which have separately disclosed in the consolidated financial statements. |
SCHEDULE II VALUATION AND QUALI
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS | 12 Months Ended |
Dec. 31, 2018 | |
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS | |
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS | ADDITION INFORMATION — FINANCIAL STATEMENTS SCHEDULE II HUAZHU GROUP LIMITED This financial information has been prepared in conformity with accounting principles generally accepted in the United States. VALUATION AND QUALIFYING ACCOUNT S Balance at Beginning of Charge to Costs and Addition Due to Charge Taken Balance at Year Expenses Acquisition Against Allowance Write off End of Year (Renminbi in millions) Allowance for doubtful accounts of accounts receivables and other receivables: 2016 6 1 7 — (2) 12 2017 12 2 — — (3) 11 2018 11 10 4 — (8) 17 Valuation allowance for deferred tax assets 2016 93 55 12 (17) (28) 115 2017 115 60 3 (47) (8) 123 2018 123 36 — (43) (9) 107 |
SUMMARY OF PRINCIPAL ACCOUNTI_2
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES | |
Basis of presentation | Basis of presentation The consolidated financial statements of the Group have been prepared in accordance with the accounting principles generally accepted in the United States of America (“US GAAP”). |
Basis of consolidation | Basis of consolidation The consolidated financial statements include the financial statements of the Company, its majority-owned subsidiaries and consolidated variable interest entities (the “VIEs”). All intercompany transactions and balances are eliminated on consolidation. |
Variable Interest Entities | Variable Interest Entities The Group evaluates the need to consolidate certain variable interest entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. The Company is deemed as the primary beneficiary of and consolidates variable interest entities when the Company has the power to direct the activities that most significantly impact the economic success of the entities and effectively assumes the obligation to absorb losses and has the rights to receive benefits that are potentially significant to the entities. As of December 31, 2017 and 2018, the Group consolidated two and six entities under VIE model, and the assets and liabilities of the consolidated VIEs are immaterial to the Group's consolidated financial statements. The Group evaluates its business activities and arrangements with the entities that operate the manachised and franchised hotels and the funds that it serves as general partner or fund manager to identify potential variable interest entities. Generally, these entities that operate the manachised and franchised hotels qualify for the business scope exception, therefore consolidation is not appropriate under the variable interest entity consolidation guidance. For the disclosure of significant non-consolidated variable interest entities, see Note7 Investments. |
Use of estimates | Use of estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Group bases its estimates on historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant accounting estimates reflected in the Group’s consolidated financial statements include the useful lives and impairment of property and equipment and intangible assets, valuation allowance of deferred tax assets, purchase price allocation, impairment of goodwill, fair value measurement and impairment of investments, share-based compensation, estimates involved in the accounting for its customer loyalty program, and contingent liabilities. |
Cash and cash equivalents | Cash and cash equivalents Cash and cash equivalents consist of cash on hand and demand deposits, which are unrestricted as to withdrawal and use, and which have original maturities of three months or less when purchased. |
Restricted cash | Restricted cash Restricted cash mainly represents deposits used as security against borrowings and deposits restricted due to contract disputes or lawsuit. |
Investments | Investments Investments represent equity-method investments, equity investments with readily determinable fair values, equity investments without readily determinable fair values and available-for-sale debt securities. The Group accounts for equity investment in entities with significant influence under equity-method accounting. Under this method, the Group’s pro rata share of income (loss) from investment is recognized in the consolidated statements of comprehensive income. Dividends received reduce the carrying amount of the investment. When the Group’s share of loss in an equity-method investee equals or exceeds its carrying value of the investment in that entity, the Group continues to report its share of equity method losses in the statements of comprehensive income to the extent and as an adjustment to the carrying amount of its other investments in the investee. Equity-method investment is reviewed for impairment by assessing if the decline in market value of the investment below the carrying value is other-than-temporary. In making this determination, factors are evaluated in determining whether a loss in value should be recognized. These include consideration of the intent and ability of the Group to hold investment and the ability of the investee to sustain an earnings capacity, justifying the carrying amount of the investment. Impairment losses are recognized in other expense when a decline in value is deemed to be other-than- temporary. Investments in equity securities that have readily determinable fair values (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) are measured at fair value, with unrealized gains and losses from fair value changes recognized in net income in the consolidated statements of comprehensive income. Investments in equity securities without readily determinable fair values are measured at cost minus impairment adjusted by observable price changes in orderly transactions for the identical or a similar investment of the same issuer. These investments are measured at fair value on a nonrecurring basis when there are events or changes in circumstances that may have a significant adverse effect. An impairment loss is recognized in the consolidated statements of comprehensive income equal to the amount by which the carrying value exceeds the fair value of the investment. Prior to the fiscal year of 2018, these investments were accounted for using the cost method of accounting, measured at cost less other-than-temporary impairment. Debt securities that the company has no intent to hold till maturity or may sell the security in response to the changes in economic conditions are classified as available-for-sale debt securities. Available-for-sale debt securities are reported at fair value, with unrealized gains and losses (other than impairment losses) recognized in accumulated other comprehensive income or loss. Realized gains and losses on debt securities are recognized in the net income in the consolidated statements of comprehensive income. The Group monitors its investments for other-than-temporary impairment by considering factors including, but not limited to, current economic and market conditions, the operating performance of the companies including current earnings trends and other company-specific information. As a result of the impairment analysis, the Group recorded an impairment of RMB3, nil and nil in 2016, 2017 and 2018, respectively. |
Accounts receivable, net of allowance | Accounts receivable, net of allowance Accounts receivable mainly consist of franchise fee receivables, amounts due from corporate customers, travel agents, hotel guests and credit card receivables, which are recognized and carried at the original invoice amount less an allowance for doubtful accounts. The Group establishes an allowance for doubtful accounts primarily based on the age of the receivables and factors surrounding the credit risk of specific customers. |
Loan receivables | Loan receivables Loan receivables are measured at amortized cost with interest accrued based on the contract rate. The Group classified loan receivables as long-term or short-term investments according to their contractual maturity or expected holding time. The Group evaluates the credit risk associated with the loans, and estimates the cash flow expected to be collected over the life of loans on an individual basis based on the Group’s past experiences, the borrowers’ financial position, their financial performance and their ability to continue to generate sufficient cash flows. A valuation allowance will be established for the loans unable to collect. No valuation allowance has been recorded in 2016, 2017 or 2018 based on the result of the assessment. The Group entered into entrusted loan agreements with certain franchisees with the typical terms to be two to three years and annual interest rates ranging from 8.0% to 8.5%, and with other un-related third-parties with the annual interest rates ranging from 6% to 12%. |
Inventories | Inventories Inventories mainly consist of small appliances, bedding and daily consumables. Small appliances and bedding for new hotels opened are stated at cost, less accumulated amortization, and are amortized over their estimated useful lives, generally one year, from the time they are put into use. Daily consumables and beddings replacement are expensed when used. |
Property and equipment, net | Property and equipment, net Property and equipment, net are stated at cost less accumulated depreciation and amortization. The renovations, betterments and interest cost incurred during construction are capitalized. Depreciation and amortization of property and equipment is provided using the straight line method over their expected useful lives. The expected useful lives are as follows: Leasehold improvements Shorter of the lease term or their estimated useful lives Buildings 20-40 years Furniture, fixtures and equipment 3-10 years Motor vehicles 5 years Construction in progress represents leasehold improvements and property under construction or being installed and is stated at cost. Cost comprises original cost of property and equipment, installation, construction and other direct costs. Construction in progress is transferred to leasehold improvements and depreciation commences when the asset is ready for its intended use. Expenditures for repairs and maintenance are expensed as incurred. Gain or loss on disposal of property and equipment, if any, is recognized in the consolidated statements of comprehensive income as the difference between the net sales proceeds and the carrying amount of the underlying asset. |
Intangible assets, net and unfavorable lease | Intangible assets, net and unfavorable lease Intangible assets consist primarily of brand name, master brand agreement, non-compete agreements, franchise agreements and favorable leases acquired in business combinations and purchased software. Intangible assets acquired through business combinations are recognized as assets separate from goodwill if they satisfy either the “contractual-legal” or “separability” criterion. Intangible assets, including brand name, master brand agreement, non-compete agreements, franchise agreements and favorable lease agreements acquired from business combination are recognized and measured at fair value upon acquisition. Non-compete agreements, franchise agreements and favorable lease agreements are amortized over the expected useful life, remaining franchise contract terms and remaining operating lease terms respectively. Unfavorable lease agreements from business combination transactions are recognized as other long-term liabilities and are amortized over the remaining operating lease terms. Purchased software is stated at cost less accumulated amortization. Brand name is considered to have an indefinite life. Master brand agreement, acquired in Accor acquisition (Note 3), granted the Group certain franchise rights with initial term of 70 years, and can be renewed without substantial obstacles. As a result, the useful life is determined to be indefinite. The Group evaluates the brand name and master brand agreement each reporting period to determine whether events and circumstances continue to support an indefinite useful life. Impairment is tested annually or more frequently if events or changes in circumstances indicate that it might be impaired. The Group measures the impairment by comparing the fair value of brand name and master brand agreement with its carrying amount. If the carrying amount of brand name and master brand agreement exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess. The Group measures the fair value of the brand name under the relief-from-royalty method, the master brand agreement under the multi-period excess earnings method. Management performs its annual brand name and master brand agreement impairment test on November 30. |
Land use rights | Land use rights Land use rights, which are all located in PRC, are recorded at cost and amortized on a straight-line basis over the remaining term of the land certificates, between 30 to 50 years. Amortization expense of land use rights for the years ended December 31, 2016, 2017 and 2018 amounted to RMB4, RMB5 and RMB5, respectively. |
Impairment of long-lived assets | Impairment of long-lived assets The Group evaluates its long-lived assets and finite lived intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When these events occur, the Group measures impairment by comparing the carrying amount of the assets to future undiscounted net cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Group recognizes an impairment loss equal to the difference between the carrying amount and fair value of these assets. The Group performed a recoverability test of its long-lived assets associated with certain hotels due to the continued underperformance relative to the projected operating results, of which the carrying amount of the property and equipment exceed the future undiscounted net cash flows, and recognized an impairment loss of RMB151, RMB169 and RMB35 during the years ended December 31, 2016, 2017 and 2018, respectively. Fair value of the property and equipment was determined by the Group based on the income approach using the discounted cash flow associated with the underlying assets, which incorporated certain assumptions including projected hotels’ revenue, growth rates and projected operating costs based on current economic condition, expectation of management and projected trends of current operating results. |
Goodwill | Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the identifiable assets less liabilities acquired. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. The Group completes a two-step goodwill impairment test. The first step compares the fair values of each reporting unit to its carrying amount, including goodwill. A reporting unit is identified as a component for which discrete financial information is available and is regularly reviewed by management. All the acquired business has been migrated to the Group’s business, and the Group's management regularly reviews operation data including industrial metrics of revenue per available room, occupancy rate, and number of hotels by scale/brand, rather than discrete financial information for the purpose of performance evaluation and resource allocation at brand level. The Company concluded that it had only one reporting unit, and therefore the goodwill impairment testing was performed on consolidation level. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only performed for purposes of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or liabilities. An impairment loss is recognized in general and administrative expenses for any excess in the carrying value of goodwill over the implied fair value of goodwill. Management performs its annual goodwill impairment test on November 30. The Group had not recognized any goodwill impairment for years ended December 31, 2016, 2017 and 2018. |
