Q4 2021 Huazhu Group Ltd Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the Wazoo Group 2021 Q4 and full year earnings conference call.

Please be advised that today's conference is being recorded.

At this time all participants are in a listen only mode.

It is now my pleasure to introduce IR director, Jason Chen.

Thank you Andrew.

Morning, and good evening, everyone. Thanks for joining us today welcome to <unk> group's 2021 fourth quarter and full year earnings conference call.

Joining us today is our founder and chairman Mr. Chi Chi our CEO , Mr. Jim <unk>, our president Mr dosing scheme.

Our CFO , Mr. <unk>, our deputy CFO yesterday, and our CEO of international business.

What's your home.

Following their prepared remarks management will be available to answer your questions. Before we continue. Please note that the discussion today will include forward looking statements made under the safe Harbor provision of the United States Private Securities Litigation Reform Act of 1995.

Forward looking statements involve inherent risks and uncertainties.

As such our results may be materially different from the views expressed today.

Number of potential risks and uncertainties outlined in our public filings with the SEC <unk> group does not undertake any obligations to update any forward looking statements, except as required by applicable laws.

The core today, we will also measure adjusted financial measures during the discussion of our performance reconciliation of those measures to comparable GAAP information can be found in our earnings release that was just.

Debuted at the yesterday as it were.

Reminder, this conference call is being recorded the webcast of this conference call as well as supplementary slides presentation is available on <unk> group's website at IR Dot <unk> dot com with that now I will turn the call over to Mr. <unk> Mr. <unk>. Please.

Good morning, and good evening everyone.

2020, along with another challenging year.

And the duration.

Although COVID-19.

And the gorilla for many uncertainties to the lodging industry.

And to the same time global macro conditions hours are becoming.

Increasingly complex.

See the China's economic.

Changing from high speed of growth of high quality development.

We also adjusted our cities from previous Nick as scale grows.

Sustainable quality growth.

<unk> high quality hotel development.

With the new cities, we should be able to achieve sustainable and quality growth.

Create a greater value to our customers employees and franchisees.

The industry by.

By leveraging our unique 301 business model, which include brand traffic and the technology.

And it is sustainable quality growth strategy.

Still there.

However, the corrosive relies on two critical conditions.

The Dakota precision or accuracy.

Leveraging on positive as chunks technology.

Innovative capability.

It will.

People oriented organization.

Don.

<unk>.

We can see a more precise on that.

Great ratios.

High efficiency and quality.

Moreover.

The precision or requires us to benchmark world class of companies on <unk>.

So the calculation.

Rest of Asia.

In order to maximize the efficiency in the company.

In addition, those products and the service should also between changes.

Good enough.

On a more.

Previously for simple simplicity concentration.

<unk> focus on core strategy.

Success or failure.

Often determined by timing details.

<unk> business.

Yes.

<unk> becomes a more and more important.

Another condition is recorded value.

Right.

It means value creation long term focus.

And the social benefit.

Although we are continuously focused on creating greater values to our stakeholders.

Along the value chain.

So we would.

You'll see on difficult at other large fees.

And the long term focus.

Last but not least.

We will also focus on ESG.

Environmental protection carbon emission reduction social welfare and the corporate social responsibility to bring long term benefits to our customers employees franchisees partners shareholders.

And the countries.

Our tenant culture to.

Discuss our opinion.

Okay.

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Yes Angie.

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But when it does that.

Jean Georges who can have Amit <unk> looking I'd say to answer that.

Thank you <unk>.

As mentioned earlier.

Full year 2021 was again a challenging year.

However, we continuously insist on implementing our strategies and achieved several great achievements for the year. Please.

Please turn to slide four.

Quality hotel expansion front.

We define again, our standoff, what 360 program and the quality hotel.

We achieved 7830 hotels in operation by the end of this year with net openings of 1041 hotels.

We further penetrated into lower tier cities with roughly $2 200, new Cds of coverage added during the year.

Also we successfully introduced the indoor CD at a Max Brad into China market.

Moreover, through the joint venture with <unk>.

We have opened 14 stagnant Burger brand hotels in China in 2021.

Lastly, low somehow to further tap into the booming domestic leisure travel into the market.

In regards to our multi Doug mentioned the direct sales we had achieved another year of solid member growth of 14% to total 193 million members by the end of 2021.

Also officially launched our <unk> App 3.0 version two anti great customer service it from online to offline.

Also our room nights contributed from corporate customers further improved to 11% in the fourth quarter 2021, and Crs contribution further improved to 63% in the same quarter.

Lastly in terms of our global technology platform, we had started gradually roll out of our one digital one global digital platform, but yes, just hotels.

Yes.

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So as you enhance the Rev.

Yes.

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So it doesn't mean that sensor information packed room a ballpark.

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Thompson.

The only thing you can do the trend towards liquid versus hoping other sandwiches.

We already did you end up having to do.

Leslie.

As of call it consistently affected our Revpar recovery, please turn to slide five.

China remains implemented zero carbon policy everywhere.

Just off covered in relative large scale with the result.

Victor traveling restructure and hanes significantly affected our revpar recovery.

In February post the Chinese new year, we saw our Revpar recovered steadily on a week over week basis. However, since March the highly infact shows on the coronavirus has been spreading rapidly into China, which interrupted our revpar recovery trend as of March 20 <unk>.

Our month to date Revpar recovered to only 64% of the same period of 2019.

Dr. Jeff <unk> you Jim.

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Susan Barsamian, Xiaomi and Huawei <unk> amaze trial, it won't be in the same scenario.

Please turn to slide six although we are facing many difficulties and the challenges we will implement our sustainable quality growth strategy. We have formulated for strategy <unk> forecast is for 2022, which includes growth strategy Brian strategy.

<unk> strategy and digitalization strategy.

Well discuss details on each of the strategy in the following slides.

Jean <unk> this year.

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This slide seven gross strategy, mainly includes three areas firstly, the China forecast to penetrate into lower tier cities secondly, breakthrough into part two is less penetrated market certainly further developing upper mid and upscale.

Hotel segment.

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Chris you forget.

Firstly, we will continuously penetrate into the lower tier cities. Please turn to slide eight.

As of 2021, there are 40% and 57% hotels contributed from lower tier cities for hotel in operations and pipeline respectively.

We totally signed up to 849, new hotels during 2021 with 50% 55% of them came from lower tier cities at.

At the end of 2021, we had covered 1062 cities in total our future talking it is to cover 2200 cities, which means we still have around over 1000 empty market to be penetrated.

Yes.

Yes.

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Julian J G G Tanzania tissue that shelter at home.

Alright.

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74, <unk> Chengdu solid financial policies.

Jonathan attributes, including high bar.

Let me tunnel syndrome, and Lisa Susie and Jim will go through the three Nevada.

Please turn to slide nine our lacks the key regions key forecast the region is to penetrate our solid in southern and western parts of Tyler.

National strategy includes four economic development loans as shown on the slide we have good penetration in jeans agglomeration and touch on the outer area. However, Chengdu Chongqing economic circle, and Guangdong, Hong Kong Macau, Great Bay area, Osteo very much less penetrated for us.

Last year, we had established the our regional headquarters in Shenzhen and <unk> to develop these two areas.

Attract local attract local franchisees and to penetrate the local market by doing so we can achieve a more balanced.

Across all regions in China.

Yes.

Angie this is Todd.

This year, it's all about.

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Imagine going to vote.

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Yes.

Lastly, I would like to discuss our upper mid and upscale hotel segment. Please turn to slide 10.

In the upper mid segment, we are we insisted on using multi brand strategy to develop the market. Our brands include <unk>.

Crystal Orange Intercity Madison Miocene mature at Novatel as of 2021, we have 454 upper middle hotels in operation and a 264 in pipeline.

We are targeting to achieve over 1000 hotels in operations and the pipeline by the end of 2023.

Sure.

<unk> seen this year.

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So Jim on the total year also answer neither hoods.

Towards oncology Sulya.

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Our EBIT Jeff.

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Our upscale hotel segment is also progressing steadily please turn to slide 11, we divided our upscale hotels into three parts. Firstly, we are expanding the number of upscale hotels through the joint venture with <unk>.

As of 2021, we achieved our first milestone of total 100 apps, Google hotels in operation within the pipeline.

Currently we use our blues on house brands to further tap into the blooming domestic leisure travel market.

During 2021, we signed up total 35 hotels have been somehow spread.

Lastly, we are using macs brands to seek for the conversion opportunities in China, focusing on China's existing market of independent upscale hotels.

Best example, is we had cooperated with Shanghai less sweet Orient hotels by using Max brand to enter the CBD area at the bone in some high.

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Timings without diluting our the changes in king by hydrogen for many years.

Changing chairman since you've done that quite a vacuum matching the holly.

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To do that.

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Motion Union Associates.

In terms of our brand strategy. We also divided into three parts. Please turn to slide itself.

First one is the product upgrade we constantly upgrade our products for different brands to enhance the brand recognition and the product quality for example, our flagship economic Brian hunting, we continuously upgrade the product and introduce new versions to the market.

Second one is on the flagship hotels.

We selectively invest and opened our flagship hotels in the core cities at core locations to improve our brand awareness. For example, we opened our new version of Crystal Orange 2.0 flagship hotels in Shanghai last year.

Lastly, we sharpened our brand positioning.

Each of our tools brands that has.

Its unique positioning to provide the differentiated products and services to its own talking to customers.

The two gradually transient from products and function, beating in the past to brand leading in the future.

For example, hunting is targeting the mass market and the customers who are seeking support the highest value for money.

Orange brand represents healthy and the <unk>.

<unk> and SME niihau brands that have become China, new youngsters from first choice when they choose the hotel.

Hello.

Johan here.

Thank you and chose <unk> <unk>.

<unk>.

Then so this year.

So it won't be changing crude towards that.

Joe you want <unk>.

Being here positive way wafer version, because we're changing syndrome.

Now, let's look to the membership strategy. Please turn to slide 13, we remain focusing our direct sales channels, which mainly through our in house sales corporate customers and across the industrial and lives.

To attract new customers and expand our membership basis, our at what is critical.

Critical core platform on Qatar conducting a deep customers operations.

Hi, Jeff and Peter for you.

Of course it is.

Possibly yes.

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Earnings year on year.

Almost all the.

Anyway by wins.

This include page 14 over the last few years, our membership continuously grow steadily.

Had achieved the AGR of 26% growth from the year of 2015, two year of 2021.

