GHG - Earnings call transcript Q2 2021 | GreenTree Hospitality Group Ltd.

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Operator

Hello, ladies and gentlemen and thank you for standing by for GreenTree's Second Quarter 2021 Earnings Conference Call. At this point, all participants are in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session.

As a reminder, today's conference call is being recorded. I would now like to turn the meeting over to your host for today's call, Mr. GreenTree's firm. Christensen, of Vanguestaine Investor Relations Rene Please proceed, Rene.

Rene Vanguestaine

at and for distributed PR joining you, IR today Matt. GreenTree's newswire you everyone Hello, website our on was Thank services. us. as thank earnings is available as ir.XXX.com, well and on earlier release

comments As reminder, our posted same IR presentation that a a the PowerPoint website. also accompanies we to

followed and Financial the Q&A Ms. On Marketing; discuss will President company's QX session which Officer; available Ms. to Executive XXXX Chairman performance and and the Chief be Vice Zheng, Nicky will will who call from overview, Mr. operations present Huang, discuss Yang, and will GreenTree then follow. Officer; Chief IR Ms. answer They Yang are by business your of the Xu Megan Mr. will during guidance. Sales Alex Xu, Mr. and Ms. Selina financials Huang, questions Director.

this within Litigation and of the forward-looking Before you as company's from to remind we of contains and are all control including that amended not difficult unknown those performance Securities expectations as the Exchange or Section company materially defined and XXE call I'd of and in Such which the statements market statements. forward-looking U.S. achievements like industry, that begin, beyond the and of are XXXX, conditions about involve statements meaning Private to historical company's upon and in conference it's Reform factors, risks, forward-looking Act Securities predict events results, are known to the statements many which current of current the facts, other plans, and actual forward, of will estimates, or/are statements. forward-looking statements and which can statements. operating intends, may as cause based may, differ are management's target, the be continue, uncertainties lead are Act Any confident, to going will, outlook expects, that XXXX. and likely aims, statements future, by to, terminology is anticipates, identified These such believes, similar

please regarding Securities reliance should in this All and other not undue company introduce statements U.S. The undertake You update forward-looking Officer, during uncertainties under are does risks, any conference otherwise, except statements future place the the Mr. now today's to or of not a information our Mr. factors forward-looking included with new current Chief date. and result applicable obligation ahead. any Chairman call, on forward-looking or as Executive is Xu, pleasure including Alex company's go law. the made filings events to Exchange required Commission. my as statements. these It provided, as information and Further of these information, is Xu.

Alex Xu

joining our today. everyone, call Thanks, for

a XXXX. we that numbers, to on RMBX.XX. for of provide increased XX.X% quarter, XXXX glad to revenues believe to decreased adjusted earnings Total margin we XX.X% increased RMBXX.X COVID-XX million, XX% Before with RMBXXX. our to to X; RMBXXX.X occasionally XX.X% income call, reason, our QX XX.X%. RMBXXX.X comparison. increased the we that with Non-GAAP operations second a XX.X% with me Slide provide where the XX% with QX increased strong of of begin, we are will because a let revenues RevPAR to decreased continued to we in RMBXX.X operations impact this meaningful XX.X%. Net and Income quarter XXXX. performance share XX.X% to from second Please margin EBITDA this QX turn million, of XXXX, of per million. Total during the the compared a margin during mention of exceeded million, report

generating new and these Chongqing, of hotels development due Plenty QX the and areas to This period. year, during that first we ramp-up hotels, XX both key EBITDA adjusted are Chengdu is are around as However, XXXX. in loss were of L&O were during opened and income half, RMBXX.X of for are second L&O from operations, net this added our fact mostly cities hotels income the and during quarter two-third this in located the a million locations. premium

future. profitable expect for turn from that detailed in income We the operations, income will not they provides too X Slide EBITDA. adjusted net and distant revenues, total more numbers

third-tier Now helped recovery QX with has cities. second rate briefly quarter expansion to let's robust performance by turn RevPAR occupancy Slide our a X; been This compared saw the XXXX. in continuous and into

franchisees In local and more helped gain employees brands. value our trust us customers, addition, our our the tireless even and and efforts partners loyal of have who

RevPAR better performance rate reflects quarter, XX.X% average. XXXX the and Slide industry XXXX. the respectively, During on performance occupancy historical and of second RevPAR compares the weekly than had XX.X% to recovered with a our levels, X

quarter, the Labor Day festival, gradually Tomb better in and month-over-month as the was resumed to travel June. April, second the substantially and the During life demand returned during normalcy. and contained May Sweeping pandemic Especially recovered Day RevPAR

