Q4 2019 Earnings Call
Thank you, Andrew. Hello everyone, and thank you for joining us. Today greentrees earnings release was distributed earlier today and is available on our website at I am. 9 9 8. As well as on prnewswire Services as a reminder, we also posted a PowerPoint presentation that accompanies our comments today to the same website.
On the call today from Green Tree and Mister chairman and chief executive officer Miss. Selena Yang Chief Financial Officer, Ms. Meagan wine director of IT department and mr. Nikki Jang I a manager. Mr. She will present the company's Q4 and fully a 2019 performance package you followed by Miss wine who will discuss business operations and missing will then discuss financials and guidance. They will be available to answer your questions during the Q&A session that follows before we begin. I'd like to remind you that this conference call contains forward-looking statements within the meaning of section 21e of the Securities Exchange Act of 1934 as amended and is defined in the US private securities.
education Reform Act of 1995.
These forward-looking statements can be identified by terminology such as May expects anticipates aims future intense plans. Need estimates continue. Target is more likely to going forward confident Outlook and similar statements about any statements that are not historical facts including statements about the company and its industry forward-looking statements. Such statements are based upon Management's current expectations and current market and operating conditions and relate to events that involve known and unknown risks and uncertainties and other factors all of life difficult to predict and many of which are beyond the company's control which may cause the company's actual results performance or achievements to differ materially from those
In the forward-looking statements, you should not Place undue Reliance on these forward-looking statements further information regarding these and other risks and uncertainties of $5 is included in the company's filing with the US Securities and Exchange Commission.
All information provided including the forward-looking statements made during this conference call our current as of today's date. The company does not understand undertake any obligation to update any forward-looking statement as a result of new information future events, or otherwise except as required under applicable law. It is not my pleasure to introduce our chairman and chief executive officer Mister Alex free mystery, please go ahead and thanks everyone for joining our fourth quarter earnings call today wintry is Ace consecutive quarter of solid the operating the financial performance. Let's start with a slide phone number of five by the end of December 2019. We had to grow our geographical coverage to 339 cities across China Club.
Ways 3957 hotels in operation up 43.5% over the prior-year Thursday 4th quarter of 2018 total revenues in Q4 grew 20.4% to 289.4 million RMB net income increased 48.9% to 74.5 M A R and B and non-core and a non-gaap 11.4% to 162.3 million R&B for the four-year total revenues grew 20.6% over 2018 back to 1.1 billing R&B. Net income increased 17.9% to 437.8 million RMB and non-gaap. Yep.
12.1% to 594.1 million R&B
our operating performance remains solid our Blended ADR increase the 3.6% year-over-year to 170 R&B while our occupation rate had a small 2.2% decrease to 78.2% that's primarily due to the consolidation of the urban hotels and the Frog party increased 0.9% to 133 R&B for the full-year Blended ADR increased 3.6% off over a 2018 to 170 R&B occupancy slightly decreased by 1.2% to 80.9% off on the car increase the 2.0% to 137 R&B. We further our Market presence across China.
In the fourth quarter of 2019. We open 190 hotels and we end the year with 949 hotels in our pipeline wage up 121% year-over-year. We also completed the consolidation of our guy hotels Management Group in in Q2 wage and urban Hotel Group in December 2019. Both chains are highly complementary to greentrees Hotel portfolio and the geographical restriction the our cooperation with Ginkgo education group providing entrepreneurial training to graduate majoring in hotel management off our own cost most college set up more than $1,700 targeted training courses to accelerate talent development that waiving our company and respect.
During the prepared for this covid-19 crisis. We continue the to roll out our FMB concept by branding FMB Services into our hotel to turn them into profit centers and attract additional gas for our hotels regarding marketing. We are formulating joint marketing programs with the same major Banks to attract the local crop to clients and high-value business Travelers.
And throughout the year.
We were continuously upgrading the functionality of rit's structure and our mobile base applications to improve customer experience.
