Q2 2020 GreenTree Hospitality Group Ltd Earnings Call
Thank you, Rachel. Hello everyone, and thank you for joining us green trees earnings release was distributed earlier today and is available on our website that I am. 998. As well as a news wire Services is a reminder. We also posted a PowerPoint presentation that accompanies our comments to the same website on this call. We are going to refer to this presentation. So please make sure they you open it now. Thank you on the call from Green Tree and mr. Alex shoe chairman and chief executive officer Chief Financial Officer. Miss make and one vice president of sales and marketing and mr. Nikki Jean our manager.
Mr. She represent the company's performance overview followed by Miss Wang who is discuss business operations and Michigan will then dismissed finding shows and guidance. They would be available to answer your questions during the Q&A session that will follow
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 as defined in the US private Securities litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as May. We'll expect anticipates aims future intense plans beliefs wage its continued Target or likely to going forward confident Outlook and similar statements.
Any statements Saddam knocks historical facts including statements about the company and its industry are forward-looking statements. Such statements are based upon Management's job expectations and current market and operating conditions and relate to events that involve known and unknown risks and uncertainties and other factors all of which are dead go 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 factors is included in the company's filings with the Securities and Exchange Commission.
all information from
I did including the forward-looking statements made during this call a current as of today's date. The company does not 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 mister shook, please go ahead and thanks everyone for joining our second quarter on this call today. Let's start with a slight 5 during the quarter our performance as that of the hospitality industry as a whole continued to be impacted by the covid-19 with reductions in both business and Leisure travels over all those off and despite some local Resurgence of the factions in June our business continued that will recover or a blended decrease the 17.4% year-over-year to 142 R&B. Our occupancy rate dropped to 63.4% and the decreased birth.
Be 5.4% to 90 R&B. If we exclude the hotels under requisition temporary closures and the impact the from Consolidated entities with him hotel, please 2.2% to 112 R&B. Nonetheless dead. We continue the to expand our Market presence across China by the end of the quarter. We had grown our Geographic coverage to 343,000 across China with 111 new hotels open and the reached a new Milestone exceeding the 4000 Mark with 6000 66 hotels in operation. We ended the quarter with 1087 hotels in our pipeline up 82.4% wage.
Yeah over here total revenues or 216s R&B 21.4% decrease compared to the second quarter of 2019 gross profit decreased 38.2% to 121.1 million R&B not in fact decreased 26.3% to ninety three point seven million R&B non-gaap adjusted ebitda decreased about 47.2% the two ninety one point four million R&B. Net income for a DS decreased 19.7% Mm. 1.01 R&B and the core net income decreased 40.9% 2.72. Yep.
B
Let's now turn to slide seven for further update on the impact of covid-19. China effectively contained the spread of covered by second quarter of 2020 or bait with the same restrictions on certain consumer related activities. So Thursday's our business was in affected by some business closures and the travel restrictions imposed by governments that continue the throughout the second quarter, especially during the June as cold weather nineteen came under control and restrictions were gradually lifted. We saw a return a domestic tourism the business Travelers according to the SDR data occupancy rate ADR and Rural part of hotels in China improved.
During the second quarter partially offsetting the decline observed in the first quarter. Once again, green trees overall performance with the better than the average performance across the hospitality industry in China. I around 20% less of decrease of Rapport. This is a thanks to the tireless work and dedication of our hotel staff and franchisees and the strong support of a lawyer individual and corporate members during June and July bought a new cover. The nineteen cases were reportedly in several cities, including Beijing and Italian total measures including strict travel restrictions temporary closed off of entertainment places and many other Leisure places were re-imposed hoping to bring those Resurgence of covid-19 quickly under control.
Now let's turn to slide eight. We continue to act quickly and strategically to ensure that we are providing as much support as possible to all our franchisees and employees to protect the long-term health of our business with the resumption of business travel and domestic tourism increased our cooperation with our corporate clients and provided additional sales support to our franchisees during the quarter. We expanded our cooperation with the number of travel management companies to attract a more corporate clients and business Travelers. Also, every one of our hotels is expanding job promotion programs and the cooperation with the local Merchants with all these efforts and the system's from Green Tree central office the performance of our home.
As quickly improved even with a slight.
