Q1 2020 Huazhu Group Ltd Earnings Call
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So Jeff.
Gotcha.
Well, if you choose to again.
Hello, Hello, everyone on June we'd do you watch with China before we start to Oh sure about thoughts about the strategy 2020, I would like to review our.
Our hotel recovery in China.
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No we don't woman talk to them and you seem to though Weve <unk>.
So after the worst Oh the top on February think the second half outside the <unk>. We already started we've gone reboot team very quickly.
In order to make sure that 50 of our staff members and also the guest.
We try to keep the.
Hotels.
Open as soon as possible.
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I said them quarter, 97% of all hotels has resumed operations.
Due to the preventive.
Measures are the border control by the government and also the second wave of the coping 19 Beijing.
By June 29, we do have 157 hotels under government requisition.
Well sure woman the children do you does so she though.
We can be buying PBP.
Meantime, our occupancy rate is also on the trajectory of recovery piece, we refer to page eight.
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During the week of June 14th two twice the average occupancy up operating hotel has feedback to 74%.
Meantime, this number review advise t., our China, it's 47 up the injury industry comps.
So.
In the show me talking.
It's a woman in Boston, Washington.
The resurgence of Corbin, Nike Beijing thing June 11.
Did have an active impact of our operation.
We also see the Chinese government took a very possible quick reaction to this situation. Therefore, we keep very cautiously optimistic.
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On page nine a it shows the recovery curve all of all our revpar. It eats shale it yet it is actually means that same store revpar in 2020 as the percentage of all 2019.
Reflect the Coleman chairman she just mention it takes shape recovery.
By the 28 of June all Revpar of the same store at being back to that 65% last year.
Here's what I will jump High School Park.
I don't yet.
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The old tend to follow.
Now I'm going to shift the lights on the strategic.
Direction, All 2020, there are major three areas.
Do you do us a two Goodman ginza sunbelt.
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So it's a change we'll do some can jump booking attitudes.
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Yeah ways I doubt that she will send us anything goodness.
So the first one is the accelerated quality hotel expansion.
Second we viewed the multi dimensional direct sales capability insert it skewed to the global technology based shifts of its platform.
On the pressed into acquired through China, I missed the Neil Doshi, it's going to join me to share that three major strategic point without in a next diffuse like.
Well, John jumper intangible loan quality, England and don't have done.
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Jimmy leaching.
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Yes.
Talking about the growth strategy of our stores I'm looking at the charts the hotel pipeline.
We can't see even with the coffee 19, the pipeline by the first quarter do keep the same level as last year at slightly over last few years number and also in the pipeline structure. There's a clear trend also further penetration into the lower tier city in terms of.
During the month of hotels majority up a hotels are still in.
Economy and to meet the skill segment, which is more resilience and a profitable but in the upskill and neat neat upscale sectors. We all pipeline remains strong at all.
So I saw you could use all woman's obsolete.
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On page 12, we compare that new signing of hotels from January two in May of 2020 versus 2019, you can't see the nominees almost the same lab as last year. Therefore, it shows the strong confidence from all franchisee in that.
So with the convenience wismer shouldn't the woman.
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So Jim.
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Where each of those old thought I love when things could get.
The whole House War.
For the you seem to do it.
We do type side too much on God, it's good.
Yes, the or the challenges.
Hockey she married.
During the Intel.
So why is the franchisees chose does there are major for reasons.
First off war of the consolidation and to.
Further penetration on the chain hotel and the evitable join a Chen can help often try to eat two for the most the market rent.
Second part two is quite Cmos for the high operating efficiency and low cost structure, therefore translate into higher profitability. This it's even more evidence and Colby Nike and downward macro economy. The franchisees have care more about the calls and.
The efficiency.
It's hard to has a very strong membership system with.
In Hobbs volume airport, it's going to bring very strong and stable customer flow to the franchisee.
And lastly, and most importantly, I would like to say watches organization is very nimble and had very strong agility responded to the coffee Nike very quickly and adeptus.
Therefore, oh, Oh franchisees reliance further strengthened through this up coping Nike.
Total loan pipeline.