Let's now turn to slide seven. I think it is important to say a few words about the impact of covid-19. Thanks to the government's efforts to contain the spread. The outbreak is coming under control in China, but the measures that had to be taken including the lockdown of Citibank business closures and restrictions on travel disrupted the operation of our hotels.
a number of them
Will force that to close and the number of hotels were used to house medical staff volunteers and the quarantine travelers. All of this had the severe life impacted our performance in q1 twenty-twenty and we expect revenues to be done 30 to 35% year-over-year off on the line to like basis revenue for the first quarter would be done in the high 30%
That's excluding the impact from the newly Consolidated entities from Urban Hotel Group. Please turn to slide eight all along. Our number one priority has been to keep every guests and our staff safe and healthy to that effect. We took a number of substantial measures first. We tightened up our already high health safety and hygiene standards and protocols second. We provide the Shack hours and the financial support to our franchisees third. We created the safe and comfortable isolation space. We also offer for self quarantine employees and guests and the force we provided for free covid-19 plus insurance for our guests.
With this assistance from Green Tree. Our franchisees were ready to resume business operations, when shelter-in-place was to be probably lived at the result today. Ninety 3% of all hotels are back in operation and occupancy, exceeded 50% off substantially from the low of 21.9% on General John January 31st, and most importantly none of our guests or employees wages have been infected by the virus in our hotels.
I am particularly grateful to our franchisees employees and partners for the hard work in this battle with covid-19 the combination of our Georgia Swift and tactical response our support and assistance to our franchisees our well-trained staff and the song business office help the Green Tree successfully navigate these difficult times. In fact, many of our hotels came through with better occupancies and the name under comparable sets. I will now pass the call over to our IT director making form making please. Go ahead.
Thank you, Alex moving to slide ten at the end of the fourth quarter. We operated 3957 hotels 43.5% higher than a year ago. Thirty four of these hotels were leased and operated or l o hotels and the $3,923 or franchise and managed AM FM hotels. Why are the midscale segment Remains the core of our business was almost a 65% of our hotels last year. We expanded more in touch with the higher end and the economy segments of the market by the end of 2019 the number of hotels in the mid to upscale and a luxury segment increased to 7.2% of the total portfolio and the economy segment through to 28% with the consolidation.
Flight eleven you can see that in the fourth quarter. We open 190 hotels compared to 224 in Q4 2018 wage down 15.2% 29 war in the mid to upscale segment 81 in the midscale segment and eighty in the economy segment life insurance it he's thirty-seven and tier-two cities and the remaining $139 were in tier-three and other cities in China. Meanwhile, we close 5:41 hotels 9:00 due to Brent upgrade 20 due to non-compliance with our brand and operating standards and 12:00 through to property related issues. So not not we added 149 hotels to our portfolio.
It's like twelve shows the growth. You know what pipeline of new hotels as you can see our parts line increased from $652 on September 13th to $949 on December 31st, more than double our pipeline at the end of 2018 around 36 38% of these hotels are in a mid-scale segment about thirty-seven in the economy that factored in around 25% in the mid to upscale and the luxury segment as we continued our accelerating expansion into the mid to upscale and the luxury segment.
Like fourteen shows that the fourth quarter saw Improvement in operating performances across the board our FM Hotel occupancy rate up slightly from 18.7% to 78.4% ATR improved 3.9% to 188 160 a month and a reptile increased 2.9% to 133 R&B slide 15 shows the same operating metrics for the 4-year our hotel occupancy decreased from 82.3% to 81.1% APR improved 3.6% to 116,000 increased 2.1% to 137 R&B and our hotels ATR was up 3.1% to yep.
111
Quarterly reports and also real powerful our low, although red papal our LOL hotels decreased 1.52% year-over-year to 135 MB rep for our FM hotels increased 9% to $133 and made off with that are part of the call over to our CFO Lena young. Thank you Megan. Please turn to slide eighteen during this quarter combined total revenues grew 20.4% year-over-year to 289 point four million and be this growth was primarily due to four factors off the opening of 190 new FM Hotel improved royalty membership program and compilations of birth.
And I'll go through into our financial statements.
There was partially offset by the reservation of six are all hotels.
Here's a rough news for hotel 20.3% to 220.9 million MB with total revenue from Arrow Hotel those 20.9% to 68.6 million our needs during the year total revenue Rose by 20.6% off to a 101,000 91.8 million RMB. And who revenue for FM Hotel was 838000.4 Million MB up 21.0% year-over-year until the reviews for are all hotels was 250 3.45 up 19.2% year-over-year.
Like nineteen shows. The total operating costs were 92.6 million MB up 28.7% year-over-year.