Dip in June due to the Resurgence our occupancy rate increased from a low of 21.5% of end of January 2018 65% during the second half of the Mets to exceed 75% on the second half of the July and to exceed 52% further during the first two weeks of August with this encouraging Trends. We are confident that we can achieve our Revenue targets during the third quarter of 2020. I am proud of the queue to result we achieved especially considering the difficulty invite that we operated under as a result of the covid-19 through it all our business remained resilient and highly adaptable we quickly adjusted birth.
Our operation and the marketing campaigns to meet involving consumer preferences and the weaker market conditions. We protected our margins thanks to all a flexible cost structure and the measures we implemented over recent quarters and that that will continue to implement it for the rest of the twenty-twenty the result our sales recovered and we return the to profitability for this quarter with the Chinese government's efforts to bring the spread of covid-19 under control domestic tourism and business is gradually bouncing back on July fifteen twenty twenty the ministry of culture and tourism lifted off restrictions on inter-provincial travel. The lifting of these restrictions is a stimulating business travel and the summer travel and the hopping the hospitality sector to log
Study and improved performance after the lifting of the restrictions we have observed another 10% increase of our occupancy.
With assistance and the support from the government and our business partners together with our core strengths such as our large loyal membership base strong operational capabilities and our proprietary proprietary Technologies. Well, well positioned to deliver another years of outstanding service to our guests from insult to our franchisees and the sustainable growth to our shareholders. I will now pass the call to Megan Wong making please. Go ahead.
Thank you. Alex moving to slight chance at the end of the second quarter. We had 4066 hotels in operation 37.6% higher than the year-ago 35 of these hotels who are leased and operated or are all hotels and 4031 for franchise and managers or SM hotels took the midscale sentiment Remains the call off our business with almost 64.2% of all of our hotels last year. We expanded more into both the higher-end package, statement as a result by the end of the second quarter the number of hotels in the mid to upscale and luxury segment increased to 7.8% of the total for you and the economy segments do to 28% our entering to be segments will enhance our ability to cross Market or different brand new Jersey.
also increased our damage
And position in tier three and a smaller cities as a result 66.8% full power hotels who are in the cities and at the end of the second age eleven, you can see that we open 111 hotels compared to 134 in second quarter 2019 17:22 for Dan job one hotel was in a luxury segment 28 were in the mid to upscale segment 50 in the midscale segment and the 32 in the in the economy segment five were interior 150s or 250s and the remaining 72 were in Cherry Street in the small cities in China more than 26% newly-opened hotel to a luxury and a mid to upscale hotels.
Give me while we close 4345 upgrade 22 non-compliant with our brand and operating standards and 18 due to problems related issues. So not not we added 68 hotel to our portfolio in the second quarter.
Like twelve shows the growth in the pipeline of meals hotels despite covid-19 our pipeline increased from $1,025 on March 31st, 2020 to 1087 on June 30th, 2020 around 40% of these hotels are in a mid-scale segment about 35% in the economy sector and around 35% in the mid to upscale and the luxury segment selects fourteen summarizes the impact of covid-19 on our second quarter operating performance package rep hard decreased the year-over-year due to covid-19 to 90 R&B. However, excuse excluding the impact of our guy and urban our repair 1508 our hotel ADR decrease the 17.4% to 142 RMB occupancy rate dipped 17.6 to 6.
Team 4% and the rear part decreased 35.2% to 90 R&B y o l o hotel or decrease 19.7% to 1003 R&B occupancy rates up to 24% to 47% and and rub part decreased 47.1% Mm. I'm being the hotel performance was impacted by those Kobe and as well as recent and ongoing Renovations that were delighted to Cody two of them be completed this quarter.
Flight 17 sure of the court and if you can see real popular hotels decreased 47.1% year-over-year to 80 R&B and the red part for a hotel decrease 35.2% and 90 MB but red car is rebalancing rebounding from the first quarter level.
Like 16 we now have about forty nine million battery loyal individual members and a 5.0 1.56 million corporate members up from approximately 46 million and 1.52 million as well as of March 31st during the quarter around ninety 3.7% of all night for sale directly finally through to our individual and corporate members with that are passed call over to our CFO Selena, Please turn to slide 17 total revenues decreased the 21.4% year-over-year to 216 million MB down as a revenue for Atlanta hotel increase the 22.7% to 165.7 million MB wanted to revenue from birth.