Oh, Hi, Jonathan.
But involved and again.
So what you call.
Besides the pipelines situation I would also like to share with you our development in the Upskill sector.
Hi, guys, who told US you quadrant.
Hi.
So the recent goes you gold company that things would be.
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Since you don't adoption.
In cost, Brad, Georgia, and the block one house have enjoyed a very good recovery above industry average compared to occupancy number but at the ASCO sector of S.T. ours call the occupancy of Joy and blossom killed it.
He's a head up by 20 percentage points.
It's it's also like that pig Blokland House as an example, you know because the travel restrictions for international markets. The surgeons have the local market travel a really drives the performance off a block and Hugh.
It's Roman synergy the told all the called out.
Well I don't do which is called don't change.
Well, you kinda sizable city.
And looking that fits in with it.
Except for our Chinese type of Ah upscale brand like Julia and good Blossom, how what can I also bring the upscale brand of D H into China.
In a very soon future, we will see that the three brands.
Hotels launch in China, including Shagun, Berger Intercity hotel and Max.
So I met with though for the finance alternatives Eugene.
Well, our doing gel or cheese and sentiment.
Now I'm going to turn the call [noise].
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Strident in.
[laughter].
Thank you.
Good morning, everyone [noise].
I'd like to shield you about outlets Jackie.
<unk> gotten to know if you actually see out.
Let's turn to page 14.
Got you had said about treaty drunk online you got to see us capabilities.
Patrick accumulate during this call me to 19 outbreak.
Due to the pandemic pandemic I'm traveling this picture.
Hi.
Declined significantly.
Contribution from online travel agencies.
Our total bookings also decreased.
Oh, maybe thinking could be.
Absolutely book.
I'm line travel agencies.
Deal for things to point lower compared to last year.
Uh huh.
Got them, that's books to watch Oh, saying to us because the lesion good comedy their schappel that Bob.
Michael stronger than the old age as they come Kentucky contribution Rob why don't own thing to a reservation exceeding 29 T mobile.
Also take this opportunity to food as Jenson, our offline sales capabilities.
Please turn to page 15.
Oh I'm sorry for offline do you actually see out what channels through our local I'm like sales.
Real and through our coffee to see all Daisy team.
Teach she mentioned earlier.
Who travel market recorded a factor the powering during this pandemic.
For local sales effort, we want to establish relationships with the local communities no coke element local enterprise located at least in certain geographies makes a great Eric I love our hotels.
Finally, I'd hand, corporate in sales and easy to focus on publishing indexed relationship with our culture to constantly.
He comes to mind I wouldn't be put that to meet the needs of cost them with different loading <unk>.
We also create <unk> direct to booking and settlement IP solutions that can be connected to our b to b copied the kinect and often automation Suzanne.
[laughter] loosen enable our coffee the customs to book easily based on their staff people to travel back at that level and also the ease of monthly say told them directly with the company combining hundreds of whose helped build into one.
Singles Day month come up.
The number off the I'll be Toby coffee the cost them through to more than three highs in June tending to me.
Corporate attack and I'm like Okay.
Electrical appliances company HEICO Weitian, China National Green I, just to name a field.
Now, let's turn.
Turning to page 16.
I would like to show a few more about another strategic her focus on global technology base to share the silly blackball.
I can knowledge and efficiency has always been but can be anything before last full fly to an hour globalization Jackie.
That's going to pick 17.
I T integration I think of smart as a lot Creek was that for future integration with watching.
We adopted a one itcs and debt.
And then a follow on to the days due to Matt to empower the agency relations, who that ditch candidly or family and consistent that gas experience.
He faces the Jualin Coty operation and the centralized beans, Moto full global Jackie.
No one system Jackie include.
Fixed pool wax Ocwen Fudge factor when China, when I see I wouldn't see I am.
One P.M., Matt slashed, yeah, he and the one that follows the Pos system.
This afternoon, we will officially launched our global light to prove Glenn in Germany.
It's the same time Cason, Tim Cope DXJ hotel Europe through <unk>.
We are replaced keeping our proven China needed to approach from apply to two DXJ now, let's turn to page 18.
