Q1 2020 GreenTree Hospitality Group Ltd Earnings Call
[music].
Good day and welcome to the Green Tree Hospitality Group Ltd. First quarter 2020 financial results release Conference call. All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After todays presentation, there will be an opportunity to ask questions. Yes. Good question you.
The press Star then one or your telephone keypad and to withdraw your question. Please press Star then too. Please note that this event is being recorded I would now like to turn the conference over to Renee Bank a scene of Christiansen Greentree Investor Relations firm. Please go ahead Sir.
Thank you Chuck Hello, everyone and thank you for joining us great trees earnings release lots distribute it only up to date and is a bit about an hour I'll, let sites. It's a young adult 998 dot com is when there's some PR newswire services.
As a reminder, we also posted the Powerpoint presentation that accompanies our governments to the see an IR website.
On the goal from Green tree, I'm, just Onyx true Chairman and Chief Executive Officer.
Yes, I do not Yang Chief Financial Officer.
Lisa Megan boring direct Oh, I see department, and Mr. Leaky journey, I, where I'm I'm not sure.
Yes, sure will present, the company's first quarter Twentytwenty coolness overview.
Well all by me swine, who will discuss business operations and you see I will then discuss financials and guidance.
They would be available to answer your questions during the Q any section which follows.
Before we begin I'd like to remind you that discomfort in school contains forward looking statements within the meaning of section 21 of the Securities Exchange Act of 1930 cool. It was amended and is defined in the U.S. Private Securities Litigation Reform Act of 1995.
These forward looking statements can be identified by terminology such as me when expects anticipates Ames future intends plans believes estimates continue target is all are likely to going forward.
Oh, Hey, Doug outlook and similar statements.
Any statements I don't know to historical facts, including statements about the company and industry all forward looking statements.
Such statements are based upon managements current expectations and current market and with the living conditions.
And relate to events that involve known and unknown risks uncertainties and other factors.
All of which are difficult to predict.
And many of which I'll be on the company's control, which make goes the company's act your results performance or achievements to differ materially from those into forward looking statements.
You should not place undue reliance on these forward looking statements.
Future information regarding these and other risks uncertainties. All factors is included in the company's filings, we do see the U.S. Securities and Exchange Commission.
All information provided including the forward looking statements made during discomfort in school are Caroline is off to this day.
The company does not undertake any obligation to update any forward looking statements as a result from new information future events or otherwise, except as required under applicable law.
And it's now my pleasure to introduce our chairman and Chief Executive Officer, Mr. Onyx shoot Mr. Shirley. Please go ahead.
Thank you every night and thanks, everyone for joining our first quarter, earning call. It today.
Let's start with the slide five.
In the first quarter, our operating performance was the severely impacted by Kobe Tonight Chief.
Our blended to aid yard decreased 7.8% year over year to 150 RMB.
Our occupancy rate dropped to 47.3% and the ROE Paul decreased 24.1% to 71 RMB.
Now unless we continue to expand our market depressants across China.
During the first quarter, we opened 62 hotel mainly in the first part of January 2020.
And the we ended the quarter ways, a 1000 and a 25 hotels you know a pipeline that's up 100, the front team 0.1% year over year.
By the end of the quarter, we had to grow our geographic coverage to 342 cities across China with a 3090 3998 hotel sheen operation up 41.3% or what apply a year.
Total revenues were 120, 157.4 mailing RMB, 33.1% decrease compared that to the first quarter of 2019 gross.
Gross profit decreased 56.4% to six.
67.6 mailing RMB.
Non-GAAP adjusted EBITDA decreased 64.5% to 47.6 mailing RMB.
And the core net income per acre, yes, but that's basic and diluted non-GAAP decreased 17.3% to zero point Twentyseven R&D.
Let's now turn to slide seven for an update on the could impact Kobe 19.
Thanks to the government's efforts they ought to break has largely come under control you in China.
<unk> after Blaine our operating performance declined due to the lock down off for a number of cities. This is closures on the travel restrictions imposed by governments around China.
However.
Reentry <unk> overall performance was better than the average performance across the hospitality industry in China due to the strong dedication and hard to work off our staff franchisees and partner seem to food and beverages business as well as our strong positioning interest rate.
And the smaller cities.
Now please turn to slide eight.
The coping 19 outbreak create didn't in knees, which together with all franchisees wintry I sort of it immediately.
We responded promptly to the government's call under private <unk> provided the rooms to holliston medical staff.
Volunteers under child ours that needed to be core in king and a state.
Anticipating the resumption of the business.
We work with our corporate clients to provide the core and clean rooms for their workers, who are returning to work.
We provided the fee reverse and other meaningful financial support to our franchisees I.
And we implemented a new precautionary measures to reinforce our alrighty stringent health safety and the hygiene standards and put a course.