Increase the 16.8% to 50.3 million MB. The decrease was primarily due to the impact of covid-19 office which resulted in D kind of rough part of our hotel and airfare and hotel renovation of hotels delay in your hotel opening Thursday as well as partial reduction and exchange of public income definition.
Like eighteen shows that hotel operating costs were a 94.9 million up 20.2% year-over-year.
The increase was mainly attributable to higher rents higher depreciation and amortization and the consolidation of operation, So I bought an urban
increase compared to one year ago primarily due to rest for two are or hotels in development.
Including that impacts applied attitude Hotel operating costs for this quarter decreased 6.2% which would lead you to you to a decrease instead of race of Hotel staff and the regional general manager added increase in utilities consumer food and beverage which regarded from the lower occupancy rate.
Danny and the my page senses were attacked media RV
a decrease of 26.6% year-over-year. The decrease was mainly attributable to sustainable reduction in court before advertising and the mirror.
including
An urban expenses set in the marketing expenses in this quarter decreased 37.6%
enemies expenses were on 48.1 be 1% year-over-year.
Your increase was primarily attributable to higher depreciation and amortization for our party and Equipment increase the Consulting fees off and a consolidation of expenses from the urban.
Additional 100. Returning to account receivable due to covid-19 was accrued.
Excluding impact from quite a few entities and a cruise back at origin expenses decreased by 21.6%
overall total operating costs and expenses will 14.8% year-over-year to 155.1 million month.
Including impact identities our total operating costs and expenses increased 6.4% compared with one years old.
20
you see that increase the 38.2% year-over-year to 121.1 million MB in this quarter.
Yes, margin decrease the flow of 71.3% to 56.1%
Net income decreased 26.3% to ninety. Ninety three point seven million be
And Max margin decrease the from 46.2% to 43.4% year-over-year decrease was primarily due to the impact of covid-19.
It's like 21, we can see that Jack D B. Decreased 7.2% year-over-year to 91.4 MB and just give it a margin decrease the to 42.3% income decreased 40.2% to 34.6 billion lb and the corner of charging. What's 34.6%
It depends like 22.
Net income decreased the 19.7% to 1.01 MB equal to $0.14 US dollars.
Y.
All according to income, but if you ask please speak to a non-gaap increase the 14.9% 2.72 MB that took $10.
23 as of June 13th 2020 the company had a total balance of cash and cash equivalents restricted cash check on your back to active Securities unhappy parties of one point seven billion and be home as compared to 1.6. As of March 31st and try to turn key the increase transfers. The quarter was primarily attributable to cash flow from operating activities changes in fair value of active Securities proceed from this productive Investments and offset by allows us to prep and investment or upgrade decorations.
The cash and cash equivalents play White which animal restarted as we continue to evaluate potential Investments added to support our flag.
Flight 24 and Alex mentioned covid-19 had a significant impact on our business as a result. We expected high in Iraq Iraq news of 10% to 15% for the full year twenty-twenty as compared to 2019.
This concludes our prepared remarks. We are now ready to begin the Q&A session. Thank you.
Thank you. We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you are using a speaker phone, please pick up the handset before pressing the cave to withdraw your question, please press star then to your first question comes from Dustin from Goldman Sachs off, please go ahead.
Hi morning management. Thanks for taking my question. I hope everyone that's safe at the moment. Perhaps I'll have a free broader question the first one that in terms of your we reference to the guidance that you made on the third quarter in the nozzles on the full-year. Can I get a sense on on a like-for-like basis where I'm seeing on your ref bar for the freaky and then for Q well compared to that of 2019. How much would that be recovered? That's the first question but the second question that's on the level of competition that you are seeing in the market, especially on the signup of the new franchisees. It's nice to see that your pipeline has actually grown. Mm hotels now I do you have a sense that you guys are taking more market share or what level of competition that you are seeing and I think the last question is a hot topic now in the market wage.
the secondary listing
Back to Hong Kong or other markets. What's your view? What are your consideration on that? Thank you.