Please increase the cost and then expansion cost for our hotel higher depreciation and amortization Higher One Time reservation, hotel and operating costs of our goal and urban.
Excluding the impact for newly constructed additives and urban Hotel operating costs of this quarter increased 13.6% year-over-year.
For the full-year hotel or cranking card was 338.8 Million MB up 23.5%
And the marketing expenses in the fourth quarter was 23.2 million MB up 66.9% year-over-year.
These increase was mainly made up of incentive bonuses and Marty and are the costs associated with brand promotion and with an urban joggers and expenses and extraordinary costs.
Start in the Box expensive in this quarter increased 12.2%
And for the year that in the marketing expenses were $85 million on be $79 40% from the prior-year.
Enemies the expenses were 79.6 million and be at 224% year-over-year.
This was due to increased it research and developmental cost legal expenses m&a and other Consulting v a novel and urban.
Additionally a backpack provision of investment in Regional was a crude in the fourth quarter considering that you didn't loaned focuses on Chrome. Do you stock the food to Travellers is a railway station and his business was seriously impacted by the traffic restrictions and covid-19.
Also due to the outbreak of nineteen a backpack provision of rental income from someplace was a crude.
Including the back. Provision in the urban and 150 our DNA twenties in this quarter increased from 21.1% expended for the 4 year or $185 per barrel million are be 5% over the year of 2018.
overall combined total operating costs and expenses for the quarter grew 67.9% year-over-year to 100 98.5 may not be
excluding the urban core region for backpack and one time fee our combined total operating costs and expenses increase the 10% compared compared with wire ago.
10 Rock Brews, 16.9% year-over-year to 196.8 million MB
marking decreased slightly for 70.1% to 68.7%
net income increase the 48.9% to 74.5 million MB.
And the next marking improved from 20.8% to 25.8%
for the year or possibly do 19.3% year-over-year to 741.6 million MB and net income Thursday, 17.9% year-over-year to 437.8 million MB.
Blackjack 21 you can see that increase the 11.4% over here to 162.3 million month and just needed a marking decrease to 56.1%
our core net income increase the 15.8% to 129.9 million MB and the Coronet margin was 44.9% for the year increased the truck Point 1% year-over-year to 594.1 million MB with marketing or fog 54.4% and connecting increase the 16.7% year-over-year to 482.7 million bath.
But are now to like 12 next income vs increase the 51% 2.75 months on T. That's equal to $0.11 US Dollars, why are income-based not increase the 15.1% off to 1.27 MB equal to $0.19 US dollars.
For the year maximum, please. You can improve the by 16.8% to 4.34 G equal to 16 to 60 or solid wired cornet income tax increase by 13.4% off to four point 17th Street and be equal to 69%
Let's not look at 10:33 during this quarter our operating net cash inflow was 118.5 Million month of December 31st. We have cash and cash equivalents of 1.8 billion MB.
addition
Text you our lenders. We have three hundred thirty million be of contact low interest credit line to allow us to assist our franchisee.
I would like twenty-four mentioned covid-19 has a significant impact on our business that results which back to the Rescue Bots high 30 to 35% for the first quarter of 2020 and to Define 10% to 15% for the fraud year 2020 compared the 2019. However, we still anticipate that we will pay our cash dividends of US Dollars fifteen years twenty-five cents in the 20 2020.
We had received inquiries from some of our investors regarding our legal structure that would like to clarify that we have been from that. They want office Holding On The Foreigner and price in China and it's as such our shareholders have direct ownership in other operating entities exact same 168. Com and cannot be owned by foreigners on a Chinese role. However, 168. Account for only 1% of our revenues month.
That's conclude. Our prepared remarks operator. We are now ready to begin the Q&A session. Thank you Google Now begin the question-and-answer session to ask a question. You may press * then one on your telephone keypad. If you are using the speaker phone, please pick up your handset before pressing the keys at any time. The customer has been addressed and you would like to withdraw your question, please press * then two.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Justin of Goldman Sachs, please. Go ahead.
Hi, Alex, and everyone. Thanks for taking my question. And I hope everyone that says healthy as well in in the evening. Perhaps I'll get off with three questions. I'll just let them out now and then you can just take it one by one the first question. Its I want to get a sense on how management derived the ten to fifteen percent decline in the food year Revenue in terms of what kind of ram up in your operations into YouTube app or into the second half of the year that you are anticipating some color on the occupancy or changes would be very helpful. And at the same time are you anticipating further of franchisees wave or support into the rest of the gear or you do expect the franchise's number to get back to normal size. So that's the first question on how to get to the
Revenue growth the second question is on the call.