We these assistance from Green tree, our franchisee have gradually manage that to resume a business operations and that the result, our occupancy rate has rebounded and exceeded the 65% on average in the second half of Maine.
That's from low off 21.5% at the end of the January.
I think some March nice our individual or corporate my number members have accounted for more than 80% off all of our gas.
Despite these encouraging trends.
We expect the revenues for our second quarter to be down 18% to 23% year over year.
I cannot thank you enough all of our employees franchisees and gas.
Well as the medical professionals police and fire fighters and the community leaders for their support and dedication help humorous resume our business rapidly.
Despite these extremely challenging times.
We are well positioned to deliver on our multiple missions sadness to serve our guest to support our franchisees and employees and to create long term sustainable growth for our shareholders.
I will now pass the call overcome making long, resulting in charge off our sales and marketing Megan. Please go ahead.
Thank you add like moving here like 10 at the end up there.
Third quarter, we had 3998 hotels in operation, 41.3% hired and then you have got.
35 of these hotels for at least in operate it all alphacat and the straight down 963 war franchise and management or and hotel wired to mid scale. Like you were laid the call I'll take a nice with almost 64.6% of all I'll tell.
Last year, we can get more into both the higher end and economies like like open lacking.
I read out by the end of this quarter and number I will tell him the mixture upscale and luxury segment increased to 7.3% of the total portfolio and the economy second like 3% to 28.1%.
Our entry into these segment income was how ability to cross market Oh different Brent.
We have also increased our dominant position in Q3 and smaller cities.
As I read out, 650.8%, Oh, Hello already all pay to it the cities at the end of this first quarter.
That's right data such as the MTR indicates that helping these cities I recovery FATCA and got plenty back our 10 hotels in tier one tier two cities.
On Slide 11, you can see that we opened six hit Q accounts compared to 102 in third quarter 2019.
39.2, I cant job.
I don't know before in the midst your upscale segment.
37 in mid scale like an 80 E com the second night, so anywhere in tier one cities searching in tier two cities and the remaining 46 or eight she has three is smaller cities in China.
Meanwhile, we closed 21 hotel five due to Brent upgrade eight due to your noncompliance with our friends and all parties stand back and eight due to property related issue. So net net we added 41 hotels to our portfolio in the first quite yet.
Slide 12 shows the growth pipeline appeal hotel.
Pipeline increased from 949 on December 31st 2019, Tier 1025, I'm, Mark sorry, Tony Friday.
I'm, 39% upbeat hotels are in the mid scale second like about it takes about 36% in the economy sector and around 25% in mid two.
Thanks, Mike.
Slide 14 summarized the impact of Toby 19 on our first quarter operating performance.
<unk> FM hotels 80 aren't decreased 7.6% your 149 Arnie.
Occupancy rate it from 78.4% to 47.7% and I Revpar decreased 43.8 present to 71 RMB.
Well I'll, let l. upheld HDR decreased 15.4% your 169 occupancy rate it from 39% <unk>, 0.6% to 32.7%.
<unk> decreased 53.6% to 55 RMB.
Slide 15 shows quarterly Rep touch it actually you can see revpar for our El Kalay decreased 53.6% year over year to 55, RMB and a revpar for our hotels decreased 43.8% to 71 R&D.
That I'll pass the call over to our C. I felt so yeah.
Okay, Hey can you like 17.
<unk> revenue increased 33.1. Thank you only had two 157.4 median on me.
So does that you asked them out how increasing 32.6%.
You will find it had a 3.6 media R&D wire to rack, new Oh account.
Okay 34.8, Dan just 33.8 me Dan R&D.
The decrease was almost the entirety you entered the impact of coal we 19, we treat Saudi he is trying to reconcile cancer already closure in compliance with local government you exciting.
In late in your hotel opening.
Everywhere and passion redemption, any danger that lead in huh.
What's mall in support of our franchisee from gather already said she market. So he for it when they do you get those franchisee imagine any fee and central reservation, taking you to feed by 50%.
Slide 18 shows that hotel operating costs were 89.8 million I'd be happy tariff when she gets there year over year.
<unk> increased cod <unk>.
Where many educated though to higher depreciation and amortization and if the consolidation of Apple and urban.
Excluding anchoring urban.
Operating profit decreased 3.9%.
Which wasn't primaries, you 50, Cree instead, our rate of return okay. The managers.
And decreases in your opinion, he consumable food and beverage victories not exact they try and I think the rate.
Got it and I'm not exactly why 70.8 media RFP.
That decrease of 27.7% year over year.
The decrease was many of you gave it though to be crazy advertising traveling and mirror.
Because of the match or taken you can't show the spread of wholly 19.
Including the lock down certain state. He did you probably should any restrictions and travel.
Yeah, there aren't any interest expense base, what kind of 8.7 media Eileen.
At 11.7% year over year.