Revenue recognition | Revenue recognition Revenue are primarily derived from products and services in leased and owned hotels, contracts of manachised and franchised hotels with third-party franchisees as well as activities other than the operation of hotel businesses. Leased and owned hotel revenues Leased and owned hotel revenues are primarily derived from the rental of rooms, food and beverage sales and other ancillary goods and services, including but not limited to souvenir, laundry, parking and conference reservation. Each of these products and services represents an individual performance obligation and, in exchange for these services, the Group receives fixed amounts based on published rates or negotiated contracts. Payment is due in full at the time when the services are rendered or the goods are provided. Room rental revenue is recognized on a daily basis when rooms are occupied. Food and beverage revenue and other goods and services revenue are recognized when they have been delivered or rendered to the guests as the respective performance obligations are satisfied. Manachised and franchised hotel revenues The manachised and franchised agreement contains the following promised services: · Intellectual Property ("IP") license grant the right to access the Group’s hotel system IP, including brand names. · Pre-opening services include providing services (e.g., install IT information system and provide access to purchase platform, help to obtain operational qualification, and help to recruit and train employees) to the franchisees to assist in preparing for the hotel opening. · System maintenance services include providing standardization hotel property management system (PMS), central reservation system (CRS) and other internet related services. · Hotel management services include providing day-to-day management services of the hotels for the franchisees. The promises to provide pre-opening services and system maintenance services are not distinct performance obligation because they are attendant to the license of IP. Therefore, the promises to provide pre-opening services and system maintenance services are combined with the license of IP to form a single performance obligation. Hotel management services forms a single distinct performance obligation. Manachised and franchised hotel revenues are derived from franchise agreements where the franchisees are primarily required to pay (i) an initial one-time franchise fee, and (ii) continuing franchise fees, which mainly consist of (a) on-going management and franchise service fees, (b) central reservation system usage fees, system maintenance and support fees and (c) reimbursements for hotel manager fees. Initial one-time franchise fee, is typically fixed and collected upfront and recognized as revenue over the term of the franchise contract. The Group does not consider this advance consideration to include a significant financing component, since it is used to protect the Group from the franchisees failing to adequately complete some or all of its obligations under the contract. These fees are typically collected upfront and are recognized as revenue over the term of the franchise contract. On-going management and franchise service fees are generally calculated as a certain percentage of the room revenues of the franchised hotel. Generally, management and franchise service fees are due and payable on a monthly basis as services are provided and revenue is recognized over time as services are rendered. Central reservation system usage fees, other system maintenance and support fees are typically billed and collected monthly along with base management and franchise fees, and revenue is generally recognized as services are provided. Reimbursements for hotel manager fees , which cover the manachised hotel managers’ payroll, social welfare benefits and certain other out-of-pocket expenses that the Group incurs on behalf of the manachised hotels. The reimbursements are recognized over time within revenues for the reimbursement of costs incurred on behalf of manachised hotels. Other Revenues Other revenues are derived from activities other than the operation of hotel businesses, which mainly include revenues from Hua Zhu mall and the provision of IT products and services to hotels. Revenues from Hua Zhu mall are commissions charged from suppliers for goods sold through the platform and are recognized upon delivery of goods to end customers when its suppliers’ obligation is fulfilled. Revenues from IT products are recognized when goods are delivered and revenues from IT services are recognized when services are rendered. Loyalty Program Under the loyalty program the Group administers, members earn loyalty points that can be redeemed for future products and services. Points earned by loyalty program members represent a material right to free or discounted goods or services in the future. The loyalty program has one performance obligation that consists of marketing and managing the program and arranging for award redemptions by members. The Group is responsible for arranging for the redemption of points, but the Group does not directly fulfill the redemption obligation except at leased and owned hotels. Therefore, the Group is the agent with respect to this performance obligation for manachised and franchised hotels, and is the principal with respect to leased and owned hotels. For leased and owned hotels, a portion of the leased and owned revenues is deferred until a member redeems points. The amount of revenue the Group recognize upon point redemption is impacted by the estimate of the “breakage” for points that members will never redeem in the Group's owned and leased hotels. For manachised and franchised hotels, the portion of revenue deferred by manachised and franchised hotels are collected by the Group which will be refunded upon redemption of points at manachised and franchised hotels. The estimated breakage for points earned in manachised and franchised hotels are recognized as manachised and franchised revenue for each period. The Group estimates breakage based on the Group's historical experience and expectations of future member behavior and will true up the estimated breakage at end of each period. Membership fees from the Group’s customer loyalty program are earned and recognized on a straight-line basis over the expected membership duration of the different membership levels. Such duration is estimated based on the Group’s and management’s experience and is adjusted on a periodic basis to reflect changes in membership retention. The membership duration is estimated to be two to five years which reflects the expected membership retention. Revenues recognized from membership fees were RMB145, RMB160 and RMB192 for the years ended December 31, 2016, 2017 and 2018, respectively, which amount were included in revenues from leased and owned hotel or revenues from manachised and franchised hotels depending on the type of hotels the membership was sold at. Contract Balances The Group's payments from customers are based on the billing terms established in contracts. Customer billings are classified as accounts receivable when the Group's right to consideration is unconditional. If the right to consideration is conditional on future performance under the contract, the balance is classified as a contract asset. Payments received in advance of performance under the contract are classified as current or non-current contract liabilities on the Group's consolidated balance sheets and are recognized as revenue as the Group performs under the contract. |
PRC Value-Added Taxes and surcharges | PRC Value-Added Taxes and surcharges Starting from May 2016, the accommodation services of the Group are subject to 6% of Value-Added Taxes. The Group is subject to education surtax and urban maintenance and construction tax, on the services provided in the PRC. |
Advertising and promotional expenses | Advertising and promotional expenses Advertising related expenses, including promotion expenses and production costs of marketing materials, are charged to the consolidated statements of comprehensive income as incurred, and amounted to RMB65, RMB91 and RMB103 for the years ended December 31, 2016, 2017 and 2018, respectively. |
Government grants | Government grants Government grants represent cash received by the Group in the PRC from local governments as incentives for investing in certain local districts, and are typically granted based on the amount of investments the Group made as well as income generated by the Group in such districts. Such subsidies allow the Group full discretion to utilize the funds and are used by the Group for general corporate purposes. The local governments have final discretion as to whether the Group has met all criteria to be entitled to the subsidies. Normally, the Group does not receive written confirmation from local governments indicating the approval of the cash subsidy before cash is received, and therefore cash subsidies are recognized when received and when all the conditions for their receipts have been satisfied. Government grants recognized were RMB83, RMB55 and RMB106 for the years ended December 31, 2016, 2017 and 2018, respectively, which were recorded as other operating income. |
Leases | Leases A lease of which substantially all the benefits and risks incidental to ownership remain with the lessor is classified as an operating lease. All leases of the Group are currently classified as operating leases. When a lease contains rent holidays or requires fixed escalations of the minimum lease payments, the Group records the total rental expense on a straight-line basis over the initial lease term and the difference between the straight-line rental expense and cash payment under the lease is recorded as deferred rent. As of December 31, 2017 and 2018, deferred rent of RMB50 and RMB71 were recorded as other current liabilities and RMB1,380 and RMB1,507 were recorded as long-term liabilities, respectively. |
Income taxes | Income taxes Current income taxes are provided for in accordance with the relevant statutory tax laws and regulations. Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. Net operating losses are carried forward and credited by applying enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of the Group, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. |
Foreign currency translation | Foreign currency translation The reporting currency of the Group is the Renminbi (“RMB”). The functional currency of the Company is the United States dollar (“US dollar”). Monetary assets and liabilities denominated in currencies other than the functional currency are translated into functional currency at the rates of exchange ruling at the balance sheet date. Transactions in currencies other than the functional currency during the year are converted into the functional currency at the applicable rates of exchange prevailing on the day transactions occurred. Transaction gains and losses are recognized in the statements of comprehensive income. Assets and liabilities are translated into RMB at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange rates and revenues, expenses, gains and losses are translated using the average rate for the year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of comprehensive income. The financial records of the Group’s subsidiaries are maintained in local currencies, which are the functional currencies. |
Comprehensive income | Comprehensive income Comprehensive income includes all changes in equity except for those resulting from investments by owners and distributions to owners and is comprised of net income, foreign-currency translation adjustments and unrealized securities holding gains (losses) recognized before the adoption of ASU No. 2016-01. |
Concentration of credit risk | Concentration of credit risk Financial instruments that potentially expose the Group to concentration of credit risk consist primarily of cash and cash equivalents, restricted cash, short-term and long-term investments, loan receivables, amount due from related parties and accounts receivable. All of the Group’s cash and cash equivalents and restricted cash are held with financial institutions that Group management believes to be high credit quality. In addition, the Group’s investment policy limits its exposure to concentrations of credit risk and the Group’s short-term and long-term investments consist of equity investments in listing and private companies. The Group’s loan receivables are lent to entities with high credit quality. The Group conducts credit evaluations on its group and agency customers and generally does not require collateral or other security from such customers. The Group periodically evaluates the creditworthiness of the existing customers in determining an allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers. |
Fair value | Fair value The Group defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. The established fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs may be used to measure fair value include: Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The Group’s financial instruments include cash and cash equivalent, restricted cash, loan receivables current and non-current portion, receivables, payables, short-term debts, long-term debts. The carrying amounts of these short-term financial instruments approximates their fair value due to their short-term nature. The long-term debts and long-term loan receivables approximate their fair values, because the bearing interest rate approximates market interest rate, and market interest rates have not fluctuated significantly since the commencement of loan contracts signed. When available, the Group uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Group measures fair value using valuation techniques that use, when possible, current market-based or independently sourced market parameters, such as interest rates. As of December 31, 2017 and 2018, information about inputs into the fair value measurements of the Group’s assets and liabilities that are measured at fair value on a recurring basis in periods subsequent to their initial recognition is as follows: Fair Value Measurements at Reporting Date Using Quoted Prices in Active Significant Markets for Identical Significant Other Unobservable Years Ended Assets Observable Inputs Inputs December 31, Description Fair Value (Level 1) (Level 2) (Level 3) 2017 Equity securities with readily determinable fair value 1,037 1,037 — — 2017 Available-for-sale debt securities 346 — 346 — 2018 Equity securities with readily determinable fair value 4,111 4,111 — — 2018 Available-for-sale debt securities 320 — 320 — The following table presents the Group’s assets measured at fair value on a non-recurring basis for the years ended December 31, 2016, 2017 and 2018: Fair Value Measurements at Reporting Date Using Quoted Prices Significant Fair Value for Markets for Other Significant Total Years Ended Years Ended Assets Inputs Inputs Loss for December 31, Description December 31 (Level 1) (Level 2) (Level 3) the Year 2016 Property and equipment 21 — — 21 151 2016 Equity-method investments — — — — 3 2017 Property and equipment 52 — — 52 169 2018 Property and equipment 10 — — 10 35 As a result of reduced expectations of future cash flows from certain leased hotels, the Group determined that the hotels property and equipment with a carrying amount of RMB172 RMB221 and RMB45 was not fully recoverable and consequently recorded an impairment charge of RMB151, RMB169 and RMB35 for the years ended December 31, 2016, 2017 and 2018, respectively. As a result of the impairment assessment, the Group determined that the long term investment amount with a carrying amount of RMB3, nil and nil was impaired as a result of the impairment assessment for the years ended December 31, 2016, 2017 and 2018, respectively. Fair value of the property and equipment impairment testing was determined by the Group based on the income approach using the discounted cash flow associated with the underlying assets, which incorporated certain assumptions including projected hotels’ revenue, growth rates and projected operating costs based on current economic condition, expectation of management and projected trends of current operating results. As a result, the Group has determined that the majority of the inputs used to value its long-lived assets held and used and its reporting units are unobservable inputs that fall within Level 3 of the fair value hierarchy. The revenue growth rate and the discount rate were the significant unobservable input used in the fair value measurement, which are 4% and 20%, respectively, for the years ended December 31, 2016, 2017 and 2018, respectively. |