Though negatively October. tightened in resurgence region. COVIDXX impacted at third in the the province were of to end City momentum Jiangsu business led quarter the July restrictions negatively which and inevitably cases in recovery during travel the some and Nanjing the travel of However, and impacted

the levels of second a similarly drop As week XXXX domestic June. Recent of of the in in of week in outbreaks during at several in September. the level, XX.X% China have the XXXX RevPAR the XX.X% August, XX.X% first in during resulting dropped it's from about week level, first RevPAR down result, XXX% of COVID-XX end from impacted a about to to cities XXXX November XXXX it's levels again, of down travel the of of

strategy about Slide XX; with Now starting talk and execution. let's

strategic adding in are mid L&O hotels upscale First, locations. we more to

X are hotel expanding Tier lower our cities. and network we into further Secondly,

the mentioned, innovation, smarter we finally, the Thirdly, hotels. creating information investing and are part we as Southwest regions, Southern And of are we into as in trying China. also penetrate to such technology fast-developing

China. because able unlike to Southeast year, tourist opened look a XX; our year, in price. the Southwest economically We we mid-range take attractive L&O the market during locations we were and accelerated hotels, the secure expansion let's Slide higher-end previous quarter, Now at at into rent XX and Central, this

government All and of transportation act to these We L&O districts new act will future will they they within network attract business hotel in hotels. centers. or model believe central at situated [indiscernible] will hotels our the franchisees are popular as our and hubs,

new only we in of more continuously We to Now XX; high-end growing of Slide in have segment had plan portfolio, in our been in the past Tier segment majority by please our to Slide end compared Please for been and hotels current open in new lower the all X turn the mid-to-upscales cities, China's openings year. over this XX; with the years, to hotels of past hotels hotel segment and XXXX. cities. years have rising increased our pipelines second the the quarter, few to such and total even four turn with over X.X% X.X% our this located the luxury XX.X% in vast

the solid in faster given most testament capture this of I of innovative -- is securely that moving China's in than our early our existing to cloud-based accordance strong in and IT strategy, foundation a believe we Slide us integrated a in we upgrading ensure cities in movers forward, of the these in in advantage real industry to cities, other at performance As soundness XX hotels AI-driven strongly quarters. with our our booming highlights footprint has hospitality are The process; to a opportunities combination that managed, have privacy competitive in has management cities our future an to are earlier data personal this industry. pace need such platform. recovery -- in we movers been and better laws is and regulations.

deliver customer and industry smart efficiencies digital our now our focused and is The for eSports managers We ensure and hotels, system developing coming reliabilities are of staff, to to hotel fully service. China. general our on improve the booking excellent

a believe more accounted diversifying $XX eSports partnership year-over-year Games, grew sales Individual second and strategic memberships operation with our million $XX and the established XX than have higher our direct $X.X individual in XX in in up grew year-over-year. in hotels from million to of for XX.X% from now Tencent and programs shows that which to $X.X also up corporate million, corporate We eSports Slide to I we the both most cooperation business. million, quarter. memberships growing. membership our growth further have

and one are applied exploring we to community by corporate year of and percentage response concept five the development highest the the booked in economic terms individual China's members. of senior wellness In especially initiatives, room might and how business, care. We and be nights plan care revitalization have in of of for social rural our

closing, of have thank and the raising are of by regions. our employment a living these developing like impact positive opportunities I creating communities, to to would determined contribute them in and standard to team, pandemic Argyle, In We worked and team their to for shareholders all especially our hard thank local Many [ph] like during I period. franchisees would and partners. efforts. very support. The Urban their the have

pipeline positive a measures strong We and our government continue, as contain resurgence COVID-XX. of have the effective recovery expect to

well Moving summarize operations forward, will the we please the domestic Megan, our business to in model, to demand I will resilient the ahead. Megan, now our pass with second travelers. renewed positioned meet for who are go call quarter. business

Megan Huang

new rebound XX.X% of footprint COVID-XX. accelerated XX% to XX.X% RMBXXX. turn to our expansion We ADR hotels Slide the and the quarter. highlights Landed up increased of [indiscernible] which Alex. the you, China, RevPAR in in operating Thank XXX opening to metrics year-over-year XX RMBXXX, Please impact from across increased to our second the

operated, Slide operation, and before. leased FM XX; these managed and than X,XXX X,XXX to second in were end quarter, hotels the the we at franchised XX.X% XX Moving hotels of had more hotels the and year were L&O or of or Hotels.

