Q1 2022 Huazhu Group Ltd Earnings Call
Good day and thank you for standing by welcome to Watch you Group Limited first quarter 2022 earnings Conference call.
At this time all the pits as soon as I in the listen only mode. After the speaker's presentation, there will be a question and answer session.
Also a question during the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded.
If you require any sport is just please press star zero and now I'll like to hand, the conference over to Mr. Jason Chen IR director of <unk> Group limited. Thank you. Please go ahead Sir.
Thank you Andrew good morning, and good evening, everyone. Thanks for joining us today.
Home to a larger group.
The quarter Tucson in 'twenty two earnings conference call.
Joining us today is our founder and chairman Mr Chi Chi.
The old Mr. Jim <unk>, our president Mr. Xing Jin, our CFO pinpointing, our deputy CFO and our CEO of international business missed but achievable.
Following 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 safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995.
Forward looking statements tables inherent risks and uncertainties.
As such our results may be materially different from the views expressed today.
A number of potential risks in the Earth's entities outside in our public filings with the S E T.
<unk> group does not undertake.
To take any obligation 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 distributed yesterday.
As a reminder, this conference call is being recorded the webcast of this conference call as well as supplementary slide presentation is available on Cuatro group's website at IR Dot one dot com.
With that now I will turn the call over to Mr. Chi Chi Mr. Zhu Please.
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Mr. Lai. Please go ahead.
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Please go ahead your conference is life now please continue.
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Yes, I'm here I can't hear it clearly, okay, Jason I'm going to put Mr. Qi back into the line now Okay. We are gonna stay on this.
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Okay, Jason Jason.
Please go ahead.
Yeah.
Or.
Hello.
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Okay.
Good morning.
Yeah.
You may notice that Amit.
Alright.
By the triangle deposit two to three months.
But the pandemic or comes that can be unlocked.
At this time.
It's the development of Chin and the impacts are far over peoples.
Patient.
The pandemic.
Heartbreak.
Good control once again really huge challenges or difficulties with China.
Operations.
I'm the oldest thing.
Bobby space or not.
Under the current situation.
Either you know how to overcome the current difficulties.
On the Caribbean and sure.
Hey, what about customers and I can tell you.
Yeah.
On the corporate book.
Cooperate with the government.
Upon them.
You can use your lives at.
Corporate.
Rental utilization.
Jason.
Yeah on the field.
Strategic or.
Adjustments to overcome.
Got it.
More importantly.
Our franchisees are facing more.
Correct.
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That'd be great.
I was just franchisees how are you.
You can put in a bunch of partners, we needed to provide support.
But the other than to go through this difficult period.
I'll leave it there.
Currently.
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Over the past decade.
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In the future.
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We needed to build our long term core competency like boku can accommodate their limited it resources.
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We should also take this opportunity to you.
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Customer experience.
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After the current Dakota winter.
Impact.
Certainties for them from them or in the global macro factors.
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And I believe with the truth.
We believe.
And they learn.
We will continuously.
Center on customers.
He and I am pleased to implement our sustainable quality growth.
And the beauty of our ability to ride through that.
So cool.
A long time.
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Julien.
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Jim.
Thank you Julien.
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We're pushing hard.
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Thank you.
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Thank you Gigi.
As <unk> just mentioned the Covid provision measures then that's very strict in China.
In March the Army coronavirus has been spreading widely in China, which result in cities like Shanghai, and the Chile post the lockdown provision measure it again.
And thats being significantly affecting our revpar recovery, so as Dan Please.
Please turn to page three.
Our Revpar recovery was on track and he uptrend in January and February .
However, it was seriously interrupted since March the recovery declined to only 67% of 2019 level.
And further lowered to the bottom of 53% in April .
May saw slight better revpar recovery in April with the launch to date Revpar recover to roughly 58% of 2019 level.
Your Revpar number that I just mentioned only reflects our hotels in normal operations.
If we included those hotels and the reputations our April and May Revpar recovery would be roughly at 65% for both Moses.
Which indicate roughly seven to 12 percentage points further down hotels, even though more operations.
Since may we are seeing a normal hotel is gradually improving in terms of the performance and the impacts of the reputation is gradually decreasing.
Each will make some comments yeah.
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And going through challenges.
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Under the situation of district covered provision control, we are implementing several mitigation measures to overcome the difficulties.