Share-based compensation | Share-based compensation The Group recognizes share-based compensation in the consolidated statements of comprehensive income based on the fair value of equity awards on the date of the grant, with compensation expenses recognized over the period in which the grantee is required to provide service to the Group in exchange for the equity award. Vesting of certain equity awards are based on the performance conditions for a period of time following the grant date. Share-based compensation expense is recognized according to the Group’s judgement of likely future performance and will be adjusted in future periods based on the actual performance. The share-based compensation expenses have been categorized as either hotel operating costs, general and administrative expenses or selling and marketing expenses, depending on the job functions of the grantees. For the years ended December 31, 2016, 2017 and 2018, the Group recognized share-based compensation expenses of RMB55, RMB66 and RMB83, respectively, which was classified as follows: Years Ended December 31, 2016 2017 2018 Hotel operating costs 13 20 27 Selling and marketing expenses 1 2 3 General and administrative expenses 41 44 53 Total 55 66 83 |
Earnings per share | Earnings per share Basic earnings per share is computed by dividing income attributable to holders of ordinary shares by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised or converted into ordinary shares, which consist of the ordinary shares issuable upon the conversion of the convertible senior notes (using the if-converted method) and ordinary shares issuable upon the exercise of stock options and vest of nonvested restricted stocks (using the treasury stock method). The loaned shares under the ADS lending agreement are excluded from both the basic and diluted earnings per share calculation unless default of the ADS lending arrangement occurs which the Group considered the possibility is remote. |
Segment reporting | Segment reporting The Group identifies a business as an operating segment if: i) it engages in business activities from which it may earn revenues and incur expenses; ii) its operating results are regularly reviewed by the Chief Operating Decision Maker (“CODM”) to make decisions about resources to be allocated to the segment and assess its performance; and iii) it has available discrete financial information. The Group’s chief operating decision maker has been identified as the chief executive officer. CODM regularly reviews the operation data, such as industrial metrics of revenue per available room, occupancy rate, and number of hotels by scale/brand, to assess the performance and allocate the resources at brand level. All the acquired business including Accor, Crystal Orange and Blossom Hill has been migrated to the Group’s business, and the Group operates and manages its business as a single segment. Therefore, the Group has one single operating segment. The Group primarily generates its revenues from customers in the PRC. Substantially all of the Group’s long-lived assets are located in the PRC. |
Treasury shares | Treasury shares Treasury shares represent shares repurchased by the Company that are no longer outstanding and are held by the Company. Treasury shares are accounted for under the cost method. As of December 31, 2018, under the repurchase plan, the Company had repurchased an aggregate of 3,096,764 ordinary shares on the open market for total cash consideration of RMB107. The repurchased shares were presented as “treasury shares” in shareholders’ equity on the Group’s consolidated balance sheets. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements Adopted Accounting Standards The Group adopted the ASU 2014-09 and all related ASUs (collectively, the "new revenue standards") on January 1, 2018 utilizing the full retrospective basis in the consolidated financial statements, which required the Group to adjust each prior reporting period presented. The adoption of new revenue standards impacted the timing of revenue recognition related to initial one-time franchise fee from upon the opening of hotels to over the term of the franchise contract. In addition, the adoption of new revenue standards also impacted the accounting of the loyalty program. Under previous guidance, the Group adopted the incremental cost model to account for customer loyalty program. The estimated incremental costs, net of the reimbursement received from the franchisees, were accrued and recorded as accruals for customer loyalty program as members accumulate points and were recognized as cost and expense in the accompanying consolidated statements of comprehensive income. Upon adoption of new revenue standards, loyalty program is considered a separate performance obligation and the consideration allocated to the loyalty program are recognized as revenue upon point redemption, net of any cost paid to the franchisees and other third parties. The impact of the changes made to the Group’s consolidated financial statements as a result of the adoption of new revenue standards was as follows: Years Ended December 31, 2016 2017 Effect of the Effect of the Adoption of Adoption of New Revenue As New Revenue As Reported Standards Adjusted As Reported Standards As Adjusted Revenues: Leased and owned hotels 5,212 27 5,239 6,343 (5) 6,338 Manachised and franchised hotels 1,412 7 1,419 1,787 64 1,851 Total revenues 6,655 34 6,689 8,170 59 8,229 Net revenues 6,539 34 6,573 8,170 59 8,229 Operating costs and expenses: Hotel operating costs 4,932 2 4,934 5,674 1 5,675 Selling and marketing expenses 146 63 209 215 70 285 Total operating costs and expenses 5,650 65 5,715 6,803 71 6,874 Income from operations 872 (31) 841 1,438 (12) 1,426 Income before income taxes 1,078 (31) 1,047 1,609 (12) 1,597 Income tax expense 287 (8) 279 360 (3) 357 Net income 797 (23) 774 1,237 (9) 1,228 Net income attributable to Huazhu Group Limited 805 (23) 782 1,237 (9) 1,228 Earnings per share: Basic 2.92 2.84 4.43 4.40 Diluted 2.84 2.76 4.24 4.21 December 31, 2017 Effect of the Adoption of New Revenue As Reported Standards As Adjusted Deferred tax assets 326 80 406 Total assets 17,428 80 17,508 Deferred revenue – current 832 111 943 Accrued expenses and other current liabilities 1,265 (16) 1,249 Deferred revenue - noncurrent 172 226 398 Total liabilities 10,953 321 11,274 Retained earnings 2,754 (241) 2,513 Total equity 6,475 (241) 6,234 Total liabilities and equity 17,428 80 17,508 In January 2016, the FASB issued ASU No. 2016-01, which improves the recognition and measurement of financial instruments. The new guidance requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income and separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Group adopted the ASU effective January 1, 2018. The unrealized gains (losses), net of tax, on the available-for- sale securities of RMB41 were reclassified from accumulated other comprehensive income to retained earnings as of January 1, 2018. In November, 2016, the FASB issued ASU 2016-18, which amends ASC 230 to add or clarify guidance on the classification and presentation of restricted cash in the statement of cash flows. Under ASU 2016-18, restricted cash and restricted cash equivalents are included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statements of cash flows. This ASU should be applied retrospectively and becomes effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, but early adoption is permitted. As a result of this update, restricted cash are included within cash and cash equivalents on the statements of consolidated cash flows. The Group adopted the ASU effective January 1, 2018. The balance of restricted cash of the Group of RMB361, RMB1 and RMB481 million are included within the beginning balance of cash, cash equivalents, and restricted cash on the statements of consolidated cash flows for the year ended December 31, 2016, 2017 and 2018, respectively. In June, 2018, the FASB issued ASU 2018-07, which simplifies aspects of share-based compensation issued to non-employees by making the guidance consistent with the accounting for employee share-based compensation. The ASU is effective for public business entities for fiscal years beginning after December 15, 2018. The Group's early adoption of this ASU in the year ended December 31, 2018 had no material impact on the Group's consolidated financial statements. Accounting Standards Not Yet Adopted In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities with certain practical expedients available on the balance sheet and disclosing key information about leasing arrangements. The accounting for lessors remains largely unchanged. Subsequent to ASU 2016-02, the FASB issued related ASUs, including ASU No. 2018-11 ("ASU 2018-11"), Leases (Topic 842): Targeted Improvements , which provides for another transition method in addition to the modified retrospective approach required by ASU 2016-02. This option allows entities to initially apply the new leases standard at the adoption date and recognize a cumulative adjustment to the opening balance of retained earnings in the period of adoption. The provisions of ASU 2016-02, and all related ASUs, are effective for interim periods and fiscal years beginning after December 15, 2018, with early adoption permitted. The Group expect to adopt ASU 2016-02 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). The Group expects material changes to its consolidated balance sheet. On January 1, 2019, the Group expects to recognize right-of-use lease assets in the range of RMB19 billion to RMB22 billion and related lease liabilities in the range of RMB20 billion to RMB23 billion for operating leases. As a result of adoption, the Group will reclassify from assets and liabilities approximately RMB1 billion, net to right-of-use lease assets which has been factored into the range above. The Group does not believe the standard will materially affect the consolidated statements of income or consolidated statements of cash flows. The standard will have no impact on the debt covenant compliance under the current agreements. In January 2017, the FASB issued ASU 2017-04, "Intangibles-Goodwill and Other" , which removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. As a result, under the ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, the ASU clarifies the requirements for excluding and allocating foreign currency translation adjustments to reporting units in connection with an entity’s testing of reporting units for goodwill impairment. The ASU also clarifies that an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. For public business entities, the ASU is effective prospectively for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Group is in the process of evaluating the impact on the consolidated financial statements. In June 2016, the FASB released Accounting Standards Update No.2016-13 ("ASU 2016-13"), Financial Instruments - Credit Losses (Topic 326) : Measurement of Credit Losses on Financial Instruments. ASU 2016-13 replaces the existing impairment model for most financial assets from an incurred loss impairment model to a current expected credit loss model, which requires an entity to recognize an impairment allowance equal to its current estimate of all contractual cash flows the entity does not expect to collect. ASU 2016-13 also requires credit losses relating to AFS debt securities to be recognized through an allowance for credit losses. The provisions of ASU 2016-13 are to be applied using a modified retrospective approach and are effective for interim periods and fiscal years beginning after December 15, 2019, with early adoption permitted. The Group is currently evaluating the impact of adopting ASU 2016-13. In August 2018, the FASB released Accounting Standards Update No. 2018-13 ("ASU 2018-13"), Fair Value Measurement (Topic 820) : Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements on fair value measurements. The provisions of ASU 2018-13 are to be applied using a prospective or retrospective approach, depending on the amendment, and are effective for interim periods and fiscal years beginning after December 15, 2019, with early adoption permitted. The Group is still evaluating the impact of adopting ASU 2018-13. In August 2018, the FASB released Accounting Standards Update No. 2018-15 ("ASU 2018-15"), Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) : Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The provisions of ASU 2018-15 are to be applied using a prospective or retrospective approach and are effective for interim periods and fiscal years beginning after December 15, 2019, with early adoption permitted. The Group is currently evaluating the impact of adopting ASU 2018-15. |
Translation into United States Dollars | Translation into United States Dollars The financial statements of the Group are stated in RMB. Translations of amounts from RMB into United States dollars are solely for the convenience of the reader and were calculated at the rate of US$1 = RMB6.8755, on December 31, 2018, as set forth in H.10 statistical release of the Federal Reserve Board. The translation is not intended to imply that the RMB amounts could have been, or could be, converted, realized or settled into United States dollars at that rate on December 31, 2018, or at any other rate. |
SUMMARY OF PRINCIPAL ACCOUNTI_3
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES | |
Schedule of expected useful lives of property and equipment | Leasehold improvements Shorter of the lease term or their estimated useful lives Buildings 20-40 years Furniture, fixtures and equipment 3-10 years Motor vehicles 5 years |
Schedule of information about inputs into the fair value measurements of the assets and liabilities that are measured at fair value on a recurring basis in periods subsequent to their initial recognition | Fair Value Measurements at Reporting Date Using Quoted Prices in Active Significant Markets for Identical Significant Other Unobservable Years Ended Assets Observable Inputs Inputs December 31, Description Fair Value (Level 1) (Level 2) (Level 3) 2017 Equity securities with readily determinable fair value 1,037 1,037 — — 2017 Available-for-sale debt securities 346 — 346 — 2018 Equity securities with readily determinable fair value 4,111 4,111 — — 2018 Available-for-sale debt securities 320 — 320 — |
Schedule of assets measured at fair value on a non-recurring basis | Fair Value Measurements at Reporting Date Using Quoted Prices Significant Fair Value for Markets for Other Significant Total Years Ended Years Ended Assets Inputs Inputs Loss for December 31, Description December 31 (Level 1) (Level 2) (Level 3) the Year 2016 Property and equipment 21 — — 21 151 2016 Equity-method investments — — — — 3 2017 Property and equipment 52 — — 52 169 2018 Property and equipment 10 — — 10 35 |
Schedule of share-based compensation expense recognized | Years Ended December 31, 2016 2017 2018 Hotel operating costs 13 20 27 Selling and marketing expenses 1 2 3 General and administrative expenses 41 44 53 Total 55 66 83 |
Schedule of changes made to consolidated financial statements as a result of the adoption of new revenue standards | Years Ended December 31, 2016 2017 Effect of the Effect of the Adoption of Adoption of New Revenue As New Revenue As Reported Standards Adjusted As Reported Standards As Adjusted Revenues: Leased and owned hotels 5,212 27 5,239 6,343 (5) 6,338 Manachised and franchised hotels 1,412 7 1,419 1,787 64 1,851 Total revenues 6,655 34 6,689 8,170 59 8,229 Net revenues 6,539 34 6,573 8,170 59 8,229 Operating costs and expenses: Hotel operating costs 4,932 2 4,934 5,674 1 5,675 Selling and marketing expenses 146 63 209 215 70 285 Total operating costs and expenses 5,650 65 5,715 6,803 71 6,874 Income from operations 872 (31) 841 1,438 (12) 1,426 Income before income taxes 1,078 (31) 1,047 1,609 (12) 1,597 Income tax expense 287 (8) 279 360 (3) 357 Net income 797 (23) 774 1,237 (9) 1,228 Net income attributable to Huazhu Group Limited 805 (23) 782 1,237 (9) 1,228 Earnings per share: Basic 2.92 2.84 4.43 4.40 Diluted 2.84 2.76 4.24 4.21 December 31, 2017 Effect of the Adoption of New Revenue As Reported Standards As Adjusted Deferred tax assets 326 80 406 Total assets 17,428 80 17,508 Deferred revenue – current 832 111 943 Accrued expenses and other current liabilities 1,265 (16) 1,249 Deferred revenue - noncurrent 172 226 398 Total liabilities 10,953 321 11,274 Retained earnings 2,754 (241) 2,513 Total equity 6,475 (241) 6,234 Total liabilities and equity 17,428 80 17,508 |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accor | |
Acquisitions | |
Summary of fair values of the assets acquired and liabilities assumed | 2016 Amortization Period Current assets 207 Property and equipment 311 5-30 years Favorable leases 3 remaining lease terms Master brand agreement 192 Land use rights 150 remaining contracts terms Long-term investments 418 Goodwill 63 Other noncurrent assets 2 Current liabilities (39) Deferred tax liabilities (43) Total 1,264 |
Crystal Orange | |
Acquisitions | |