Eventually we will introduce 14 to being healthy balance applications filed why to have knowledge Pete injuries basis.
That's real house ditch to enhance the operation efficiency improved customer experience and to do you add sales capability.
With that I would think that coal, which appeals please.
Thank you think thing and good morning, everyone.
As shown on slide 20 at the end of Q1.
The total number of 5900 pick a triple upheld with 575480 age.
You know operations and increase off that you want the fan from the and a full one nine.
Excluding the hundreds and fixing the usual tells at the end of Q1 like do you want to read all the a room events, we goal of 26% with $552 or 352 homes at the end of Q1.
As mentioned by GE, Shelia, Colvin, I Didnt pet and it has a significant impact on our try not to be so since January two and you add socket to compare our dth vsan in Europe from early March onwards.
In order to contains a spread all depend any government in both China and Europe imposes a strict socialist disposing matches, our travel restriction that this across that caused the decline in all the hotel occupancy.
Oh, what system wide tell total right caught us a 52% decline from 7.2 billion in Q1 last year to 4.9 billion issue.
Excluding these age like watching for Hello, Hello would have declined by 49% to 3.7 billion [noise].
Yes, we would have effective discussion on our blended rest Paul for legacy quadrant and you could just because the academic impacted these two regions at a different timing.
Page 20 did you want.
Our blended revpar for legacy plot to excluding hotels on the requisitions declined by 58% to maybe 75 in Q1.
<unk> decreased by 15% 195, Lindy and all the busy decreased to 40% from if you want the fan.
Q1 last year.
As mentioned by two quick Lydia.
I wouldn't be average occupancy has increased so because of the defense are doing in mid June before dropping to 74% following the resurgence off the call late night in cases in Beijing.
With a recording of Revpar in China.
Let me point that we have recorded a positive EBITDA in Maine [noise].
[noise] puzzle page 22.
D. age for part of a small broking lapping Revpar January and February just yet.
Uh huh.
Colin I think tenant mix up at the spread you from early March behavior, but other revpar declined by 32% before the six fuel.
Well compared to 59 no posture.
Idiotic decreased by 6%.
Thank you Walt office decreased by 10 percentage points of 52% from 62% last year.
Hey, Paul will further in April but other than the college in May when you buy the we will open this economy.
The age occupancy has for copper stupid to treat the fed and the Revpar ultimately public to Pacific triggered a little at the end of June.
Review open and I do want upheld also night, but that all huge Borneo at the end of June [noise].
[noise] they see all financial results on slide 20 tree.
Our net revenue declined by 16% in Q1 year over year.
Would deem that by the end all our previous guidance.
Good morning de age like watching revenue dropped by 46% also at the better at all what got good guys.
Breaking down the road equal chill, while net revenues from our lease and always will help declined by 11% Julia and net revenue from all Manachised and franchised hotels declined by 30% year over year.
Excluding dth our lease revenue would have declined by 53%.
In Q1.
Also provides us a waterfall a waiver even many many fees fees on all think of hotels that were located lot and you also provide the waiver for those that remain opened during that at all or the various cities as well as hotels that.
Has been recruitment trends by the government.
The impact of each one time fee waiver amounting to approximately 74 million in Q1.
We'll have a direct impact on our.
EBITDA and net called.
In Q1 rapidly contribute this fall at something like Manachised business models are called the poor couldn't trip event in total revenue was five percentage points rule phone can you put that into one for one night. However, if you exclude the Robin no problem age, which mainly comprised of all revenue from.
Needs and operate upheld.
Let's just be watches revenue contribution from I felt like Medicare business model would have improved by seven percentage points to put the 5%.
We expect the cooperation from all Manachised business in China will continue to increase going forward.
We contribution from you can't seem to meet an upscale hotel seconds as shown on slide 24 in Q1, the ratable contribution for me and upscale hotels decreased by 12% to 1.4.
Excluding the age running from week to upscale hotels would have been used by 45% to 700 million.
He called me and Midscale hotels has been too big for all led to deepwater basis.