Firstly, we had started our reinforcement of cost control for domestic operations.
Please turn to page four.
The cost of control will mainly from three specific aspects.
First streamlining had called in expenses, we are further optimizing our headquarter with upsell all had cost reduction by roughly 15% to 20%.
Second we are concentrating our company's resources to our key strategies and reducing any unnecessary expenditures.
Negotiating lease waivers or reduction due to the pandemic.
We had formed a special team internally to contact police waiver or reduction negotiation for both our leased and owned hotels and monetize in the franchise to a hotel to reduce operational cost.
So that's the way it alone.
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Send us achieve all of that and shame public with yet.
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James do you want to commercialize all you see the solid admissions up.
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We are also undertaking the corporate social responsibilities during the pandemic by providing many organizations hotels, please turn to page five.
Since early March.
A number of hotels Underutilization increase massively from just over 202, the highest off more than 1800 hotels.
Since the pandemic has gradually under control recently, our number of hotels and the reputation that start to decline from the peak in April .
In fact from another perspective, it is actually a win win choice for us to provide hotels for acquisition per person during the pandemic period.
Given the normal business and leisure travel demand declined sharply due to the traffic restriction during the pandemic period their reputation actually helps hotels to achieve relative sleep better occupancy rates and to support the hotel's operational performance.
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Please turn to page six despite the pandemic impacts we remain driving hard to grasp any sales opportunities during the period to improve our performance. Firstly, we actively seek a COVID-19 related accommodation needs such as reputation of hotels that I just.
Mentioned before.
We actively seek any accommodation needs of quarantine magical James delivery riders governmental officers and operates for both leased and owned.
Many types of the franchised hotels.
Taking Shanghai as an example, whereas the most affected cities by the pandemic at this time, our hotel surf to over 9500 medical stops and over 5000 of delivery riders during the lockdown period.
In addition, we also initiated several creative products packages to meet the special needs during the pandemic such as unlike class hotel rooms walk from hotels and so on.
Secondly, we adjusted our sales strategy from previously branded based to a new original based unified sales and the marketing strategy by doing so we can't be more precisely target strong local demand for specific regions, especially for those areas will have lasting impacts from that.
Pandemic.
Lastly, we extended the expiration dates of our members privileges and a point and I mentioned to our Memphis State us to further improve our members' loyalty.
At the same times, we are also actively cooperating with external traffic platform and are participating in the virus marketing compares organized by different OTT platforms to capture the recovery opportunities post COVID-19 through pre sales activities.
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Yes.
The pandemic lockdown have resulted in a physical shutdown of our headquarter in Shanghai.
However, we are still able to maintain high walking in operational efficiency through remote work. Please turn to page seven.
<unk> and internal informational platform provides a solid foundation and a conductor to our hotel stops at quarter employees franchisees and suppliers for efficient remote work for example for our headquarter employees in Shanghai there are over 10000 online meetings.
Hosted there are over 250000 daily messages were sent and received and over 7000. Unlike all commence were used per day on a bottle etch tone platform.
The pandemic and the lockdown demonstrated our digitalization capability.
In the long run we think the strong technology capability and our cloud based information platform well be critical foundation for our future broad the regional and international business collaboration and the synergy.
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Please turn to page eight.
From cost control to our acquisition of hotels to marketing at Michelle's efforts during the pandemic and the dance you're highly efficient remote work. These are all measures that we had taken in the current pandemic period.
From a longer term perspective, despite the market conditions are uncertain.
Continuously center on our customers franchisees and employees to build capabilities to ride through the ups and downs.
Big cycles, so just a couple of detail yet.
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Firstly, despite carrying our customers please turn to page nine.
I would like to share two letter yourselves, thanks from our customers recently.
First the latter is from our customers from Tommy County, Keith.
He is stating modulus hotels due to the quarantine needs. He feels that our core hotel provides the warm soft home and it would become our loyal customers in the future. The second the latter is from our customers in Shanghai, who was trapped at in Shanghai to choose city look Doc He has chosen the populace hotel to stay not only.
Because that he has a loyal member, but also he's high trustee in cuatro.
In conclusion, we will continuously upgrade and improve our product and the service qualities to meet our customers' needs for better experiences and satisfaction.
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Secondly by carrying franchisees. Please turn to page 10 franchisees, our critical and a reliable partners given the recent difficulties. We have provided a series of supportive measures and the policy is to help our franchisees to tide over at the tough periods.