Summary of pro forma information | Years Ended December 31, 2016 2017 Pro forma net revenue 7,508 8,630 Pro forma net income 835 1,267 |
Summary of fair values of the assets acquired and liabilities assumed | 2017 Amortization Period Current assets 137 Property and equipment 842 3-20 years Favorable leases 91 remaining lease terms Franchise agreement 58 remaining contract terms Brand Name 1,142 indefinite life Goodwill 2,093 Other noncurrent assets 131 Current liabilities (222) Noncurrent liabilities (180) Deferred tax liabilities (323) Noncontrolling interest (4) Total 3,765 |
Blossom Hill | |
Acquisitions | |
Summary of pro forma information | Years Ended December 31, 2017 2018 Pro forma net revenue 8,331 10,124 Pro forma net income 1,214 701 |
Summary of fair values of the assets acquired and liabilities assumed | 2018 Amortization Period Current assets 84 Property and equipment 187 3-20 years Favorable leases 7 remaining lease terms Unfavorable leases (1) remaining lease terms Franchise agreement 25 remaining contract terms Brand name 170 indefinite life Goodwill 365 Land use rights 10 Deferred tax assets 12 Current liabilities (105) Noncurrent liabilities (18) Deferred tax liabilities (50) Noncontrolling interest (150) Total 536 |
REVENUE FROM CONTRACTS WITH C_2
REVENUE FROM CONTRACTS WITH CUSTOMERS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
REVENUE FROM CONTRACT WITH CUSTOMERS | |
Schedule of disaggregated revenues | Years Ended December 31, 2016 2017 2018 Room revenues 4,781 5,842 6,894 Food and beverage revenues 218 249 304 Others 240 247 272 Leased and owned hotels revenue 5,239 6,338 7,470 Initial one-time franchise fee 56 59 79 On-going management and service fees 589 759 983 Central reservation system usage fees, other system maintenance and support fees 308 436 630 Reimbursements for hotel manager fees 321 371 455 Other fees 145 226 380 Manachised and franchised hotels revenue 1,419 1,851 2,527 Other revenues 31 40 66 Total revenues 6,689 8,229 10,063 |
Schedule of contract balances | Our contract assets are insignificant at December 31, 2017 and December 31, 2018. As of December 31, 2017 2018 Current contract liabilities 943 1,005 Long-term contract liabilities 398 458 Total contract liabilities 1,341 1,463 The contract liabilities balances above, as of December 31, 2017 and 2018 were comprised of the following: As of December 31, 2017 2018 Initial fees received from franchisees owners 553 674 Cash received for membership fees and not recognized as revenue 305 357 Advances received from customers 425 374 Deferred revenue related to the loyalty program 58 58 Total 1,341 1,463 |
PROPERTY AND EQUIPMENT, NET (Ta
PROPERTY AND EQUIPMENT, NET (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
PROPERTY AND EQUIPMENT, NET | |
Schedule of property and equipment, net | As of December 31, 2017 2018 Cost: Buildings 247 247 Leasehold improvements 6,453 7,389 Furniture, fixtures and equipment 1,034 1,162 Motor vehicles 1 1 7,735 8,799 Less: Accumulated depreciation (3,707) (4,344) 4,028 4,455 Construction in progress 495 563 Property and equipment, net 4,523 5,018 |
INTANGIBLE ASSETS, NET AND UN_2
INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE | |
Schedule of intangible assets, net | As of December 31, 2017 2018 Intangible assets with indefinite life: Brand name (Note 3) 1,170 1,340 Master brand agreement (Note 3) 192 192 Intangible assets with definite life: Franchise agreements 70 95 Non-compete agreement Favorable lease agreements 256 278 Purchased software 65 69 Total 1,753 1,974 Less: Accumulated amortization (109) (140) Total 1,644 1,834 |
Schedule of unfavorable lease | As of December 31, 2017 2018 Unfavorable lease agreements 4 3 Less: Accumulated amortization (3) (2) Unfavorable lease agreements, net 1 1 |
Schedule of annual estimated amortization expense for intangible assets and unfavorable lease excluding brand name and master brand agreement | Amortization for Amortization for Intangible Assets Unfavorable Lease Net Amortization 2019 37 0 37 2020 35 0 35 2021 34 0 34 2022 32 0 32 2023 30 0 30 Thereafter 134 1 133 Total 302 1 301 |
INVESTMENTS (Tables)
INVESTMENTS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
INVESTMENTS. | |
Schedule of investments | As of December 31, 2017 2018 Equity securities with readily determinable fair values: Accor 780 3,816 Other marketable securities 257 295 Equity securities without readily determinable fair values: OYO 66 66 Mobike 67 — BJ GOOAGOO/GOOAGOO 60 — Blossom Hill (Note 3) 60 — Other equity securities without readily determinable fair values 103 113 Equity-method investments: AAPC LUB 478 461 Hotel related funds 56 503 Shared office management entities 148 111 China Young 41 34 Cjia/Cjia Group — 298 China Hospitality JV — 117 BJ GOOAGOO/GOOAGOO — 52 Other investments 30 55 Available-for-sale debt securities: Cjia/Cjia Group 246 220 CREATER 100 100 Total 2,492 6,241 |
GOODWILL (Tables)
GOODWILL (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
GOODWILL. | |
Schedule of changes in the carrying amount of goodwill | Gross Accumulated Net Amount Impairment Loss Amount Balance at January 1, 2016 113 (4) 109 Increase in goodwill related to acquisitions 63 — 63 Balance at December 31, 2016 176 (4) 172 Increase in goodwill related to acquisitions 2,093 — 2,093 Balance at December 31, 2017 2,269 (4) 2,265 Increase in goodwill related to acquisitions 365 — 365 Balance at December 31, 2018 2,634 (4) 2,630 |
DEBT (Tables)
DEBT (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
DEBT | |
Schedule of short-term and long-term debt | As of December 31, 2017 2018 Short-term debt: Long-term bank borrowings, current portion 0 0 Short-term bank borrowings 131 948 Total 131 948 Long-term debt: Long-term bank borrowings, non-current portion 1,895 5,603 Convertible senior notes 3,027 3,209 Total 4,922 8,812 |
ACCRUED EXPENSES AND OTHER CU_2
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |
Schedule of accrued expenses and other current liabilities | As of December 31, 2017 2018 Payable for business acquisitions 118 39 Liabilites related to customer loyalty program 138 154 Payable to noncontrolling interest holders 87 107 Payable to franchisees 418 698 Other payables 264 351 Accrued rental, utilities and other accrued expenses 174 187 Deferred rent, current 50 71 Total 1,249 1,607 |
HOTEL OPERATING COSTS (Tables)
HOTEL OPERATING COSTS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
HOTEL OPERATING COSTS. | |
Schedule of hotel operating costs | Years Ended December 31, 2016 2017 2018 Rents 1,871 2,059 2,406 Utilities 346 366 399 Personnel costs 1,089 1,388 1,663 Depreciation and amortization 677 773 869 Consumable, food and beverage 495 551 673 Others 456 538 466 Total 4,934 5,675 6,476 |
PRE-OPENING EXPENSES (Tables)
PRE-OPENING EXPENSES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
PRE-OPENING EXPENSES | |
Schedule of pre-opening expenses incurred during the hotel pre-opening period | Years Ended December 31, 2016 2017 2018 Rents 67 192 221 Personnel costs 2 6 18 Others 3 8 16 Total 72 206 255 |
SHARE-BASED COMPENSATION (Table
SHARE-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
SHARE-BASED COMPENSATION | |
Summary of the Group's share option activity under the option plans | Weighted Average Number of Weighted Average Remaining Aggregate Intrinsic Options Exercise Price Contractual Life Value US$ Years US$'million Share options outstanding at January 1, 2018 2,044,724 2.12 Forfeited (32,019) 1.75 Exercised (876,715) 2.42 Share options outstanding at December 31, 2018 1,135,990 1.89 0.91 30 Share options vested or expected to vest at December 31, 2018 1,125,336 1.87 0.89 30 Share options exercisable at December 31, 2018 1,099,720 1.81 0.83 29 |
Summary of the Group's nonvested restricted stock activity | Number of Restricted Weighted Average Grant Stocks Fair Value US$ Nonvested restricted stocks outstanding at January 1, 2018 12,492,570 5.86 Granted 1,708,980 27.51 Forfeited (253,323) 8.63 Vested (1,680,939) 5.75 Adjusted for performance conditions (170,672) 4.89 Nonvested restricted stocks outstanding at December 31, 2018 12,096,616 8.89 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
EARNINGS PER SHARE | |
Schedule of computation of basic and diluted earnings per share | Years Ended December 31, 2016 2017 2018 Net income attributable to ordinary shareholders — basic 782 1,228 716 Eliminate the dilutive effect of interest expense of convertible senior notes — 5 40 Net income attributable to ordinary shareholders — diluted 782 1,233 756 Weighted average ordinary shares outstanding — basic 275,139,070 279,272,140 281,717,485 Incremental weighted-average ordinary shares from assumed exercise of share options and nonvested restricted stocks using the treasury stock method 7,750,424 12,202,369 11,463,212 Dilutive effect of convertible senior notes — 1,599,469 10,425,112 Weighted average ordinary shares outstanding — diluted 282,889,494 293,073,978 303,605,809 Basic earnings per share 2.84 4.40 2.54 Diluted earnings per share 2.76 4.21 2.49 |
Schedule of outstanding securities excluded from the computation of diluted earnings per share | Years Ended December 31, 2016 2017 2018 Outstanding employee options and nonvested restricted stocks — — 530,009 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
INCOME TAXES | |
Schedule of tax expense (benefit) | Years Ended December 31, 2016 2017 2018 Current Tax 253 436 660 Deferred Tax 26 (79) (91) Total 279 357 569 |
Schedule of a reconciliation between the effective income tax rate and PRC statutory income tax rate | Years Ended December 31, 2016 2017 2018 PRC statutory tax rate 25 % 25 % 25 % Tax effect of non-deductible expenses and non-taxable income in determining taxable profit 3 % 1 % 15 % Effect of different tax rate of group entities operating in other jurisdictions (1) % 1 % 4 % Effect of change in valuation allowance 1 % — (1) % Effect of tax holiday (3) % (1) % (3) % Effect of cash dividends 3 % (1) % 5 % Effect of disposal of subsidiary (1) % — 1 % Effect of excess tax benefit of rewards — (3) % (5) % Effective tax rate 27 % 22 % 41 % |
Schedule of the aggregate amount and per share effect of the tax holidays | Years Ended December 31, 2016 2017 2018 Aggregate amount 27 24 31 Per share effect—basic 0.10 0.09 0.11 Per share effect—diluted 0.10 0.08 0.10 |
Schedule of the principal components of the Group's deferred income tax assets and liabilities | As of December 31, 2017 2018 Deferred tax assets: Net loss carryforward 140 181 Deferred revenue 159 186 Deferred rent 9 5 Long-term assets 130 149 Bad debt provision 4 6 Liabilities related to customer loyalty program 37 37 Accrued payroll 14 16 Other accrued expenses 21 14 Share-based compensation 13 17 Others 2 1 Valuation allowance (123) (107) Total deferred tax assets 406 505 Deferred tax liabilities: Favorable lease, building and land use rights-fair value adjustment 399 447 Capitalized interest 3 3 Unrealized gain for investment 7 7 Others 13 18 Total deferred tax liabilities 422 475 |
Schedule of unrecognized tax benefits | Years Ended December 31, 2016 2017 2018 Balance at January 1 15 20 26 Addition for tax positions 5 6 (12) Balance at December 31 20 26 14 |
RELATED PARTY TRANSACTIONS AN_2
RELATED PARTY TRANSACTIONS AND BALANCES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
RELATED PARTY TRANSACTIONS AND BALANCES | |
Schedule of related parties | Related Party Nature of the Party Relationship with the Group Ctrip.com International, Ltd. (“Ctrip”) Online travel services provider Mr. Qi Ji is a director Sheen Star Group Limited (“Sheen Star”) Investment holding company Equity method investee of the Group, controlled by Mr. Qi Ji Accor Hotels (“Accor”) Hotel Group Shareholder of the Group China Cjia Group Limited (“Cjia Group”) Apartment Management Group Equity method investee of the Group Shanghai CREATER Industrial Co., Ltd. (“CREATER”) Staged office space company Equity method investee of the Group Shenzhen Hanmo Investment Fund Partnership LLP (“Hanmo”) Hotel related fund Equity method investee of the Group China Hospitality JV, Ltd. (“China Hospitality JV”) Property management company Equity method investee of the Group |
Schedule of amounts due from related parties | As of December 31, 2017 2018 Sheen Star 39 44 CREATER 27 40 Ctrip 32 34 Cjia Group 15 23 Hanmo — 22 Accor 2 2 Others 3 11 Total 118 176 |
Schedule of amounts due to related party | As of December 31, 2017 2018 Ctrip 29 25 China Hospitality JV — 25 Accor 7 8 Cjia Group — 7 Others 1 10 Total 37 75 |
Schedule of significant related party transactions | Years Ended December 31, 2016 2017 2018 Commission expenses to Ctrip 77 61 Lease expenses to Ctrip — — 18 Brand use fee, reservation fee and other related service fee to Accor 6 11 18 Marketing and training fee from Ctrip 13 24 12 Service fee from Accor 4 8 14 Service fee from China Hospitality JV — — 10 Service fee from Sheen Star — — 2 Goods sold and service provided to Cjia Group 0 8 30 Interest income from Sheen Star 2 — — Interest income from Hanmo — — 7 Interest income from CREATER — — 10 Loan payment to Sheen Star 35 — — Loan payment to Cjia Group — 85 — Loan payment to CREATER — 27 — Loan from Cjia Group — — 103 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
COMMITMENTS AND CONTINGENCIES. | |
Schedule of future minimum lease payments under operating lease agreements | Future minimum lease payments under non-cancellable operating lease agreements at December 31, 2018 were as follows: Year Ending December 31, 2019 2,854 2020 2,863 2021 2,777 2022 2,661 2023 2,548 Thereafter 15,669 Total 29,372 |
ORGANIZATION AND PRINCIPAL AC_2
ORGANIZATION AND PRINCIPAL ACTIVITIES (Details) - item | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Leased and owned hotels | ||
Organization and presentation activities | ||
Number of hotels | 699 | 671 |
Manachised hotels | ||
Organization and presentation activities | ||
Number of hotels | 3,309 | 2,874 |
Franchised hotels | ||
Organization and presentation activities | ||
Number of hotels | 222 | 201 |
Minimum | ||
Organization and presentation activities | ||
Term of franchise and management agreement | 8 years | |
Minimum | Leased and owned hotels | ||
Organization and presentation activities | ||
Period of rental holiday | 2 months | |
Fixed escalation in rent (as a percent) | 3.00% | |
Period before rent escalations | 3 years | |
Maximum | ||
Organization and presentation activities | ||
Term of franchise and management agreement | 10 years | |
Maximum | Leased and owned hotels | ||
Organization and presentation activities | ||
Period of rental holiday | 6 months | |
Fixed escalation in rent (as a percent) | 5.00% | |
Period before rent escalations | 5 years |
SUMMARY OF PRINCIPAL ACCOUNTI_4
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES - Variable Interest Entities (Details) - item | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
VIEs | ||
Variable Interest Entities | ||
Number of entities consolidated | 6 | 2 |
SUMMARY OF PRINCIPAL ACCOUNTI_5
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES - Investments, Loan receivables and Inventories (Details) - CNY (¥) ¥ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Investments | |||
Impairment loss | ¥ 0 | ¥ 0 | ¥ 3 |
Loan receivables | |||
Valuation allowance for uncollectible loans | ¥ 0 | ¥ 0 | ¥ 0 |
Inventories | |||
Estimated useful life of small appliances and bedding | 1 year | ||
Minimum | Certain franchisees | |||
Loan receivables | |||
Term of loan agreement | 2 years | ||
Interest rate (as a percent) | 8.00% | ||
Minimum | Un-related third-parties | |||
Loan receivables | |||
Interest rate (as a percent) | 6.00% | ||
Maximum | Certain franchisees | |||
Loan receivables | |||
Term of loan agreement | 3 years | ||
Interest rate (as a percent) | 8.50% | ||
Maximum | Un-related third-parties | |||
Loan receivables | |||
Interest rate (as a percent) | 12.00% |
SUMMARY OF PRINCIPAL ACCOUNTI_6
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES - Property and equipment, net (Details) | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Leasehold improvements | |||
Property and equipment, net | |||
Property and equipment, estimated useful life | Shorter of the lease term or their estimated useful lives | Shorter of the lease term or their estimated useful lives | Shorter of the lease term or their estimated useful lives |
Buildings | Minimum | |||
Property and equipment, net | |||
Property and equipment, estimated useful life | 20 years | 20 years | 20 years |
Buildings | Maximum | |||
Property and equipment, net | |||
Property and equipment, estimated useful life | 40 years | 40 years | 40 years |