The increase was primarily attributable to increased legal and accounting to sound fee.
Im sorry shopping fancy for our garden, but.
Excluding EYEGUARD urban Gen eight sandy increased by 15.5%.
Mainly due to a degree is back related costs and completion capacity [noise].
Oh, the all kinda operating cost and expenses grew 5.5%.
Year over year, Q1 hundred six or 7.5 media RMB.
Excluding I've already urban total operating costs and expenses.
Decreased 11.0%.
Compared with one year ago.
Oh like Nike.
If feedback broad parfait decreased to 56.4% year over year to 60 standpoint, yeah RMB.
Gross margin decreased the fraud, 66%.
To 43%.
Net income decreased a 110.6%.
Net you 14.1 million RFP.
And next marketing it creates the solid 56.9 cents connect <unk>, 9%.
This year over year creepy, well primary due to the impact of coli 19.
Oh Black turnkey.
You can see back I guess you'd be bad Crazy 64 point, if I could again year over year to 47.6 median I'd be.
And get the EBITDA, marking decreased to 30.2 parent.
Core net income in crazy.
69.9, or 10 to 27.7 media B.
And coordinate marking what 17.6%.
He's tend to slide Kent you want.
Net income 80 at basic and diluted decreased a 108.7%.
Your next he would point he labs RMB Jackie quarterly net interest that you got it.
Right well net income for 80, and basic and diluted Matt Yeah increased to 70.3 times that get 20 to 27 be equal to four cents U.S. dollar.
Let's now look can like 92.
Our operating Mac cash outflow was 48.4 minute hobby activities now off operation that income law, because our core Weve 19.
And the Marty studies right fit techie to 2010 he.
We had cash and cash equivalent of 1.8 billion hobby.
Compared to 1.8 feet in Abby as of December 31st 2019.
Primary due to love to franchisees.
No losses on your back to many equity securities.
And the rest of Mad Catz breakout Harris decoration.
Cash and cash equivalents for white athletes and when we started as we continue to evaluate potential you rationing and.
And to support our franchisees.
Oh long term corporation that real bad in China, and our strong financial position operational performance.
But allow after 10 and utilize that back facility of 330 media Todd.
Oh right 23.
As mentioned.
Oh, we 19 hectic needed can impact.
Between.
As a result out we expect the tying into the rack news of 10% to 15% for the fiscal year 2000 trend he is comparable to 2019.
This conclude our prepared remarks.
Operator, we're now ready to get to gain if you're in a fashion. Thank you.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone, if you're using a speakerphone. Please pick up your handset before pressing the keys and to withdraw. Your question. Please press Star then to at this time, we'll pause momentarily to assemble roster.
And our first question will come from Justin Walk with Goldman Sachs. Please go ahead.
Hi, modeling, a Alex and Tina Thanks for taking my question.
Perhaps I'll I'll start with a two question I'm more broadly I want it I'm on the M&A side I think that's Oh, you've just mentioned in a immediately you've got 1.6 billion worth of our cash and cash equivalent now what are you seeing or the market post cobot 19 are you actually see mall.
Kennedy's coming out or not because I think I when I talked a lot of the industry participant. It seems at this time around the disruption was pretty short and then there was still quite ample liquidity. So they are not seem a lot of deals happening I'm. So that's the first one and the second one regarding your revenue growth guidance for the second quarter.
Tom and I get a sense on what broadly you assuming say in terms you all of your occupancy level in terms of your room rate level and also are you, assuming any thoughts or a discount or help to the franchisees through the franchise fees or cups or repay us well. Thank you.
Thanks, Justin City, and I'll take phase two questions that you can add.
On top of that.
So just in those are great questions the regarding the M&A landscape.
Since the beginning of the covered my team.
I think theres a number of measure measures taken by the government also taken by the companies and also taking but that they participation.
Through the employees of flight.
And hotel owners I think most of the hotel companies at this moment still able to absorb it's a shock.
So we have Oh, we know it and that they overdraw financial performance of the hotel industry has been impacted that.
Severely.
That's a ah, but it takes time for us the companies to realize you know that the strategic partnership with the Green tree would be the best interest to what their begin the hotel owners to our two to all the parties. So we we have.
We have received information regarding certain.
Small to medium and some regional some of the sorts and segment.
That the inquiries about certain off.
Financial strategic investment.
But we do expect that I think in that are in the third quarter and the fourth quarter, there should be more opportunities because see recovery is rapid.
But we'll see really how rapidly to recover the speed is at this moment I think the recovery the speed I just like what we said that in the second quarter.
The from May the second half of the main we only recovered the to 65% of the occupancy.
Originally that and as I think it's a little bit Lowber fan the industries.
Our expectation.
So overall the industry recovers how can we love to the numbers I Love This solar worth and Green tree. So we would expect the M&A opportunities will be more orthopaedic definitely more towards the second half a year. So we're prepared to evaluate you briefly has always been very reasonable clients.