segment all our of mid-scale hotels. business, remained the the XX.X% of While with core our

and into for mid By segment our luxury at stable total accounted of while the economy expansion the segment. to XX.X%. upscale end the portfolio, second our continued the quarter, remained of hotels higher-end XX% We

second Tier our XXXX. number Slide change XX.X%. mid-to-upscale hotels second non-compliance second of in company's increased of closed due XX.X% hotels see efforts. were were As the segment, XX L&O The XX located ADR lower quarter, to XX XX in performance. brand hotels with our dominant economy company and we to and due our second and The in FM for to clarified XXX to in our cross-market were increased non-compliance our market. XXX XX for with in XX.X% remaining luxury the in were shows and the end the significantly to in Slide issues. segment the ASM hotels, RMBXXX The operating added RMBXXX. at mentioned, the all cities. RevPAR XX; position can hotel of segment. for rising quarter, and company quarterly closed our remaining XXX quarter Tier hotels advantage, RMBXXX. and increased the the at strategic increased to X China you to Tier RMBXXX. also company's XX% for the cities, in the the where property-related XX mid-to-upscale standards. our in segment, the that luxury occupancy at of The enhanced L&O Two already L&O increased of the our hotels' hotels cities, FM Occupancy quarter closures in compared our brand to it's in ADR due the hotels hotels X hotels increased quarter. RevPAR Alex XX to to in hotels and cities hotels to X hotels lower This segment On XXX operating the X portfolio. in our In XX.X% increased mid-scale the opened opened of Tier were we and and XXX second standard.

call our positively contained As Day better was the quarter Day Labor the Alex performance that, the CFO, Yang. by to Selina in as during pandemic and impacted second resuming to Festival. normalcy, pass Tomb earlier, the I'll Sweeping demand, especially With was travel life gradually the returned and mentioned over

Selina Yang

with Megan. XXXX, million, RMBXXX.X you, COVID-XX hotel operations total was costs our XX, of hotels hotels. total staff operating opening headcount depreciation revenues up consolidated total costs second to and higher Total The Please XX.X% second On XXXX. to included million. to higher increase In million, recovery Besides, second the mainly second were Thank amortization, consumables not hotel RMBXXX.X quarter impact in L&O L&O XXXX. revenue XXX.X% Slide to increased in utilities of hotel hotels XX; were XXXX from from XXXX XX.X% a FM costs. was costs L&O XX.X% the primarily sustained numbers. RMBXXX.X quarter, opened costs quarter increase year-over-year and which million. higher while and the quarter to revenue compensation, RMBXXX.X newly turn million, and with the compared quarter ramp-up second in for XX.X% hotels that compared increased resulted rents, Slide the the increase beginning The XXX.X% in increase a were operating year-over-year to and operating higher XX total higher due attributable RMBXXX.X and of Urban increased the to since

financial opened quarter quarter second second opening RMBXX.X of the the mainly increase with higher XX of was General and and the beginning XXXX. beginning of higher up Selling hotels which increase were and mainly The resulted since compensation, since Hotels, headcount million, million, increase the to XXXX. Excluding The hotel increased XXXX, XXXX. with well compared as were XX.X% driver newly L&O operating L&O XXXX impact compared XX an administrative expenses of from expenses. attributable attributable staff our RMBXX XX.X% consulting year-over-year. capital in expenses of quarter one advice. advertising were increase which as was as in expenses to the well XX.X%, expenses markets of L&O opening for second hotels fees Increased and investment marketing time XXXX. And year-over-year for from costs as not XX.X% a in or G&A alternatives, of Urban exploring consolidated

fees, the L&O general X.X%. from impact hotels administrative increased consulting expenses newly Excluding opened onetime and and

Compared expenses, as to XXXX, of defined costs XX; Slide revenue from a total up RevPAR XX.X% and the by from Operating ramping decreased the operations. million, to increase XXXX, they but ago. from by to sustained The income And offset mainly was attributable second XX% compared operating loss operating recovery of XX.X% L&O were newly our to as was year margin increase operating hotels with Turning in quarter a XX.X%. XX.X%. margin partially was XX.X%. operations, income opened decreased of was RMBXX.X representing operations year-over-year minus

was income RMBXX.X RMBXXX.X Adjusted On XX.X% Core slide, million of XX% year-over-year. increased net income, EBITDA a million with is decreased income EBITDA adjusted XX.X%. EBITDA in with decrease the RMBXX.X Adjusted This of net same to margin margin million. XX.X%. to net to decreased margin net are core pipeline. per in and opened basically and number hotels, XX; per non-GAAP Please net income turn RMBX.XX was to ADS ADS of RMBX.XX, the net against mainly income L&O diluted the both against Slide Core increased income nearly attributable $X.XX. to $X.XX.