So we are using.

Yes.

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Tony.

Thanks.

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Our Crs contribution also continuously improved please turn to slide 15 for the full year of 2021, the Crs contribution improved by three percentage points year over year to 58%.

Importantly, our Crs contributions in lower tier cities are only slightly lower than the tier one tier two cities.

Okay.

Jeff I noticed through year.

<unk> year ago comps.

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Yeah.

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The piece of it.

Please turn to slide 16.

Contributions from corporate customers also further improved for the full year of 2021 room nights come to Bluetooth from the corporate customers accounted for roughly 11, 9%.

Two five percentage points improved from 2020.

Specifically Ah cooperates customers' contribution also gradually improve the in the upper mid and upscale segment.

Thanks, Jeff.

Susan.

Pose Porsche the finance or <unk>, which are within the sort of challenge you again.

You bet.

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Thanks, Susan.

Detail juices, Youll ship voyage, ODM Mandeans Amendment chimneys.

Let's now move to the digitalization strategy.

Please turn to slide 17.

Over the past several years of development <unk> had already achieved several digitalization processes for its limited service hotels at the hotel level.

Transform transferring many offline functions to online created that churn management Hotel model, China management model.

Today, while we are deeply reviews, our previous litter blokland process, we find out that there are still many concepts or the functions that hotel level and it can't be further operated in and manage that didn't you Tony.

Therefore, the first a part of our digitalization strategy is to achieve a comprehensive potentially utilization of our limited service hotels at the offline hotel level.

Despite.

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Quality showed you caught up quite a bit.

Please turn to slide 18.

In the future we think of the comprehensive digitalization can include.

The physical sales unlike gas, thanks, Trs quality management, GOP management lifetime franchisees services and extra.

The more digitalization can further improve our management efficiency and the capabilities.

This is Julia.

Sure.

Yes sure.

Most of that you were seeing for potential.

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While this was a house I need it.

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Anymore.

Almost all sorts of other entitled the future.

So again that can be helpful.

Yeah.

Let's turn to slide 19.

Terms of the foodservice the hotel.

This model is different two limited service hotels that is also a very new area for partners to experiment.

Therefore, the second in parts of our destination strategy is to transform the full service hotels from single Hotel management to cloud based digital churn Hotel management model.

We are experimenting to buildup, but digital shared platform to move offline functions at hotel level, such as human resources, accounting and finance and supply chain management to online in order to achieve an online shared service platform among many foodservice up hotel upscale hotels.

Yeah.

Just what do you mean by Enbridge had three hotels.

Yes to your partner.

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Deposit, especially ones with that being said, yes Johnson.

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Also there to implement.

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So as you.

Pardon.

Before I finish my prepared remarks, I would like to.

To emphasize again on the importance of ESG for part two.

Please turn to slide 20.

Under the backgrounds of China's carbon utilization target as well as increasing concern on sustainable growth globally.

<unk> already incorporate ESG into our long term strategy planning.

Last year, we released our first ever ESG report since listing and the release will continue in the future.

At the same times.

<unk> has also started a very comprehensive internal assessment among each business divisions do you think the potential of improvements.

ESG related matters.

Sure.

With Iraq.

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Tyler Lewis unless.

Yes.

Thank you Jim good.

Good morning.

With that I'll turn the call to say to discuss our fourth quarter and full year of Tucson, The 'twenty, one operational and financial performance.

Please.

Thank you jumped the gun a little bit.

Good morning, good evening to everyone.

Let's move on to our operational and financial review for the fourth quarter and full year of 2021.

As shown on slide 2022 slide.

Slide.

Finally to our combined hotel networks expanded by 15% in 2021 to <unk>.

753 cadence of 7830 hotels.

Compared with 650 <unk> of.

6708, 89 hotels in 2020.

Excluding DH legacy <unk> Hotel network expanded by 16% year over year to roughly 720 8-K rooms of 7700 <unk> six hotels in 2021.

For our hotel turnover in 2021.

Our total hotel turnover grew at 36% year on year to RMB 45 in.

In 2021. This was mainly due to our continued network expansion in China and low base of 2020.

Excluding DH legacy <unk> hotel turnover grew 38% year on year to RMB $42 7 billion in 2021.

Turning to page 23, <unk> <unk> blended revpar for Q4, 'twenty, one was RMB 163, 14% lower than 2019 level.

ADR in Q4 was up five 3% compared to 2019 level at RMB 239, while the occupancy in Q4 is 14 percentage point lower compared to 2019.

This was mainly due to COVID-19 resurgence in November for.

For the full year 2021 legacy Quad two blended Revpar was RMB 172 have declined by 13% from 2019, but an increase of.

One 6% from 2021.

The ADR was RMB 239 up by 2% compared to 202019.

Occupancy is 12 percentage point lower compared to 2019.

It was mainly due to the several outbreaks of COVID-19 through the years of 2021, especially in the later half.

Turn to page 24.

Despite the recovery in the fourth quarter was interrupted by Amit Amit from vibrant since November .

Our legacy DH business saw strong recovery in Q4 2021 on a yearly basis.

DHS blended revpar for Q4, 'twenty, one rebounded by 153% to 43 euro compared with Q4 2020 the.

Occupancy improved by two four percentage points compared with Q4, 2020, and the ADR improved by 24% to 94, Youll only 3% lower than 2019 level.

For the full year DH blended revpar slightly increased by 4% to 32 euro compared to 2020, mainly driven by 3% increase the ADR Aki.

Occupancy rate was roughly flattish at 35% between 2020 and 2021 as the first quarter of 2020, what pre Covid in Europe .

Please see our financial results on slide 25.

Total net revenue grew by 9% still year to RMB, three 4 billion in the fourth quarter 'twenty, one mainly driven by 130% increase of DHS revenue.

'twenty one.

Legacy <unk> recorded a 2% year on year revenue.

Declined to RMB, two 8 billion in line with our previous guidance.

Due to COVID-19 resurgence in over 20 provinces since November China's leased and owned hotels saw a 13% year over year decline in revenue.

Thats, partially by an 8% year over year growth of managed and.

And the franchise revenue.

For the full year of 2021 total net revenue grew by 25 year on year to RMB.

$12 8 billion.

Excluding DH legacy Quadro recorded at 30% year on year revenue growth to RMB 11, 2 billion in line with our previous guidance.

Breaking down the full year revenue revenue from leased and owned hotels increased by 17% year on year to RMB, eight 1 billion and the revenue from <unk> and franchised hotels grew by 40% to RMB four 4 billion.

The asset light <unk> and franchised business contributed 34% of total revenue in 2021 compared to 31% in 2020 at group level.

For the moment. This is mainly driven by the legacy managed and franchise business.

Portion also increased from 36% to 39% in 2021.

Now, let's move to the cost and profitability session on slide 26.

In Q4 'twenty one the reported operating income was RMB $39 million compared to a loss of 134 million RMB last year and positive $72 million a quarter before.

The year over year improvement was mainly driven by the DH business recovery.

That 60.

60 million Euro government subsidy received in Q4, but offset by the weaker China business performance.

Excluding DH less impact to operating income in Q4 was RMB $16 million compared to 301.

5 million RMB last year, and 239 million RMB a quarter ago.

On a full year basis, the reported operating income turned positive to RMB $164 million from a loss of RMB, one 7 billion last year.

Slide step a resurgence of Covid during 2021 legacy Quadro recorded an operating income of RMB $891 million compared to a loss of RMB 100 last year.

<unk> narrowed its lost significantly from RMB, one 6 billion in 2020 to RMB $727 million in 2021.

Thanks to the government subsidy totally.

European dollar $100 1 million received in the second and fourth quarter.

The total hotel operating.

For fourth quarter 2021 was RMB, three 2 billion increased by 16% year on year.

The increase included a noncash impairment loss of RMB $257 million, which was mainly related to DH.

For <unk>, it's a recorded RMB, two 3 billion, our hotel operating cost, indicating a 13% a year on year growth.

The increase was mainly attributable to higher rental cost of a new upscale and upper mid hotels.

Higher personnel costs as we expanding our hotel network rapidly and higher DNA costs, which were related to the upscale and upper mid hotels opening and also upgrading of existing hotels.

As well as the consolidation impact.

Recent physical acquisition.

So, let's the DH, it's recorded RMB 866 million hotel operating cost, indicating a 28% year on year growth.

The increase was mainly due to variable costs increased along with business recovery as well as noncash impairment loss of 257 million RMB mentioned above.

On a full year basis total hotel operating costs grew 16% year on year to RMB 11, 3 billion, mainly driven by 20% year on year growth of Lexi Quadro.

With similar reasons mentioned above.

As we mentioned in previous quarters.

Future expansion of upscale hotel will mainly used <unk> model therefore.

Running cost declined by 19% to only RMB 13 million in Q4.

Opening cost significantly declined by 72% a year on year to only RMB $81 million for the full year of 2021.

Our SG&A in Q4 increased by 21% year over year to RMB 602.

$24 million driven by the increase in both legs required to and the legacy ph.

<unk> SG&A for <unk> increased by 8% year over year to RMB $437 million.

The increase was mainly attributable to the increase of head count.

Sales team ITT BD team and last but not least the upscale business unit, which are the areas we strategically invest in.

As you can see from the chart. The increase of SG&A is mainly driven by legacy module, while deep cited recorded 2% savings from 2020, which also has part of the reclassification impact from the BH side.

Turning to page 27.

Our.

Adjusted EBITDA income was RMB $278 million in Q4, compared to RMB $375 million a year ago.

If we exclude a noncash impact loss of 257 million, which was mainly related to D. H adjusted.

Adjusted EBITDA would have been RMB $535 million, representing a 43% year over year growth.

This EBITDA positive in Q4, 'twenty one to RMB.

$69 million compared to a loss of RMB 389 million last year, thanks to the business recovery and government subsidy.

But offset by the noncash impairment loss.

Excluding D H Lexi Quadral recorded and adjusted EBITDA income of RMB 209 million declined by 73% in Q4 2020.

Due to the impact of COVID-19 resurgence in the fourth quarter.

Full year adjusted EBITDA turned positive.

On the $1 6 billion from a loss of RMB $244 million in 2020.

This was mainly driven by the 81% of growth of legacy <unk> adjusted EBITDA of $2 billion as well as a narrowed adjusted EBITDA loss of ph.

RMB 461.

