GreenTree Hospitality Group Ltd. Q3 FY2024 earnings call

• Hotel business improved in the third quarter compared to the first two quarters of 2024, with the economy recovering and travel patterns normalizing. The company is focusing on growing its pipeline and upgrading hotels.
• Restaurant: Street stores increased their proportion of the store count, unprofitable stores were closed, and the focus is on growing the number of restaurants.
• Financials: Total revenues were 357 million RMB, down 22.5%. Income from operations was 106.4 million RMB with a margin of 29.8%. Net income was 65.2 million RMB, down 44.4%. Adjusted EBITDA was 122.5 million RMB, down 32.1%.

Hotel Segment

• Total hotel revenues in third quarter 2024 were 286.9 million RMB, a decrease of 15.4% compared to the third quarter of 2023. Total revenues from LO hotels were 118.2 million RMB, down 22.2% year-over-year, primarily due to a 7.5% year-over-year decrease in RevPAR and the closing of six hotels. Revenues from FM hotels decreased 9.7% to 167.9 million RMB, mainly because of a 13.8% decrease in RevPAR, partially offset by new openings. RevPAR for LO hotels was 196 RMB, down 7.5%, and for FM hotels was 133 RMB, down 13.8%. Membership programs saw individual memberships grow to 100 million and corporate memberships to 2.1 million.

Restaurant Segment

• Restaurant business net income remained positive for a second consecutive quarter. Street stores accounted for 55.5% of the store count, and the number of restaurants in operation stabilized at 182 at the end of the quarter.

• Expect the fourth quarter to perform better than the third quarter. The company is optimistic about 2025 performance, with many new hotels in the pipeline, including in tier-two and tier-three cities, which is expected to improve RevPAR and overall performance.

• Forward-looking statements are subject to known and unknown risks, uncertainties, and other factors beyond the company's control that may cause actual results to differ materially. Economic conditions can affect travel patterns, and competition in the hospitality industry poses challenges.

Q: How does the company's performance in the third quarter compare to other peers? And what do you expect for Q4 in the restaurant business?

A: In terms of the hospitality industry, the portfolio has a higher percentage of aged legacy hotels, making RevPAR impact more severe in downward trends, but newly opened hotels perform better. Expect Q4 restaurant business to continue being profitable with planned store additions.

Q: Could you give more color on the supply-and-demand landscape going forward? And what measures is the company planning to take to further improve RevPAR?

A: Industry competition is intense with normalized environment post-pandemic surge. Supply has more new hotels/brands, demand not fully caught up. New products in new locations will be more competitive. Expect better performance in 2025 for RevPAR and hotel openings.

Q: What do you think about the bargaining power of the hotel side versus OTAs in the future? And could you share color on the Guizhou Province project?

A: OTAs' strong growth is market share redistribution; working with reputable OTAs for win-win. Guizhou project is collaborating with strategic partners on four- and five-star hotels to reposition a non-performing asset.

Q: Do you plan to continue paying dividends in the future? And what steps are you taking to improve liquidity?

A: Dividend policy remains unchanged as fundamentals are confident. Reorganization with parent company merging with GHG to increase liquidity, with approval processes ongoing.