Last year <unk> was the only company, which constantly providing fee waivers or reductions to franchisees. This year, we again provided new fee waiver or deferral payment policies for hotels in medium and high risk areas and also for the new signed hotels.
Moreover, we also assist our franchisees too often really relevant information and to take advantage of any government.
Preferential and assist as policies released during the pandemic we.
We help them to apply a value added tax reform and a reduction.
Provided legal support for franchisees are rental waiver of negotiation and helped our franchisees to apply financial support from external financial institutions.
In addition, despite the street traffic restrictions due to the pandemic outbreak our supply chain teams do is drive very hard to provide sufficient food and supplies to our <unk> franchise to hotels to ensure their hotels seeing normal operations as well as provided food and supplies to hotels.
Cost structure is in pipeline.
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Lastly, <unk>.
Hi, Kerry employees, please turn to page 11.
We always value our frontline staff as valuable assets for our call.
Similar to what we had done in 2020, we retired we returned our all.
Fronts livestock during the pandemic period to keep all of the hotels in operation at the same time.
We constantly focus on our employees future career development, even during the pandemic period.
Oh nice to over 1000 online training programs for our company for our employees to further helping them improving their skill set.
In addition, we also established a special Covid fault to support all reward employees, who are infected by Covid.
Looking at the reputation of hotels, and who have any outstanding contributions during the period.
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Please turn to page 12, despite the uncertainties, our long term sustainable quality growth strategy remains unchanged.
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We still insist on further lower tier cities penetrations, Please turn to page 13.
At the end of the first quarter lower tier city contribution was still improving.
It has contributed.
37% and 55% of hotels in operation and a pipeline respectively.
For the new signings in the first quarter.
Nearly half of them were attributed from lower tier cities.
However, we have to be very honest to update you. The most erasing the situation.
Although our new signings are still grow in the first quarter.
Pandemic outbreak in lockdown seriously affected our new signings in April .
Signing numbers in April declined significantly compared to last year.
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Although the pandemic tremendously affected our domestic operation.
The Dodge hospitality business performance.
A very robust recovery recently, please turn to page 14.
Sure. The etch Revpar recovery was constantly in uptrend from January to April with April Revpar recovered to 80% of 2019 level and the recovery trying to score the improving he made.
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Please turn to page 15 things.
Seems to continuous easing of traveling restructuring, Germany, and Europe , the edge cell capacity rates improved to 51% in April compared to only 30% in January .
Leisure traveling was demand driver for the strong recovery in the first quarter.
We expect that the business traveling will also gradually recover in the next couple of months is mainly driven by the resumption of meetings contrast, and escape vicious even.
However, given the recovery is still at early stage together with the currency impacts of inflation in Europe , we would constantly implement our cost and the revenue measures that we mentioned in previous few quarters.
It mainly includes cost reduction operational efficiency improvements cash flow management and ADR recovery.
In terms of the strategic forecast post Covid, we will mainly focus on cost reduction process tend margin improvement execution of digital strategy for process efficiency and analytics.
Validating the gross potential of limited service Hotel segment and building up the Edgewater reward global loyalty program.
I mean, it wasn't <unk> Ali you keep routine G <unk>.
With that I will turn the call to Mr. <unk> to discuss our 2022 first quarter operational and financial performance.
Yes.
Thank you Julie good morning, or good evening to everyone wherever you are.
Move on to our operational and financial review for the first quarter of 2022.
As shown on slide 17, our hotel network expanded by 15% in the first quarter of 2022 to 765 kw compared to 663 K rules in Q1 2021.
Excluding DH legacy Flagellates Hotel network expenses by 16% EMEA to roughly 740, K rooms in which midscale hotels contribute most of the growth.
While our hotel turnover in the first quarter of 2022, our total hotel revenue grew at 16% year over year to RMB nine 5 billion. This was mainly due to our continued network expansion in China and strong business recovery of our European business.
Lexi to hotel turnover grew 11% year over year to RMB, eight 8 billion in the quarter and DH recorded a 100% 70% of growth to the turnover of RMB 683 million.
Turn to page 18.
Blended revpar of legacy Quadral for Q1 declined 25% compared to the 2019. The ADR in Q1 was up by one 2% compared to 2019 level at RMB 224, mainly driven by the mix change from mid scale and upper mid scale.