In Q4 2021, we recorded an adjusted net loss of RMB $227 million in large from a loss of RMB 8 million in Q4 2020.

Excluding ph <unk> recorded an adjusted loss of RMB $187 million compared to net income of RMB $300 million in Q4 2012.

<unk>.

Adjusted net loss for the full year narrowed from RMB, one 8 billion in 2020 to RMB $260 million in 2021.

Lastly required to turn positive profit of RMB $358 million compared to a loss of RMB $459 million a year ago.

Coming to the cash position.

Our net debt remains healthy at RMB four $7 billion by the end of Q4 and there is no risk of breaching the financial covenants of the remaining amount of Europe .

Dollar $303 38 million syndication loan.

Cash balance was RMB, five 1 billion and the Unutilized bank facilities or RMB, three 3 billion.

Given the Covid impact remains uncertain in the foreseeable future, we will keep cautious on capital spending and discretionary spending to preserve cash.

A few more words on V. H since November last year DHS recovery trend was again interrupted by omicron vibrant.

Occupancy rate dropped by three percentage points to 46% compared to a quarter ago. However, as German government unfolded as the initial opening our plans things like that.

And later too.

March 4th.

It should help to re accelerate our revpar.

Recovery in the future.

However, we will remain cautious and are still implement the mitigation measures.

The emphasis on efficiency improvements negotiation of these flavor personnel cost optimization deferral of major capex.

Additionally, the short time worker compensation, what continue to be valid until June 32022.

Turning to page 31 on guidance.

As you May know since March 22, the highly infectious omicron filings has been spreading rapidly in China, which seriously affected our business performance and China's zero corporate policy also adds great uncertainty to the business recovery.

Moreover, the wall between Ukraine, and Russia may negatively impact our European business.

Therefore, the guidance of.

Short term view and only reflect our current understanding of the situation.

In terms of our hotel opening plan 2022.

After reviewing our existing pipeline hotels under construction, we now expect to open around 1500 hotels and it cost around 500 to 550 hotels for the year.

This is built on the presumption that COVID-19 spread will be contained in a reasonable timeframe in China.

In terms of revenue guidance for the first quarter of 2022, we expect revenue growth to be in the range of 11% to 15% compared to the first quarter of 2021 or to the range of 1% to 5% excluding GH.

For the full year of 2022, we expect the revenue growth to range from 15% to 20% compared to the full year of 2021 or two the range from 4% to 9% excluding GH.

Again.

<unk> only reflect our current view, which is subject to chance.

Last but not least considering current condition, we may from time to time make repurchase.

Our securities including American.

Depository shares and convertible notes in open market transactions privately negotiated transactions or otherwise subject to market conditions and other factors.

With that let's open for the Q&A.

Thank you.

Ladies and gentlemen, if you have a question you will need to press star one on your telephone.

If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.

Once again to ask a question press star one.

Our first question comes from the line of Billy <unk> with Bank of America.

Good morning.

Thanks, Joe.

Yeah, So Jason.

Oil <unk>.

Vijay <unk> di <unk> paid out now listen to the <unk>.

The churn councilwoman Tricia <unk>.

Product operation.

You talked about how the patients.

Coaches Eli shortly.

Okay.

And those things as juices.

Hi, guys.

Come on kind of lifestyle.

Well Neal.

Hey, Bob.

Okay.

Turning to the <unk>.

The inventory so high.

Sure.

Right.

<unk> seen the product.

Yes.

<unk> not yet.

Okay.

Just wonder like that in terms of product upgrades.

I think in the PBT you.

You guys mentioned that as one of the growth driver.

We understand that in the past like product.

Actually you can significantly enhance rock com.

But.

Is that still the case going forward and.

And if that's the case and also in terms of the plan, but linked quarter upgrades.

Are we helping.

The existing.

Our franchisees to do a large scale.

Okay.

We'll share with our deal with your hallmark.

Quite a few pieces and chi the contour Jesus users' English, albeit shelf fisheries from shipping.

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<unk> <unk> Hudson.

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Solar timing the sushi, the gaijin SMT tools, the way looking harder teaching Shelby Sushi Jayson.

The Shelby the synergies which uses.

Singapore's Alonso.

Sure.

Bureau, Shanghai team.

Generally the timing do you see any knowledge.

Well, John as you can tell the Chisholm II treatable sure Jonathan.

The title we bought we bought.

You mentioned <unk>.

She can get it closed this week.

So the product upgrading is our key strategy to cater into the consumption upgrade trend in China is happening not only into high MTG hotel, but I'll also like Orange and Hi, E. I think the Revpar improvement of.

<unk> existing hotels upgrade has been.

Brian has brought a very good return to the franchisees at least comparable level as the new hotels to the franchisees.

You can kind of hunting.

<unk> <unk>.

<unk> using <unk>.

Tissue curtains.

We're starting from today on the timing of season, two dollar tree coming this yet.

Arguably high jewelry is the only one pushing the economy product upgrades and in China, which is also well received by the customers of us.

On the chart change the other way.

Yes.

That's also the one micron thousands that somebody's home.

Sounds good I spoke to it than that.

Alright, that's it for now.

You bet.

Well Neil comes out for the evening gentlemen, some that you've done.

Tom and <unk> when you also look.

What the April call.

Alright.

Sure Tyler.

Uh huh.

Neil Thomas Chung.

Hi.

Yes.

So I think my second question is like that basically.

<unk> noticed right now on the call.

Great.

It could ease up in China, So I just wonder whether this outbreak.

Its impact.

Impact.

The incentive.

ICEE and their whether theyre besides to open but thats.

That's changed.

Yes.

So the Navy.

Jean <unk>.

She said Tom <unk> each in doing some good Jim.

Amazon the total U S housing.

Sure.

<unk> been kind of down in total.

Yes.

For me it Dina <unk> fit on water.

Tuesday morning.

I mentioned, Russia.

This is how you build on that.

Prasad from sheet Bouchard, <unk> <unk> hydro portfolio.

Good job.

So should the switching moment charters just honestly the fact that salary Thompson Cabozantinib will reach an El Nino Tokyo pop I assume India.

Shypoo suite.

Far east.

Was there anything on Jordan, Egypt, Pakistan Lithuania.

<unk> was down two quarters.

Launching <unk> phones.

Bob This is Jim again.

So we think it will toggle element.

<unk> balances.

I'll start with you.

The motto use endogenous versus some of the larger pick up orders as the funds.

Okay.

Certainly you are right the current Covid situation and also the China zero.

Covid policy has the negative impact of our performance and also the franchisees.

The inkjet, especially reflected in the March number, but having said that I would also mention two factors as a mitigation first of all China is very big and large market actually our hotels in the lower tier city has been running good and this further stimulating.

The signing of the new hotels in those markets. That's number one two is the further requisition of of our hotels by the current government.

Bureau currently more than 850 hotels are on the requisition, it's roughly 12% of our hotel portfolio. This is very important to help our franchisees to go through current tough time, especially for the franchisees in the tier one or tier two.

Cities.

Yes.

Sure.

Thank you.

Next question comes from the line of <unk> Li with CIC.

This is Tom.

<unk> sure that launches are an inch vignette sure guidance say hall and logical Revpar Photoshop.

I don't know, what the irons and agile Shea.

Sure <unk>.

OTC sales.

That will mean that then.

Easy calibration holding graveyard Ashish here.

Excuse me you compound as usual ADR, which you said execution.

Somehow Hopkins Johan Sverdrup will come either fashion on Hawaii somehow nitrogen leaching tells me, let Sheila we open towards <unk>.

Can I assume that tissue intracellular enzymes <unk> take us outside of the Yodlee as it sounds you guys have done in the past that.

So my first question is that for the full year revenue guidance was implying.

Employee reservoir recovery rates.

And my second question is that we know that.

Adi recover faster dialysis 891, what's the trend of ADR in the future when we recover from COVID-19, because some people, let's say ADR may continue to increase because people pursue better quality and strong brands like I mean, I think so considering the soft consumption environment. So that's my two questions. Thank you.

Paul.

Well share with our dealers.

And that's the real power.

E R E Julien Tableau department as a part of us.

<unk> units.

Women Kalua junior to the eating food as Ashish.

And so on and so each.

This year's switching editions essentially for the neighborhood.

<unk> hundred <unk>.

There is some good each incurred some good changes things.

It's a good change.

Shell's leases on the Caribbean.

So the way this year.

Pushing the CRB.

Charter was assistant English obviously on the pure.

Mohan.

Nigel sits in good XI system or <unk>.

Dietmar.

Preferred elements.

We opened 10 year Goodbye agenda.

To choose the preferred shares.

Then.

Switching.

Sony the issue IPL towards the bulk Cushing.

Two answers.

No.

Duration is quite.

Great.

Yeah to a charter amendment to our systems.

Systems to the module, that's a good figure to use whatsapp plausible differentiation.

<unk> cautions because showed you this year.

Our same innovation in denim with Suncor can do or the Jordan Tyler can go shop.

Little more industrial.

Industrial parts of the portfolio.

This is joey.

As always Tom.

Causing abbvie detailing the timing, especially the type of assortment regionally.

Genes in the liver.

Okay.

To answer your question in terms of revenue guidance for the legacy China side.

But we budget at the 81% to 84% of our Revpar recovery compared to 2019 level.

It is based on our internal assessment and also the evaluation of the impact of <unk>.

<unk> and.

And regarding to your second question.

Consumer markets and also the corporate markets reaction, yes, we admit that there is a challenge.

Further sensitivity of the customer's price sensitivity, especially regarding the corporate customers.

Our latest number, especially in January and February Chinese Festival actually.

The recoveries pretty decent.

Both both for the leisure travel and also business travel I would say from module group, we have full spectrum of.

If a product.

This creates a very good opportunity for us to capture all kinds of customers, especially those who will become more price sensitive because we are we have our own competitive edge in terms.

Efficient and low cost business model, creating both value for our franchisees and also customers.

Thank you for the next question.

And our next question comes from the line of Lee <unk> with Goldman Sachs.

Yeah.

We talked about previously.

Simon boutique.

Noma.

Seven.

Alrighty.

<unk> will come it all comes out you can go and the men gentlemen, how long ago, you didn't you Ali when we.

Now jumbo on EBITDA margin I was hoping that you did.

Talk to you the commentary.

Johnny.

And Andrew on the scene.

And gentlemen.

EBITDA the cheeses.

Hi, Justin.

The <unk> <unk> contract.

The Tianjin Gwen TJ on the tender.