Thank you Justin. This is Alex. I'm going to pick up trying to answer as much as much as I can and Selena and make and YouTube app and supplement. So regarding the uh guidance for the like to like for par for the third quarter and the fourth quarter page. Uh, we are very, you know, uh polish and we're very optimistic and the encourage that by the lifting of the restrictions and and that's July 15th by the government the inter-provincial travels, even though we still think the travel right now Malay probably concentrated on the business trucks, you know, really require the distance travel. Those are really hard demand, uh that less of a um Leisure because people are still a little bit
Signed about you know travels as a lot as of same period last year so we believe our business model are very resilient because we both have a very loyal base of an individual co-opted members as a result our occupancy. You can see the first two weeks of August already achieved 82% of war and but we are we are observed that there is a more addition from a different classes of different classes hotel which will compress the ADR such as the competition from the luxury segment the resort types of four or five star hotels. I think their demand they still softer than ours and we see many many.
Higher end as reducing the red to attract the business. So there is a Dr. Pressure on Thursday. So the quarter we believe the ADR will be a lag indicator and so our occupancy will catch up and with a with a little bit lower ADR. So our internal expectation of the third quarter, we should be under rural properties the perhaps tend to 15% the light light and compared to the same period a year ago and that the force the first quarter I think we'll pretty much probably arrived 5% or or uh, Five. Below to 10% below last year or roughly and on the optimistic optimistic side. We perhaps worse equal the same rural part of the same.
last year
So that's the my first question and I want to give this opportunity to Selena and Meghan to add to see whether this is the right, uh my our system. So no the numbers are more than I do. I think better than I do. So Selena
Thank you. And thank you again for being questioned indeed during the first two weeks. We have observed a quick recovery, especially with the rate. So we just encouraging Trend exactly our revenues for our sort of culture and to be it down 8% to 15% over a year if we talked about like to Maxwell we think our 85° will be in the range of below 10. So if there is no major code which cases happen during the second half of 2020. Hopefully that in the fourth quarter of Revenue agent will recover gradually to last year's level. So at least our year-over-year decrease will be less than 5% than the hopefully our our birth.
A restaurant will be a decrease will be in the range. It decrease will be in the range of around 5% as well. So in line of this week Saturday trying to write off 10% to 15% So Jessica regarding the second question, thanks, Selena regarding second second question regarding the pipeline wage and whether we are gaining or losing market share Ur, the first the second quarter what we find is that our velocity of a dead a contract is the same and considering that our business developers are still not able to travel in all over truck for you since right now like an area, uh, there's still some quarantine. I think it's just uh some cities get lifted and so uh without the phone number
You know the free trial of freedom of follow our signing up we have the same of last year last year for instance that the wage based on second-quarter. We added 173. Uh, so that's equivalent to about $700 hotels New Edition per year and but we have not dead we have not observed that at our franchise. Yes, you're not totally become that energized and adding the new hotels expanding in the second quarter first quarter because there's they're a little bit concerned including for the hotel opening and they took sometimes to get a better promotion work down because if you open the hotel during the co with pure the ramp up. Is too long and the your rent rent rent. You have a higher cost so our rep
You know our some of our franchise.
And choose the take a little bit more time. So we understand we support them and but also a lot of our franchise were prepared to grow but they were also a bit more cautious during the first and second quarter, but I believe in the third quarter we should be able to see a much more higher speed of our page in terms of a contract signing and that in terms of uh, the uh, in terms of uh, increasing to a higher speed of gross in the back and forth quarter because they have already experienced and the green trees business model. We are in the more resilient and that's straight in the first-quarter and second-quarter wage. We are also overall has supported the our franchisee the most with the least amount of fees and cost so you can see wage
From our a number of closures, you know the hotel closures we are still leading and another one ninety-nine per-cent of our hotels franchisees off, you know cost and the continue to operate the hotels and then with the uh, the uh with the profitability in mind, so I think our pipelines and well, we're pretty confident that we think that the July fifteenth so lifting of the restrictions and also that the occupancy rapidly increase the third quarter of wax and we should be able to see our franchise in our developers are able to you know, get in a better deals in the marketplace because we will see more of the existing Hotel some of the other you know that independent or some other local brand the hotel owners are not able to make it under that they probably are more dead.
