GreenTree Hospitality Group Ltd. Q4 FY2023 earnings call

• Hotel Business: Further expanded in the mid-to-upscale segment with 474 hotels (11.2% of total portfolio), continued expansion in Tier 3 and lower cities (73.5% of current pipelines), streamlined operations to increase efficiency and quality, and optimized products/services to improve brand identity.
• Restaurant Business: Focused on growing franchisees, expanding street stores, and closing unprofitable stores in shopping malls and supermarkets.
• Financials: Total revenues were RMB 372.2 million, up 3.2%. Income from hotel operations increased to RMB 47.4 million year-over-year, adjusted EBITDA for hotels increased 82.8% to RMB 107.7 million, while restaurant operations had a loss of RMB 29 million but adjusted EBITDA increased to RMB 4 million.

Hotel Segment: Fourth quarter 2023 hotel RevPAR increased 23.3% year-over-year, reaching 110% of its fourth quarter of 2019 level during the October national holiday. Hotel revenues reached RMB 289.6 million, up 21.7%. Income from operations was RMB 23.1 million with a margin of 6.2%, and adjusted income from operations (excluding certain expenses) was RMB 99.2 million with a margin of 26.7%. Restaurant Segment: Restaurant average daily sales were up 14% year-over-year to RMB 5,433 but down sequentially due to seasonality. Total restaurant revenues were RMB 87.7 million, a 29.2% year-over-year decrease mainly due to the close of L&O stores, though ADS increased. Total operating costs and expenses for restaurants decreased 16.7% year-over-year.

• 2024 organic hotel revenues expected to grow 7% to 12% year-over-year.
• Combined revenues from restaurant and organic hotel business expected to grow 3% to 5% year-over-year.
• Plan to open ~500 hotels in 2024, with RevPAR growth primarily from ADR increase and hotel count growth. RevPAR growth expected to be around 2% from ADR and 10% from hotel number growth.

• Uncertainties in market conditions affecting RevPAR and occupancy, especially with seasonality and travel patterns.
• Challenges in the restaurant business including stronger competition and legacy issues from closed unprofitable stores.
• Risks associated with forward-looking statements where actual results may differ from projections due to unknown risks and uncertainties.

Q: Could you break down the 7% to 12% hotel revenue growth guidance, including drivers from RevPAR and hotel openings?

A: RevPAR growth is expected to be ~2% from ADR increase, and ~10% from hotel number growth (planning to open ~500 hotels). Also, considering renovation of older hotel portfolios which will help upgrade ADR.

Q: How do leased (L&O) and franchised/managed (F&M) hotels' RevPAR trends differ, and what's the plan for L&O hotels in 2024?

A: L&O hotels are showcase hotels with higher ADR initially, but F&M hotels will catch up as renovations are completed. Plan to have 1-2 showcase L&O hotels for flagship brands, focusing on ADR-driven growth strategy for both L&O and F&M hotels