So it seems that you got someone off course related to all the emanate and the one of expenses Soldier margins was declined on either your basis. Can you just kind of a month for some performer numbers? If you exclude these one of what would the emergency and into like 2020 given now you would have been a full year number with these newer position where would be off just kind of roughly up? And the last one is on the m&a? Can you remind I'm not sure whether you you mentioned it in the call. I might have listed. What would be your capacity now for m&a as of June of the end of the year and what kind of targets you're looking for? I mean what kind of opportunities you're looking at at this stage given potentially. There is some liquidity squeeze event in China. Are you turning even more or are you seeing more aggressive targets you can do now given now you're you started off very good financial position into the year. Thank you.
Thank you Justin. This is Alex and likewise the best and be saved to everybody on the phone call with regard to Thursday. We arrive to ten to fifteen percent the guidance for the year and that's based on our ramp up. We think there's a continued rampant. The students second quarter and third quote and all the way to the fourth quarter. So the recovery will not be you know, the immediately like the team takes the same times as it's go down to go out with takes a little bit longer, but the detailed number I'll have Selena to address her rationale is arriving that down to 15% Selena.
Thank you. And thank you for Jackson question. The four years will cost was made by any Accord week forecast and for each calling forecast may even buy two major operation Matrix number of newly opened hotels and the girls of rehta first quarter of weeks. The most difficult time and with our occupancy. Uh, that's what about 16 get about 62% of our normal condition. And as you can see and by the end of March, our occupancy rate has heat and what is 50% Yes and an hour afterwards open same time to have as academics was under good control. So during the summer in the march of action's a great job of the for the lowest level and that's why we hate the Dead.
It's easy. It's more than 50% and you have a forecast in the second quarter. I would consider to be a continue to recover gradually and and by the end of the second quarter the option to wait is like most likely to exceed 80% and in the fourth quarter and it's a great day at the highest level of the four year two thousand twelve twenty, but because the last year so the quarter is also the hottest the season series to the full year. So am I speaking there's a seal vehicle decrease but the absolute value will be the highest of this year and in the fourth quarter our in our forecast opposite, which will resume to the same level as the fourth quarter. So that means the year-over-year decrease no decrease anymore even be a little higher birth.
And the last few years of integrated.
And during the whole years our ADR the level Remains the nearly the same as the last two years that's for our experience from the first quarter of 2010 key. So accordingly, it's a revenue will reach the same level as one year ago until the fourth quarter. So we think we in our forecast is very conductive dead and alive with this assumption that we achieved the decline of 10% to 15% of revenues for this year's.
Okay, Justin that let me add one more thing and even though you know the first time I looked the number I find that is a little bit probably aggressive or later. We looked at the because we also have the addition of new hotels adding to the pipeline. So and being opened especially we have accumulated them more from the year end of last year and you can see our pipeline has been doubled from the year-ago the Q4 2018 so often those hotels being opened and put it into the actions so believe, I believe the overall, uh, we should be able to achieve that number.
With regard to your second question about you know, the second part of this question, whether we're going to consider additional fevers and so our fee basically waved a certain fees for our franchisees and that we were is ur going, you know going to be a you know, finished and terminate expires and we'd the left of the shot in place. And so we I think we are in pretty lucky in the past year the two that we have always convinced our franchisee to be conservative. I'm not to be too aggressive. So, you know, a lot of our franchisees position financial position wise I'm using a very good so we expect our franchise reps will recover also very very rapidly from the crisis. So with regard to the second question the cost side and the phone number
A few issues there that the from the I will have a Celine to give the detailed and these each item's the roughly the the numbers but our core performance or cost really have not increased that much and we're trying to be sensitive to the last year especially with a tougher year because there's so many Branch popping up in China and some of them are already closed down and but there is a you know, the talent Acquisitions and overall cost including the poverty level wage costs in the all you know are all Rising, you know the rising pretty fast at the towards the end of last year so created a real resistance off and the two for our both our development as well. As our cost. We also have another element income that really need did not calculated in the core birth.
For on the internet that is our interest income.