Want you send devised and it's l to convert. So, uh, we we we see we see a free update kick in that end. So that's regarding the pipeline. And so I want to also gave the microphone to to Salina and make see what I have anything else to add. I thank you. Yeah, I'd like to share some sort of the franchisees from our discussion with them and we looked at all those existing franchisees now capturing good opportunities to open more Hotel typing different cultures, especially when they overcome covid-19 and then can find more cost-effective properties with sales events.
Xyy potential franchisees. They are more focused on the return of Investments. There are more cautious to that page operational capability customer service and the system efficiency. So which are all related to their cost to control and we think they're all the stresses. So that's why they have confidence as the uh, the industry covers. We may we face more opportunities than we can have to dispose of communities. I sent you Alex.
so dusting regarding the
1/3 questions of yours said the we understand and there is a uh potential risk of error and that there were trying to comply with with a regulation from both countries on the other side were also talking with our advisor evaluating options. And of course, I think there are probably more options available for life, cuz two years ago when we first when we first got our IPO and as everybody knows our liquidity, we only offer 10% and our corporate office. We are a parent company hold 90% We never really I think so the one share, uh, but if there is a new listing off and then we can further increase our liquidity and complete our first round and not completed a portion of the the job and secondly give you the cock.
A little bit more on Freedom Financial Resources to further explore the opportunities available in the marketplace. And we also see just just now to say that that the chef to be more individual Hotel availability. So um in the third fourth quarter, we also see some local hotel change the smaller to medium-sized Hotel companies and the may be ready, you know to to do some John Winters or being Consolidated off. So we have a a little bit more resource in that end. So we are evaluating and our advisors working on that and so we are confident that we are not able to
Find a solution in the satisfactory to everybody. Also. Mostly it's a win-win for the company and when when the shareholder.
Thanks. Thanks for all the discussion. Maybe just one very quick follow-up any color on the pre-booking status for the upcoming month of October was cold and weak. Thank you.
Okay the right now say pre-booking for the October 1st. I think I'm a little bit less than the pre-booking of last year and for a couple of reasons and that that the one is there is ample Hotel available at that time and secondly that people are still a little concerned about the Dynamics and the condition at the time but I think that that's from the information. We got we still have a very strong demand for the in the pipeline pipeline is very close and the to that to that of last year.
Yeah.
And may again make an under Selina over there in you guys can add the TV. Sorry. Our guests will start booking Hotel Hilton head's for October since the middle of object, and we're happy to observe that the booking rate around order and vegetable and the nation saying now is nearly dead in the normal level yesterday. What happens show with everyone? Thank you. Thank you.
Thank you.
Thank you. Your next question comes from Denver from Morgan Stanley, please go ahead.
Thank you. Good morning, Alex. Selena and Megan. Can you hear me?
Very clear. Thank you.
Thank you. I have two questions. The first question is a follow-up on the competition which is on from the another angle is some of the month the hotel companies have talked about getting into the lower-tier cities, which country has 70% of their hotels in tsv city and Below. Do you see any competition increasing competition or have they gone into any of existing franchisees or potential franchisees? That's my first question from Edition. My second question is about Thursday. It's a long respect that are accrued of 9.5 million. Maybe can you comment a little bit more on that? Uh, what is it about? Uh and wage is it due to the franchisee long as well? Thank you so much.
Okay, so regarding the competition because I'm involved with the development in a daily weekly basis and so I can provide a r a i think clear observation that end. I think at this moment what we see is a glass of a competition in the third and forces through tears and the lower-tier cities because a lot there were last year's competition with the fears because there are so many factors including some of the response or some of the so-called soft brand and also that new brand they are and from local and from the other companies owned. So even including from uh-huh a company from India, so they are they are going everywhere, uh this year. I think a lot of them.
We see them either close the business and exit from the industry and or have a seriously reduced and understaffed action our staff and that's so we actually see the competition become healthier than the than the last year. So that's that's from the uh, the competition from back and forth to our safety side. And I think that that's because our we in July we typically I think we'll bill or four years the system service fees off under that provision for a bad bad for the for the one time that those yearly yearly the system service fees that may I do not know what the weather will be a portion of franchisees financial burden is too much that they may not be able to pay in time. I believe that's the reason wage.
Pop-up provision just the precautious. Um
Action and this in the place the amount over there and that may or may not happen. So I I'm going to defer that to to Salina.