These two segments contributed approximately 90, but that's all lenders. So this was done already.
During the last few months lifting a quick only probably can do you still expect but in China.
I couldn't be hit the revenue would have been studied it but then for economy, 46% told me you.
And then a 6% for upscale hotels prospectus.
[noise] last also slapping five on the operating costs on the operating loss.
The reported loss from operations was 807 [noise].
Neither.
To operating income of 284 million last year.
The operating loss in Q1, maybe contract with fire. That's the part two of approximately 700 million and behavioral patterns.
Especially MACI earlier and also during our earnings call in March we took it off walking a deep mobilized our team will improve our cost focus.
Quoting, but not limited negotiation with a medical and reduce rat strip like it won't be picked call once you've sharing and so for us.
Operating costs, excluding <unk> was a 1.7 billion rolled up to one tool and die.
Excluding English selling and general and administrative expenses in Q1.
Hello at 200, and I need it.
207 suddenly here last year.
To haul.
Also compared to our two for all 375 million last year.
So you start of our cost cutting efforts has not been fully reflected in our Q1 results.
Examples the payroll cost reduction from the streamlining of I'll hit, albeit calls was partially offset by a while also brings paid.
The reduced the revised rental apartment fix all the time to negotiate and realized.
And another thing if that's the timing also be six all the conversations or from the government issues by each all for the full open employees and that he dropped operations will only be reflected in subsequent quarters. That's all the cost savings will gradually be glad he didn't affect that either future quarters.
As mentioned in our earlier on his call presentation.
We will also we will also slow down the old pace in the meat and.
Enrollment hotel openings and focus more on the development and on Metros business. It has been reflected lower pre opening expenses that Q4, two or whatnot.
Turning to page 26.
We recorded a net loss for 104 million adjusted EBITDA compared to a policy hundreds and millions last year.
Our adjusted net income declined from 232 million into one pool wondering who have invested a 1 billion in the up this year.
Our adjusted EBITDA and net income was also impacted by the why all of Manchester management fee waiver of 74 million and that they didn't cost saving measures.
Measures mentioned earlier.
In addition.
So the impact all the Carbonite game be me, so look what weakness on the number of our long term investments that will know rod directly related to our core health business.
Totaling approximately 100 million.
In addition, Oh there was also a fourx law, because it's sort of million that did religious and with our currencies in rural.
And I saw asking.
For diesel has been fully dig Pat what type of new respect that involve our adjusted EBITDA and adjusted net loss of Columbia.
The non-GAAP pro forma just one mentioned in this page included the unrealized and realized fall from the fed I'm changes all activities related to our investments such as a culture of approximately 1 billion.
Let's move on to the update on the financial impact of Carbonite seem to our Chinese business on page 28.
Yeah, our revenue for Q2 in Q3 to be lower than what I.
And yet you know they to walk you expect to our <unk> revenue being up in China. The dropped by approximately 35, because it's sort of deciding to food rule.
As mentioned in our Cubist presentation.
We would then in the process, we'll see the pool from this indication bad I meant all financial covenants.
Oh, Yeah happy to report that we had killed the approvals from the bank, who the for the financial Covenant package.
Fourth one next year.
We also managed to feel fine on the issue of 500 million U.S. dollar coupled with a bundled in may.
We get used to these post it can be paid all revolving credit facilities under the syndication loan.
This will not only allow us to reducing interest payment on our balance while also have effectively can be drawn down in the future rent a need for right.
Especially you know people coal we have a comfortable boat totaling 475 million. Good color that provides an investor arrived to put the note that to watch on November 2nd who would rule shoot the CV price is below 100.
I put that date, the right will last.
Therefore, we will resist detached from the hour issuance, albeit a new coupled with a football for the probable we got some of these convertible note on the lumber second.
At home yesterday.
The only the price for the convertible notes was created a book hundred autos I'm talking about Ah Ah. The convertible note that that has a quick for the lender and they go to be sure.
How much of a car we all the Chinese market and also a halt pardon my efforts, we ever I called it a positive EBITDA in may.
At the end of June we have a cash balance of 4.8 billion.