Hotel occupancy in Q1 is 21 percentage points lower compared to 2019 due to the impact of Corona virus outbreak since mid March.
Turn to page 19.
Dth business is impacted by I mean, all become violent and the beginning of this year.
However, due to the opening up into Germany.
Mid February it's Revpar.
It was accelerating things that therefore, <unk> blended revpar for Q1, 2022 grew 158% to 33 compared with Q1 2021.
Occupancy improved by 19 percentage points.
With Q1, 2021, and the ADR improved by 28% to 88.
Please see our financial results on slide 20.
Total revenue grew by 15% year over year to RMB, two 7 billion in Q1, 2022, mainly driven by 165% revenue growth of Lexi D. H in Q1 2022.
Excluding GH legacy what you recorded a four 6% revenue growth to RMB, two 3 billion.
Revenue was in line with our previous guidance.
Leased and owned revenue of legacy five two was flattish at RMB, one 3 billion caused by the large scale upfront virus outbreak since March net.
Net revenue from <unk> and franchised hotels grew by 9% to RMB 974 million, mainly driven by the net growth of over 1100 <unk> Hotel.
<unk> revenue growth is mainly driven by lease hotel recovery. Therefore overall the group managed and franchise revenue contribution temporarily shrank, 237% in Q1 2022, compared with 38% in Q1 2021, that's a group.
<unk>.
However for legacy Quad to do to further expansion with asset light model and manage height and franchise revenue contribution further expanded to 43% compared with 41% a year ago.
Now, let's move to the cost and profitability section on slide 21 in.
In Q1 2022, it reported operating loss was 700.
$708 million compared to a loss of RMB 575 million last year, and a positive $39 million a quarter ago.
Mainly due to the weaker China business performance.
Excluding the H <unk> operating loss in Q1, 2022 was RMB 401, 6 million compared to RMB 172 million last year and positive income of $60 million a quarter ago.
Yes.
The hotel operating cost for Q1, 2022 was RMB two 8 billion increased by 14% year on year for legacy collateral. It recorded RMB, two 3 billion hotel operating cost, indicating a 11, 7% of helium well.
Increase was mainly attributable to higher rental cost of our newly opened hotels higher personal cost as we keep growing hotel networks, and a higher D&A depreciation and amortization cost, which we which were related to the upscale hotel opening and upgrading of existing hotel.
Well as the consolidation impact of Citigroup acquisition.
For like CCH recorded RMB 558 million hotel operating cost, indicating a 25% and gilead wealth the ink.
Kris was mainly due to the variable cost increase along with business recovery.
Our pre opening cost increased by 24% year over year to RMB $26 million in Q1 2022.
21 million last year.
Absolute dollar amount of pre opening cost remains low as our future expansion well, mainly used asset light model as mentioned in previous quarters as well.
Our SG&A in Q1, 2022 increased by 34% year on year to RMB $584 million driven by the increase in both legacy module and the legacy G. H.
SG&A for legacy Quad two increased by 29% to RMB 424 million. The increase was mainly attributable to the increase of head count.
Our BD team to support penetration into the lower tier city operation team in southern and Western China sales team for corporate customer expansion in highest ITT as well as the expansion of upscale Hotel division.
However.
Given the significant impact of recent omnicom outbreak, we have started implementing strict cost control measures by streamlining overhead like headcount and expenses.
D H SG&A increased 48% compared with last year, driven by the Ot condition increased alongside with business recovery and onetime restructuring cost of the organization.
Turning to page 22.
Adjusted EBITDA loss was RMB $333 million in Q1, 2022, compared to a loss of RMB $133 million a year ago.
DHS EBITDA loss narrowed in Q1 two.
240 million compared to a loss of RMB 340 million last year, thanks to the reopening, Germany, which accelerate business recovery.
Excluding DH legacy module recorded and adjusted EBITDA loss of $93 million compared to a positive EBITDA of RMB 207 million EQ want 2021, due to the impact of the large scale optical outbreak.
And also the higher cost.
In Q1 2022, we recorded an adjusted net loss of RMB 660 million enlarged from a loss of RMB 400, 451 million a year ago, Excluding D. H Lexi Quadro reported an adjusted net loss of RMB 339.
Compared to a loss of 150 million Q1 'twenty one.
Coming to the cash position, our net debt increased to RMB 6 billion by the end of Q1 from RMB four 7 billion last quarter was mainly due to the decline in cash from operation.