Furniture, fixtures and equipment | Minimum | |||
Property and equipment, net | |||
Property and equipment, estimated useful life | 3 years | 3 years | 3 years |
Furniture, fixtures and equipment | Maximum | |||
Property and equipment, net | |||
Property and equipment, estimated useful life | 10 years | 10 years | 10 years |
Motor vehicles | |||
Property and equipment, net | |||
Property and equipment, estimated useful life | 5 years | 5 years | 5 years |
SUMMARY OF PRINCIPAL ACCOUNTI_7
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Details) ¥ in Millions, $ in Millions | 12 Months Ended | ||||
Dec. 31, 2018USD ($)item | Dec. 31, 2018CNY (¥)item | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Dec. 31, 2018CNY (¥) | |
Accounting policies | |||||
Amortization expense | ¥ 39 | ¥ 31 | ¥ 17 | ||
Long-lived asset impairment loss | ¥ 35 | 169 | 151 | ||
Number of reporting units | item | 1 | 1 | |||
Net revenues | $ 1,464 | ¥ 10,063 | 8,229 | 6,573 | |
VAT (as a percent) | 6.00% | 6.00% | |||
Advertising related expenses | 103 | 91 | 65 | ||
Unrestricted government subsidies from local governmental agencies | 106 | 55 | 83 | ||
Deferred rent current | 50 | ¥ 71 | |||
Deferred rent long-term | $ 219 | 1,380 | ¥ 1,507 | ||
Loyalty program | |||||
Accounting policies | |||||
Net revenues | 192 | 160 | 145 | ||
Land use rights | |||||
Accounting policies | |||||
Amortization expense | ¥ 5 | ¥ 5 | ¥ 4 | ||
Master brand agreement | |||||
Accounting policies | |||||
Initial term | 70 years | 70 years | |||
Minimum | |||||
Accounting policies | |||||
Estimated membership duration | 2 years | 2 years | |||
Minimum | Land use rights | |||||
Accounting policies | |||||
Remaining contractual term | 30 years | 30 years | |||
Maximum | |||||
Accounting policies | |||||
Estimated membership duration | 5 years | 5 years | |||
Maximum | Land use rights | |||||
Accounting policies | |||||
Remaining contractual term | 50 years | 50 years |
SUMMARY OF PRINCIPAL ACCOUNTI_8
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES - Fair value (Details) ¥ in Millions, $ in Millions | 12 Months Ended | ||||
Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | |
Fair value | |||||
Equity securities with readily determinable fair value | ¥ 130 | $ 13 | ¥ 89 | ||
Equity-method investment impairment | ¥ 3 | ||||
Long-lived asset impairment loss | ¥ 35 | ¥ 169 | ¥ 151 | ||
Revenue growth rate | |||||
Fair value | |||||
Measurement input | 4 | 4 | 4 | 4 | |
Discount rate | |||||
Fair value | |||||
Measurement input | 20 | 20 | 20 | 20 | |
Recurring basis | Fair value | |||||
Fair value | |||||
Equity securities with readily determinable fair value | ¥ 1,037 | ¥ 4,111 | |||
Available-for-sale debt securities | 346 | 320 | |||
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | |||||
Fair value | |||||
Equity securities with readily determinable fair value | 1,037 | 4,111 | |||
Recurring basis | Significant Other Observable Inputs (Level 2) | |||||
Fair value | |||||
Available-for-sale debt securities | 346 | 320 | |||
Non-recurring basis | |||||
Fair value | |||||
Property and equipment | 52 | ¥ 21 | 10 | ||
Non-recurring basis | Carrying value | |||||
Fair value | |||||
Property and equipment | 221 | 172 | 45 | ||
Long-term investments | 0 | 3 | 0 | ||
Non-recurring basis | Significant Unobservable Inputs (Level 3) | |||||
Fair value | |||||
Property and equipment | ¥ 52 | ¥ 21 | ¥ 10 |
SUMMARY OF PRINCIPAL ACCOUNTI_9
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES - Share-based compensation and Treasury shares (Details) ¥ in Millions | 12 Months Ended | ||
Dec. 31, 2018CNY (¥)segmentshares | Dec. 31, 2017CNY (¥)shares | Dec. 31, 2016CNY (¥) | |
Share-based compensation | |||
Recognized share-based compensation expenses | ¥ 83 | ¥ 66 | ¥ 55 |
Number of operating segments | segment | 1 | ||
Treasury shares | |||
Repurchase of ordinary shares (in shares) | shares | 3,096,764 | 3,096,764 | |
Cash consideration paid for ordinary shares repurchased | ¥ 107 | ||
Hotel operating costs | |||
Share-based compensation | |||
Recognized share-based compensation expenses | 27 | ¥ 20 | 13 |
Selling and marketing expenses | |||
Share-based compensation | |||
Recognized share-based compensation expenses | 3 | 2 | 1 |
General and administrative expenses | |||
Share-based compensation | |||
Recognized share-based compensation expenses | ¥ 53 | ¥ 44 | ¥ 41 |
SUMMARY OF PRINCIPAL ACCOUNT_10
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES - Recently Issued Accounting Pronouncements (Details) ¥ / shares in Units, $ / shares in Units, ¥ in Millions, $ in Millions | 12 Months Ended | |||||||
Dec. 31, 2018USD ($)$ / shares¥ / $ | Dec. 31, 2018CNY (¥)¥ / shares | Dec. 31, 2017CNY (¥)¥ / shares | Dec. 31, 2016CNY (¥)¥ / shares | Jan. 01, 2019CNY (¥) | Dec. 31, 2018CNY (¥)¥ / $ | Jan. 01, 2018CNY (¥) | Dec. 31, 2015CNY (¥) | |
Revenues: | ||||||||
Total revenues | $ 1,464 | ¥ 10,063 | ¥ 8,229 | ¥ 6,689 | ||||
Net revenues | 1,464 | 10,063 | 8,229 | 6,573 | ||||
Operating costs and expenses: | ||||||||
Hotel operating costs | 942 | 6,476 | 5,675 | 4,934 | ||||
Selling and marketing expenses | 50 | 348 | 285 | 209 | ||||
Total operating costs and expenses | 1,155 | 7,945 | 6,874 | 5,715 | ||||
Income from operations | 341 | 2,344 | 1,426 | 841 | ||||
Income before income taxes | 203 | 1,393 | 1,597 | 1,047 | ||||
Income tax expense | 83 | 569 | 357 | 279 | ||||
Net income | 106 | 727 | 1,228 | 774 | ||||
Net income attributable to Huazhu Group Limited | $ 104 | ¥ 716 | ¥ 1,228 | ¥ 782 | ||||
Earnings per share: | ||||||||
Basic (in RMB and dollars per share) | (per share) | $ 0.37 | ¥ 2.54 | ¥ 4.40 | ¥ 2.84 | ||||
Diluted (in RMB and dollars per share) | (per share) | $ 0.36 | ¥ 2.49 | ¥ 4.21 | ¥ 2.76 | ||||
Deferred tax assets | $ 73 | ¥ 406 | ¥ 505 | |||||
Total assets | 3,490 | 17,508 | 23,993 | |||||
Deferred revenue | 146 | 943 | 1,005 | |||||
Accrued expenses and other current liabilities | 233 | 1,249 | 1,607 | |||||
Deferred revenue | 67 | 398 | 458 | |||||
Total liabilities | 2,571 | 11,274 | 17,674 | |||||
Total equity | 919 | 6,234 | ¥ 5,184 | 6,319 | ¥ 3,441 | |||
Total liabilities and equity | 3,490 | 17,508 | 23,993 | |||||
Retained earnings (Accumulated deficit) | 380 | 2,513 | 2,610 | |||||
Accumulated other comprehensive income (loss) | (6) | 168 | (42) | |||||
Restricted cash | $ 91 | 481 | ¥ 622 | |||||
Translation into United States Dollars | ||||||||
Foreign exchange rate used to translate amounts denominated in RMB to US dollar | ¥ / $ | 6.8755 | 6.8755 | ||||||
ASU 2014-09 | As Reported | ||||||||
Revenues: | ||||||||
Total revenues | 8,170 | 6,655 | ||||||
Net revenues | 8,170 | 6,539 | ||||||
Operating costs and expenses: | ||||||||
Hotel operating costs | 5,674 | 4,932 | ||||||
Selling and marketing expenses | 215 | 146 | ||||||
Total operating costs and expenses | 6,803 | 5,650 | ||||||
Income from operations | 1,438 | 872 | ||||||
Income before income taxes | 1,609 | 1,078 | ||||||
Income tax expense | 360 | 287 | ||||||
Net income | 1,237 | 797 | ||||||
Net income attributable to Huazhu Group Limited | ¥ 1,237 | ¥ 805 | ||||||
Earnings per share: | ||||||||
Basic (in RMB and dollars per share) | ¥ / shares | ¥ 4.43 | ¥ 2.92 | ||||||
Diluted (in RMB and dollars per share) | ¥ / shares | ¥ 4.24 | ¥ 2.84 | ||||||
Deferred tax assets | ¥ 326 | |||||||
Total assets | 17,428 | |||||||
Deferred revenue | 832 | |||||||
Accrued expenses and other current liabilities | 1,265 | |||||||
Deferred revenue | 172 | |||||||
Total liabilities | 10,953 | |||||||
Total equity | 6,475 | |||||||
Total liabilities and equity | 17,428 | |||||||
Retained earnings (Accumulated deficit) | 2,754 | |||||||
ASU 2014-09 | Effect of the Adoption of New Revenue Standards | ||||||||
Revenues: | ||||||||
Total revenues | 59 | ¥ 34 | ||||||
Net revenues | 59 | 34 | ||||||
Operating costs and expenses: | ||||||||
Hotel operating costs | 1 | 2 | ||||||
Selling and marketing expenses | 70 | 63 | ||||||
Total operating costs and expenses | 71 | 65 | ||||||
Income from operations | (12) | (31) | ||||||
Income before income taxes | (12) | (31) | ||||||
Income tax expense | (3) | (8) | ||||||
Net income | (9) | (23) | ||||||
Net income attributable to Huazhu Group Limited | (9) | (23) | ||||||
Earnings per share: | ||||||||
Deferred tax assets | 80 | |||||||
Total assets | 80 | |||||||
Deferred revenue | 111 | |||||||
Accrued expenses and other current liabilities | (16) | |||||||
Deferred revenue | 226 | |||||||
Total liabilities | 321 | |||||||
Total equity | (241) | |||||||
Total liabilities and equity | 80 | |||||||
Retained earnings (Accumulated deficit) | (241) | |||||||
ASU 2016-01 | Adjustment | ||||||||
Earnings per share: | ||||||||
Retained earnings (Accumulated deficit) | ¥ 41 | |||||||
Accumulated other comprehensive income (loss) | ¥ (41) | |||||||
ASU 2016-18 | ||||||||
Earnings per share: | ||||||||
Restricted cash | 481 | 1 | ¥ 361 | |||||
ASU 2016-02 | Forecast | ||||||||
Earnings per share: | ||||||||
Net to right-to-use lease assets | ¥ 1,000 | |||||||
Minimum | ASU 2016-02 | Forecast | ||||||||
Earnings per share: | ||||||||
Right-to-use assets | 19,000 | |||||||
Lease liabilities | 20,000 | |||||||
Maximum | ASU 2016-02 | Forecast | ||||||||
Earnings per share: | ||||||||
Right-to-use assets | 22,000 | |||||||
Lease liabilities | ¥ 23,000 | |||||||
Leased and owned hotels | ||||||||
Revenues: | ||||||||
Total revenues | $ 1,087 | ¥ 7,470 | 6,338 | 5,239 | ||||
Leased and owned hotels | ASU 2014-09 | As Reported | ||||||||
Revenues: | ||||||||
Total revenues | 6,343 | 5,212 | ||||||
Leased and owned hotels | ASU 2014-09 | Effect of the Adoption of New Revenue Standards | ||||||||
Revenues: | ||||||||
Total revenues | (5) | 27 | ||||||
Manachised and franchised hotels | ||||||||
Revenues: | ||||||||
Total revenues | $ 368 | ¥ 2,527 | 1,851 | 1,419 | ||||
Manachised and franchised hotels | ASU 2014-09 | As Reported | ||||||||
Revenues: | ||||||||
Total revenues | 1,787 | 1,412 | ||||||
Manachised and franchised hotels | ASU 2014-09 | Effect of the Adoption of New Revenue Standards | ||||||||
Revenues: | ||||||||
Total revenues | ¥ 64 | ¥ 7 |
ACQUISITIONS - AccorHotels (Det
ACQUISITIONS - AccorHotels (Details) ¥ in Millions, $ in Millions | 1 Months Ended | 12 Months Ended | |||||
Jan. 31, 2016CNY (¥)shares | Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Dec. 31, 2018CNY (¥) | Dec. 31, 2015CNY (¥) | |
Acquisitions | |||||||
Issuance of ordinary shares for acquisition of AccorHotels (Note 3) | ¥ 1,144 | ||||||
Net revenues | $ 1,464 | ¥ 10,063 | ¥ 8,229 | 6,573 | |||
Net income | 104 | ¥ 716 | 1,228 | 782 | |||
Fair values of assets acquired and liabilities assumed: | |||||||
Goodwill | $ 383 | ¥ 2,265 | 172 | ¥ 2,630 | ¥ 109 | ||
AAPC LUB | |||||||
Acquisitions | |||||||
Noncontrolling interest (as a percent) | 28.00% | ||||||
Accor | |||||||
Acquisitions | |||||||
Percentage of ownership interest acquired | 100.00% | ||||||
Issuance of ordinary shares for acquisition of AccorHotels (Note 3) | ¥ 1,144 | ||||||
Cash consideration | ¥ 120 | ||||||
Number of shares issued as share consideration | shares | 24,895,543 | ||||||
Net revenues | 153 | ||||||
Net income | 64 | ||||||
Fair values of assets acquired and liabilities assumed: | |||||||
Current assets | 207 | ||||||
Property and equipment | 311 | ||||||
Long-term investments | 418 | ||||||
Goodwill | 63 | ||||||
Other noncurrent assets | 2 | ||||||
Current liabilities | (39) | ||||||
Deferred tax liabilities | (43) | ||||||
Total | ¥ 1,264 | ||||||
Accor | Minimum | |||||||
Fair values of assets acquired and liabilities assumed: | |||||||
Amortization period of property and equipment | 5 years | ||||||
Accor | Maximum | |||||||
Fair values of assets acquired and liabilities assumed: | |||||||
Amortization period of property and equipment | 30 years | ||||||
Accor | Master brand agreement | |||||||
Fair values of assets acquired and liabilities assumed: | |||||||
Intangible assets | ¥ 192 | ||||||
Accor | Favorable lease agreements | |||||||
Fair values of assets acquired and liabilities assumed: | |||||||
Intangible assets | 3 | ||||||
Accor | Land use rights | |||||||
Fair values of assets acquired and liabilities assumed: | |||||||
Intangible assets | ¥ 150 |
ACQUISITIONS - Crystal Orange &
ACQUISITIONS - Crystal Orange & Blossom Hill (Details) ¥ in Millions, $ in Millions | May 25, 2017CNY (¥) | Aug. 31, 2018CNY (¥) | Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Dec. 31, 2018CNY (¥) | Dec. 31, 2015CNY (¥) |
Acquisitions | ||||||||
Net revenues | $ 1,464 | ¥ 10,063 | ¥ 8,229 | ¥ 6,573 | ||||
Net income | 104 | 716 | 1,228 | 782 | ||||
Summary of the fair values of the assets acquired and liabilities assumed | ||||||||
Goodwill | 383 | 2,265 | 172 | ¥ 2,630 | ¥ 109 | |||
Cash consideration to noncontrolling interests | $ 12 | 84 | 4 | 4 | ||||
Crystal Orange | ||||||||
Acquisitions | ||||||||
Percentage of ownership interest acquired | 100.00% | |||||||
Cash consideration | ¥ 3,765 | |||||||
Net revenues | 777 | |||||||
Net income | 100 | |||||||
Business acquisition, pro forma information | ||||||||
Pro forma net revenue | 8,630 | 7,508 | ||||||
Pro forma net income | 1,267 | ¥ 835 | ||||||
Summary of the fair values of the assets acquired and liabilities assumed | ||||||||
Current assets | 137 | |||||||
Property and equipment | 842 | |||||||
Goodwill | 2,093 | |||||||
Other noncurrent assets | 131 | |||||||
Current liabilities | (222) | |||||||
Noncurrent liabilities | (180) | |||||||
Deferred tax liabilities | (323) | |||||||
Noncontrolling interest | (4) | |||||||
Total | 3,765 | |||||||
Business combination cost related to consultation services agreements and option cancellation agreement | ¥ 256 | |||||||
Transaction costs | ¥ 46 | |||||||
Crystal Orange | Minimum | ||||||||
Summary of the fair values of the assets acquired and liabilities assumed | ||||||||
Amortization period of property and equipment | 3 years | |||||||
Crystal Orange | Maximum | ||||||||
Summary of the fair values of the assets acquired and liabilities assumed | ||||||||
Amortization period of property and equipment | 20 years | |||||||
Crystal Orange | Favorable lease agreements | ||||||||
Summary of the fair values of the assets acquired and liabilities assumed | ||||||||
Intangible assets | ¥ 91 | |||||||
Crystal Orange | Franchise agreement | ||||||||
Summary of the fair values of the assets acquired and liabilities assumed | ||||||||
Intangible assets | 58 | |||||||
Blossom Hill | ||||||||
Acquisitions | ||||||||
Percentage of ownership interest acquired | 83.00% | 94.00% | 94.00% | |||||
Aggregated consideration | ¥ 536 | |||||||
Cash consideration | 463 | |||||||
Implied fair value of equity interests | ¥ 73 | |||||||
Percentage of equity interests transferred | 11.00% | |||||||
Gain on remeasurement | ¥ 13 | |||||||
Net revenues | 30 | |||||||
Net income | (15) | |||||||
Business acquisition, pro forma information | ||||||||
Pro forma net revenue | 10,124 | 8,331 | ||||||
Pro forma net income | ¥ 701 | 1,214 | ||||||
Summary of the fair values of the assets acquired and liabilities assumed | ||||||||
Current assets | ¥ 84 | |||||||
Property and equipment | 187 | |||||||
Goodwill | 365 | |||||||
Deferred tax assets | 12 | |||||||
Current liabilities | (105) | |||||||
Noncurrent liabilities | (18) | |||||||
Deferred tax liabilities | (50) | |||||||
Noncontrolling interest | (150) | |||||||
Total | 536 | |||||||
Percentage of noncontrolling interest acquired | 11.00% | |||||||
Cash consideration to noncontrolling interests | ¥ 73 | |||||||
Blossom Hill | Minimum | ||||||||
Summary of the fair values of the assets acquired and liabilities assumed | ||||||||
Amortization period of property and equipment | 3 years | 3 years | ||||||
Blossom Hill | Maximum | ||||||||
Summary of the fair values of the assets acquired and liabilities assumed | ||||||||
Amortization period of property and equipment | 20 years | 20 years | ||||||
Blossom Hill | Favorable lease agreements | ||||||||
Summary of the fair values of the assets acquired and liabilities assumed | ||||||||
Intangible assets | 7 | |||||||
Blossom Hill | Unfavorable leases | ||||||||
Summary of the fair values of the assets acquired and liabilities assumed | ||||||||
Intangible assets | 1 | |||||||
Blossom Hill | Franchise agreement | ||||||||
Summary of the fair values of the assets acquired and liabilities assumed | ||||||||
Intangible assets | 25 | |||||||
Blossom Hill | Land use rights | ||||||||
Summary of the fair values of the assets acquired and liabilities assumed | ||||||||
Intangible assets | 10 | |||||||
Brand name | Crystal Orange | ||||||||