Let me be an underutilized bank facilities, all 4.9 billion really to finance all operations.
However, the pandemic is not over yet they are you uncertainty on the pace or recovery. Therefore, we will continue to implement the street cash management practice and all those Oh.
For the I was 15 pessimism <unk> to me any future uncertainties.
[noise] coming through the financial impact of public my team on board or behavior on picking the right.
At the people other than I've seen in you.
As of March and April the local government has requested close 84% or simply proof of that all I'll help to contain the spread of Cobiz I think virus. He's made movies on has graduated opened the quality quality. The early success and the containment all depends on it.
At the end of June.
[laughter] makes reopen it could be night, but that or likely while these hotels.
Similar to all activity in China, Yes, I thought that we negotiated with a level will be further rental repayments.
It has been supported.
In addition, we also get all the quick I always thought that we thought on the furlough at foods and I'll get calls.
As an excuse me discretionary spending and Capex expenditure.
In addition, we have also feel a lot more financial support from the local German banks, hopefully 45 million euro to fall support our heap Leach operation.
Turning to page Turkey.
On the guidance.
We expect all net revenues.
For Q2, two tool to declined by 51 to get the trip offense also the five to all but if I could say since the fed excluding the hedge.
We maintain our gross openings pocket of 1600 to what I'll say, a hot but into two old Auger hand, guesstimate that our past school here to be the range. All 345 450, including the blank Hoelscher. All 350 220 to 50, another 5200 hothouse impacted by.
Probably not dealing.
With that please open deferral for acuity.
Susan.
Ladies and gentlemen me remind everyone. If you wish to ask a question. Please press star one on your telephone in rates, where you need to be in them.
If you wish to pencil do well he's supposed to town or in Kentucky.
Again for questions, it's only one.
The first question, we have each timberline of Justin quotes.
Goldman Sachs. Your line is that something.
Hi, Good morning, Thank you for taking my question.
Perhaps I'll start with two questions. The first one is about a the recovery pop off your operations in both China and also in Europe I guess, we already just finished the the calendar Q2 and there were no just up into the Q3, so can I get offends on what you're looking at in terms of the takeaway for both Oh.
You can see and also the room rates into the end of Q2 over into Q3, what are you looking at that's the first question.
The other question that about I'm used to tease out earlier comments at the beginning of the coal that I really look at the industry you have noticed a very fast recovery of the local market demand when compared to that off the unknown I seem to T market demand and also the also the challenge that you have already seen for the new business.
Do I need to national Uprate does in the market so with that in mind, how would you look at how would you derive fuel upcoming new product to openings. All your product setting you view of these are two mockup phenomenon I think.
Yes.
Okay.
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Hi, Steve would you should know ginger.
Women Great Q2, since Q3, then kitchen.
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Okay.
Hi, everyone I would like to comment on the recovery in China.
And now slide you can see that actually the recovery trajectory caffeine in Q2, the Revpar of 20 times. He has already reached 65 percentage of last year. So it's a push curve of the recovery juices.
In the.
During the year NGL producers Beijing Louisville.
John.
Uhhuh managing Sujit you jump up.
Oh, we have to say that the resurgence of the her coffee 19, Beijing, that's had a negative impact of I'll I'll follow up operation.
Thinker each.
We will that seemed to show I'm sorry, yes.
Woman series once you seem to limit type that should you some three each and good luck on that.
Uhhuh shoe the switch.
We keep the cautiously optimistic about the future operation because the you know the uncertainty of the coffee 90, it depends on its highly depends on the government is countermeasures.
Oh woman's it's one wants them to what could that be changing the upon close towards to the show you see phase home doses at once.
Oh woman.
So do some good real hopper with isn't good or something from Dol.
Ooh familial stopping you should look foolish and watch out for me. She says union acoustic woman the real possibly something but she is going to go up I wanted to Boston So.
Right.
Our government to took very thoughtful matches to counter the big Beijing resurgence of called the Nike Therefore, what generate positive about or the outflow kebab of Revpar recovery.
Activation or is that by Q4 Revpar will reach around 85 percentage of the last year's operation.