This quarter.
Cash balance was RMB, four 1 billion and the Unutilized bank facilities, well 3 billion RMB.
Given the Covid impact remains uncertain in the foreseeable future we have reduced the capex and expenses budget to reserve cash. In addition, we're also prepared to meet our upcoming CD collection loan repayments and possible redemption of 2017 convertible bond.
There is available funding sources.
Turning to page 25, Oh guidance.
These March this highly infectious omicron, Byron has been spread and wrapping China, which affect our business performance now.
Also the current Covid prevention policy has rendered business performance more unpredictable in the foreseeable future.
Under such circumstances, we will suspend providing or updating guidance in respect of annual revenue and hotel openings and to the situations sustainably improve.
Nevertheless, we will continue to provide quarterly guidance based on our best understanding of the most recent situations.
In the second quarter of 2022 larger group expect revenue to decline, 2% to 6% compared to the second quarter of 2020, 142 declined 23% to 27% if excluding DH, mainly due to the large impact from omnicom.
Outbreak in China.
DHA self expect a three times revenue increase since its recovery is on a healthy track.
Then above guidance only reflects our current view, which is subject to further change with that let's open up for Q&A.
Thank you ladies.
Ladies and gentlemen, we will now begin the question and answer session.
If you wish to ask a question now please press star one on your telephone them bites for your name to be announced if you wish to withdraw your request. Please press the pound key please standby, while we compile the question and answer roster once again to sell one or two questions.
Our first question comes from the line of Billy <unk> from Bank of America. Please go ahead.
All right.
How are you doing.
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Sorry, you'll new Utah wasn't doing so Joseph.
Actually when we see from the presentation. We saw that there were about 700, new sign up year to date up till April .
Which I'm actually on track for almost like 2004. This year. So my question is have you seen very.
Very recently.
<unk> slowed down from the new sign up and also if you can give some colors on the new opening as well like I remember in <unk> are you guys open 300 hotels, just wonder have you seen slowdown on new opening.
In the last couple of weeks on the last couple of months. Thanks. That's my first question.
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Jim.
Oh, you do see you at all in that.
Jennifer will aid us in our carrier Chintung human tissue.
Okay. Thanks for your question is yes, I think youre right in the first quarter Q1, we have been investing quite off quite a lot of resource in the expenses in terms of expanding our BD team last year. So we actually achieved relatively grades new signings for the first quarter, but it seems.
The army Corona outbreak starting from the late March.
This has very rps impacted all of our new signings due to the pandemic due to the strict traffic control as well as the franchisees coffee. This level is declining as well. So definitely we are seeing some of the slow down when you're signing recently and in terms of the construction.
The pandemic has huge impact on the construction as well, especially on the transportation limits in our supply chain management due to the due to the.
Traffic control.
And especially for the months of April and then make the construction process is being slowed significantly which you're going to have some negative impacts on our new openings for the year.
Uh huh.
Thank you and then my second question, what do you have a one teacher since Targa L T.
Consume whaler I.
Hey, it's all.
Sorry, she wouldn't sound consumer at all you'd get the SG&A Aha cause on me and Yahoo wasn't wait until shale Neil you got to tee those sorts of credit funds out so it's a way like.
Some do you want to the no go run rate well might be you expect a bullish out there you got co. Gen can you choose yet.
My second question is regarding to the streamlining costs.
And just wonder if you'll have a little bit more detail.
In terms of the numbers and in the next few quarters, what kind of run rates, we can expect compared to the first quarter. If we comparing the SG&A number or the hotel operating cost number.
So that will then EG with all the features that it tells that that largely with <unk>. So I'm going to avoid jeans on the 10 year.
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Ah yes.
So basically the pandemic definitely give.
Give us a lot of challenges and difficulties, but we still insist on our China forecast as well as long term sustainable quality growth strategies unchanged.
In terms of the cost savings what I can share to you is that we are going to focus on our had a quarter in terms of the swim and lie after had comps. So we are planning to reduce the head costs by at least 20% annual will further.
Further to see if we need to reduce any any more according to the market conditions, but however, as I mentioned in my presentation. So the frontline and operational staff are very valuable asset for us. So we will still return.
10 dose Frank livestock operational stuffs, our cost savings will be mainly focus on our headquarters.
Thank you.
Thank you.
Yeah.