Summary of the fair values of the assets acquired and liabilities assumed | ||||||||
Intangible assets | ¥ 1,142 | |||||||
Brand name | Blossom Hill | ||||||||
Summary of the fair values of the assets acquired and liabilities assumed | ||||||||
Intangible assets | ¥ 170 |
ACQUISITIONS - Hotels (Details)
ACQUISITIONS - Hotels (Details) ¥ in Millions | 12 Months Ended | ||
Dec. 31, 2018CNY (¥)item | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | |
Acquisitions | |||
Number of reporting units | item | 1 | ||
Two individual hotels acquired in 2016 | |||
Acquisitions | |||
Cash consideration | ¥ 3 | ||
Two individual hotels acquired in 2017 | |||
Acquisitions | |||
Cash consideration | ¥ 0 | ||
Two individual hotels acquired in 2018 | |||
Acquisitions | |||
Cash consideration | ¥ 7 |
REVENUE FROM CONTRACT WITH CUST
REVENUE FROM CONTRACT WITH CUSTOMERS - Disaggregated Revenues (Details) ¥ in Millions, $ in Millions | 12 Months Ended | |||
Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | |
Disaggregated Revenues | ||||
Total revenues | $ 1,464 | ¥ 10,063 | ¥ 8,229 | ¥ 6,689 |
Leased and owned hotels | ||||
Disaggregated Revenues | ||||
Total revenues | 1,087 | 7,470 | 6,338 | 5,239 |
Room Revenues | ||||
Disaggregated Revenues | ||||
Total revenues | 6,894 | 5,842 | 4,781 | |
Food and Beverage Revenues | ||||
Disaggregated Revenues | ||||
Total revenues | 304 | 249 | 218 | |
Others | ||||
Disaggregated Revenues | ||||
Total revenues | 272 | 247 | 240 | |
Manachised and franchised hotels | ||||
Disaggregated Revenues | ||||
Total revenues | 368 | 2,527 | 1,851 | 1,419 |
Initial one-time franchise fee | ||||
Disaggregated Revenues | ||||
Total revenues | 79 | 59 | 56 | |
On-going management and service fees | ||||
Disaggregated Revenues | ||||
Total revenues | 983 | 759 | 589 | |
Central reservation system usage fees, other system maintenance and support fees | ||||
Disaggregated Revenues | ||||
Total revenues | 630 | 436 | 308 | |
Reimbursements for hotel manager fees | ||||
Disaggregated Revenues | ||||
Total revenues | 455 | 371 | 321 | |
Other fees | ||||
Disaggregated Revenues | ||||
Total revenues | 380 | 226 | 145 | |
Other revenues | ||||
Disaggregated Revenues | ||||
Total revenues | $ 9 | ¥ 66 | ¥ 40 | ¥ 31 |
REVENUE FROM CONTRACT WITH CU_2
REVENUE FROM CONTRACT WITH CUSTOMERS - Contract Balances (Details) ¥ in Millions, $ in Millions | Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) |
Contract with Customer, Liability [Abstract] | |||
Current contract liabilities | $ 146 | ¥ 1,005 | ¥ 943 |
Long-term contract liabilities | $ 67 | 458 | 398 |
Total contract liabilities | ¥ 1,463 | ¥ 1,341 |
REVENUE FROM CONTRACT WITH CU_3
REVENUE FROM CONTRACT WITH CUSTOMERS - Contract Balances - Contract liabilities (Details) - CNY (¥) ¥ in Millions | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Contract with Customer, Liability [Abstract] | ||
Initial fees received from franchise owners | ¥ 674 | ¥ 553 |
Cash received for membership fees and not recognized as revenue | 357 | 305 |
Advances received from customers | 374 | 425 |
Deferred revenue related to the loyalty program | 58 | 58 |
Total contract liabilities | 1,463 | 1,341 |
Revenue recognized | ¥ 468 | ¥ 445 |
REVENUE FROM CONTRACT WITH CU_4
REVENUE FROM CONTRACT WITH CUSTOMERS - Contract Balances - Unsatisfied performance obligations (Details) - CNY (¥) ¥ in Millions | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Deferred revenues related to unsatisfied performance obligations of loyalty program | ¥ 58 | ¥ 58 |
Deferred revenue related to initial fees | 674 | 553 |
Deferred revenue related to membership fees | 357 | 305 |
Deferred revenues related to advances received from customers, expected to recognize revenue in future periods | ¥ 374 | ¥ 425 |
Minimum | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Remaining contract period | 1 year | |
Remaining membership life | 1 year | |
Maximum | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Remaining contract period | 10 years | |
Remaining membership life | 5 years | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-01-01 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Deferred revenues related to unsatisfied performance obligations of loyalty program | ¥ 58 | |
Deferred revenue, recognized as revenue, estimated period | 2 years |
PROPERTY AND EQUIPMENT, NET - S
PROPERTY AND EQUIPMENT, NET - Schedule (Details) ¥ in Millions, $ in Millions | Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) |
Cost: | |||
Property and equipment, gross | ¥ 8,799 | ¥ 7,735 | |
Less: Accumulated depreciation | (4,344) | (3,707) | |
Property and equipment net excluding construction in process | 4,455 | 4,028 | |
Construction in progress | 563 | 495 | |
Property and equipment, net | $ 730 | 5,018 | 4,523 |
Buildings | |||
Cost: | |||
Property and equipment, gross | 247 | 247 | |
Leasehold improvements | |||
Cost: | |||
Property and equipment, gross | 7,389 | 6,453 | |
Furniture, fixtures and equipment | |||
Cost: | |||
Property and equipment, gross | 1,162 | 1,034 | |
Motor vehicles | |||
Cost: | |||
Property and equipment, gross | ¥ 1 | ¥ 1 |
PROPERTY AND EQUIPMENT, NET - N
PROPERTY AND EQUIPMENT, NET - Narrative (Details) - CNY (¥) ¥ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
PROPERTY AND EQUIPMENT, NET | |||
Depreciation expense | ¥ 847 | ¥ 753 | ¥ 674 |
INTANGIBLE ASSETS, NET AND UN_3
INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE - Schedule (Details) ¥ in Millions, $ in Millions | 12 Months Ended | ||||
Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | |
Intangible assets, net | |||||
Intangible assets, gross | ¥ 1,753 | ¥ 1,974 | |||
Less: Accumulated amortization | (109) | (140) | |||
Total | 1,644 | $ 267 | 1,834 | ||
Unfavorable lease | |||||
Unfavorable lease agreements | 4 | 3 | |||
Less: Accumulated amortization | (3) | (2) | |||
Unfavorable lease agreements, net | 1 | 1 | |||
Amortization expense of intangible assets | ¥ 39 | 31 | ¥ 17 | ||
Franchise agreement | |||||
Intangible assets, net | |||||
Intangible assets, gross | 70 | 95 | |||
Non-compete agreement | |||||
Intangible assets, net | |||||
Intangible assets, gross | 0 | 0 | |||
Favorable lease agreements | |||||
Intangible assets, net | |||||
Intangible assets, gross | 256 | 278 | |||
Purchased software | |||||
Intangible assets, net | |||||
Intangible assets, gross | 65 | 69 | |||
Brand name | |||||
Intangible assets, net | |||||
Intangible assets, gross | 1,170 | 1,340 | |||
Master brand agreement | |||||
Intangible assets, net | |||||
Intangible assets, gross | ¥ 192 | ¥ 192 |
INTANGIBLE ASSETS, NET AND UN_4
INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE - Amortization (Details) - CNY (¥) ¥ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Amortization for Intangible Assets | ||
2019 | ¥ 37 | |
2020 | 35 | |
2021 | 34 | |
2022 | 32 | |
2023 | 30 | |
Thereafter | 134 | |
Amortization for Intangible Assets, Total | 302 | |
Amortization for Unfavorable Lease | ||
2019 | 0 | |
2020 | 0 | |
2021 | 0 | |
2022 | 0 | |
2023 | 0 | |
Thereafter | 1 | |
Unfavorable lease agreements, net | 1 | ¥ 1 |
Net Amortization | ||
2019 | 37 | |
2020 | 35 | |
2021 | 34 | |
2022 | 32 | |
2023 | 30 | |
Thereafter | 133 | |
Net Amortization, Total | ¥ 301 |
INVESTMENTS - Schedule (Details
INVESTMENTS - Schedule (Details) ¥ in Millions, $ in Millions | Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) |
Equity Securities, FV-NI | $ 13 | ¥ 89 | ¥ 130 |
Investments | 6,241 | 2,492 | |
Accor | |||
Equity Securities, FV-NI | 3,816 | 780 | |
Other marketable securities | |||
Equity Securities, FV-NI | 295 | 257 | |
OYO | |||
Equity Securities without Readily Determinable Fair Value, Amount | 66 | 66 | |
Mobike | |||
Equity Securities without Readily Determinable Fair Value, Amount | 67 | ||
BJ GOOAGOO/GOOAGOO | |||
Equity Securities without Readily Determinable Fair Value, Amount | 60 | ||
Blossom Hill | |||
Equity Securities without Readily Determinable Fair Value, Amount | 60 | ||
Other equity securities | |||
Equity Securities without Readily Determinable Fair Value, Amount | 113 | 103 | |
Hotel related funds | |||
Equity Method Investments | 503 | 56 | |
Equity-method investments | BJ GOOAGOO/GOOAGOO | |||
Equity Method Investments | 52 | ||
Equity-method investments | AAPC LUB | |||
Equity Method Investments | 461 | 478 | |
Equity-method investments | Hotel related funds | |||
Equity Method Investments | 503 | 56 | |
Equity-method investments | Shared office management entities | |||
Equity Method Investments | 111 | 148 | |
Equity-method investments | China Young | |||
Equity Method Investments | 34 | 41 | |
Equity-method investments | Cjia | |||
Equity Method Investments | 298 | ||
Equity-method investments | China Hospitality JV | |||
Equity Method Investments | 117 | ||
Equity-method investments | Other investments | |||
Equity Method Investments | 55 | 30 | |
Available-for-sale debt securities | Cjia | |||
Available-for-sale debt securities | 220 | 246 | |
Available-for-sale debt securities | CREATER | |||
Available-for-sale debt securities | ¥ 100 | ¥ 100 |
INVESTMENTS - Equity securities
INVESTMENTS - Equity securities with readily determinable fair values (Details) ¥ in Millions, $ in Millions | 12 Months Ended | |||
Dec. 31, 2018CNY (¥)shares | Dec. 31, 2017CNY (¥)shares | Dec. 31, 2018USD ($)shares | Dec. 31, 2018CNY (¥)shares | |
Equity securities with readily determinable fair values | ||||
Equity Securities, FV-NI | ¥ 130 | $ 13 | ¥ 89 | |
Accor | ||||
Equity securities with readily determinable fair values | ||||
Number of ordinary shares acquired | shares | 10,782,131 | 2,309,981 | ||
Accumulated number of shares acquired in investment | shares | 13,092,112 | 13,092,112 | ||
Equity Securities, FV-NI | ¥ 780 | ¥ 3,816 | ||
Unrealized losses from fair value | ¥ 794 | |||
Accor | Maximum | ||||
Equity securities with readily determinable fair values | ||||
Investment in equity securities (in percentage) | 5.00% | 5.00% | ||
Other marketable securities | ||||
Equity securities with readily determinable fair values | ||||
Equity Securities, FV-NI | ¥ 257 | ¥ 295 | ||
Unrealized losses from fair value | ¥ 120 |
INVESTMENTS - Equity securiti_2
INVESTMENTS - Equity securities without readily determinable fair values (Details) ¥ in Millions, $ in Millions | 1 Months Ended | 12 Months Ended | ||
Jan. 31, 2017USD ($)shares | Dec. 31, 2018CNY (¥) | Dec. 31, 2017 | Sep. 30, 2017 | |
OYO | ||||
Equity interest owned (as a percent) | 1.00% | |||
Mobike | Maximum | ||||
Equity interest owned (as a percent) | 1.00% | |||
Mobike | Preferred shares | ||||
Shares purchased (in shares) | shares | 1,316,205 | |||
Amount of investments | $ | $ 5 | |||
Recognized gain on disposal of equity-method investment | ¥ | ¥ 55 | |||
Mobike | Convertible notes | ||||
Interest rate | 8.00% |
INVESTMENTS - Equity-method inv
INVESTMENTS - Equity-method investments (Details) ¥ in Millions, $ in Millions | 12 Months Ended | ||||||
Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Jan. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Equity-method investments | |||||||
Investment income (loss) | $ (14) | ¥ (97) | ¥ (12) | ¥ 6 | |||
Consideration for purchase of investments | 721 | 4,959 | 1,328 | 293 | |||
AAPC LUB | |||||||
Equity-method investments | |||||||
Equity-method investments ownership percentage | 28.00% | ||||||
Investment income (loss) | 43 | 31 | |||||
Proceeds from Dividends Received | 60 | ||||||
Hotel related funds | |||||||
Equity-method investments | |||||||
Investment income (loss) | (28) | 0 | |||||
Equity Method Investments | 503 | 56 | |||||
Maximum potential loss, in loss of value of interests in investments | ¥ 503 | ||||||
Cjia Group | |||||||
Equity-method investments | |||||||
Equity-method investments ownership percentage | 17.00% | ||||||
Investment income (loss) | ¥ (38) | ¥ (33) | ¥ (25) | ||||
Consideration for purchase of investments | $ | $ 45 | ||||||
China Hospitality JV | |||||||
Equity-method investments | |||||||
Equity-method investments ownership percentage | 20.00% | ||||||
Investment income (loss) | ¥ (11) | ||||||
Percentage of equity interest acquired | 20.00% | 20.00% | |||||
BJ GOOAGOO/GOOAGOO | |||||||
Equity-method investments | |||||||
Equity-method investments ownership percentage | 41.00% | 19.00% | 19.00% | 19.00% | 8.00% | ||
Investment income (loss) | ¥ (14) | ||||||
Cjia | |||||||
Equity-method investments | |||||||
Equity-method investments ownership percentage | 17.00% | 23.00% | |||||
Amount of gain (loss) on sale or disposal of equity in securities of subsidiaries | ¥ 50 | ||||||
Convertible notes term | 60 months | ||||||
Amount invested in convertible note | ¥ 200 | ||||||
Gain recognized on deemed disposal | 40 | ||||||
Original value of convertible notes invested | ¥ 252 | ¥ 52 |
INVESTMENTS - Available-for-sal
INVESTMENTS - Available-for-sale debt securities (Details) - CREATER ¥ in Millions | 1 Months Ended |
Sep. 30, 2017CNY (¥) | |
Available-for-sale debt securities | |
Convertible notes term | 2 years |
Amount invested in convertible note | ¥ 100 |
Interest rate | 10.00% |
GOODWILL (Details)
GOODWILL (Details) ¥ in Millions, $ in Millions | 12 Months Ended | |||
Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | |
Changes in carrying amount of goodwill | ||||
Balance at the beginning of the period, Gross Amount | ¥ 2,269 | ¥ 176 | ¥ 113 | |
Balance at the beginning of the period, Accumulated Impairment Loss | (4) | (4) | (4) | |
Balance at the beginning of the period, Net Amount | 2,265 | 172 | 109 | |
Increase in goodwill related to acquisitions | 365 | 2,093 | 63 | |
Balance at the end of the period, Gross Amount | 2,634 | 2,269 | 176 | |
Balance at the end of the period, Accumulated Impairment Loss | (4) | (4) | (4) | |
Balance at the end of the period, Net Amount | $ 383 | ¥ 2,630 | ¥ 2,265 | ¥ 172 |
DEBT - Components (Details)
DEBT - Components (Details) ¥ in Millions, $ in Millions | Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) |
Debt | |||
Short-term Debt | $ 138 | ¥ 948 | ¥ 131 |
Total | 948 | 131 | |
Long-term bank borrowings, non-current portion | $ 1,282 | 8,812 | 4,922 |
Long-term debt | 8,812 | 4,922 | |
Bank borrowings | |||
Debt | |||
Long-term bank borrowings, current portion | 0 | 0 | |
Short-term Debt | 948 | 131 | |
Bank borrowings | |||
Debt | |||
Long-term bank borrowings, non-current portion | 5,603 | 1,895 | |
Convertible senior notes | |||
Debt | |||
Long-term bank borrowings, non-current portion | ¥ 3,209 | ¥ 3,027 |
DEBT - Bank borrowings (Details
DEBT - Bank borrowings (Details) € in Millions, $ in Millions | Feb. 28, 2018EUR (€) | Feb. 28, 2018EUR (€)shares | Nov. 30, 2017USD ($) | May 31, 2017USD ($) | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) |
Term facility | ||||||
Debt | ||||||
Maximum borrowing amount | $ 250 | |||||
Line of credit draw down amount | $ 250 | |||||
Repayment of line of credit facility | $ 0 | $ 0 | ||||
Weighted average interest rate (as a percent) | 3.93% | 3.04% | ||||
Revolving bank credit facility | ||||||
Debt | ||||||
Term of debt instrument | 35 months | |||||
Maximum borrowing amount | $ 250 | |||||
Line of credit draw down amount | $ 250 | $ 370 | ||||
Repayment of line of credit facility | $ 250 | $ 120 | ||||
Revolving bank credit facility | Libor | ||||||
Debt | ||||||
Percentage points added to the reference rate | 1.75% | |||||
Three-year term facility | ||||||
Debt | ||||||
Maximum borrowing amount | € | € 260 | € 260 | ||||
Period to obtain loan amount | 30 days | |||||
Shares pledged | shares | 13,092,112 | |||||
Weighted average interest rate (as a percent) | 1.70% | |||||
Three-year term facility | EURIBOR | ||||||
Debt | ||||||
Term of debt instrument | 3 years | |||||
Percentage points added to the reference rate | 1.70% |
DEBT - Convertible Senior Notes
DEBT - Convertible Senior Notes due 2022 (Details) - Convertible senior notes - The Notes $ / shares in Units, ¥ in Millions | Nov. 03, 2017USD ($)$ / shares | Nov. 03, 2017CNY (¥) | Nov. 03, 2017CNY (¥) |
Debt Instrument [Line Items] | |||
Aggregate principal amount | $ 475,000,000 | ||
Fixed interest rate (as a percent) | 0.375% | 0.375% | |
Initial conversion rate per ADS | 5.4869 | 5.4869 | |
Increment used for debt conversion | $ 1,000 | ||
Initial conversion price | $ / shares | $ 182.25 | ||
Repurchase price as a percentage of principal amount | 100.00% | 100.00% | |
Proceeds from issuance of debt | $ 467,000,000 | ¥ 3,093 | |
Debt issuance costs | $ 8,000,000 | ¥ 54 |
DEBT - ADS Lending Arrangement
DEBT - ADS Lending Arrangement (Details) - ADS Lending Arrangement $ / shares in Units, ¥ in Millions, $ in Millions | 12 Months Ended | ||