All right on some good each live on food So awards of with each other down the good shingle Eugene.
Youre, hoping to see good to be breaching the phone homelessness will suit woman do it so it will fall, whom do whatever fairly good coins.
Thank you.
And our government is also you know.
Because different to prepare a resurgence in order to contend is caught in 19 were very confident about our government the reaction.
Because it doesn't go with the KUSA Inclusively Jupiter savvy Beach in Nova.
Tweets that sort of tuned to the sort of that.
So this was.
Having said there there there's also a chance of resurgence of so called me 90, some areas of China. However, we are prepared for that kind of situation.
[noise] [noise] just can't wages.
That brings the decision or sir.
No one was a little you only have that somewhat over the years.
Yeah.
Not to the issues you know.
During the summer either.
So.
Because of previous company long alone.
Looking that's all.
Mhm.
So far to realize that sort of compelling sort element on the software.
Doesn't come down.
Sunday evening.
You know the couples of acquired through the normal level to give it another compound, though it's almost a vision that's all.
For the philanthropic.
It is I know you'd be direction here.
So maybe it was a beautiful.
The vacancy.
Please.
Oh.
The other.
I mean.
While the students like his own woman sitting on top and another 100 million involved.
Listen this was all tone revenue.
Okay.
I would like to comedy Central Christian buying Jumpy, and then kill me talk about and gauge later.
So.
You may find them through our previous on you know reporting we use that invested invested in company something like Oh, you and anyhow, which is like the aggregator of Ah nonstandard a small hotel this type of.
Business model is under extreme task of coffee 19.
80 to it it is much harder or for the nonstandard product to to pool to take coffee in China.
Therefore on personal phone, we stick to our Hopper and standard second even when we launch our soft brands, we have a very specific product standard and the which might involve certain level of a renovation of the hotels its not.
Ah pure aggregator of the hotels.
Although the probably Nike has a very enacted impact of office.
But we do keep a very strong.
Devotion and the investment into the product development.
Oh I [noise].
Hi, Justin I'll do I for your questions on the gorge hospitality.
And just to recap that the Indian you'll band, but in Germany is that he has a corbett Nike in spite of the impact impact on the based on an in depth continent, as well as obesity Europes button from early March and the.
Is that in much at the end of March and beginning of April. The so we think it was right too badly hurt if I get that the we have far post Dol approximately halter, great is that more than likely sustainable upheld during that period, but had since then is that Germany, but little bit government in Germany has taken a very soon.
And very effective control on our.
I wanted to contain dependent make and I'll say that up by the end of June Oh, we have seen that we have we opened approximately like Nike Wattup. All the hotels also denied but that all portfolios and our occupancy has like a school rose from the lowest point, all like 15% to 23%.
And with June as well and the rest how's the rules do like between a euro as well and though while while we will be have to be cautious cautious about the a the the growth the recovery going forward as the exploration China is that the a depend then they may read between the much in Indian something.
It is a that these lease expected, but Ah. So the Germany government has made me taking a very strict actions in a in restocking the economy as well while also taking into account of the protection measurements due to prevent or the second new emergence, having said that is that oh.
I will say that didn't choose to use that youre the impact on the all European East won't you will be the you will be a low point and you based on the other experience in China, we expect that the the recovery occupancy. If you will start to recover in Q3, particularly in you do during the summer and go into the awesome.
With that you said does is it as the real or European do you really we're putting these two at the very beginning stage yet to be seen into see there how the different countries in Europe are working together to.
Contained the virus together because in Europe. The you did the all the countries there many countries got connected to each other.
Thank you Justin.
[noise] I. Thank you.
Your next question, we have emerged from the line of deleting some bank of America.
Your line is no.
Thank you and good morning, I also have two questions. The first question.
This is more like two fold on pushing Simpson's justins regarding to the reason trends and I mean, we notice that the Ross Pom poms to the Beijing small outbreaks decline again or decelerate a little bit again, but it has been about three weeks now have leaps and that's a trend stabilize.
<unk>.