Create a win win.
Situation for all parties, so we hope that.
We will take advantage of the on the.
The situation and the sees the moment tend to create the you know it's quite a win win for everybody. So that's on the the land.
And then they landscape and Thats. The reason why we have untapped.
He is a credit lines no we plan to him up 10 more from our lender and if we need them.
Regarding the second.
Second question the revenue cars on the second quarter.
As we have indicated to you the second quarter. Our revenue consists of several components. When these the M amortize the inc. or they amortized income from hotel opening.
And ER the.
System fees and also a.
Hi type fees.
Those are the three primary fees, we have and that the so we have in combined that we have a 18% to 23% depend on the second even the best second that they juice recovery speed.
No I think I know that government and so really speeding up talking the business to recover so really depends on the recovery speed up the June. So we hope that's why we have a bear you know we have a range or what they are up 5% classic minuses.
So we think that are the oh drop her.
Well priced youre comparing with the lost last Q2 in 2019.
You know, probably 20% to 30% or 25% plus or minus in that end. So a city and I can correct me if I'm wrong.
And so the and.
A week's record third quarter, the recovery will be given that would be better then the second quarter and so we do not at this moment to house. So it's a financial house of our franchisees to us and are the most critical.
Elements that green tree pays attention that's the most important area with folks that we want to make sure when trees franchisee has the best the financial house in the industry. So we'll do whatever we need that including you can see our cash flow. They first quarter, how provided them more that you're close to.
What about 18 million to support our franchisees and at that we also you know waived a 50% award fees. We also returned so that's the reason why we have a 48.
Lastly, mailing cash from operation loss, you know that negative used rather we have a 20 <unk> core earnings of 27 mailing list. So we're supposed to have a similar cash flows, but because we we found that that's a pre paid to the.
The pause or that we use a cancellation that we'd also prepaid deposit on the prepaid also paid at the revenue a room revenue to our central reservations, we actually refund that we actually disperse those quickly so created that meditative eight almost $18 million to cash outflows.
And so our.
Our balance sheet, you will see that number drop a fully with the leads that that's the impact of that we still have a positive.
Cash flow from the operation to the company. So we plan to use them all to support our franchisees necessary at this moment or what we observe piece the our overall financial conditions of the franchisee are very how well very healthy. So we have not a planned to cod.
And the franchise or system fees or reservation fees under that the however, if ER depend the recovery speed then if there is a really another did I know another right you know what that.
Somehow or another.
Impacts and what prepared to do everything possible to help.
Yeah, our franchisees, but at this moment or we don't see we have not we don't we have not seen though we need all doors that we may continue to plot provide some financial support to our franchisees who wants to open more hotels. During this time period, the because the caf two.
Then in the market is not as Sam readily lack of available like before so because it's not real estate hard assets as it's more on the supply chain inside the construction improvement in the renovation.
So that's a the the my questions my answers to your question Justin.
So Selena do you have anything else that.
I think you act as it has to offer Justins cracking I wonder at crime in fact, we observed a I would.
Operation performance and has read dealing there seems to.
Me to off May and I mean, there I read you end up optically than ever before so as we have introduced to our revpar decreased in the first quarter, what that and 44% and you're now if it's up to our to Queasy wrap hall and how it wasn't batches said he presented to 35%.
So and everything going smoothly can get away likely to see and get crazy in Iraq. How we are now, though and end the call me second quarter. Thank you.
Oh. Thanks, So both me I just have one more question if that Oh I see the current discussion on 80, our recent the lifting all the other thing to help unlock add to something very hot in the market and away, how what management Cds I income selfie opportunities.
In terms of other considerations that you're looking at if you can just hopefully provide some overall feedback. Thank you.
Okay, just in a city the I'm also going to take this question. Okay. So adjusting.
We take every a risk factor, it's very seriously because our mission is really to pack to a very clearly to protect though again that the financial house at the franchisees and.
Keep kind of stable platform for our employees as well as providing a long term stable returns to our shareholders. So the recent HFC a initiative by the Senate along with those greatly so.
We do not know how.
We do not know how this will be impacted Doris and how quickly that we implemented or would be you put them into dara.
However that what we have Chad However, I did commission, though.
Our advisor to do analysis on that night, you see to see whether we can be prepared the advance.
Yeah advantage to see to see secure and alternative or just how about backup to backup plan to mitigate.
The risk for this potential.
Legislation. So again, we take everything we take every risk very seriously and you ought to protect our shareholders loans from the interest so adjusting and we can work will continue to report.
Two hour you Masters about progress, we're making so but we are a we have taken the these tapes.
Thank you.
[laughter].
And our next question will come from previous two dray with Morgan Stanley. Please go ahead.
Thank you very much.