Because we Finance are certain operations to the key and the Performing the key and the best franchise fees. And so we think that's a part of the you know, really good a combination of the tools and both forget some good income for the stable income for the company as well. I'm not supporting the franchisees to expand so it's qualified and those qualities contrarieties, but I believe I don't believe the interest and all those income. I include in the normal operation, you know operating comes and that itself also has an element of legal underwriting additional cost in current wage is proud of the, you know, part of the legal and the writing cost in addition to the acquisition the merger and acquisition cost and uh dead
Selena also mentioned to you that we have to write off because we have a small I think that we have imagined alone. We have a page Finance long to one of the brand of the kids were into the real world food and caterings and the due to the uh, the crisis I think the food business office with her on the suffer. The soul. Our finance department are audits. I decided to write it off so detailed number I will leave that off to you know to Salina Salina.
I think you can you may I ask. Can you repeat your question for the detailed number so that I can verify this question?
Oh, yep, maybe just quickly on just imagine was down year-over-year. Obviously, I think Alex also mentioned some somewhat of items that included with like writing or something and then also the m&a cost expensing all these so can I just check on on like for like basis or Corps bases? What should be the the margin and actually in 2020? What was the margin of the
Thank you. Thank you. Yes, just explain the two reasons. The first one is that the off position that's due to the outbreak of covid-19. So that is the that is a voucher that is about 4% impacted our marketing and the one-time fees. That is the about 1% Yes of the impact of that marking. Yes.
Great. Thank you. Maybe just a lots of the question is about m&a just to see adjusting the correct right off the question, uh or want to give you the you know, they give you a color on that last year what happened is that we generated an operating cash flow roughly about five hundred million units ballpark number, so don't quote me. And so we have a maid roughly 1.2 billion investment that's variety of consists of we pay the dividends and we also um, uh, you know, you invested in some key strategic located property hotels near the uh, railway station, and then we also made and to Investments and actually dead.
In the one is the one is the King Cole one is the Aurora a new Centre Kon hotels and then I understand that the the fish portions we made also the two of the merger acquisition with the argyle and with the urban and finally we made a number of investors, you know, the financial assistant to franchisees. So combined we have, you know, one point two billion dollars. I think all of them are producing good results we're producing results for the company's future and even with so with that that our cash balance I think drop from 2.3 to 1.8 billion because we took it into the cash we have and the considering the situation and the current situation. I think we're all glad will not add that aggressive as last year in both and the property dead.
As well as you know Hotel development as well as the Acquisitions and so this gave us a a steel and uh resource to evaluate and we are currently evaluating and several smaller and the complimentary complementary geographically and the brand wise opportunities. And yes, we are going to systematically to evaluate but we also think that that the China and overseas are kind of am a different because I think that our system economic system and the support and that the the we receive over there are a lot of I think it would be a while. I think before we see, uh, you know, great opportunities or service I think right now there are some but I think there's still people looking to see wage.
It's a recovery speed the recovery.
They just slower and that will be more I do believe that would be more opportunities out there. But we want to be disciplined as a as always and we also wants to be disciplined off because um a lot of our shareholders even expected that some of the dividends so we looked at our income before this year the revenue and expense and we looked at the uh, the cash flow. We think we are also able to continue to stick to our stick to our dividend policy. So that's the and I also welcome everybody online, you know, because you have you met a lot of leads to recommend to us and if there are Target's that can create win-win situation for us, so just being thank you so much for all of us Wonder of questions.
Thank you. The next question comes from Green Tree of Morgan Stanley, please.
Thank you very much for taking my question. Aisle X Hi Selena. Thanks for the presentation and answering these questions. I have two questions. First one is could you talk about the Kurdish demand situation after the coronavirus outbreak, especially in March or April? I'm trying to understand what part of the occupancy increase that's coming from business versus Leisure. Also understand. How much is this for the occupancy increases because of the local demand like people who live in the same city wage because we are seeing very little train increases or or the transportation helping people to go from one place to another so just want to understand what's driving that demand come back and uh so that we can understand when we did eventually get to normalize. The second question is more related to the urban and Argyle acquisition dead.