Oh, we see a recovery on sections, and we acceleration or investments or is this still kind of decelerating and it sounds right now and also how does that compare the situation I was kind of Beijing have you seen classic hadn't changed a bit.
After that outbreaks, Oh, sorry, I'll say June as well and then my second question is about on the cost side.
Notice that like the in Q1 the over on the EBITDA declined.
Hi, you then be revenue decline that suggests that most is increasing and I am just sent to you is where you know little bit Oh, there's some one off items and and Ah, but can you.
Tell us a little bit more how much it's a one off items impacting Q1, two and what should we expect in terms of second quarter. When we full cost to close it's just so kind of increasing.
Some of the accrue a happened in one two and surely.
We'll be a will not be there in the second quarter.
Yes, that's those are my two questions. Thanks.
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Oh, the woman to Beijing jump wasteful Debbie.
Equal.
Yes its relationship.
Beijing is probably the most important.
Business and tourism sense Center City of China Airport has now.
The impact of the outflow of the travelers from Beijing, the occupancy in Beijing and remain at the low level.
Therefore, because the government has imposed very strong preventive measures to container and dynamic therefore, it drags down the occupancy apart from network by 10% reset the occupancy back to the later hop off me.
We do see the slowly and the gradual recovery of occupancy in Beijing and right now we enter into the second.
14 days. So therefore, we think after the 214 days.
The situation will be better.
Let me address your question with the automotive parts side.
That's a mentioning they make presentations the nimble items, which actually impact the Oh EBITDA, even though in Q1 number one is there though he provided a one off mentally fee waiver friend for our franchisees are in Q1, a while we'll see that into April.
Is that the because for those hotels. There has been like are located in a in who pay and honey Rip and number two is there though for the hotels that though has been keep on all reopen are doing the locked down in doing that period. We de pickup that is approximately like 74 million 74 million in going forward He said because.
This is a one off a few management a waiver. So a brief always they'd be able to collect that into subsequent quarters is number one number two is there. The also as I mentioned that the assemble a nimble for cost.
Oh, the streamlining of our head count in hit all fees or as you can see that I presented the probably the saving you didn't feel good luck somebody like 400 million no. There has been reflected in Q1. The main reason it because the cost saving has been more than offset by the severance cost. If you pay to these employees. So they pay small yet reflected.
And then the treat that there'll be a few undergoing a a renegotiation with our rental up with our lender and a and none of the rental reduction as we reflected in Q1 as well. So so the nation or that you said that the 1 billion law. If you're talking about also include the age in D. age is that does your business actually started because.
Line in March and the composition that the they're going to receive on the full employees as what the business interruptions.
Yeah, when do we see building into subsequent quarters, so you're going to read or that the subsequent quarters as well. So so say that is the in addition to that is that in Q1. We also a mix of provisions approximately 100 million on our long term investment not related to.
Oh call Hotel business.
Then to name a few he said there would be the official isn't that they'd be happy to be fully provided for that or the investment maybe talk about in the immediate hotels, where it is quite similar to do that all your model. If they go to fully provider for that stay approximate though to a 100 million. In addition to that is that though the also recorded a 57 million law.
All the Forex loss due to the are declining have you already be come back we always euro currency. So so between these two we just treat pick a combined package that our our adjusted EBITDA and net income is quite similar or even slightly higher compared to our revenue decline.
Going forward is that the beat me, we read the recall resolve the ER franchise fee that though is that they can collectible from our franchisees because a waiver has been has been less than the two weeks that though with normalization Debbie going to pay it out to all employees the cost saving cost saving from the a reduction in crop cost well.
You started flowing into our I'll, probably lost health initiative that is that they'll be will also reflect the the rent reductions are going forward you that next few quarters as well. So so that that's about it. Thank you beat it.
Thank you.
Thank you.
Your next question we have in terms of mine. This man some reaches P.T. Your line is open.
Okay management, thanks, very much for taking my question. So my first question is regarding to the number.
So you're mentioning you may you bid I have seen positive. So can you be either rate at what would be you breakeven that powerful who'd house in China, and Darfur D. H, maybe in China, what would be that before they go like a hotel no, Florida upscale hotel they succeed like so that would be my next question. My first question.