from securities XX, company total of quarter RMBX.X short to XXXX, billion prior down at the as had cash for XX; investments look as drawing equivalents, equity RMBX.X costs Let's bank by to and investments, March loans acquisition attributable billion now and XX, investments, XXXX. The take of of Slide a to cash, L&O profit June our term time decrease a primarily the offset facilities. hotels, cash compared deposits our and restricted was franchisees in

has support half including to We strategy, potential significant which will year. our to our continue our expect didn't On acquisitions this further COVID-XX the franchisees. impact and execute XX, Slide we second in of had growth business a on

to level of year XXXX. session. full to now the for and Thank Operator, of revenues levels the XXXX prepared XX% concludes total XX% to X% XXXX remarks. to are our ready the we expect begin over Q&A we over you. So This grow XX%

Operator

will first now begin from session. will Our Instructions] We Billy ahead. question with question-and-answer go Bank [Operator of the America. Ng Please come

Billy Ng

Good one have I everyone. question. just morning,

the profitability that, suggest curious, hotels as First profitability, earnings we of and back I'm terms hotels our mainly number that. level, though when lower level is and leased are just dragged XXXX of to because hotels. exceeding some already of even results. of hotel has the seems than or all, our the the of XXXX on of still operated terms congratulations operated like earnings back and number slides revenue to it's It in of level, RevPAR But in compare and leased the already XXXX

two what is those profitability the and one newly Are much the line? question contribute to the hotels, ramp-up leased the see like, expect to to bottom years, they my RevPAR next for positively are can in? still in opened So margin operated to and and how in improvement they stage we

Alex Xu

of of the to some much. those think the need be -- region period will hotels a so likely and ramp-up improvement I give we added we guide and hotels. that -- general further -- our COVID well as status you you thank direction make by the also those as, Billy, to I even to want affected the further,

hotels, affordable of part Southeast as Now into way in all has having to a penetration, model price up lower hotel our XXXX to such XXXX, market been difficult It great locations areas, the set very XXXX, and we with where the hard. the very Southern China. secure those to especially is to are

all and newly and rental and are to some there of and staffing up added operation and so-called them operations these could we convert attractive be a preparation CapEx the that -- hotels be months hotels very per some and -- you over we with also and them most nine and the a doing repositioning we so, take But are those those year typically, hotels, like in of to And into change those is hotels. will six the expected standard there -- of improvement in whenever a at existing work price necessary needed is and time. same of the and

the such so those a can is locations, past. great And as the think hotels in a creating Shanghai-Nanjing a in we those Chengdu, [indiscernible], find in positive development. six of months So few we showcase that back the Road I year, to hotels future, into use and are in bottom impact model in line also for added very instance, the for which as added difficult to -- our cities. And a expect in were the those creating hotel also we

Billy Ng

-- those what's if we now? question -- of operated from number RevPAR that, if are say we hotel about opened if leased one and newly RevPAR target RevPAR, is the compare for what's the last and just this let's we One year talking

Selina Yang

is can RevPAR opened Actually, RevPAR for find L&O them hotels, hotels. our the you hotels higher [ph]. was the in And franchise, FM RMBXXX this Billy, Selina. RevPAR newly -- of the Hi than quarter, our this for was for average

Billy Ng

Thank you.

Operator

will from go question ahead. next Modak ClearBridge. Yogesh with Our come Please

Yogesh Modak

you me? there, Hi hear can

Selina Yang

very clear. Yes,

Yogesh Modak

why it this -- XXXX QX think you're I is two Hi, this a so Why late? reporting the checking announcing I of Like, when is was so months reporting and announced announced late? was QX. was before good the

Selina Yang

you. more time second in acquisition your audit the the Thank spent single completing the due newly quarter, for our you acquired question. hotels. we of XX Actually, hotels. Thank process, to We opened

So of major end quarter reason that's call to the we and third this complete earnings accordingly, plan year. the by our