Dec. 31, 2018USD ($)$ / sharesshares | Dec. 31, 2018CNY (¥)shares | Dec. 31, 2017shares | |
Debt Instrument [Line Items] | |||
Number of Loaned ADS lent | 2,606,278 | ||
ADS par value per share | $ / shares | $ 0.0004 | ||
ADS outstanding | 2,606,278 | 2,606,278 | 2,606,278 |
Debt issuance costs | $ 4 | ¥ 26 |
DEBT - Capped Call Options (Det
DEBT - Capped Call Options (Details) - Call Option ¥ in Millions, $ in Millions | Oct. 26, 2017USD ($) | Dec. 31, 2018CNY (¥)$ / item |
Debt Instrument [Line Items] | ||
Cap price of the capped call transactions per ADS | 221.31 | |
Premium paid for capped call transactions | $ 27 | ¥ 177 |
ACCRUED EXPENSES AND OTHER CU_3
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) ¥ in Millions, $ in Millions | 12 Months Ended | ||
Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |||
Payable for business acquisitions | ¥ 39 | ¥ 118 | |
Accrual for customer loyalty program | 154 | 138 | |
Payable to noncontrolling interest holders | 107 | 87 | |
Payable to franchisees | 698 | 418 | |
Other payables | 351 | 264 | |
Accrued rental, utilities and other accrued expenses | 187 | 174 | |
Deferred rental, current | 71 | 50 | |
Total | $ 233 | ¥ 1,607 | ¥ 1,249 |
Additional disclosures | |||
Payable to franchisees, term (in years) | 1 year |
HOTEL OPERATING COSTS (Details)
HOTEL OPERATING COSTS (Details) ¥ in Millions, $ in Millions | 12 Months Ended | |||
Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | |
HOTEL OPERATING COSTS. | ||||
Rents | ¥ 2,406 | ¥ 2,059 | ¥ 1,871 | |
Utilities | 399 | 366 | 346 | |
Personnel costs | 1,663 | 1,388 | 1,089 | |
Depreciation and amortization | 869 | 773 | 677 | |
Consumable, food and beverage | 673 | 551 | 495 | |
Others | 466 | 538 | 456 | |
Total | $ 942 | ¥ 6,476 | ¥ 5,675 | ¥ 4,934 |
PRE-OPENING EXPENSES (Details)
PRE-OPENING EXPENSES (Details) ¥ in Millions, $ in Millions | 12 Months Ended | |||
Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | |
PRE-OPENING EXPENSES | ||||
Rents | ¥ 221 | ¥ 192 | ¥ 67 | |
Personnel costs | 18 | 6 | 2 | |
Others | 16 | 8 | 3 | |
Total | $ 37 | ¥ 255 | ¥ 206 | ¥ 72 |
SHARE-BASED COMPENSATION - Plan
SHARE-BASED COMPENSATION - Plan (Details) - shares | 12 Months Ended | ||||||||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2015 | Aug. 31, 2010 | Sep. 30, 2009 | Oct. 31, 2008 | Jun. 30, 2007 | Feb. 28, 2007 | |
Share options | |||||||||
Share based compensation | |||||||||
Granted (in shares) | 0 | 0 | 0 | ||||||
Incentive Award Plans | |||||||||
Share based compensation | |||||||||
Vesting period | 10 years | ||||||||
Incentive Award Plans | Maximum | |||||||||
Share based compensation | |||||||||
Share-based payment award, contractual term | 10 years | ||||||||
Incentive Award Plans | Share options | |||||||||
Share based compensation | |||||||||
Share-based payment award, option granted (in shares) | 24,577,669 | ||||||||
Incentive Award Plans | Restricted stocks | |||||||||
Share based compensation | |||||||||
Share-based payment award, nonvested restricted stocks (in shares) | 23,795,090 | ||||||||
Incentive Award Plans | Second anniversary of the stated vesting commencement date | |||||||||
Share based compensation | |||||||||
Share-based payment award, vesting percentage | 50.00% | ||||||||
Incentive Award Plans | Vesting ratably over the following two years | |||||||||
Share based compensation | |||||||||
Share-based payment award, vesting percentage | 50.00% | ||||||||
Vesting period | 2 years | ||||||||
2007 Global Share Plan | |||||||||
Share based compensation | |||||||||
Share-based payment award, maximum number of incentive award available (in shares) | 10,000,000 | ||||||||
2008 Global Share Plan | |||||||||
Share based compensation | |||||||||
Share-based payment award, maximum number of incentive award available (in shares) | 7,000,000 | 3,000,000 | |||||||
2009 Share Incentive Plan | |||||||||
Share based compensation | |||||||||
Share-based payment award, maximum number of incentive award available (in shares) | 43,000,000 | 15,000,000 | 3,000,000 |
SHARE-BASED COMPENSATION - Opti
SHARE-BASED COMPENSATION - Option assumptions and Activity (Details) - Share options $ / shares in Units, ¥ in Millions, $ in Millions | 12 Months Ended | |||
Dec. 31, 2018USD ($)$ / sharesshares | Dec. 31, 2018CNY (¥)shares | Dec. 31, 2017CNY (¥)shares | Dec. 31, 2016CNY (¥)shares | |
Number of Options | ||||
Share options outstanding at the beginning of the period (in shares) | shares | 2,044,724 | |||
Forfeited (in shares) | shares | (32,019) | |||
Exercised (in shares) | shares | (876,715) | (609,224) | (684,632) | |
Share options outstanding at the end of the period (in shares) | shares | 1,135,990 | 2,044,724 | ||
Share options vested or expected to vest (in shares) | shares | 1,125,336 | |||
Share options exercisable (in shares) | shares | 1,099,720 | |||
Weighted Average Exercise Price | ||||
Share options outstanding at the beginning of the period (in dollars per shares) | $ / shares | $ 2.12 | |||
Forfeited (in dollars per shares) | $ / shares | 1.75 | |||
Exercised (in dollars per shares) | $ / shares | 2.42 | |||
Share options outstanding at the end of the period (in dollars per shares) | $ / shares | 1.89 | |||
Share options vested or expected to vest (in dollars per shares) | $ / shares | 1.87 | |||
Share options exercisable (in dollars per shares) | $ / shares | $ 1.81 | |||
Weighted Average Remaining Contractual Life and Aggregate Intrinsic Value | ||||
Share options outstanding, Weighted average remaining contractual life | 10 months 28 days | |||
Share options vested or expected to vest, Weighted average remaining contractual life | 10 months 21 days | |||
Share options exercisable, Weighted average remaining contractual life | 9 months 29 days | |||
Share options outstanding, Aggregate intrinsic value | $ | $ 30 | |||
Share options vested or expected to vest, Aggregate intrinsic value | $ | 30 | |||
Share options exercisable, Aggregate intrinsic value | $ | $ 29 | |||
Weighted-average period for recognition of unrecognized compensation costs | 1 year 1 month 6 days | |||
Aggregate intrinsic value of options exercised | ¥ | ¥ 194 | ¥ 77 | ¥ 41 |
SHARE-BASED COMPENSATION - Nonv
SHARE-BASED COMPENSATION - Nonvested restricted stocks (Details) ¥ in Millions | 12 Months Ended | |||
Dec. 31, 2018CNY (¥)$ / shares | Dec. 31, 2018CNY (¥)trancheshares | Dec. 31, 2017CNY (¥)shares | Dec. 31, 2016CNY (¥)trancheshares | |
Share based compensation | ||||
Number of tranche | tranche | 10 | 10 | ||
Restricted stocks | ||||
Number of Restricted Stocks | ||||
Nonvested restricted stocks outstanding at the beginning of the period (in shares) | 12,492,570 | |||
Granted (in shares) | 1,708,980 | |||
Forfeited (in shares) | (253,323) | |||
Vested (in shares) | (1,680,939) | |||
Adjusted (in shares) | (170,672) | |||
Nonvested restricted stocks outstanding at the end of the period (in shares) | 12,096,616 | 12,492,570 | ||
Weighted Average Grant Date Fair Value | ||||
Nonvested restricted stocks outstanding at the beginning of the period (in dollars per shares) | $ / shares | $ 5.86 | |||
Granted (in dollars per shares) | $ / shares | 27.51 | |||
Forfeited (in dollars per shares) | $ / shares | 8.63 | |||
Vested (in dollars per shares) | $ / shares | 5.75 | |||
Adjusted for performance conditions (in dollars per share) | $ / shares | 4.89 | |||
Nonvested restricted stocks outstanding at the end of the period (in dollars per shares) | $ / shares | $ 8.89 | |||
Total unrecognized compensation expense | ¥ | $ 621 | ¥ 621 | ||
Weighted-average period for recognition of unrecognized compensation costs | 4 years 2 months 5 days | |||
Total fair value of nonvested restricted stocks, vested | ¥ | ¥ 183 | ¥ 274 | ¥ 123 | |
Restricted stocks | Performance Condition | ||||
Number of Restricted Stocks | ||||
Granted (in shares) | 661,973 | 1,876,975 | ||
Restricted stocks | Performance Condition | Second anniversary of the stated vesting commencement date | ||||
Share based compensation | ||||
Share-based payment award, vesting percentage | 50.00% | |||
Restricted stocks | Performance Condition | Vesting ratably over the following two years | ||||
Share based compensation | ||||
Share-based payment award, vesting percentage | 50.00% | |||
Period for remaining percentage vested | 2 years |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) ¥ / shares in Units, ¥ in Millions | 12 Months Ended | |||
Dec. 31, 2018$ / shares | Dec. 31, 2018CNY (¥)¥ / sharesshares | Dec. 31, 2017CNY (¥)¥ / sharesshares | Dec. 31, 2016CNY (¥)¥ / sharesshares | |
EARNINGS PER SHARE | ||||
Net income attributable to ordinary shareholders - basic | ¥ | ¥ 716 | ¥ 1,228 | ¥ 782 | |
Eliminate the dilutive effect of interest expense of convertible senior notes | ¥ | 40 | 5 | ||
Net income attributable to ordinary shareholders - diluted | ¥ | ¥ 756 | ¥ 1,233 | ¥ 782 | |
Weighted average ordinary shares outstanding - basic | 281,717,485 | 279,272,140 | 275,139,070 | |
Incremental weighted-average ordinary shares from assumed exercise of share options and nonvested restricted stocks using the treasury stock method | 11,463,212 | 12,202,369 | 7,750,424 | |
Dilutive effect of convertible senior notes | 10,425,112 | 1,599,469 | ||
Weighted average ordinary shares outstanding - diluted | 303,605,809 | 293,073,978 | 282,889,494 | |
Basic earnings per share (in RMB and USD per share) | (per share) | $ 0.37 | ¥ 2.54 | ¥ 4.40 | ¥ 2.84 |
Diluted earnings per share (in RMB and USD per share) | (per share) | $ 0.36 | ¥ 2.49 | ¥ 4.21 | ¥ 2.76 |
Outstanding employee options and nonvested restricted stocks (in shares) | 530,009 |
Cash Dividend (Details)
Cash Dividend (Details) $ / shares in Units, ¥ in Millions, $ in Millions | Dec. 13, 2018$ / shares | Oct. 23, 2017$ / shares | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) |
CASH DIVIDEND | ||||||
Cash dividends declared (Per share) | $ / shares | $ 0.34 | $ 0.16 | ||||
Cash dividends recorded as a reduction against retained earnings | ¥ 660 | ¥ 295 | ||||
Cash dividends recorded as a receivable in other current assets | ¥ 11 | |||||
Dividends payable | $ 96 | ¥ 658 |
INCOME TAXES (Details)
INCOME TAXES (Details) ¥ in Millions, $ in Millions | 9 Months Ended | 12 Months Ended | |||||||||||
Sep. 30, 2017 | Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 | Dec. 31, 2009 | Dec. 31, 2008 | |
Income tax | |||||||||||||
Effective tax rate (as a percent) | 25.00% | 25.00% | 25.00% | 25.00% | |||||||||
Profit tax | $ 83 | ¥ 569 | ¥ 357 | ¥ 279 | |||||||||
PRC | |||||||||||||
Income tax | |||||||||||||
Effective tax rate (as a percent) | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | |
China Lodging Holdings (HK) Limited | Hong Kong | |||||||||||||
Income tax | |||||||||||||
Effective tax rate (as a percent) | 16.50% | 16.50% | |||||||||||
Starway | Hong Kong | |||||||||||||
Income tax | |||||||||||||
Effective tax rate (as a percent) | 16.50% | 16.50% | |||||||||||
IBIS China Investment Limited | Hong Kong | |||||||||||||
Income tax | |||||||||||||
Effective tax rate (as a percent) | 16.50% | 16.50% | |||||||||||
ACL Greater China Limited | Hong Kong | |||||||||||||
Income tax | |||||||||||||
Effective tax rate (as a percent) | 16.50% | 16.50% | |||||||||||
TAHM Investment Limited | Hong Kong | |||||||||||||
Income tax | |||||||||||||
Effective tax rate (as a percent) | 16.50% | 16.50% | |||||||||||
City Home Investment Limited | Hong Kong | |||||||||||||
Income tax | |||||||||||||
Effective tax rate (as a percent) | 16.50% | 16.50% | |||||||||||
Orange Hotel HongKong Limited | Hong Kong | |||||||||||||
Income tax | |||||||||||||
Effective tax rate (as a percent) | 16.50% | 16.50% | |||||||||||
Huazhu Investment I Limited | Hong Kong | |||||||||||||
Income tax | |||||||||||||
Effective tax rate (as a percent) | 16.50% | 16.50% | |||||||||||
Huazhu Investment II Limited | Hong Kong | |||||||||||||
Income tax | |||||||||||||
Effective tax rate (as a percent) | 16.50% | 16.50% | |||||||||||
China Lodging Holdings Singapore Pte. Ltd. | Singapore | |||||||||||||
Income tax | |||||||||||||
Effective tax rate (as a percent) | 17.00% | 17.00% | 17.00% | 17.00% | |||||||||
Profit tax | ¥ 0 | ¥ 0 | ¥ 0 | ||||||||||
Hanting Suzhou | PRC | |||||||||||||
Income tax | |||||||||||||
Effective tax rate (as a percent) | 15.00% | 25.00% | 25.00% | 25.00% | |||||||||
Jizhu Shanghai | PRC | |||||||||||||
Income tax | |||||||||||||
Effective tax rate (as a percent) | 12.50% | 12.50% | 12.50% | 12.50% | |||||||||
Income tax exemption period | 2 years | 2 years | |||||||||||
Period of income tax rate reduction | 3 years | 3 years | |||||||||||
Percentage of tax reduction | 50.00% | 50.00% |
INCOME TAXES - Reconciliation (
INCOME TAXES - Reconciliation (Details) ¥ / shares in Units, ¥ in Millions, $ in Millions | 12 Months Ended | |||
Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥)¥ / shares | Dec. 31, 2017CNY (¥)¥ / shares | Dec. 31, 2016CNY (¥)¥ / shares | |
Tax expense (benefit) | ||||
Current Tax | ¥ | ¥ 660 | ¥ 436 | ¥ 253 | |
Deferred Tax | $ (13) | (91) | (79) | 26 |
Total | $ 83 | ¥ 569 | ¥ 357 | ¥ 279 |
Reconciliation between the effective income tax rate and the PRC statutory income tax rate | ||||
PRC statutory tax rate | 25.00% | 25.00% | 25.00% | 25.00% |
Tax effect of non-deductible expenses and non-taxable income in determining taxable profit | 15.00% | 15.00% | 1.00% | 3.00% |
Effect of different tax rate of group entities operating in other jurisdictions | 4.00% | 4.00% | 1.00% | (1.00%) |
Effect of change in valuation allowance | (1.00%) | (1.00%) | 1.00% | |
Effect of tax holiday | (3.00%) | (3.00%) | (1.00%) | (3.00%) |
Effect of cash dividends | 5.00% | 5.00% | (1.00%) | 3.00% |
Effect of disposal of subsidiary | 1.00% | 1.00% | (1.00%) | |
Effect of excess tax benefit of rewards | (5.00%) | (5.00%) | (3.00%) | |
Effective tax rate | 41.00% | 41.00% | 22.00% | 27.00% |
Aggregate amount and per share effect of the tax holidays | ||||
Aggregate amount | ¥ | ¥ 31 | ¥ 24 | ¥ 27 | |
Per share effect - basic (in RMB per share) | ¥ / shares | ¥ 0.11 | ¥ 0.09 | ¥ 0.10 | |
Per share effect - diluted (in RMB per share) | ¥ / shares | ¥ 0.10 | ¥ 0.08 | ¥ 0.10 |
INCOME TAXES - Deferred income
INCOME TAXES - Deferred income tax assets and liabilities (Details) - CNY (¥) ¥ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Deferred tax assets: | ||
Net loss carryforward | ¥ 181 | ¥ 140 |
Deferred revenue | 186 | 159 |
Deferred rent | 5 | 9 |
Long-term assets | 149 | 130 |
Bad debt provision | 6 | 4 |
Liabilities related to customer loyalty program | 37 | 37 |
Accrued payroll | 16 | 14 |
Other accrued expenses | 14 | 21 |
Share-based compensation | 17 | 13 |
Others | 1 | 2 |
Valuation allowance | (107) | (123) |
Total deferred tax assets | 505 | 406 |
Deferred tax liabilities: | ||
Favorable lease, building and land use rights-fair value adjustment | 447 | 399 |
Capitalized interest | 3 | 3 |
Unrealized gain for investment | 7 | 7 |
Others | 18 | 13 |
Total deferred tax liabilities | ¥ 475 | ¥ 422 |
INCOME TAXES - Valuation allowa
INCOME TAXES - Valuation allowance (Details) ¥ in Millions, $ in Millions | 12 Months Ended | |||
Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | |
Valuation allowance | ||||
Valuation allowance additions due to acquisition | ¥ 0 | ¥ 3 | ||
Loss carryforwards | 722 | |||
Uncertain tax benefits | ||||
Interest or penalty expense | 0 | 0 | ¥ 0 | |
Roll-forward of the unrecognized tax benefits | ||||
Beginning balance | 26 | 20 | 15 | |
Addition for tax positions | (12) | 6 | 5 | |
Ending balance | ¥ 14 | 26 | 20 | |
Withholding income tax rate (as a percentage) | 10.00% | 10.00% | ||
Withholding income tax rate with Hong Kong as holding company (as a percentage) | 5.00% | 5.00% | ||
PRC dividend withholding tax accrued | ¥ 34 | |||
PRC dividend withholding tax liability | 18 | |||
Future annual dividend distribution | $ | $ 100 | |||
Additional provision for PRC dividend withholding tax accrued | ¥ 0 | |||
Period of statute of limitations | 3 years | 3 years | ||
Period of statute of limitations, if the underpayment is more than the specified amount | 5 years | 5 years | ||
Minimum amount of underpayment of taxes for statute of limitations to be extended to five years | ¥ 0.1 | |||
Period of statute of limitations for transfer pricing issues | 10 years | 10 years | ||
Valuation allowance for deferred tax assets | ||||
Valuation allowance | ||||
Charge to costs and expenses | ¥ 36 | 60 | 55 | |
Valuation allowance additions due to acquisition | 3 | 12 | ||
Charge taken against allowance | 43 | 47 | 17 | |
Write off | ¥ 9 | ¥ 8 | ¥ 28 |
MAINLAND CHINA CONTRIBUTION P_2