After the downtime. Please go ask the next question. Thank you.
Okay.
The breakeven the breakeven level of our.
Our China business, you're talking about is like including a including attack there will be approximately 131.
Our living be on it is one of them be on all the world basis, you. Some one ltwo is that the on although on a de age is that Oh say that d. The numbers these little bit of upgrading the main the main reason behind that is because the the substitute that'd be received from the from from the government the it into the full employ.
Ah yes, it is not certain depending on we hope has got good talking about the roughly 40% of this stop costs are being or do you guys. So that when you speak as had been but having said that is that Oh BBC the impact of the our dth operations. He though on the oral or profitability is.
Not that significant.
Because that's the idea that for example in a in Q1 the impact of the Oh, Oh, the loss from a vacation spots many like kind of medium the renminbi.
Oh, Okay got it but you cannot my God do they have to do you have done a breakeven that possible upscale hotels and we can we are Uh huh.
Are we looking to be looking to the breakeven because the biggest part two has a significant our ship operations. We centralized operating platform. So these are going to be looking to the other groups. The trying to operation is a break a breakeven EBITDA, we like looking at the blended <unk>.
Okay, Yeah, that's more a self operated and a franchise and manage Oh My gosh, there's nothing like the blended.
Oh, well need to pay for direct costs follow these and opened hotels bonded. It had he said the franchise be says heads are significantly higher contribution margin that would also helped to.
Reduce the level of their big even let Paul.
Okay. Thank you very much and my second question I want to ask about that south and the marketing. So you mentioned in the presentation on the local like a stuff South of war and the company's now don't do briefly compare it that way. So okay. How is that depending upon the okay like south it's got he did and what is of course on application.
I thought by having more omega local without food on like Uh Huh.
And the comparing ways acquaint topic from okay. Thank you.
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How do you have seen emphasizing the importance of direct sales and the high loyalty members actually the B to B C. O is also part of the director.
Well intentioned, Oh, one bill for young team.
We see that turns that I can come and go title without what the.
Launches duties sheet pushes Tinchy, you want to shake out of London lead young Hammond nickel you'll go.
So we keep recruiting the new members at the lowest cost and that's not possible and also we encourage that repurchase minutes from all numbers.
Our two year Cohu sure woman tracing that Joel to that Kodak even Andy.
You should see a cool I can carry a woman she sidetrack counting the t. a couple that I really should time vacation high sugar, he should end up and de social and they're either Seattle Ginger.
I just don't show woman Saxon teacher show his I show no need to attack now you should go delay pick out too I couldn't comment that I think cannot well know corridor I cook with I figured out yet.
C. B cells. It's also very strong supplement to our current local sales.
Well, we did see a couple different during a meeting time Wilson once we're done at Union the teacher shaping issued three or $2 to see quite equivalent leaders with them.
Well in two satellite TV catch on T. occur when they're either kinship I counted that should show that she got 10 shut out.
A woman who died that tends to change here Oh sure three coalitions, where they can you quantify drop class E. G. I will make did you say 10, she's a b to b issue can lead to a the ATM. She is cool legal only she told them worship social elements that you can or cannot do that.
She has got to.
So the daily contribution from the B to B customers has already exceeded their level of last year, and we continue to take a different measures to strengthen the stickiness with our.
Class B to B customers.
Well this video that she a couple of time doing I don't shuttle Asian headcount collided thinking how life pushes satellite wasn't that too they shouldn't be E. G go what might happen deep dive into hit wholly who I should that were made it can come to a 22 year Cook, who they take a twod annually.
Oh, the B to B cells. These all from the sales elite often from flying and the collaborate on local sales together should dooming fish show me can teach him, but what you cook with that I can get yourself elements I just hope if we tend to consider santa-croce got to find out kind of people.
I don't want that she's done.
As a cost of acquisition pretty long and we're going to continue to push this effort.
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[noise] [noise], ladies and gentlemen, [laughter].
That's going to either conference for today.
Thank you all for participating you may now disconnect.
Thank you.
Okay.
Yes.
Mm Hmm.
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