Yeah, John <unk> in Taiwan, and Hong <unk> Salma now it sounds like you sound like Youre mill so.

You can understand wholesome sans hindrance to the concentrations.

So would you Yao NEMA and the hope is yes.

John E.

<unk>, Canada.

Top often die somebody young listeners.

<unk>.

We need to you Bob.

So the question was related to your cost.

And also the margin, perhaps because we saw a bit of a margin dilutions last year.

For the China operations wondering whether you would have any guidance on the cost as long as the margins and secondly.

And in relation to your 7000 hotel in 1000 cities and expanding into another 1000 cities geographically, we know that you have a huge exposure in.

And then in eastern part of China, I'm wondering whether you have any concentrations guidance or expectation in the first tier second tier cities. Thank you.

Yeah.

The share of women.

Sure.

Part of that was inventory wasn't what you have in that case.

Sure.

The diluted in the pool, and then sort of a little hiatus housing.

Number one is the high level of new ones with our SG&A bulk ratio number that youll fiber.

Woman Chisel junior piece, all of Genie Energy's or control accuracy to gel pushing you.

Neither dilutive share that you're able to convert.

Jonathan.

Your chances of tons, you're selling something that's either condo quality.

We certainly have higher between ratios with Julian <unk> Peter.

Julian <unk> short term.

It's more than try and this was the highest earnings under 2% neutral job versus yield on commercial leader.

Gotcha.

Well, thank you everyone.

In Q2.

Further as of yet.

Interest to Hershey.

Financials are.

Hard to quantify Jean <unk>.

So lindsay on the.

<unk> versus <unk>.

Jesus.

Congrats on all of them cope with this and just without Qingdao Micah.

Just congregation switching most enrolment of William.

Yes.

Selling my portfolio.

Sure so the Shinji searching contango.

So the way that <unk> targeted <unk> suite of <unk> solutions to the challenge.

From what <unk> been a holdup.

Yes.

Later shipping by the Tupac, Oklahoma support both.

<unk> 20, <unk> to answer that so she doesn't know women.

I appreciate your <unk>.

<unk> please.

Switching the Rev hydrogen.

Okay and those have been helpful.

Hey.

In fact the majority.

I see good treatment centers.

Once that changing with the sensible in terms of the two four <unk> radios.

Yes, Jason.

Talking about Santo.

<unk> was in the Muni the trim is central part.

You bet.

<unk> talking about trimming that T&D group medical agenda.

Our tissue.

Okay.

Firstly to the second question first.

So first of all for certainly the lower tier city is much less penetrated compared to the up tier cities.

The 1000, the Incrementals cities will mainly coming from third tier city fourth and fifth even like counting.

And secondly, we are relatively we have lower market share in the southern China and Western China. So there is a lot of further growth area for <unk> as well so two summary.

In our.

Further.

Portfolio, it will be 55% coming from lower tier cities and below and 45% it will coming from tier one tier two cities and our strategy is.

<unk> penetration in through all tier of cities in China through <unk>.

Full spectrum of brands for example, we're going to enhance our.

Yes.

Penetration in tier one tier five.

More upscale and mid upscale product lifecycle, Burger plus some house and et cetera, and and same time, we will increase our market share by economy, and Midscale brands in lower tier City and for example, <unk> Hotel.

A question and answer to the second question for the first question certainly we admit there is.

Mounting pressure in terms of our EBITDA because the revenue is under pressure.

For this.

Southern change.

Coffee is a situation that's number one two also we internally we have analyzed.

There is a further improvement areas of cost management, even allow our key strategy further penetration upscale and upper mid scale and also digitalization.

Under the sustainable and quality growth overarching strategy, we will focus on the key areas and further improvement improved cost efficiency.

We're going to we're going to give us more detailed measures in the next.

The next period of time.

I appreciate it.

Yes.

Okay.

Thank you Simon.

Thank you and our next question comes from the line of Lina Yan with HSBC.

Okay.

Okay.

No.

Okay.

Yep.

Okay.

One question.

You have an estimate for the.

Revenue.

The memo breakeven revenue for module magazine.

And also do you have like a breakeven.

Okay.

Sorry, Youre, asking a breakeven revpar for <unk> and <unk>.

DH separately.

Yes.

And.

Historically, we have a ballpark estimate for China's that is around 130, RMB and for the for the DH side is roughly around like <unk>.

60, and $2 65 euro.

Yeah.

Okay do you have a breakeven revenue.

Good morning.

Our next question comes from the line of Bruce <unk> with UBS.

Thankfully quite a while.

<unk> wood diesel and disappointing to you Tom.

<unk> I'm sorry.

I appreciate that.

To ensure that each needs on several of our projects should hopefully without a doubt all it actually yard GWA Mayo electric electric cost in there too with Jody can you entered such as Chicago pathway for <unk>.

Teenage daughter, much handed out whether you go Takeda showed are you guys seeing that you've got Thunder Hawk liquidity wash, it's a M.

Sure <unk>.

<unk> financial.

Hi management My first two questions and the first question is on the revenue performance.

Two months.

In Q1 this year, despite the COVID-19 resurgence.

Disruption in March we saw that in Revpar recovery in the January and February is relatively better. So can I ask about the revenue performance in January and February this year.

Okay.

Joe Junkie Sean.

Yes, just you women that guy so without doing that.

So James I'll do that that would be <unk>.

Hi, sure Jonathan Jonathan Okay.

No.

<unk>.

Yeah.

And I think I mean, if you call.

Great.

Thank you Guillermo.

Okay.

Okay.

Okay.

No.

Hi, Thank you Sheila I saw the ICA.

Yes.

Yes.

Currently already Julien.

Yes.

Got it.

Okay.

Yes.

<unk>.

<unk> side of the portfolio.

Yes.

Shannon.

Currently each HR so that's good.

Trimble that refer to Shanghai.

Joseph.

Okay. That's helpful.

So the CCF.

No.

With you frequently screens have been done the tissue.

Sure. It's a message that you should take it to grow Malinda team comes from Vicente Btw, Dana Chantelle Ho Chi from Lasalle.

Switching highly charged with Jakarta mobile contract with shell, which I'm curious.

Sure.

Switching the tons are seeing way some gene, yes, sure Jonathan Jamba with sweet answer that you've looked into.

As I mentioned with Hitachi.

<unk> got charge offs in Asia.

Highly two shifts.

Portugal Pingo <unk>.

Only if I Asia.

And my second question is on the cost of fronts. So I saw that the gross margin in Q4 declined compared with the previous quarters.

And I saw that the main reasons due to the increase in rental personnel and other cost so Matt double check that is the increase.

In rental and personnel cost is mainly due to the increase in number of lease and owned hotels and also the main contributor in the in the other cost and how much is the impact on the cost increase from the acquisition of Citigroup.

Actually.

You are right the impact of that.

<unk> cost increased mainly come from the upscale and upper mid Hook hotel hotels in the lease leased hotels and.

So I'll tell you as we mentioned later.

The continued growth model will be asset light so we're going at.

Control and further investment in this area.

<unk> has a very relatively the acquisition size is small so the contribution to the cost side is relatively limited it's just.

One in like $10 million.

RMB level, it's a limited contribution.

It was helpful. Tony.

Quite independently.

Hello.

First of all congrats Louise claims was essentially hooks ranch in the onshore.

Warm in March on that what you mean with GSO and <unk> seen the change in the answer.

Sure.

Thrombosis I'll, let Jim Wilson.

So the vehicle finance team from <unk> versus <unk>.

England unknown Crinone later this year.

Mineralogy.

King.

<unk> constant somehow important novel single controls in the three hundreds are thoughts Orland, Digenea, England intermodal anytime minutes ago with India.

Any questions you can digest, Georgia.

<unk> got lots of that.

For example, according to <unk> with some goodness and infrastructure.

Yeah.

She said Burlington.

<unk> how would you.

Thank you.

Now I'll turn the call back over to IR director, Jason Chen for any closing remarks.

Thank you everyone for taking your time with US today, and we look forward to connect with you again in the upcoming quarter. Thank you again bye bye.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.

[music].

Yes.

Okay.

[music].

[music].

Ladies and gentlemen, thank you for standing by.

Welcome to the Wazoo group 2021 Q4 and full year earnings conference call.

Please be advised that today's conference is being recorded.

At this time all participants are in a listen only mode.

It is now my pleasure to introduce IR director, Jason Chen.

Thank you Andrew.

Good morning, and good evening, everyone. Thanks for joining us today welcome to <unk> group's 2021 fourth quarter and full year earnings conference call.

Joining us today is our founder and chairman Mr. Chi Chi our CEO , Mr. Jean Cui, our precedent Smith notion king our CFO Ms <unk>, our deputy CFO yesterday, and our CEO of international business.

What's your home.

Following their prepared remarks management will be available to answer your questions. Before we continue. Please note that the discussion today will include forward looking statements made on this.

Safe Harbor provision of the United States Private Securities Litigation Reform Act of 1995.

Forward looking statements involve inherent risks and uncertainties as such our results may be materially different from the views expressed today.

A number of potential risks and uncertainties outlined in our public filings with the SEC <unk> group does not undertake any obligations to update any forward looking statements, except as required under applicable laws on the call. Today. We will also mention adjusted financial measures during the discussion of our.

Performance reconciliation of those measures to comparable GAAP information can be found in our earnings release that was just.

Debuted it yesterday as a reminder, this conference call is being recorded the webcast of this conference call as well as supplementary slides presentation is available on the group's website at IR at <unk> Dot com with that now I will turn the call over to Mr. <unk>. Mr. <unk>. Please.

Good morning, and good evening everyone.

2020, along with another challenging year.

Cost and the duration.

Do you see COVID-19.

And the gorilla, many uncertainties to the lodging industry.

At the same time global macro conditions hours are becoming.

Increasingly complex.

See the China's economic.

Given that administrative changing from high speed of growth of high quality development.

So the adjusted our cities from previous Nick as scale grows.

For sustainable quality growth.

Focusing on high quality hotel development.

With the new cities with <unk>.

Would it be able to achieve sustainable quality growth.

Create a greater value to our customers employees and our franchisees.

Industry.

By leveraging our unique <unk> business model, which include brand traffic and the technology.

Under the sustainable quality growth strategy.

Clearly still there.

However, the <unk> relies on two critical conditions due.

The Dakota precision accuracy by leveraging on positive as Jonathan analogy.

Innovative capability.