For taking my question this is proving.
Two questions from me I like since we know the first one is I'm trying to understand the demand side of the integration.
There are two parts that question one is in the new normal considering the social distancing what part of the business.
He is not yet coming back for example, leisure probably is coming back slower I'm just trying to understand.
Whether it will come back at all or it will not come out at least in Q3 Q4 this year.
And how what percentage of your business comes from that segment.
The second related question is what you mentioned I think that 80% or fuel customers their members.
I wanted to understand what percentage of that was.
Corporate versus individual.
And then I have a third question, which is not related to demand, which is about equity portfolio.
Which has seen some losses in Q1, which is understandable, but I just wanted to know whether you have either bought new shares or sold any of those existing.
Shares thank you.
[noise] prevent a sensor so much for us as a tool wonderful questions. The Oh I will take the first part to that the Selena and Megan you cut you got to complete the supplement.
Regarding the demand side.
That will help you with just talk about the general trend and the we are particularly concerned about the loans from the impact of this koby 19.
Number one to leisure and number two to group meetings to the commissions fixed commissions and holidays in the publishers cash provided a strong supported you're in a certain milestones for the entire hospitality industry.
On the whether they are the you needed for the time being I believe the company.
I'm very concerned about the risk to the employees and so are we so in terms conventions logical gathering.
And also the large amount about the long distance domestic travelers prevent that we we think that was slowly come but that will not be quickly coming back depends also dependent that our government, our China government initiatives because.
The society is a little differently, they Ah I Cmos business community and citizen can be easily mobilize to do certain things.
And the but worldwide that we'll see that we're not we're coming back slowly I think would not be a shop detox lead bond.
That's is that the number of most seeks to drop the number of minus take so coming back so.
And at that Luckily I think that's et cetera that impact the no stuff for that and I'm not and then all of the men folks of our business all of our business has been always the slack and the limit the services to the essential business travelers. So they are just.
As we did describe to you that traveling medical professionals. That's a key logistic supply are as <unk> engineers and the key supporting people or so on the and that they are so those the types of also there and the Oh it looks like selective surgery.
People going to the hospitals going to school is going to the resort. We you know the I'm going to a key locations. So those types of clientele, we see right now a provisions were catering to them and that that or we will all be very careful in terms of monitoring.
Our high end hotels, and how do we actually solve the problem for the group lack of books group reservations, because I think its associate this is James I tool on the last we have either you know effective vaccine or some kind of a therapeutic remedy I think than the.
Yeah that would be a so much pent up demand the from my point of view.
Good.
I don't I don't think there'll be a problem, but until then I think this we see the business are leaving ourselves are taking a lot more on precautions to attack.
Our people and I think the other this is not doing the same and that you know addition.
The families you don't have broken that your family members to travel long distance. So the leisure travelers I think we'll be subdued and coupled with their lack of international traveling a tourist demand. So the leisure travel will be Oh, I've seen will be coming back a slower.
Sends the price point to where we are providing.
So that 80% you've said that they members of individual and a corporate at this moment or we see the like more than 50%, 60% from local cooperate and then 30 to 40 person for individual individual members, but they also traveling for business.
So and the more and more towards Italy interpret mapping, we see half in the house.
So it's a healthy balance and that that we also see a great you know higher quicker recovery in the third unforced. Your cities, we had a strong strategy in the past initiative going down to providing the.
Till providing a brand and system supports to go cities hotel operator, a second a yield the good result.
So thats how the demand.
Side. So we are Oh, they were pretty lucky that in the past the we have that strategy to provide us most affordable.
That value driven value driven pull top products and services to our business and Dallas individual.
Travelers I think that is being paid off I think that another reason that they're pete being paid off because a lot of small to medium size of businesses you know if he fee provide.
70% healthy employment.
For that but they are also very constrained with the budget in the back then lack of revenues Cindat covered 19 on Sylvie naturally if he will also cut back.
And they're Cabo budget on that then we are sure for them.
And the regarding the second question.
The equity portfolio basically we only invest in the past that the we report to our shareholder assigned the key strategic I think you know a puts real are we still have some left in the ice species.
That thing from the past that that that then we the other three stocks we have our our are we at the second largest shareholder for the building.
Hotel Chan, that's what they need I think number one and domestic out five star brand in China. So we have not changed the positions we last quarter, we neither buyers so at any positions within that we didn't Chen So we'll I think luckily the you will see the second quarter would be a rebound. The second is we are so.
The teaching the cornerstone at that time, and you've asked a for a new century. That's a second that's also when that the past.
Or higher and luxury hotel and also for the five Star Hotel can you essentially.
Sure days that we have a strategic investment linking the university.
You know that the Kimco University assess the past a large bristow hospitality for your best for full year, a four year Bachelor degree though.
University in China and that the CR the past the so fast the three major holdings we have.