MAINLAND CHINA CONTRIBUTION PLAN (Details) - CNY (¥) ¥ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
MAINLAND CHINA CONTRIBUTION PLAN | |||
Employee benefit contributions | ¥ 321 | ¥ 264 | ¥ 213 |
RESTRICTED NET ASSETS (Details)
RESTRICTED NET ASSETS (Details) - CNY (¥) ¥ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
RESTRICTED NET ASSETS | |||
Minimum required percentage of after tax profit appropriated to general reserve fund | 10.00% | ||
Threshold percentage of general reserve fund to registered capital | 50.00% | ||
Reserve funds not distributed as cash dividends | ¥ 502 | ¥ 379 | ¥ 277 |
Restricted share capital of PRC subsidiaries | 2,777 | ||
Restricted net assets not available for distribution to the Company in the form of dividends, loans or advances | ¥ 3,279 |
RELATED PARTY TRANSACTIONS AN_3
RELATED PARTY TRANSACTIONS AND BALANCES (Details) ¥ in Millions, $ in Millions | 12 Months Ended | ||||
Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | Dec. 31, 2018CNY (¥) | |
Related party transaction | |||||
Amount due from related parties | $ 25 | ¥ 118 | ¥ 176 | ||
Due to related party | 37 | 75 | |||
Loan payment | 1 | ¥ 7 | 113 | ¥ 39 | |
Loan from related party | $ 15 | 103 | |||
Sheen Star | |||||
Related party transaction | |||||
Amount due from related parties | 39 | 44 | |||
Loan payment | 35 | ||||
Sheen Star | Service fee | |||||
Related party transaction | |||||
Revenue from related parties | 2 | ||||
Sheen Star | Interest income | |||||
Related party transaction | |||||
Interest income from related party | 2 | ||||
CREATER | |||||
Related party transaction | |||||
Amount due from related parties | 27 | 40 | |||
Loan payment | 27 | ||||
CREATER | Interest income | |||||
Related party transaction | |||||
Interest income from related party | 10 | ||||
Ctrip | |||||
Related party transaction | |||||
Amount due from related parties | 32 | 34 | |||
Due to related party | 29 | 25 | |||
Ctrip | Marketing and training fee | |||||
Related party transaction | |||||
Revenue from related parties | 12 | 24 | 13 | ||
Ctrip | Commission expenses | |||||
Related party transaction | |||||
Expenses with related parties | 61 | 77 | 44 | ||
Ctrip | Lease expenses | |||||
Related party transaction | |||||
Expenses with related parties | 18 | ||||
China Hospitality JV | |||||
Related party transaction | |||||
Due to related party | 25 | ||||
China Hospitality JV | Service fee | |||||
Related party transaction | |||||
Revenue from related parties | 10 | ||||
Cjia Group | |||||
Related party transaction | |||||
Amount due from related parties | 15 | 23 | |||
Due to related party | 7 | ||||
Loan payment | 85 | ||||
Loan from related party | 103 | ||||
Cjia Group | Goods sold and service provided | |||||
Related party transaction | |||||
Revenue from related parties | 30 | 8 | 0 | ||
Cjia Group | Chengjia Hotel Management Co., Ltd. | |||||
Related party transaction | |||||
Consideration from sale of subsidiary | 10 | ||||
Hanmo | |||||
Related party transaction | |||||
Amount due from related parties | 22 | ||||
Hanmo | Interest income | |||||
Related party transaction | |||||
Interest income from related party | 7 | ||||
Accor | |||||
Related party transaction | |||||
Amount due from related parties | 2 | 2 | |||
Due to related party | 7 | 8 | |||
Accor | Service fee | |||||
Related party transaction | |||||
Revenue from related parties | 14 | 8 | 4 | ||
Accor | Brand use fee, reservation fee and other related service fee | |||||
Related party transaction | |||||
Expenses with related parties | ¥ 18 | 11 | ¥ 6 | ||
Others | |||||
Related party transaction | |||||
Amount due from related parties | 3 | 11 | |||
Due to related party | ¥ 1 | ¥ 10 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Operating lease and purchase commitments (Details) ¥ in Millions | Dec. 31, 2018CNY (¥) |
Operating lease commitments | |
2019 | ¥ 2,854 |
2020 | 2,863 |
2021 | 2,777 |
2022 | 2,661 |
2023 | 2,548 |
Thereafter | 15,669 |
Total | 29,372 |
Purchase commitments | |
Purchase commitments expected to be incurred within one year related to leasehold improvements and installation of equipment for hotel operations | ¥ 91 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES - Contingencies (Details) - CNY (¥) ¥ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Contingencies | |||
Accrued contingencies | ¥ 20 | ¥ 41 | |
Reversed contingencies | 25 | 36 | |
Further accrued contingencies | ¥ 4 | ¥ 11 | |
Other operating expense | |||
Contingencies | |||
Accrued contingencies | ¥ 66 |
SCHEDULE I FINANCIAL INFORMAT_2
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY - BALANCE SHEETS (Details) ¥ in Millions, $ in Millions | Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) |
Current assets: | |||
Cash and Cash Equivalents, at Carrying Value | $ 620 | ¥ 4,262 | ¥ 3,475 |
Other current assets | 78 | 540 | 329 |
Total current assets | 1,014 | 6,974 | 5,761 |
Other assets | 69 | 471 | 365 |
Long-term investments | 895 | 6,152 | 2,362 |
Total assets | 3,490 | 23,993 | 17,508 |
Current liabilities: | |||
Short-term debt | 138 | 948 | 131 |
Dividends payable | 96 | 658 | |
Amount due to related parties | 11 | 75 | 37 |
Accrued expenses and other current liabilities | 233 | 1,607 | 1,249 |
Total current liabilities | 868 | 5,969 | 3,771 |
Long-term debt | 1,282 | 8,812 | 4,922 |
Total liabilities | 2,571 | 17,674 | 11,274 |
Equity: | |||
Ordinary shares (US$0.0001 par value per share; 8,000,000,000 shares authorized; 294,040,234 and 296,597,888 shares issued as of December 31, 2017 and 2018, and 280,518,358 and 283,076,012 shares outstanding as of December 31, 2017 and 2018, respectively) | 0 | 0 | 0 |
Treasury shares (3,096,764 and 3,096,764 shares as of December 31 2017 and 2018, respectively) | (16) | (107) | (107) |
Additional paid-in capital | 540 | 3,713 | 3,624 |
Retained earnings | 380 | 2,610 | 2,513 |
Accumulated other comprehensive income (loss) | (6) | (42) | 168 |
Total equity | 898 | 6,174 | 6,198 |
Total liabilities and equity | 3,490 | 23,993 | 17,508 |
Parent Company | |||
Current assets: | |||
Cash and Cash Equivalents, at Carrying Value | 101 | 695 | 557 |
Short-term investments | 13 | 89 | 130 |
Other current assets | 4 | 29 | 37 |
Total current assets | 118 | 813 | 724 |
Other assets | 2 | 11 | 33 |
Investment in subsidiaries | 1,957 | 13,454 | 10,062 |
Long-term investments | 780 | ||
Total assets | 2,077 | 14,278 | 11,599 |
Current liabilities: | |||
Short-term debt | 131 | ||
Dividends payable | 96 | 658 | |
Amount due to related parties | 69 | 477 | 313 |
Accrued expenses and other current liabilities | 8 | 54 | 35 |
Total current liabilities | 173 | 1,189 | 479 |
Long-term debt | 1,006 | 6,915 | 4,922 |
Total liabilities | 1,179 | 8,104 | 5,401 |
Equity: | |||
Ordinary shares (US$0.0001 par value per share; 8,000,000,000 shares authorized; 294,040,234 and 296,597,888 shares issued as of December 31, 2017 and 2018, and 280,518,358 and 283,076,012 shares outstanding as of December 31, 2017 and 2018, respectively) | 0 | 0 | 0 |
Treasury shares (3,096,764 and 3,096,764 shares as of December 31 2017 and 2018, respectively) | (16) | (107) | (107) |
Additional paid-in capital | 540 | 3,713 | 3,624 |
Retained earnings | 380 | 2,610 | 2,513 |
Accumulated other comprehensive income (loss) | (6) | (42) | 168 |
Total equity | 898 | 6,174 | 6,198 |
Total liabilities and equity | $ 2,077 | ¥ 14,278 | ¥ 11,599 |
SCHEDULE I FINANCIAL INFORMAT_3
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY - BALANCE SHEETS (Parenthetical) (Details) - $ / shares | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
BALANCE SHEETS | ||||
Ordinary shares, par value (in dollars per share) | $ 0.0001 | $ 0.0001 | ||
Ordinary shares, shares authorized | 8,000,000,000 | 8,000,000,000 | ||
Ordinary shares, shares issued | 296,597,888 | 294,040,234 | ||
Ordinary shares, shares outstanding | 283,076,012 | 280,518,358 | 278,282,366 | 250,881,559 |
Treasury stock, shares | 3,096,764 | 3,096,764 | ||
Parent Company | ||||
BALANCE SHEETS | ||||
Ordinary shares, par value (in dollars per share) | $ 0.0001 | $ 0.0001 | ||
Ordinary shares, shares authorized | 8,000,000,000 | 8,000,000,000 | ||
Ordinary shares, shares issued | 296,597,888 | 294,040,234 | ||
Ordinary shares, shares outstanding | 283,076,012 | 280,518,358 | ||
Treasury stock, shares | 3,096,764 | 3,096,764 |
SCHEDULE I FINANCIAL INFORMAT_4
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY - STATEMENTS OF COMPREHENSIVE INCOME (Details) ¥ in Millions, $ in Millions | 12 Months Ended | |||
Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | |
Operating costs and expenses: | ||||
General and administrative expenses | $ 124 | ¥ 851 | ¥ 691 | ¥ 492 |
Total operating costs and expenses | 1,155 | 7,945 | 6,874 | 5,715 |
Loss from operations | 341 | 2,344 | 1,426 | 841 |
Interest income | 21 | 148 | 113 | 67 |
Interest expense | (35) | (244) | (87) | (11) |
Foreign exchange gain (loss) | (21) | (144) | (18) | 16 |
Other income, net | 30 | 203 | 128 | 134 |
Unrealized gain (loss) from fair value changes of equity securities | (133) | (914) | 35 | |
Net income attributable to Huazhu Group Limited | 104 | 716 | 1,228 | 782 |
Other comprehensive income | ||||
Unrealized securities holding gains (losses), net of tax of (2), (8) and nil for 2016, 2017 and 2018, respectively | 1 | 16 | ||
Reclassification of realized gains to net income, net of tax | (5) | (68) | ||
Foreign currency translation adjustments, net of tax of nil for 2016, 2017 and 2018, respectively | (25) | (169) | 177 | (13) |
Comprehensive income attributable to Huazhu Group Limited | 79 | 547 | 1,401 | 717 |
Parent Company | ||||
Operating costs and expenses: | ||||
General and administrative expenses | 13 | 89 | 69 | 60 |
Total operating costs and expenses | 13 | 89 | 69 | 60 |
Loss from operations | (13) | (89) | (69) | (60) |
Interest income | 0 | 1 | 2 | 0 |
Interest expense | 29 | 198 | 87 | 10 |
Foreign exchange gain (loss) | 2 | 17 | (14) | 15 |
Other income, net | 7 | 50 | 7 | 70 |
Unrealized gain (loss) from fair value changes of equity securities | (6) | (45) | 35 | |
Income in investment in subsidiaries | 143 | 980 | 1,354 | 767 |
Net income attributable to Huazhu Group Limited | 104 | 716 | 1,228 | 782 |
Other comprehensive income | ||||
Unrealized securities holding gains (losses), net of tax of (2), (8) and nil for 2016, 2017 and 2018, respectively | 1 | 16 | ||
Reclassification of realized gains to net income, net of tax | (5) | (68) | ||
Foreign currency translation adjustments, net of tax of nil for 2016, 2017 and 2018, respectively | (25) | (169) | 177 | (13) |
Comprehensive income attributable to Huazhu Group Limited | $ 79 | ¥ 547 | ¥ 1,401 | ¥ 717 |
SCHEDULE I FINANCIAL INFORMAT_5
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY - STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) (Details) - CNY (¥) ¥ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
STATEMENTS OF COMPREHENSIVE INCOME | |||
Unrealized securities holding gains, tax | ¥ 0 | ¥ (8) | ¥ (2) |
Foreign currency translation adjustments, tax | 0 | 0 | 0 |
Parent Company | |||
STATEMENTS OF COMPREHENSIVE INCOME | |||
Unrealized securities holding gains, tax | 0 | (8) | (2) |
Foreign currency translation adjustments, tax | ¥ 0 | ¥ 0 | ¥ 0 |
SCHEDULE I FINANCIAL INFORMAT_6
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY - STATEMENTS OF CASH FLOWS (Details) ¥ in Millions, $ in Millions | 12 Months Ended | |||
Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) | |
Operating activities: | ||||
Net income | $ 106 | ¥ 727 | ¥ 1,228 | ¥ 774 |
Adjustments to reconcile net income to net cash used in operating activities: | ||||
Share-based compensation | 12 | 83 | 66 | 55 |
Investment (income) loss | 147 | 1,009 | (160) | (117) |
Amortization of issuance cost of convertible senior notes | 4 | 28 | 3 | |
Changes in operating assets and liabilities: | ||||
Other current assets | (8) | (56) | (76) | (41) |
Other assets | (5) | (32) | (54) | (5) |
Accrued expenses and other current liabilities | 20 | 140 | 278 | 225 |
Net cash provided by operating activities | 444 | 3,049 | 2,453 | 2,066 |
Investing activities: | ||||
Purchase of long-term investments | (721) | (4,959) | (1,328) | (293) |
Purchase of short-term investments | (96) | |||
Net cash provided by (used in) investing activities | (923) | (6,345) | (6,235) | (176) |
Financing activities: | ||||
Net proceeds from issuance of ordinary shares upon exercise of option | 2 | 14 | 9 | 12 |
Proceeds from short-term bank borrowings | 135 | 928 | 137 | 282 |
Repayment of short-term bank borrowings | (19) | (128) | (295) | (333) |
Proceeds from long-term bank borrowings | 622 | 4,275 | 3,633 | |
Repayment of long-term bank borrowings | (116) | (799) | (1,651) | |
Proceeds from issuance of convertible senior notes, net of issuance cost and capped call option | 2,925 | |||
Debt financing costs paid | (10) | |||
Proceeds from ADS lending | 0 | |||
Dividends paid | (306) | (276) | ||
Net cash (used in) provided by financing activities | 618 | 4,248 | 4,536 | (266) |
Effect of exchange rate changes on cash and cash equivalents, and restricted cash | (3) | (24) | (34) | 14 |
Net increase in cash and cash equivalents, and restricted cash | 136 | 928 | 720 | 1,638 |
Cash, cash equivalents and restricted cash at the beginning of the year | 575 | 3,956 | 3,236 | 1,598 |
Cash, cash equivalents and restricted cash at the end of the year | 711 | 4,884 | 3,956 | 3,236 |
Parent Company | ||||
Operating activities: | ||||
Net income | 104 | 716 | 1,228 | 782 |
Adjustments to reconcile net income to net cash used in operating activities: | ||||
Share-based compensation | 12 | 83 | 66 | 55 |
Income in investment in subsidiaries | (143) | (980) | (1,354) | (767) |
Investment (income) loss | 7 | 46 | (41) | (51) |
Amortization of issuance cost of convertible senior notes | 4 | 28 | 3 | |
Changes in operating assets and liabilities: | ||||
Other current assets | 1 | 8 | (26) | 1 |
Other assets | 3 | 21 | (33) | |
Accrued expenses and other current liabilities | 3 | 18 | 26 | (17) |
Net cash provided by operating activities | (9) | (60) | (131) | 3 |
Investing activities: | ||||
Investment in subsidiaries | (3,250) | |||
Receipt of investment in subsidiaries | 309 | 2,121 | 236 | |
Purchase of long-term investments | (550) | (3,782) | (760) | (48) |
Proceeds from sale of long-term investments | 58 | 4 | ||
Purchase of short-term investments | (96) | |||
Proceeds from sale of short-term investment | 337 | |||
Net cash provided by (used in) investing activities | (241) | (1,661) | (4,048) | 529 |
Financing activities: | ||||
Net proceeds from issuance of ordinary shares upon exercise of option | 2 | 14 | 9 | 12 |
Proceeds of advances from subsidiaries | 22 | 149 | 90 | 0 |
Proceeds from short-term bank borrowings | 136 | 282 | ||
Repayment of short-term bank borrowings | (19) | (128) | (294) | (333) |
Proceeds from long-term bank borrowings | 350 | 2,409 | 3,633 | |
Repayment of long-term bank borrowings | (114) | (786) | (1,651) | |
Proceeds from issuance of convertible senior notes, net of issuance cost and capped call option | 2,925 | |||
Debt financing costs paid | (10) | |||
Proceeds from ADS lending | 0 | |||
Dividends paid | (306) | (276) | ||
Net cash (used in) provided by financing activities | 241 | 1,658 | 4,532 | (315) |
Effect of exchange rate changes on cash and cash equivalents, and restricted cash | 29 | 201 | (170) | 36 |
Net increase in cash and cash equivalents, and restricted cash | 20 | 138 | 183 | 253 |
Cash, cash equivalents and restricted cash at the beginning of the year | 81 | 557 | 374 | 121 |
Cash, cash equivalents and restricted cash at the end of the year | $ 101 | ¥ 695 | ¥ 557 | ¥ 374 |
SCHEDULE II VALUATION AND QUA_2
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (Details) - CNY (¥) ¥ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Valuation And Qualifying Accounts | |||
Addition Due to Acquisition | ¥ 0 | ¥ 3 | |
Allowance for doubtful accounts of accounts receivables and other receivables: | |||
Valuation And Qualifying Accounts | |||
Balance at Beginning of Year | 11 | 12 | ¥ 6 |
Charge to Costs and Expenses | 10 | 2 | 1 |
Addition Due to Acquisition | 4 | 7 | |
Write off | (8) | (3) | (2) |
Balance at End of Year | 17 | 11 | 12 |
Valuation allowance for deferred tax assets | |||
Valuation And Qualifying Accounts | |||
Balance at Beginning of Year | 123 | 115 | 93 |
Charge to Costs and Expenses | 36 | 60 | 55 |
Addition Due to Acquisition | 3 | 12 | |
Charge Taken Against Allowance | (43) | (47) | (17) |
Write off | (9) | (8) | (28) |
Balance at End of Year | ¥ 107 | ¥ 123 | ¥ 115 |