As well as a people oriented organization.

We can see a more precise and accurate.

Ratios achieved high efficiency and quality.

Moreover.

The precision or is that requires us to benchmark world class of companies on talent cultivation.

Of AC.

Order to maximize the efficiency in the economy.

In addition, those products and our service should or supply chain changes.

Enough.

And the more.

Previously for sympathy simplicity concentration.

Protection focused on core strategy.

Success or failure is often determined by timing details.

Hotel business.

Precision becomes a more and more important.

The another condition is recorded value or benefit.

It means value creation long term focus.

And the social benefit.

Although we are continuously focused on creating greater values to our stakeholders.

Along the value chain lodging.

Arizona.

You'll see on there is difficult as other large fleets.

Kind of being long term focus.

Last but not least.

We will also focus on ESG.

Environmental protection carbon emission reduction social welfare and the corporate social responsibility to bring long term benefits to our customers employees franchisees partners shareholders.

And the countries.

Our tenant call to accumulate discuss our business.

Okay.

It does.

Sure.

So I noticed you saw yeah Ali and supplemental debt.

So thats a new function.

Davidson.

Hi, gentlemen, thank you for you.

Thanks, Dan.

<unk>.

I guess I, noting EG forgot Medina, Belgium.

<unk>.

Tim Barber Assembly.

So uhm.

Yes.

Changing so you had all hybrid Telangana, John ph intercity mix being that <unk> tomo eurozone cultural autonomy.

Shanghai Sibolga Julien this is Jeff <unk>, Jean Hu <unk>.

Torture, so Jeff on me.

And also you also downtown.

Yes.

Thanks, Tony.

I think this is.

Commentaries wholeheartedly funding environment, Genco Fu Sheng Zhong Sheng.

Well I mean, yes, engineered earning that all up I can see.

Moments in time.

Switching to Jean Luc <unk> Bad news.

It was is that.

Jean Georges who can have Amit.

Switching between <unk> looking I'd say it yesterday.

Okay.

Thank you <unk>.

Mentioned earlier 2021 was again a challenging year. However, we continuously insist on implementing our strategies and achieved several great achievements for the year. Please turn to slide four.

Although the quality hotel cash upfront, we define again, our spend art of Cop 360 program and the quality hotel.

We achieved 7830 hotels in operation by the end of this year with net openings of 1041 hotels.

We further penetrated into lower tier cities with roughly $2 200, new Cds of coverage added during the year.

Also we successfully introduced the Indo CD at a Max Brad to tie in the market.

Moreover, through the joint venture with <unk>.

We had opened 14 stagnant Burger brand hotels in China in 2021.

Lastly, low townhouse to further tap into the booming domestic leisure travel into the market.

In regards to our multi Todd mentioned the direct sales we had achieved another year of solid member growth of 14% to total 193 million members by the end of 2021.

We also officially launched our ex what apps 3.0 version two anti great customer service it from online to offline.

Also our room nights contributed from corporate customers further improved to 11% in the fourth quarter of 2021, and Crs contribution further improved to 63% in the same quarter.

Lastly in terms of.

Our global Technology platform, we had started gradually roll out of our one digital one global digital platform, but yes, just hotels.

Yes.

For <unk>.

<unk> had a beautiful.

So in our view yet.

It's all awards Bonington this system.

So it doesn't mean that sensor.

<unk> talked with them apart.

Switching to the charge offs.

Good morning.

Jean <unk>.

One year ago Goldman question, another way of adequate who sit hosted Johan <unk> Thompson.

The Army Corona thing you can do the tremble also pointless just hoping other sandwiches I'm sorry, Ralph we already equal you end up having to do so.

Thanks, Luke research as a covered consistently effect that our revpar recovery, Please turn to slide five.

Since China Ramirez implemented zero carbon policy everywhere.

Such as off covered in a relative large scale with the result.

Stricter traveling restructure.

<unk> significantly affected our revpar recovery in February post the Chinese new year, we saw our revpar recovered steadily on a week over week basis.

Ever since March the highly infact shows on the coronavirus has been spreading rapidly into China, which interrupted our revpar recovery trend as of March 22nd our month to date Revpar recover to only 64% of the center. It after 2019.

Dr. Jeff <unk>.

Yo Yo towards that Zohydro with John's ending tens of genes and thoughts on your portfolio.

Yes.

We are changing things are humming.

<unk> San.

Sandy.

Sundar.

Andrew you want to lose any sort.

Heart failure, Xiaomi and Huawei <unk>.

It won't be in the Chelsea neighborhood.

Please turn to slide six although we are facing many difficulties and the challenges well and swiftly implement our sustainable quality growth strategy. We have formulated for strategy <unk> forecast is for 2022, which includes growth strategy right strategy.

Membership strategy and digitalization strategy I will discuss details on each of the strategy in the following slides.

Jean <unk> this year.

Since that time is valuable Santa Pamina needle.

So in total ankle shorten census, yes.

There are two for any of the <unk> Honda <unk>.

Does that.

G code.

<unk> provides.

Please turn to slide seven.

<unk> growth strategy, mainly includes three areas firstly, the China forecast to penetrate into lower tier cities secondly, breakthrough into two it's less penetrated market certainly further developing our permit in upscale hotel segment.

So gentlemen, John Sushi central efficiency since <unk> by J D.

While many of filings.

And Jordan, Egypt, so Sheila quite efficient.

Our EMEA and Canada down Jim Barber as Sergio virtual with Angel.

This is a timekeeper window, so alright women since a few guys soon outweigh each evening news article.

Belgium, the sensitive way down Qingdao.

Schindel comeback.

<unk> okay.

Firstly, we will continuously penetrating into the lower tier cities. Please turn to slide eight.

As of 2021, there are 40% and 57% hotels contributed from lower tier cities for hotel operations and pipeline respectively.

We totally signed up to 1849, new hotels during 2021 with 50% 55% of them came from lower tier cities at.

At the end of 2021, we had covered 1062 cities in total our future talking ideas to cover 2200, <unk>, which means we still have around over 1000 empty market to be penetrated.

Yes.

Yes.

July quasi finances, our chancel enrollments on the interest <unk> Tupac country. It's all without undue this dingy pathogen moment, Julien <unk>, Hello, Daniela tissue that forgot it challenges.

Alright.

Yes.

<unk> shandy.

74, <unk> Chengdu <unk> financial market.

John I'll, let you reaching into new high impact towards an omni channel is a syndrome. So.

So as you and Jim will go through the three Nevada.

Please turn to slide nine our lacks the key ratios keep all Costa Rica is to penetrate our solid in southern and western parts of Tyler.

National strategy includes four economic development loans as shown on the slide we have good penetration in <unk>.

<unk> and touch on the outer area, However, <unk> economic circle, and Guangdong, Hong Kong, Macau Greater Bay area Osteo very much less penetrated for US last year, we had established the our regional headquarters in Shenzhen and <unk> to develop these two areas.

Attract local attract local franchisees and to penetrate the local markets are doing so we can achieve a more balanced development across our regions in China.

Oh, yes.

<unk> this year, John why don't you again <unk>.

Magic interval.

Hasan <unk> with incremental somewhat pulpwood Jesus reaching synergy.

One major clinical data.

Angela.

<unk> this is Jeff.

And also they are now, but I just would suggest.

Alright, Danielle <unk> chocolate in India.

Yes.

Lastly, I would like to discuss our upper mid and upscale hotel segment. Please turn to slide 10.

In the upper mid segment, we are we inked it only using multi brand strategy to develop the market our brands include <unk>.

Crystal Orange Intercity Madison Miocene mature at Novatel as of 2021, we have 454 upper middle hotels in operation and a $260 more in pipeline, we are targeting to achieve over 1000 hotels in operations and the pipeline by the end of <unk>.

On the 20th century.

<unk>.

<unk> seen this year.

Carlos is helman <unk>.

So Jan one the total euro so neither hoods.

Towards oncology Sulya Hello, Jim.

We will maintain quite indulge me again, you didn't talk about ebay Jack cheeses.

The momentum of audience.

Total <unk> and choosing to use it.

Our EMEA <unk> changing.

Thanks, Jeff.

Okay.

In terms of a tool called audio audience analysis on the sunlight.

Alright.

Hi.

1000 <unk>.

Jean to wait and see.

Closing the CBD.

Our upscale hotel is also progressing steadily please turn to slide 11, we divided our upscale hotels into three parts. Firstly, we are expanding the number of upscale hotels through the joint venture with <unk> as.

As of 2021, we achieved our first milestone of total 100 apps, Google hotels in operation within the pipeline.

We use our blues on house brands to further tapping into the blooming domestic leisure travel market.

During 2021 way sign up totaled 35 hotels of somehow spread.

Lastly, we are using Macs brands, we seek for the conversion opportunities in China, focusing on China's existing market of independent upscale hotels.

The example is we had cooperated with Shanghai less sweet Orient hotels by using Max brand to enter the CBD area at the bone in Shanghai.

For me, it's always in the new setup a.

<unk> site.

Timing of synergy.

So as you Johan because of being either timing Jason.

<unk>.

The router is are the changes in <unk> for many years.

Changing chairman since you find that quite of optimizing the Holly.

Yes.

And Thats, all well Magellan, including Simcity, <unk> Cushing Woods, Keisling G&A slowly Sudan.

<unk> John .

Yes, hi, Tom ammonia or <unk> that are changing that Jesus aging ardine chimbonda quarter or $2 <unk>.

So you all know well.

Sure.

Tomas was up with hoping that Doyle.

Yes, Taiwan Hong Kong.

Timing will need to move to the.

Bureau.

So this is equal I mean, the accordion, Jackie the soldier visual yet Jim half already on what the PMI to.

Two more things Union associates.

In terms of our brand strategy. We also divided into three parts. Please turn to slide itself.

First one is the product upgrade we constantly upgrade our products for different brands to enhance the brand recognition is done the product quality for example, our flagship economic Brian hunting, we continuously upgrade the product and introduce new versions to the market.

Second one is on the flagship hotels.

We selectively invest and opened our flagship hotels in the core cities at core locations to improve our brand awareness. For example, we opened our new version of Crystal Orange 2.0 flagship hotels in Shanghai last year.

Lastly, we've sharpened our brand positioning.

Each of our tools brands that has.

Its unique positioning to provide the differentiated products and services to its only talking to customers.

<unk> gradually transit from products and function, beating in the past to branded leading in the future.