The data hospitality industry has impact the most vessel at a stocks and Thats why we have a reduction in the equity value himself and if we do expect that that there won't be fully.
Coming back in the near future.
So prevent that Oh, my cricket quick answers Selena and Megan.
Hi, Thank you Eric and we also have Derby and I looked really strong property managers and an even bigger mentor to.
Keep increasing ally in the second quarter and if we compare all at their contribution how awful the first quarter and in May and April and we can be that as a percentage of all the individual members and increase that pie and I understand and difference in digital copies.
Lenders increased by 2% the wire aspects indeed, she'll only 80 created by an interesting and thinking.
<unk>.
And our next question will come from Joshing Lee with C.L.S.A. Please go ahead.
Okay.
Good morning, and good evening, Oh, actually you know Meghan and Nicky for taking the question its usually here.
I have maybe for the three questions Oh go maybe one by one number one is a hotel closer actually so actually Inc. first quarter 20, we recorded even fewer hotel close Oh, the first quarter non tino any quarters previously so I was trying to understand if we anticipate more hotel.
Floaters in the core those to calm.
Given the Kobe situation.
And maybe they don't want to calm and that will also impact on revenue going forward I will now I'd like some colors to be shed on this on many thanks.
Okay. So sitting in a that I remember that that we have the closure.
Oh, we have the close I think are about.
Went through both of them is due to the upgrade all hotels that does upgrade that thats why we have at the closure of reopening the fan.
I think if that pace due to the noncompliance and also due to the profitability issue that is.
We now we will have Holocaust, our underlying property leases for Houston said they are.
So right expiring so that leaves a lease I come to a termination.
And so we are because just shot that we have a responsible approach to help our franchisees. So.
So error at Champs and knowledge hotel, Jim. So overall, we our franchisee have not a you know we though we have not seen a major claim lot of closures you in the horizon I think if there is that if there are any major kosher. It's just can be the second quarter, but we have not seen a lot.
The small except for a closure in the pipeline I know up closer mentally due to the and there are a hotel lease a real estate lease.
It's a randy.
Expiring and at that time, some are not able to keep up with the maintenance of the hotels because franchisee house I have some other cash needs for the operations. They may not be able to put all of them.
Profit the back to that some of the profit it back to fix the hotel shops, so they're not in compliance under some of what the just insulin Olympics, we have other Brenda and that then Oh, we are able to upgrade and for that or you know renovation. So that's my that's my are we.
Adding from our pipeline of the to request. So Selena do you do you have anything to add.
Okay, No actually having January hey, thank you.
So we don't expect the I just had a large large numbers are too so close on the we have always been as I mentioned here. That's a demonstration that we have been they put them on 10, a pretty good support to our franchisees.
I would try our best and doing the Kobe there that the every every.
Employees restocking the corporate office work to support the frontline operation.
I got that thanks, Alex and Selena and my second question its own other general trend.
So we have seen some data saying in tier one cities for example in China that the general on average 80, a decline has been or even a larger than in March. So I was wondering if into a three to four cities, we have seen the similar trend or.
We see a well a similar idiotic try yeah. It was this march because we we have also on the Princeridge and data we have recorded already much less dangerous radio decline was quarter. So I was wondering if we are not affected that much by 80, Oh, even close to come as well. Thank you.
Okay Selena.
Oh, we'll try to his question.
Yeah sure are here and thank you and you can for crashing and just like you attack at your observed is there a year. We agree of 80, our into Q1 CP and we're looking at a good actually we observed and ensuring a in that here a into tier three d. over yet increase of 80 odd.
And what's not with a better then got home a tier one and actually we compare all their performance in tier one tier drinks yesterday. They did the IDR decreased in Q3 cities at what could act in back half tier two and again and which ones back then get off tier three.
No. It if they so let me also a a the leap in a more to that the.
Do you said that the one that the reason we believe okay. We believe is.
Fifth tier three seats has a lot of low core travel nurse, they are more or like on the smaller.
You know smaller groups and and the small a key individuals.
On the interior one tier two cities, especially children in cities and that's there in the past I know, it's like some of the key driver. So right now it's a machine. So he's had very natural and this will continue.
As long as that's always a key boasts rubber is not coming back for instance for international Tourism International travelers and also the a group groups travelers commissions to meetings on the so we see an it so the entire.
The <unk> those those sectors are right now are not very active so the result of that I think children city.
They are really I'm, having a shocker drop into HDR and occupancy so [noise].
But the <unk>. We hope we are very hopeful that that's always will come back in they are in the near future.
Oh, Thanks, Yes, you're right got it.
Yeah, and I like to [laughter] Honda.
Because big and he'll then studies in food and Beijing, Shanghai, Golden Sanjay and doing a week Nike and Sam Moore I was just on traveling a lot about 18 44 big Big for CP anything or late April every mine I find that gets more and driver in between.