Wanted to understand a lot more about our than we thought that they had 700 hotels. So question is do they have the same franchise rate. They create of seven eight percent wage percentage of the pipeline increase is because of urban so anything you can talk about or been impact on both pipeline Revenue as well as for for a quarter so we can model it properly. That would be very useful. Thank you so much. Thanks prevent that the demand elaborate a little bit at then I can add on top of that and you are correct by looking at the traffic. A lot of our demand are continuously to be charged for those for those workers and resume back to the job to the factories to the company's so dead.
And that's created a a the major demand.
For a hotels and that is a one of the reason a lot of our hotels have so called the self quarantine room. That is when you travel from travel from different cities and you should typically the company recommend you stay in a place for 14 days and there are also some local demand that we call the intro Province inter-cities. And so those are the two primary and demand for our hotel. So the users have not yet wage other than in certain Leisure locations. We know for instance. You probably read a story in question when the government open a resort that the no fee and then also really flooded with the gas and our function hotels have full occupancy and then yep.
4th floor of the fear of rock crowded and there were restrictions then plug Nancy dropped and so the Leisure side I think will be a while and then till 6 or more comfortable of traveling or even government will be encouraging that I think that's basically a policy and behavior of both of the issues. And so our with that that wage I will add a while asked whether Salina Salina jump in if you have anything to add and then we are the second issue and I'll have we regarding the urban and also our girls consolidation. I will you know, ask Selena to address it to you. But basically Argyle I think that the 5000 block these sectors more competitive and the the earnings we really have yet see the uh significant learning or contributions for the money.
You know for the argyle and so would have still trying to develop that major process in China and we have a good face that the team is working very hard under Carriage Josh Kevin Johnson leadership and it is just a very very, uh, the five star in terms of because that's primarily a fighting the new development that's slowing down the fighting the existing inventories and the so everybody has a a pretty aggressive Financial, um package and franchise term for the front for the home owners Argyle and we consolidate in December and so the impact is not much there yet because there's only a fraction looks like the water and and has a lower margin and has a lower relative lower occupancy. Yep.
So this all products?
Probably the back position that we will continue to help to work. And so we can improve the brand standard in increased occupancy and increase the idea and the same exact the exact, you know, leave Selena to address that to you Selena.
Yeah, electric of observations with probably and everybody and for the first question if we took the offensive in terms of the here's a breakdown. Yeah, we find that in the tier-one cities the options degrade dropped the greatest and for the month was free and Allure CTS and occupancy rate is what more stable than the other cities and also if we analyze option trade in terms of the brass instruments and we find that the middle scale the middle scares documents of integrated remained the most stable than any other Branch documents wage. And the next one is the economy segment and for the media type of scale and the Raptor decrease the was the highest so so that is dead.
And the second do an appreciation Viewpoint we find the most of all of that contributed from the local gas. I'll be declined and declines. I mean the Enterprise is surrounding our hotels and The Travelers between provinces renting up and down in March and 4th. So we find the percentage of the of the shortest gas and the gas increasing gradually thought it was the question for the contributions from Uncle and the urban and we find that toggle and nothing come off. Our car was not kids. So that has been there was no contribution from the cargo status and urban we Consolidated Urban data since the divorce.
but all of the fourth quarter of last year, so it's contribution was minor and in the in the full part of a 20 2020 dodge ball know the contribution of Africa and the urban was last the revenue contribution was less than 3% and if it does contribute and wage anticipation the day. Contribution to our forecast and thank you for having
Thanks for me in terms of preventing. Another thing that you mentioned over there out of the pipeline about $200 roughly about a from at the argyle County in a 17 from Argyle that they uh is the pipeline will carry a longer time because sometimes it takes years for a hotel and the four stuff. I took over to mature and then about 200 from the urban.
Yes.
Any suggestion, that's very helpful. Thank you very much Selena. Hope everything is fine. Thank you. So call Selena if there is any information we have not made it clear because we we would really like to be uh, very transparent in the office for all the transactions who we made and that and this will find to be a really disciplined in terms of uh, you know, underwriting setting of setting up the acquisition structure. Thanks prevent and you do the same.
The next question comes from Bank of America, please. Go ahead.
Hi, good evening. And thanks for taking my questions. I have some follow-up questions. Basically, I think we can you can you tell us more about your current occupancy. I I mean in terms of the distribution how like when we get to fifty or sixty percent occupancy. Do we see some of them at very often but some of them are still at like let's say ten twenty percent. The reason I want to ask that is I do want to see how many of the franchisees I'm so lost making at this point.