For example, hunting is targeting the mass market and the customers who are seeking support the highest value for money.

Orange brand represents healthy energetic and SME niihau brands that have become China, new youngsters from first choice when they choose the hotel.

Hello.

Yahoo.

<unk>.

Sure So <unk> <unk>.

Then so this yard.

It won't be changing towards that.

<unk>.

Being here module, we are pushing <unk> syndrome.

Now, let's look to the membership strategy. Please turn to slide 13, we remain focusing all of our direct sales channels, which mainly through our in house sales corporate customers and across the industrial and life.

To attract new customers and expanding our membership basis, our at what is the critical.

Critical core platform on Qatar conducting a deep customers operations.

Hi, Jeff and Peter for you.

Of course it is.

Possibly.

<unk>.

Earnings year on year.

We're almost through.

<unk> diamonds.

Cliff could page 14 over the last few years, our membership continues to grow steadily.

That shape the acre of 26% growth from the year of 2015, two year of 2021.

So we are eating genzyme.

Thank you Sir.

<unk>.

And so when you're already in terms of the way I wonder with spar Shanghai, earning standby.

<unk>, India Thomasville woman shot this is all important.

Tony.

Thanks.

Oh sure.

Yes.

Sure.

Our Crs contribution also continuously improved please turn to slide 15 for the full year of 2021, the Crs contribution improved by three percentage points year over year to 58%.

More importantly, our Crs contributions in lower tier cities are only slightly lower than the tier one to tier two cities.

Okay.

<unk>.

<unk> year ago comps.

So she is India.

<unk> vehicles.

Wade <unk> shown Joe Harley and T cell <unk>.

70 <unk>.

So you called out with Angel Chicago, Jamie This is Ed.

That piece of it.

Please turn to slide 16.

Contributions from the corporate customers also further improved for the.

Full year of 2021 room nights come to view to it from the corporate customers accounted for roughly 11, 9%.

Two five percentage points improved from 2020.

Specifically Ah cooperates customers' contribution also gradually improve the in the upper mid and upscale segment.

James.

The suite of heart failure.

Fortunately the financial easing, so Sheila you'll share points within the Super Hot Challenge you again.

<unk> hardware.

Sorry, Jean <unk> will tell you.

Budget on the project.

I, often do Danilov <unk> border James Hardie.

While many are Susan.

Dr. Joseph <unk>, Fuzhou with him and Indians Amanda <unk>.

Let's now move to the digitalization strategy, Please turn to slide 17.

Over the past several years of development <unk> had already achieved several digitalization processes for its limited service hotels at the hotel level.

Transform transforming many offline functions to online created that churn management Hotel model time management model today.

Today, while we're deeply reviews, our previously blocked months process, we find out that there are still many contracts of the functions that hotel level and it can't be further operated in and manage that digitally.

Therefore, the first a part of our digitalization strategy is to achieve a comprehensive potential utilization of our limited service hotels at the offline hotel level.

<unk>.

Super clear.

<unk>, yes, so we do have one geography, one jamba was almost it means one sorry I need it then.

Total language English version three minutes was as well.

Quality showed you caught up quite a bit.

Let me.

Please turn to slide 18.

In the future we think of the comprehensive digitalization can include.

The physical sales unlike gas, thanks, Trs quality management, GOP management lifetime franchisees services and extra more digitalization can further improve our management efficiency and the capabilities.

This is Julia.

Sure Joe.

Yes. She is most of that we're seeing for putting charter through your collateralized, what you're sort of changing that.

While most of the water.

God bless.

Sure Joe agenda spending one.

Oh, you're England.

Almost all of them are attaching a suite of other entitled the courtyard.

So again that can be helpful.

Yeah.

Let's turn to slide 19.

Terms of the foodservice the hotel.

This model is different two limited service hotels.

That is also a very new area for partners to experiment.

Therefore, the second part of our desktop monetization strategy is to transform the foodservice hotels from single Hotel management to cloud based digital churn Hotel management model we.

We are experimenting to buildup, but digital shared platform to move offline functions at hotel level, such as human resources, accounting and finance and supply chain management to online in order to achieve an online shared service platform.

Many full service hotel upscale hotels.

Okay.

Just what do you mean by Enbridge had three hotels.

Yes, yes, yes to your partner <unk>.

<unk>.

So it was around 40 to contour is the change of the curve.

Deposit, especially ones with Abbvie and Jeff Johnson.

Johnson with module tolling and find new brewhouse I think Linda.

Yes, Paul.

So Jonathan Pritchard, yes, several of our new Tulsa.

Also there to implement.

Yes.

Sure.

Correct.

The patent.

Before I finish my prepared remarks, I would like to emphasize again on the importance of ESG for part two.

Please turn to slide 'twenty.

I know the backgrounds of China's carbon utilization target as well as increasing concern on sustainable growth globally.

Thats already incorporate ESG into our long term strategic planning.

Last year, we released our first ever Es reports since listing.

And the radius will continue in the future.

At the same times <unk> has also started a very comprehensive internal assessment among each business divisions to seek the potential of improvements.

ESG related matters.

Sure.

We direct you.

It is changing to the table with us unless.

Great.

Thank you gene.

Good morning.

Yes.

With that I worked in the call to <unk> to discuss our fourth quarter and full year of Tucson, The 'twenty, one operational and financial performance. This year. Please.

Thank you jumped the gun a little bit.

Good morning, good evening to everyone.

Let's move on to our operational and financial review for the fourth quarter and full year of 2021.

As shown on slide 22 slide 20.

Finally to our combined hotel networks expanded by 15% in 2021 to 753 Cajuns of 7830 hotels compared with 650 to catering.

6708, 89 hotels in 2020.

Excluding DH legacy <unk> Hotel network expanded by 16% year over year.

Two roughly 720 8-K rooms of 7700 <unk> six hotels in 2021.

For our hotel turnover in 2021, our total hotel turnover grew at 36% year on year to RMB 45.

In 2021. This was mainly due to our continued network expansion in China and low base of 2020.

Excluding DH Lexi Hua Zhu with hotel turnover grew 38% year on year to RMB $42 7 billion in 2021.

Turning to page 23 legacy <unk> blended Revpar for Q4, 'twenty, one was RMB 163, 14% lower than 2019 level.

The ADR in Q4 was up five 3% compared to 2019 level at RMB 239, while the occupancy in Q4 is 14 percentage points lower compared to 2019.

This was mainly due to COVID-19 resurgence in November .

For the full year 2021 legacy Quad two blended Revpar was RMB 172.

Declined by 13% from 2019, but an increase of one 6% from 2021.

The ADR was RMB 239 up by 2% compared to 202019, while occupancy is 12 percentage point lower compared to 2019.

It was mainly due to the several outbreaks of COVID-19 through the years of 2021, especially in the later half.

Turning to page 24.

Despite the recovery in the fourth quarter was interrupted by amnio.

Omicron violent since November .

Our legacy DH business saw strong recovery in Q4 2021 on a yearly basis.

As planned the Revpar for Q4, 'twenty, one rebounded by 153% to <unk> 43, compared with Q4 2020.

Occupancy improved by 24 percentage points compared with Q4, 2020, and the ADR improved by 24% to 94 euro only 3% lower than 2019 level.

For the full year DH blended revpar slightly increased by 4% to 32 euro compared to 2020, mainly driven by 3% increase the ADR occupancy.

Occupancy rate was roughly flattish at 35% between 2020 and 2021 as the first quarter of 2020 was pre COVID-19 in Europe .

Please see our financial results on slide 25.

Total net revenue grew by 9% full year to RMB, three 4 billion in the fourth quarter 'twenty, one mainly driven by 130% increase of DHS revenue.

'twenty one.

However, legacy <unk> recorded a 2% year on year revenue decline to RMB, two 8 billion in line with our previous guidance.

Due to COVID-19 resurgence in over 20 provinces since November China's leased and owned hotels saw a 13% year over year decline in revenue offset partially by an 8% year over year growth of <unk> and the franchise revenue.

For the full year of 2021 total net revenue grew by 25 year on year to RMB.

$12 8 billion.

Excluding DH legacy Quadro recorded at 30% year on year revenue growth to RMB 11, 2 billion in line with our previous guidance.

Breaking down the full year revenue revenue from leased and owned hotels increased by 17% year on year to RMB eight 1 billion in revenue from managed and franchised hotels grew by 40% to RMB four 4 billion.

The asset light <unk> and franchised business contributed 34% of total revenue in 2021 compared to 31% in 2020 at group level.

For the moment. This is mainly driven by the legacy <unk> managed and franchised business, whose portion also increased from 36% to 39% in 2021.

Now, let's move to the cost and profitability session on slide 26.

In Q4 'twenty one the reported operating income was RMB 39 million.

<unk> to a loss of 134 million RMB last year and positive $72 million a quarter before.

The year on year improvement was mainly driven by the DH business recovery.

That 60 million Euro government subsidy received in Q4.

But offset by the weaker China business performance.

Excluding DH lexicon to operating income in Q4 was RMB $16 million compared to 301.

5 million RMB last year, and 239 million RMB a quarter ago.

On a full year basis, the reported operating income turned positive to RMB $164 million from a loss of RMB, one 7 billion last year.

Slide several resurgence of Covid during 2021 negative quarter recorded an operating income of RMB $891 million compared to a loss of RMB 100 million last year.

<unk> narrowed its loss significantly from RMB, one 6 billion in 2020 to RMB $727 million in 2021.

Thanks to the government subsidy totally.

Europe European dollar $100 1 million received in the second and fourth quarter.

The total hotel operating.

For fourth quarter 2021 was RMB, three 2 billion increased by 16% year on year.

The increase in <unk>.

<unk>, a noncash impairment loss of RMB $257 million, which was mainly related to the th.

For <unk>, it's a recorded RMB, two 3 billion, our hotel operating cost, indicating a 13% year on year growth the.

The increase was mainly attributable to higher rental cost of a new upscale and upper mid hotels.

Higher personnel costs as we expanding our hotel network rapidly and higher DNA costs, which were related to the upscale and upper mid hotels open knee and also upgrading of existing hotels.

As well as the consolidation impact of it.

Recent physical acquisition.

So, let's see GH it recorded RMB 866 million hotel operating cost, indicating a 28% year on year growth.

The increase was mainly due to variable costs increased along with business recovery as well as noncash impairment loss of 257 million RMB mentioned above.