We our you. Thank will best. try

Yogesh Modak

The in then, Okay. have more. L&O might or next I be the is, in you investment time, But profitable. question supposed year's breakeven is current by acquire to a hotels many

available So phase? to opportunity the a it sheet think You is the on you the entering capital is lot company invest balance investment an of and sounds have like good.

be you long at? returns things, lease there coming? How stay will what return as thought investing L&O those keep let's be How investment going investment depressed looking both going So you go? investing to you've margins, very what a of of margins period you're kind But low expecting generate? to couple there properties? in you an long are to enter phase, protracted and to, the associated a business. of is had depressed in and a as or lengths kind more will past, will interested How leases, you're of margins if hotels, say, phase are in capital-light with in that, years, start so hurdles capital of you are an the where And have I'd about

Alex Xu

our like continue not That's That model. franchise to been has business a manage focus we'll great changed. and would question. to that, strategy that to the you address on current I

also to We fourth service city. also digital will and the continue customer experience, improve and our and the and franchisee hotel tier system. to penetrating third our products support I concept and smart said And the

we great can found opportunities, So them development. also that very are continued. strategy they local empower that and we work in great will together, partners that and be addition, focused many do to very, And

we Urban those partners. to those focusing As They we'll the penetrating business brand manage I the our model weak Group, to [indiscernible], also and our our group, use mentioned, area, -- developing franchise our strategic cash need to and are Argyle where our are on showcase locations. and just

going So forward. that's our primary strategy on the

find And the focus. again, that's may our that's area. current some hub last -- hotels we year, quarter, -- this -- have we L&O we transportation primarily those and our that's have So, added the because

location rent to normal a will very the price and be to that the the and hard going So, and higher. time it's find great it's during be

that your plan. So, I answers regarding question future hope our business

Yogesh Modak

you. Thank

Operator

Stanley. come Instructions] Dan [Operator Please Xu with Our from ahead. Morgan go question next will

Dan Xu

and relating I Thank Stanley. quick Thanks morning, have and Alex openings. Selina two the from L&O is you. Good Megan; to Dan presentation. questions, the this for Morgan hotel both

newly to I that of expect My opened operations relating should the about was how mean the go my on the and the question all quarters? three quarter, there newly million for newly And is it the it Selina; first few these first months newly number in up -- one-off? That's break opened So the think higher that's question L&O is question the XX, hotels hotels? is this million management recurring more page So opened this all to for we is next for to RMBXX to question. does trying any for L&O my related is hotels. costs accounts RMBXX

Selina Yang

when not keep rental hotels, -- costs. personnel stable, keep million, personnel because these these a increasing hotels, in busy the of hotels, rent L&O will for our promotion the hotel million newly and Okay. as included for fees for costs opened mainly include Thank our the hotel operating our for as all for for past the the period, RMBXX some you, well course offbeat advertising and costs Actually, they will hotels, future, Dan. depreciation-amortization already RMBXX the XX the

for increasing that's So don't the why, we will think our costs hotels. operating keep hotel

Dan Xu

on clear. page you, Thank very second Selina. My XX. question is That's

hotel that for you and we Can that it multiples? outflow, that's CNYXXX other you hotels the for it we you. that the investment Does XX for acquisitions? is are on hotels, million. Thank you room per cost hotel look So value basis we is acquisition, the rough these on What this how by idea valuations use mean or use do get so the at acquire? the for the a that cash around

Alex Xu

we Okay. the locations, in location, different on it Dan, -- -- use the period. the numbers, different hotels, use property commitment the current the conditions, remaining also we depends

primarily we COVID-XX. So for newly of this very by those first some the may the based the use the negatively the hotels because cost performance revenue, basis, year quarter program -- most hotels last we was we instead of identified impacted future the -- of during quarter operating and

hotels, And the those able significantly so secure we replacing the basis. are below costs, to

Dan Xu

you, Xu. you. Thank That's Thank for it Mr. me.

Operator

Thank Instructions] you. [Operator

no this would conference turn Selina our Yang the question-and-answer back concludes for like session. are to more over I questions, closing there Ms. remarks. As to any

Selina Yang

and thank Thank your today's for entire interest you. participation of we call. Including, GreenTree in management on team, the you behalf

information free further to contact have any Thank plans us, you require feel you us. to If to please or reach all.

Alex Xu

you. you Thank all. Thank

Megan Huang

Bye-bye. you. Thank

Operator

The conference you attending Thank concluded. has now today's presentation. for

You may disconnect. now

GreenTree Hospitality (GHG) 16 Nov 212021 Q2 Earnings call transcript