Okay, Selena. Do you have that number that the to share with the believe believe? That's a good question. I do not know ma'am. I at least I I did not know that Selena what happened number but more than happy to share with with if she didn't have that in front. It's not first of all because I'm not the number I didn't do I tried it is really, uh, you know the widespread so there are hotels were running very high occupancy still to the service in demand that's are also hotels running. We have three still have three seven percent that not yet open because condition of the local community wage under so for the for the the so not every hotels are uniformly, so there's widespread in terms of their performance and the the certain city that had the dog
Hits the hardest I think that are still pretty much closed down and some provinces not yet and the start, you know, seeing the the business we have. So some hotels have running at 89,000 occupancy already and so but but I think the next wave is going to be people within the people people's confidence and I'm not going to be correlated with our the measurement the measures the government will take with the next stage and how comfortable they are and the to lift the shelter in place for each City some problems. So sitting out, please add and your um, your number if you have indeed booked, this is very good question because we observed that occupancy rate for those hotels operation will average redistributed at that means for example until one city wage.
We observed the wait was about the 43.4% That was the lowest amount hold.
And it was a bath 46% is higher than the actual out here for Wednesday and Thursday at history and the lower sixth grade was the highest that is above 52% So every stinking away we had that great about all the hotels in a relatively stable. Yes was not was not impacted by only a fuse a portion of the highest birth to wait on the account. Yeah. That was that was wrong way of duct. Yes, and we have to talk about if we analyze options great in terms of the brand segments as we found out that the middle scale hotels achieve the highest occupancy rate, then the middle tab there hotels and the economy hotels. Yeah, and also, yep.
I mean average a distributed. Yeah and the traction how many French fry the uh, starting from the last month with the very exact and accurate number but but for our past experience our break-even point for most franchise the in the normal condition wage was about 250 to 55% of occupancy rate. So that means by the end of the first quarter most of our franchisees, uh are reaching home or have you reached the point why we have constant in the second quarter. Yeah, most of our hotels and franchisees will make the Carfax. Yes. What is the talking from the last? Thank you for catching.
I see I can I pull up with just in terms of the you mention tier three to four cities outperform tier one that specifically why is that an and also can you tell us a bit more in terms of the self-imposed quarantine demand a lot of people often describe when they get back to work. They need to stay at a uh, a separate place for safety or help you reasons and and that's roughly speaking how how much of the demand is related to that and how much is we see a bit of normalized business travel demand?
Believe that c. Okay. I'll go ahead.
Thank you. Yeah, I like to experience the first quarter. I think one one reason with you to the gas the gas The Source because we know that he'll want and kill one City's most of the guests in the past. Most of the guests came from the long-distance the child a business Travellers and a crisis. Most of our long-term long-distance. Travelers have no chance to travel anymore because of the age restriction and and given by our government to protect our safety. So nowadays. Most of the computer rates was contributed to Thursday and shut his customers and also some surrounding and some community and gassed so that's why the the hotels in till 3 and the lower-wage
More stable offensive wages in that hotel thing that you want to quit and the for your concern because we have mentioned some of our hotel documented wait, from the the workers returned back to the organization. And that's and those big Enterprises were distributed among only in big cities by the also the distributed in some future and tier three and four cities and the force. I'm a big size and the prices as we know some big fight off and tried. It has moved up from the table. Once it is too he was in the lower City special. That's why most of the work most workers returned to their what position and that contributes to our opening in the hotel until 3 and all the cities so that way observe just from the first quarter's operation Viewpoint. Thank you Alex.
Believe that the my did the sorry, I did not get that the number. I don't have the exact number by my understanding. Don't clearly in the system set the marked every single room and special types of room called a self-contained room. And so most of the uh, we're right now having a new, you know, the house 60 and uh, the hygiene protocols we treated every guest coming in at the you know, the the software package. So we also limited the actual limit our contact between the front, you know between the hotel employee or nor guess. So. We also send that the but you know during the period and we send the food and to the room and we clean the separate schedule. And so which almost treated every every room off.