On a full year basis total hotel operating costs grew 16% year on year to RMB 11, 3 billion, mainly driven by 20% year on year growth of Lexi Quadro.

Similar reasons mentioned above.

As we mentioned in previous quarters.

Future expansion of upscale hotel will mainly used sli's model. Therefore, our pre opening cost declined by 19% to only RMB 13 million in Q4.

Opening costs significantly by declined by 72% of year over year to only RMB $81 million for the full year of 2021.

Our SG&A in Q4 increased by 21% year on year to RMB 600.

$24 million driven by the increase in both legs required to and the legacy D edge is.

Excluding GH SG&A for legacy Quad, two increased by 8% year on year to RMB 437 million.

The increase was mainly attributable to the increase of head count.

Our sales team ITT BD team and last but not least the upscale business unit, which are the areas we strategically invest in.

As you can see from the chart. The increase of SG&A is mainly driven by legacy module, while decided recorded 2% savings from 2020, which also have part of the reclassification impact from the BH side.

Turning to page 27.

Our.

Adjusted EBITDA income was RMB $278 million in Q4, compared to RMB $375 million a year ago.

If we exclude a noncash impact loss of 257 million, which was mainly.

Related to D. H E. Adjusted EBITDA would have been RMB $535 million, representing a 43% year on year growth.

Is EBITDA positive in Q4, 'twenty one to RMB.

$69 million compared to a loss of RMB 389 million last year, thanks to the business recovery and governments.

But offset by the noncash impairment loss.

Excluding BH Lexi Quadro recorded a net adjusted EBITDA income of RMB 209 million declined by 73% in Q4 2020.

Due to the impact of COVID-19 resurgence in the fourth quarter.

Full year adjusted EBITDA turned positive.

The $1 $6 billion from a loss of RMB $244 million in 2020.

This was mainly driven by the 81% of growth reflects the project adjusted EBITDA of $2 billion as well as a narrowed adjusted EBITDA loss.

Th.

RMB 461.

In Q4 2021, we recorded an adjusted net loss of RMB $227 million in large from a loss of RMB 8 million in Q4 2020.

Excluding ph Leslie actual recorded an adjusted loss of RMB $187 million compared to a net income of RMB $300 million in Q4 2012.

<unk>.

Adjusted net loss for the full year narrowed from RMB, one 8 billion in 2020 to RMB $260 million in 2021.

Lastly required to turn positive profit of RMB $358 million compared to a loss of RMB 459 million a year ago.

Coming to the cash position.

Our net debt remains healthy at RMB four $7 billion by the end of Q4 and there is no risk of breaching the financial covenants of the remaining amount of Europe .

Dollar $303 $38 million syndication loan.

Our cash balance was RMB, five 1 billion and the Unutilized bank facilities or RMB, three 3 billion.

Given the Covid impact remains uncertain in the foreseeable future, we will keep cautious on capital spending and discretional spending to preserve cash.

A few more words on D. H since November last year <unk> recovery trend was again interrupted by omicron vibrant.

Occupancy rate dropped by three percentage points to 46% compared to a quarter ago.

Ever as German government unfolded, the initial opening our plans since the mid <unk> fab.

And later slide two logic.

March 4th.

This should help to Reaccelerate our revpar.

Recovery in the future.

However, we will remain cautious and are still implement the mitigation measures of further emphasis on efficiency improvements negotiation of these flavor personnel cost optimization deferral of major capex.

Additionally, the short time worker compensation, what continue to be valid until June 32022.

Turn to page 31 on guidance.

As you May know since March 22, the highly infectious omicron filings has been spreading rapidly in China, which seriously affected our business performance and China's zero corporate policy also add great uncertainty to the business recovery.

Moreover, the war between recurring and Russia may negatively impact our European business.

Therefore, the guidance.

Of short term view and only reflect our current understanding of the situation.

In terms of our hotel opening climbed 2022 after reviewing our existing pipeline hotels under construction, we now expect to open around 1500 hotels and it cost around 500 to 550 hotels for the year. This is built on the presumption that COVID-19 .

Brett will be contained in a reasonable timeframe in China.

In terms of revenue guidance for the first quarter of 2022, we expect revenue growth to be in the range of 11% to 15% compared to the first quarter of 2021 or to the range of 1% to 5% excluding GH.

For the full year of 2022, we expect the revenue growth to range from 15% to 20% compared to the full year of 2021 or to the range from 4% to 9% excluding GH.

Again.

Our guidance only reflects our current view, which is subject to change.

Last but not least considering current condition, we may from time to time make repurchase our securities including American Depositary.

<unk> shares and convertible notes in open market transactions privately negotiated transactions or otherwise subject to market conditions and other factors.

With that let's open for the Q&A.

Thank you.

Ladies and gentlemen, if you have a question you will need to press star one on your telephone.

If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.

Once again to ask a question press star one.

Our first question comes from the line of Billy <unk> with Bank of America.

Good morning.

Yeah sure Jason.

Well go on T D.

So Joseph Vijay <unk> paid out now listen to the <unk>.

The churn come to woman Tricia <unk>.

Product operations.

Ralph provocation.

Coaches Eli shortly.

Okay.

And those things as juices.

<unk> balance sheet.

Come on kind of lifestyle.

Hi.

Neil.

You tend to see Hey, there's a lot more.

No.

Okay.

Since it is <unk>.

The inventory so high.

We've seen.

<unk> seen the product.

Yes.

<unk> now or does it yet.

When does that.

Just wonder like that in terms of the product upgrades.

I think in the PBT.

You guys mentioned that as one of the growth driver.

We understand that in the past like product.

Actually you can significantly enhance rockstar.

Is that still the case going forward and.

That's the case and also in terms of the plan, but linked product upgrades.

<unk>, helping.

Existing.

Our franchisees to do a large scale.

Okay.

We'll share with our deal with your hallmark.

Quite a few pieces and GT contour juices.

<unk> got some good Shelby to showcase this recently that you've gone.

<unk> <unk> Hudson.

Angie bulk or high yield.

Sure.

Inventory.

Solar tagging the sushi, the gaijin introduced away looking harder teaching Shelby.

Given the deep into the Shelby the synergies, which you see.

Singapore.

Sure.

Bruce.

<unk>.

Generally the timing do you see any.

No legitimate reason, we're challenging the Chisholm III drilled other sure Jonathan.

And how the title we bought.

Hey, Bob.

Apologies.

She told us.

So the process upgrading is our key strategy to cater into the consumption upgrade trend in China is happening not only to high teen <unk> hotel, but are also like Orange and Hi E.

I think the Revpar improvement of hunting existing hotels upgrade has been.

Brian has brought.

Very good return to the franchisees at least comparable level as the new hotels to the franchisees.

We haven't gotten kind of hunting.

<unk> <unk>.

<unk> <unk> using <unk>.

Curtains Alitalia.

We're starting from today on the timing of season, two dollar tree that the system will combing the shack.

Arguably.

<unk> is the only one pushing the economy product upgrade in China, which is also well received by the customers of us.

On the chart you can change the other way.

The other one.

Yes.

That's also a woman can handle that somebody's home.

Sounds good I suppose.

All right that's it thank you.

Yes.

Well Neal consult <unk> tomo.

Sounds good.

Tom and kite and approval for you also.

Was April the harmful.

Hi, guys.

Thailand.

Neil Thomas Chung.

Some of them.

Yes.

So I think my second question is like that basically.

We noticed right now on the call.

Right.

In China, So I, just wonder whether thats okay. Okay.

Impact.

The incentive.

Franchisees and their whether they decide to open.

But this year that's changed.

Yes.

Sure.

E Chin Tung oil.

Input tissue.

We do.

<unk> had some good Jean her job.

One was on the total U S housing in Asia.

Sales in Canada, I mean, it's helpful as always.

Tony.

For me it Dina <unk> or do you fit on quota.

G Suite day margin that you can launch out because of things such as how you bid on them.

We saw some shift Bouchard <unk> <unk> hydro portfolio.

Good job.

So should the teaching moment charters just honestly, the fact that salary Thompson Jpmorgan omni channel reach and El Nino talk or Bob I assume again thinking thats on that number.

Shape.

So for far east.

Was there any premium tortilla issue literally 10 years.

<unk> was down two quarters.

So the launching <unk>.

Bob.

So we think it will toggle element to the government in the balances.

The <unk> <unk> pumps.

Okay.

Certainly you are right. The current Covid situation and also the China Zero Covid policy has the negative impact of our performance and also the franchisees.

The inkjet, especially reflected in the March number, but having said that I would also mention two factors as a mitigation first of all China is very big and large market actually our hotels in the lower tier city has been running good and this further stimulus.

Eddie.

Signing of the new hotels in those markets. That's number one two is the further requisition of.

Our hotels by the current government.

Currently more than 850 hotels that Andre recreation, it's roughly 12% of our hotel portfolio. This is very important to help our franchisees to go through current tough time, especially for the franchisees in the tier one or tier two city.

Yes.

Yes.

Akshay.

Thank you.

And our next question comes from the line of CG Lane with TICC.

Thanks, everybody.

Glenn Deegan Azure sure that launches are an inch vignette does your guidance stay home.

I'll wrap up with Photoshop.

I don't know what the Arizona, Joe Shea.

Yeah sure ADR the OTC sales.

That will mean that then with kind of where that is utilization holding ADR the future.

Excuse me you can kind of as usual ADR, how would you say that you shouldn't uhm somehow Hopkins Johan Sverdrup will come either nationally or somehow.

I'm not sure what you can tell is relatively open towards you guys handle them you've got at Cushing I tend to think that you shouldn't use yourselves funding <unk> take us outside of the Yodlee as it sounds you guys have done in the past that.

So my first question is that for the full year revenue guidance, what the employee revpar recovery rates.

And my second question is that we know that a.

Adi recover faster that would take the 891 whats the trend of ADR in the future when we are at.

Color from COVID-19.

Some people say ADR may continue to increase because people perceive for better quality and strong brands like I mean, I think so considering the soft consumption environment.

Two questions. Thank you.

Paul.

Well share with our dealers.

And Thats.

Well Linda.

The Rd, Julien tablet type items are past us.

<unk>.

A woman Cardella junior to the <unk> <unk> to <unk>. This.

This year switching to the Shanxi friendship with Naples.

Sure.

Those will stay on as a team.

There is some good each incurred some good changes things.

It's a good change.

Sure places on the KBS.

So the way this year.

Switching the league.

Charterer due for the assistant and good service on the <unk>.