Thank you. I like to get an invitation a lower cities also and we think that with the War I mean, I mean for each single marketing lower City's the earlier entries is Market at the more opportunities to uh, we can capture in the a single rebate money and the second plate Auto for the hotels in the lower City's we think it's very important for the management capabilities including the a couple minutes here for the remote control and the quality of the general managers. And so that's why we're going to we have weekend and trained a a team of the general manager is the fact why we can also can qualify of the managers to the remote cities and
Because why we can get the get a good result in smaller interior 300 even smaller cities and the second question. I think Alex had explained very long in detail because the many franchisees in the covid-19 applied for the extension of some fees including the central agencies and the system and Genesis. Thank you and then
Thank you so much. I appreciate.
Thank you. Your next question is from Billy from Bank of America, please go ahead.
Hi, good morning. I have one one question. Just just wonder maybe it's and Selena. Would you have you noticed any change in terms of the business clients and business demand, I guess like as you mentioned the recovery is largely led by the business office and I guess initially maybe they're quite a lot of pent-up demand due to the fact that many of them have not seen their clients for quite some time. But the any of the oil companies or corporate have indicated that in the medium long-term, they may travel less or in terms of the way travel the way they travel they have some change or update demanding more lower corporate rates and in a way and also in terms of their job
It's distribution to be it's Klein on there. Any major changes? I'm just thinking about like the next six to twelve months and and try to see what what kind of business demand will be out there eventually.
Billy thank you so much for the question. That's a great. That's a great question. Not only a plug both China asia-pacific but also applied for the the other, you know other places off and we are observing the long-term impact that due to the short-term covita pandemic and the such as the month the corporate the travel Trend and so a factor affecting us as a factor is affecting the crop the travel decision makings so forth the uh, um, uh, we we we are lucky we are position or hotels. We are positioned our hotels in the price the segment that I see on lot. That's what we consider the hardcore need from the distance Travelers such as construction engineering sales and marketing, you know, all of those wage.
Change and that Travelers that could not the work that could not be remotely and so and they also very often corporate that are also very concerned about the budget because everybody will be having a lower budget and overall and concerned about the safety concern about the being with the worker being quarantined that certain area now boasting loss of the uh the time and also the health factors so but our segment wage and I think the demand is there and we will see and you know just for like in July from July 15th still almost an hour for the past one-month interprovincial, you know that the restrictions lifting and we see another bump right now over already over eighty percent. So they demand from our segment wage.
This is trailer which is we have 80% clearly indicate that and that they need to they need that the uh, uh to travel they need to contact the business and it's the uh, but are the higher-priced this is Travelers and we are not quite sure because there are the Mets have a lot of other ways to conduct long distances and that so, uh, the hotel industry you have a large amount of fixed cost. So unless you really design a fixed cost an operating structure to begin with and it's for many many hotels, they are not able to reduce the their adrs reduced.
Referee to blow certain rate. Otherwise the hotel will lose money regardless. So I I believe we have a really a competitive advantage in the world because we our cost structures and we design we along with our franchisees. We're really trying to be the most efficient by deploying the technology package on the and our interactions between our general managers and and the manager is with our technology that we are able to provide a low-cost and uh and under store a very that Pleasant environment for business Travelers. So and I think that's what what you feel our strengths and that's how we see our side of the business demand and that the the the wage
The leash or demand I think we'll come.
Back and at a later time with always. I think that the Leisure travels other than pent-up demand of to the nearby suburban area, uh travel was the leader weekend Leisure Travelers the inter-provincial. I think Leisure Travelers will follow will also a little will lag behind the home decor need of the business Travelers. So, um at this month at this moment were really encouraged to see that, uh that our priced that took the segment and the demand is there.
Phone number of companies to attract more corporate clients and the business Travelers. Yeah. Yes, indeed because we observed the contributions of operation numbers increase. I have increased the 1% every month since the covid-19 because we know so the total contribution off all the individual members a couple of your members have 80% So it's not easy. It's not easy a job for the for the corporate time to increase the wage or 2% every month, but we have observed these this is Chinese. So it's it's very good news. And we also observe that the the trailer maximum wage.