Whatever as if it has a self quarantine and so the majority of them are for Travellers and regardless whether they are required by the government or Not Dead by the local businesses or not. And the secondly I just want to emphasize that Salinas Point. Uh, that is the intro wage provincial traveling right now. I think there is a major. I think that this is a major portion of the business and across inter on the cross provincial a provincial problems right now still less unless you go back to work with the so-called. Uh, I think there's a proof of that requirement from the country home from the factories or from the companies then your apartment complex. The administrator will take that or you know, allow you to log
To try with us in the past. I think that the restrictions is
Selected but cross provincial traveling right now still, uh, I wouldn't I say that slow and not totally encouraged. Um and roll song. Hopefully the rest of the world this coronavirus crisis will be contained that that will lift the concerns off. I'll say I'll set China government of our government. Then this travel plan or travel advisory would be less. So I believe that's the the what our assessment but I do on top of that. I want to make a another Palm Garden demand. We also from the Green Tree side or demand is not only The Travelers but also demand for franchise. We believe and the demand.
And tries demand for this year will be healthy and because we have more independent hotels or some other brand in the hotel owner the hotel owners and may not need you know, a tool re-examine their cost structures and mainly the to find a hotel operator who is able to help them financially. So our first quarter of a development speed actually considering the short in place and it's pretty high and our first quarter development office and is very high speed from my point of view and that the we developed more than three, you know, the 3 digit numbers of the home tell us and that's also because of restructuring of the development. I think last year the last of Q4
A couple of a number of factors in the Q4 and we we didn't open as I planned schedule this a little bit disappointing to the management to my side. We are acknowledged that because we're both sure the 50 do to um, uh due to several reasons and that's just just that the property of cost and development costs are very high. It takes a little bit longer time. And secondly that the Spring Festival is going very, you know, the the fact that before so people in the past and try to open that speed up and they have the slow down taking the that can take that into consideration open probably afterwards and so and the thought of the deal with so many many emerging brand so that we should be able to move that makeup. Yep.
Yeah shortage for the Q4 so that we see the demand will really glad.
To see the demand of going back and put the a strong for our hotel brand and decided to mention to you that we actually uh, um in the first quarter back in July to say all the strategy in place. We didn't have we did we couldn't travel so still, uh, you just the Green Tree alone. We developed no less than what we expect it. And so that's the other demand. So we we think that we have a healthy you can't we really have a stable and healthy environment for Greentree for forestry development hotels for this year. And we think the economy is fundamentally fundamentally strong the government actually making the small policies and we can excuse me and we can have another you know, uh, uh another strong performance.
It's I'm a of the next question comes from Bruce UBS, please go ahead. Hi. Thanks Alex and a Selena for taking my questions and hope everyone stays safe and healthy. I only have one small question. So in terms of the speed of of recovery, so which city tear have you seen faster Improvement in business travel demand so far in April and which Hotel Sacramento expect to pick up more rapidly in the future. Thank you.
So for the address and then Selena you add at this point out booster then we think that the pure 3 till 4 and the cities those recovery should be the quickest because the inter-provincial restricts. You know, The Travelers is is pretty much I think that already stole it and across prevention's provincial traveling is going to be a later State and the shorter distance that travels happens for a second lady that off the whole house. We have the near the near the real stations near the hospital so near the schools and near the disks interests and those that you want that we see them coming back very quickly and they'll recover the quickest and they'll be the Leisure or any kind of uh higher wage.
Century the probably a leash or related hotel as probably the last
do you have anything else to add a Selena?
And thank you for making connection. Actually, we we we think that hotels in the history and our busiest cities, I would cover a more quickly than the set and the other hotels in the clear one ticket, but only from the Viewpoint of the occupancy rates, but also from the ADR viewpoint on life because because we observed that the room great in here three staties will be a growth uh with with the meanest and that means that India here with the decrease of ADR with the highest and the same train as offensive rated here once a case and the interior to this is the Eddy our lounge and the decrease of ATR 42 better instead of here one cities and a Toc in other cities. The room blades was nearly as the same as last year's.
That scares me is nowadays. The more people are concerned about the room rate, especially for the building travels and short distance Travelers. And so that when we think that
In the middle scale and in the theater three cities will recover more quickly than other hotels. Thank you.
Thank you, Alex, Gasolina.
This concludes our question-and-answer session. I would like to turn the conference back over to Selena Yang for any closing remarks.
Call center operator including on behalf of the entire Greentree management team. We thank you for your interest and participation in today's school. If you require any further information or any interest in China, please don't hesitate to contact us. Thank you. Everybody off. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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