Mohan.

<unk> been good XI system or <unk>.

The tumor.

As protocol womens.

Good day agenda.

To choose a preferred shares or the switching.

Switching.

These are solid as future IPL toilet Bowl Cushing.

Sure.

No.

Duration in Massachusetts.

Which year to charter.

Systems to the module that's a good thing.

So the uses with that part of the <unk>.

<unk> and Chris showed you the same NIMBY.

Namely our civilization in denim.

We can do the <unk>.

Gotcha.

I mean, there is a little more.

Industrial partners.

This is <unk>.

As always.

Causing abbvie detailing the timing, especially the timing of your assortment regionally.

<unk> children in Lima.

Okay.

So to answer your question.

Terms of revenue guidance for the legacy China site.

But we budget at the 81% to 84% of our Revpar a recovery compared to 2019 level. It is based on our internal assessment and also the evaluation of the impact of <unk>.

Colgate.

Regarding to your second question.

Consumer markets and also the corporate markets reaction, yes, we admit that there is a challenge.

Further sensitivity of the customer's price sensitivity, especially regarding the corporate customers.

From our latest number, especially in January and February Chinese Festival actually.

Recoveries pretty decent.

Both both for the leisure travel and also business travel I would say from <unk> group, we have full spectrum of our product.

This creates a very good opportunity for us to capture all kinds of customers, especially those who will become more price sensitive because we are we have our own competitive edge in terms.

Efficient and low cost business model, creating both value for our franchisees and also.

Customers.

Thank you for the next question.

And our next question comes from the line of Lee <unk> with Goldman Sachs.

We can talk about <unk>.

With you.

Yes, Simon duty.

Noma.

Seven.

With you.

<unk> kind of all comes out you can go on the.

Gentlemen, I was hoping you didn't you Ali.

We come out stronger on the EBITDA margin I was hoping that you did.

Talk to you the Columbia sideline not challenging Joni Kahn.

And Andrew on the scene.

<unk> and gentlemen.

EBITDA the cheeses.

Hi.

So if I may on the <unk>.

<unk> TV contract out.

The Tianjin Gwen TJ you tend to tense.

Yes.

<unk> seen that choose you can then one on <unk> beyond Shlomo now it sounds like you sound like Youre mill so.

Jones.

<unk> San Jose Sanchez.

The concentrations.

So Judy how neiman the hope is yes.

Meanwhile, E channel.

Top often die suddenly yeung listened.

The man.

What do you need to you Bob.

So the question was related to your cost and also the margin, perhaps because we saw a bit of a margin dilutions.

<unk>.

For the China operations wondering whether you would have any guidance on the cost as long as the margins and secondly.

In relation to your 7000 hotels in 1000 Cds and expanding into another 1000 cities.

Geographically, we know that you have huge exposure in northern and eastern part of China, I'm wondering whether you have any concentrations guidance or expectation in the first second and even third tier cities. Thank you.

Future of women.

Jim.

Part of that so it wasn't going to welcome Kate Alejandro.

The diluted in the pool of potential of <unk>.

Number one is to kind of level ones with our SG&A bulk ratio timber youll find that well.

She said once a junior piece all of genes in the sandwiches.

<unk>.

T gel pushing you.

And do the fusion that Cvs for timber.

Jonathan.

Your chances of tenancy, that's adding some let's say condo quality.

We're starting with win ratios with Julian <unk> Daiwa. Please.

<unk> charters.

It's more than try and this was the last one is harder to define what your job versus yield on commercial leader to the Taiwan Chevron.

And she that needle.

So finance will then choose to Hershey.

Analysis of the quarter.

Hard to quantify but quantico.

So all in Seattle.

<unk> <unk>.

<unk>.

All of them cope with the census, without Qingdao vehicle.

Just a couple of issues, which are most enrollments over in China.

EMEA portfolio.

Sure so the <unk> search in contango.

So willa <unk>.

<unk> <unk> summit.

<unk> been a holdup.

Yes.

Yes.

<unk> simplified the Tupac Oklahoma spoke.

<unk> 20.

<unk> issued a central element.

Yes, yes.

Okay.

Switching the Revpar that's embedded.

Those would be helpful.

In.

<unk> seen good treatment centers.

Once that changing with the sensor chickens, the Tupac hydro.

Yes, Jason this is the swisher either talking about Nielsen.

Hi, Joe.

Some awards in the meanings of trim at Central <unk>.

Part of it.

<unk>.

Talking about trimming back <unk> modified agenda our tissue.

Okay.

Firstly to the second question first.

So first of all for certainly the lower tier city is much less penetrated compared to the up tier cities.

The 1000 incremental cities will mainly coming from third tier city fourth and fifth even like counting.

And secondly, we are relatively we have lower market share in southern China and Western China. So there is a lot of further growth area for <unk> as well so two summary.

In our.

Further.

Our portfolio it will be 55% coming from lower tier cities and below and 45% it will coming from tier one tier two cities and our strategy is.

<unk> penetration in through all tier of cities in China through a full spectrum of brands for example, we're going to enhance our.

Yes.

Penetration in tier one tier five more upscale and mid upscale product lifecycle Burger plus some house and et cetera, and and same time, we will increase our market share by economy, and Midscale brands in lower tier city.

For example, <unk> hotel that's the question the answer to the second question for the first question certainly we admit there is.

Mounting pressure in terms of our EBITDA because the revenue is under pressure.

For this.

That doesn't change.

Coffee is a situation that's number one too also we internally we have analyzed.

There is a further improvement areas of cost management, even allow our key strategy further penetration upscale and upper mid scale and also digitalization.

Under the sustainable and quality growth overarching strategy, we will focus on the key areas and further improvement improved cost efficiency.

We're going to give us more detailed measures in the next.

The next period of time.

I appreciate it.

Sure.

Okay.

Thank you Simon.

Thank you and our next question comes from the line of Lina Yan with HSBC.

Okay.

Hello.

Okay.

Ginger.

Okay. I just have one question do you have an estimate for the.

Revenue.

The memo breakeven revenue for logical and legacy and D. H and also do you have like a breakeven revpar level for that.

Sorry, you're asking a breakeven revpar for module and.

D H separately.

Yes, yes, yes.

Yes.

On.

Historically, we have a ballpark estimate for China's that is around 130, RMB and for the for.

For the DH side is roughly around like a.

60, and $2 65 euro.

Yes.

Okay.

Breakeven.

Revenue.

For the team.

No I'm talking about is relatively is about you know the EBITDA breakeven level as we gave to the market before.

Certainly it will be subject to the Covid recovery.

It's going to be moving very quickly I think.

Okay. Okay. Thank you very much.

Thank you maybe internet.

Okay.

Yeah.

Our next question comes from the line of Bruce <unk> with UBS.

Thanks Ali.

<unk> do you go and do some planning its Amit.

<unk> I'm sorry.

Yes.

So first without <unk> Johnson, Pacifico Hoefle shutdowns correlate.

UAE Mayo electrical chip question, Joe <expletive> when you entered such as Chicago pathway for high quality destinations from Asia.

<unk> is a machine that will go there you go.

Talk about the food or you guys, saying that you got.

For the two markets.

Sure <unk>.

No <unk> for Asia.

Hi management My first two questions and the first question is on the revenue performance.

First two months.

In Q1 this year, despite the COVID-19 with citizens.

Disruption in March we saw that in Revpar recovery in January and February is relatively better. So can I ask about the revenue performance in January and February this year.

Okay.

So John T line Shawn just.

Yes, just the woman that guy so without doing the Duguay Tau gene Dana Johnson with that that would be <unk> obviously.

Youll get messages Ashwin Jonathan Jamba.

Hello.

<unk>.

Yeah.

That doesn't mean that you can call our.

You know on local industrial Joe as you can see that.

Yes.

Yes.

Okay.

No.

Thanks, guys.

Thank you Sheila.

Sure.

Yes.

Yes, Ben Toby already Julien.

Yes.

Got it.

Okay.

Sure.

<unk>.

<unk> side of the portfolio.

Shannon Omicron leaching, so thats good.

Trimble that refer to Shanghai.

<unk> doses.

That's helpful.

So the CCF.

No.

With you frequently claims have been done the tissue.

Thomas Citi two that you should take it to grow money that comes from Vicente <unk>, Dana Chantelle Ho Chi Chow Michelle.

Switching highly charged with chemo.

Michelle Wilson, Shanghai Jewel here.

So im.

Switching the 10 freeway some gene, yes, sure Jonathan Jamba with Sweet answer that Joe is I.

You mentioned with <unk> touch on June the <unk>.

Awesome.

Highly tissue.

City, Portugal, Pingo, <unk> gentlemen, Joe <unk> departure.

No you're fine.

Yes.

And my second question is on the cost of fronts. So I saw that the gross margin in Q4 declined compared with the previous quarters, So that Mitch and I saw that the main reasons due to the increase in rental personnel and other costs. So Matt double check that is the increase.

Rental and personnel cost is mainly due to the increased number of lease and owned hotels and also the main contributor in the other cost and how much is the impact on the cost increase from the acquisition of Citigroup. Thank you.

Actually yes.

You are right the impact of the <unk>.

The cost increase mainly come from the.

Scale and upper mid Hook hotel hotels in the lease fleet.

Hotels and.

Certainly as we mentioned later.

The continued growth model will be asset light, so we're going to.

Control the further investment in this area.

<unk> has a very relatively the acquisition size is small so the contribution to the cost side is relatively limited it's just.

One in like $10 million.

RMB level, it's a limited contribution.

It was helpful. Tony.

Anytime.

Hello.

Hi, Jonathan that's really share claims was essentially hooks ranch in the pulpwood.

<unk> March you find out what you mean with GSO and <unk> seen the change in the answer.

Okay Sean.

Thrombosis I'll, let Jim Wilson.

<unk>.

Sure.

Yes.

Crinone later this year.

Mineralogy.

King.

<unk> considered.

Well take.

<unk> controls.

Three we can handle.

Goldman Digenea, joining Glen I don't know if there are any amendments to the fintech.

With that I'll take questions you can digest, Georgia.

And to go module.

Your example.

The chiefs and as Rajeev said.

<unk> was <unk>.

Sure.

How are you.

Thank you I'll now turn the call back over to IR director, Jason Chen for any closing remarks.

Thank you everyone for taking your time with US today, and we look forward to connect with you again in the upcoming quarter. Thank you again bye bye.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.