Companies maybe I had just imagined can get charged lower commissions and encourage director connection between the corporate members and our home health so and 31 regarding the big mystery manager. We have we have talked with a very small way because they are more cautious to the 50 and not only the safety of staying in hotels are only the 50th of the good of the good when on their business travel. So I think that that the corporation with our food business as for the barrage and with the hotels also have our hotel to accommodate our to serve our guests, but the fact is never before I sent you sent me for a question under the uh, making appreciated that that that they also Billy and you suck.
Can't see that we um, because in order to assist our franchisee better, we actually have placed more weight Megan's role to do to be um, uh, coordinating the entire company sales and marketing activities and have a direct connectivity with all the major businesses and uh, and the result of this concerted effort and the the the the Selena reported to you and the boss increased increased contribution increase the reservation from our businesses from our business Travelers.
Mhm.
Thank you. I I have an audit questions regarding to a d l and so right now we I think we are about fifteen or Seventeen percent below the the the level of last year's in terms of occupancy seems I'm recovering quite well, but then in terms of how can you elaborate a little bit off what tractor in in terms of weathers are is because of their a lot of promotional package out there or actually the regular room rates off. The rack is actually coming down as much and and my follow-up question on that is how long does it take to get back to the normal level? Like how long do we need to see like a 15% Decline and the positive when you look at all the doctrines once the rate down it will take a few birth.
A couple of years or even longer just to gather back to where it was but the situation could be different. Do you think there's a chance to get back to where they were dead quickly wants to be Monday or you still need to make a gradual approach to bring the ADL back up believe that's a great question that we studied at this point because we you you clearly from the uh, sixty page seven the number that's the page I discussed if you looked at the that wage, it's quite interesting. Supposedly. We have the worst quarter in q1 yet. If you see the queue n d r by the industry, I'm just talking about the the by Str monthly data the q1 the ADR drop is only seventeen percent, but we supposed to have a queue to recovering however the queue to then time.
The industry the ADR draft almost 30% and that's very natural for the hospitality industry for the hospitality industry because we are, we are automatic the entire industry. Sometimes take time to respond to this is shocked. And in the first quarter a lot of I think that's a lot of Hotel managers on probably have not responded quickly by adjusting the India adrs to attract the customers even some some of them thinking behind it is even if your lower the you're still not able to get the gas so they are adjustment of a d r as a tool to compete online, and that offline and slowly with slow but second quarter during the recovery, you see a reduced the demand wage
so for a elastic
And that's a sometimes you take the demand 4% APR. Sometimes we have 10% and I think our industry still have that tradition and that we have to lower the idiot compete in all it would take is for a 411 hotel to lower the lower the regulator box of distance from the order started the price War so and we are quite hold on because we always have a price value price the products and services. I think that's why you can see the our ADR compression is a much lower than that of the industry and and the by basically just a 2/3 cup know we are 33% lower in terms of impact and the less impact than the rest of the industry, but unfortunately believe that's the industry's uh plan change.
And that that tradition and we are not able to stand alone to reverse that course because our with our competition reduce the rate wage and that our customers will naturally including our individual members now, so probably the members said, okay and that uh, what can green tree gave to us off because he they could they do compare and so do the price shopping and so we have to compete in the industry and we hope the entire industry will quickly address back to a Dr. But that is why I said earlier in the third and fourth quarter, we should be able to see our occupancy recovery more rapidly than a g e r recovery and you know, the only when the occupancy achieved entire industry achieved to the same level of similar level of last year of the dog
Of that of last year then I think we see the other hotels who increase the rate and as a whole and the industry's idea will be listed under for the time being we have to be we have to be sensitive to the uh, the needs of our corporate clients and for individual Travelers. And so that's you brought up a a a really a great dilemma for the industry and the the were all fighting for that ability. So that's our job is all right, you know analysis of that that uh element
Yeah, yes. Hello, ma'am. I'm more likely to reduce Andrew Blum wait to attract more guests. This is the economical will cause the tire supply and demand and we offer our grantees hold here that also affected and ruled by by this rule. But but the difference from the hotels in the industry as like just mentioned who increased wage increase was less than the average industry level. I think there are three reasons the first one according to its individual members and corporate clients contributed more than 80% of our room axles. And so the room raised to our members are always lowest wage.
and the
most stable and from the Viewpoint of our hotel