The big four cities and exactly and hoping that back and more opportunity there will be increasingly enforce 80. Thank you.
Yes, I'd say two I'll, just say is about 2% of that comes out of 10% difference between the tier one tier three cities so for use in trust.
Cure.
Sure turbine city and it is if the tier one cities them.
50%, two or three since it would be 40% so there could be 10% difference so.
The two or three city performs much better in that sense, then to children sit here at this moment.
Okay. Thank you. So my last question is okoloma subsidies, so I've seen that Inc. first quarter you have already the recall just some color subsidies Oh adjusted EBITDA level I was wondering if these war.
Related to the Reacquisition hotels aren't doing to covert peak oh outbreak or it is not so then maybe a follow up on this is that our acquisition hotels Inc. first quarter.
Ah Hominy RT and how many government subsidy to we are estimated to to being a coming from a second quarter. So quoted on wards or other similar levels as what we have seen game was called or what do you well would these be more actually thinking.
[laughter].
Yeah. He didn't think is mccracken [laughter] that raised the was mainly attributable to exact taxes that factories, the kind of Jeremy it's not for their with division and Ah, Yes, you second quarter, Oh, I remember off I held how fast here. These are back to come in and out with less than 3% and.
And now and you know on those Oh, I mean, you know or that hold here that opened at due to add and to be used to fight Academy. Thank you.
You said that I think that the one of the those are pretty much the payroll.
Related tax or some of the repaid a you another whether they are we found that so as a part of the substation dad and so I think primarily just as a.
So you know sat is is a part of reductions whats packs in essence.
Thank you. So maybe just a quick follow up so if the government subsidy in fourth quarter was not at all related to acquisition hotels. So when these government subsidies related through acquisition hotels come in the future Acone wise, what do you recall that in Revpar would you recall that just below the line.
But the we Oh two daughters, how many hotels Salina that we basically will if they have a deeper steam hum we will record to the other revenue.
The where would we do not require the at the.
Subsidies from the government.
So just a is that hopefully I sell question.
Yeah. The FERC here I think that's my question is.
Great. Thank you.
And our next question will come from Bruce Me with you B.S. Please go ahead.
Hi, good morning, Thanks, Erik sitting on making for taking my questions I just have one small question.
So could you please share with us a ball to your hotel opening Tonight.
Well this year and next year and also could you give us a rough breakdown into a by the city tiers and hotel segment. Thanks.
Okay. So Bruce I'd say that we have a stronger pipeline historically right now to a record pipeline or north and the salaries in the 25.
So we are even the first caught in the first quarter in the U.S light up the Covidiens steel steel develop that to more than 100 hotel policy in the.
We opened a 60 opened 60, a two I think that we continue to add to the pipeline.
So this year I know we plan that relate to open six you look you can easily with 700, because that's 567.
So we're trying to push to see whether when we can achieve the number.
However, we also I understand that we are sensitive to that concern so the franchisees because lower.
Occupancy and a low red demanded the second quarter. So we do not really wants to.
You know that commenced or you cars are a franchisee tool and the hotels at this moment.
But if they are ready you know they that because everything's ready then we'll definitely will help them because we have a longer ramp up period.
So.
So we will Oh, you know accounting, we were very optimistic in third quarter fourth quarter I think we're opening all when it will catch up but our plan originally the by 700 I think it the first but the first quarter second quarter, we may.
You know short of a 100, though if we can't catch up then we'll probably about 600 plus minus its you know.
It really depends on the how quickly the economy rebounds, third fourth quarter, and then well probably achieving our goal because our come our company always has been get very disciplined in.
Achieving our plan I know cheating all budget.
And in terms of flat the mixed we continue.
See is like a pure in that 10% we hope.
5% to 10% first it infrastructure and the van or 20% to 30% in the second chair and then 50% to 60% for chair.
And that that and in terms of or the brand that then we have our prior to a mid to upper and two luxury and we'll plan really 5% to 10% that end. The fan met a you know midscale hi under to about six.
Came to 15% and then Midscale Spada, you know 50.
40% to 50% that then that the balance of.
25 sort of the person economy.
So that's how our or just at the ballpark.
Strategic focus and again a development is with we're trying to habit organic given that the as possible. So also depend on the team.
The development team, where the opportunities emerge so we're focusing even more so that's how our ongoing into future plans nextera and the way we wouldn't want to speed up to open the all data.
ER hotels in the pipeline.
And the so we will because now we have to more fully.
Operating divisions that are guy or on the urban and Oh I seem to or two teams are really have Donna tried very hard.
On the boasts algar, an urban and see a CEO Kevin drama and also.
Ms. Chen.
Let's see all but you know they had a nice trying to speed up their development on the openings. So nextera and we should be able to see a you know much higher I think that the.
Gross rate than this year.
Yeah.
And our next question will come from Lydia Ling with Citibank. Please go ahead.
Oh, Hi, my doesn't ever for taking my call.
And then my first question do onto <unk> Oh.
Some idea.
So Bob was what the second quarter to date.
Also wanted to get more ideas.
The second menthol, they're all benching openshift openstack so far.
All right, let the fourth quarter and also what kind of just how do we make gate.
I'm supposed to they're all with bench.
Then my second question goes to honor.
I think in general we were back to them more consolidation to happen.
So I think Oh.
Oh yeah.
Actually I want to August.
Pardon me Bill any.
Yes.
I would probably five to Oh my.
Oh.
I guess, you're doing all that.
I want to spot.
Well.
Actually I would actually hobbies it too.
So I think declines.
Independent.
So.
Celine I'll pick up of the questions and then they use supplements. Okay. Lydia. Thank you so much for those three questions that then the opening up the second the second quarter I'll openings also we have a number a planned in June.
And the then a somewhere I would go you alluded to the larger Iran shut because.
Oh, we as a reset a as I said to you what have we want to respect to two hour to make sure that our franchisees no telling us youre comfortable as possible window opened that we also want to designed into.
Too so that we have us your quicker ramp up period, So I would I always say in a 100 to 150 numbers you know ranch.
On.
The openings.
The second quarter and that then the second question you have caught by the sentiment to of the franchisees.
Definitely as not as bullish as a previous share and however, as I said when trees franchisees.
Our you know much better financial conditions and so in the last two years last.
We have asked our franchisees to be more disciplined the because the market. It was really hot everybody's trying to get the properties that very high lease weight, you know property lease rate.
The spend up pollen sub of money borrowing with a lot of a you know loaded with them with that or that the private a boring kolpin the hotel assembly, even to a higher and higher end.
And that that a there's a lot more supplies in those areas. So we have advocated the weve forcibly.
Advocate to train our franchisees that them in the any you know very good time, you have to anticipate that there is a correction.
Whenever we expected a correction will come in in this call. The nice thing for them by the novel assets came at came.
And in such an unexpected way, but we are but our and resolve it is our franchisee are much more on you know prepared so we have a much better sentiment that they so one of the reason.
A.
Lot of our franchisees I still exploring trying to open to the whole clients will you know signing outside the <unk> at the leases or perhaps the properties signing up there and we've green tree various brand. So I'm you know I think the sentiment is it not as good as overall industry.
But our green tree.
Group that no steel is performing really well the sentiment among our franchisees.
So the that's also because we have we provide this financial support.
You can see the first quarter, we already opened an hour connections with or without lenders and also with our own cash and we continue to have these capabilities with the second quarter. We have we don't have the refound issues that the you know they pre paid up.
Central reservations no. So all of that in place I think that them, we even have more cash from the operations from the lenders to support our franchisees I wasn't what they most needed. It then they know if they have a great deal snow, we have ample financial support for the more we Angela.
And that that is the advantage alpha working with Green tree Big So well always across helped US hope was that our franchisee and the Sir.
Your third issue is it more consolidation.
Definitely we see it that's smaller to medium and disappear started out.
There are so many.
Smaller regional hotel brand.
The most important issue we should they consolidation has to be a responsible a wine.
Because a lot of the smaller hotel chains, Lydia from our point of view.
They have a several you show snack products may not be consistent.
And that data management may not be consistent that yet secondly that that's a thirdly.
The the number of years the last time that original lease term and the varies so how do we making sure.
That the when we we consolidate it's not pure that number game up but also increased overall our quality of the.
The quality of the products and on there and and the quality of service. So thats a nice one major concern secondly, whether the management team we see it that have the same philosophy at the same culture, because not every management team.
And have the same my goal and that's the most important criteria and more important than anything else. So in the past what we have talked for a long time rates and Kevin Argyle and these channels in the urban I do wish are the same philosophy, the all hard work Houston clients and make the blue.
And a valuable resource for the hotel owners.
I'm not that if a you know we think that's sort of quarter fourth quarter that would be there'll be more and ER and the will open you know our arms a fully open if oh. So if you have any such an opportunity pleased to recommend tourists and then we would we think.
In this particular environmental and our.
<unk> strategic partnership with them not was definitely students in both crop so unless we acquired the wind and we're doing that the deal. So that's all criteria media. So that my quick answers to two or three questions.
Okay.
A lot.
[noise] Selena.
I have kind of thinking any okay.
This concludes our question and answer session I would like to turn the conference back over to Miscellany Yang for any closing remarks. Please go ahead.
Thank you operator.
Imposing on behalf of the entire Braintree management team. It. Thank you for injury and participation in today's call. If they require any further information or had any interesting. If we can act in China. They don't have they get from its content.
Thank you all.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Thank you operator center truck.