Alright. Thank you. Our next question comes from Ling Cta from CIBC. Please go ahead.
She said why did you call out where you are now going to do.
No Joe should they usually go 100 pardon me you got to have Johnson <unk> Johnson <unk> Johnson of yellow you'll.
How is your partnership with you.
So my first question is regarding the expansion to southern China.
How they progress.
Is there anything above or below expectations.
How do you believe you have with ADCETRIS as a nimble.
Choose a lot too, which would be up or attitude, what's a good run.
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With that change yet, we'll have gotten the cost of that yesterday, so daiichi and cancel the chancellor.
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To change it so to be more of two credits that you could achieve.
Yeah.
Yeah. So.
As you May know that the southern part of China Auto was pretty weak previously. However, this region is not only important for the entire China economic but also it's very important market for bacci.
Despite.
The impacts of the pandemic the army outbreak since the March so I'm very glad to tell you that you.
You know despite the new signings has been negatively impacted by the army chrome, but our if it has not yet achieved the two hour our internal expectation. However, our new signings in the first quarter has already exceeded our compared to our peers. So quadro is.
The address.
Two is the one who has the largest the new financing southern part of China in the first quarter.
Oh, yes.
Oh with Yahoo introduce your you buy lifecycle.
Now what you will see social for the shuffle Julia.
Yeah.
That says that it should go a whole lot of until they find you know youll conoco at gas utility, which as you saw what she told us over that antibody now muscle question.
Jason you mentioned that you're able to do today, you'll be out celebrate but yeah.
So my second question is.
That generally speaking the reduced supply is a positive factor for the industry recovery. Meanwhile, the soft macro and consumption environment there'd be a negative factor. So how should we think back to the coming let's say recovery. Thank you.
Susan you want to.
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So I'm sure that would be helpful. I think it could well mean due to the particularly <unk>, which is the that's the closest is appreciating those pulses of module Susan the planning indeed, pinpoint any cause shots.
Accordingly.
Got it.
Yeah, I think as you may know that the business recovery in China is very much tied up with the <unk>.
Policy.
You know in terms of the pandemic provision China is continuous to be using the dynamics zero carbon policy.
Which is putting some after such a person percentages.
The foreseeable future's however, despite the uncertain market conditions, we asked you insisting on our Oh strategies, which including our local sales capability to capture the local demand as well as during the pandemic.
We have to capture some of the usual busy.
He is travelling demand, which including dose cooperates, which needs the hotels for the resumption of production and the work.
And also as I, just mentioned before the cost of control as well as improved efficiency will remain a key focus in the near future.
Thank you.
That's your management.
Thank you. Our next question comes from the line of Dan Shaw from Morgan Stanley . Please go ahead.
Yeah Clayton.
Okay. What did it go to one or two you've laid out what should I downloaded two with empathy should not that I don't know what else you can tell us.
Although we don't think that Chico with diodes at good so let's see just a chunky Taiwanese have more churn we.
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Anyway well.
Two women to question.
Please allow me to translate my question.
First I would like to thank you very much to management for this opportunity to ask the question.
Stands for Morgan Stanley . My question is about the debt management. So can you share with us.
The plan.
Progress for the 700.
For the 475 million U S dollar convertible bonds expiring in November this year and the remaining of that so you had to enter the 8 million to robotic facility expiring in December this year without the current plans and the progress. Please thank you very much.
Thank you for the question certainly we have various approach to our softest issues number one we have offshore cash on our balance sheet and second is Oh, you know we are preparing a new bank loan to actually.
We pay the current upcoming do bank loan in the later half of this year and also regarding the potential redemption of the CB. We also have a C media approach like bank loans and also other financing approach to solve the issues currently everything is look good.
Thank you. Thank you very much that's my only question. Thank you.
Thank you. Our next question comes from Simon Cheung from Goldman Sachs. Please go ahead.
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So my first question is in relation to the.
New sign up.
The addition of the hotel completion as well as steep revpar recovery.
Wanted to get a sense you know how is the cycle. This time around the different from the last several shutdowns windows also oh viral resurgence.
And if the management can you provide us with some sort of guidance all expectations.
How quick the recovery this time around going to be now that you know we have Shanghai gradually reopen that as well. So that's my first question.
Thank you Ms Lindsay.
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Yeah.
Okay. Thanks for your questions.
I have to be very honest to you. So this round of army Corona outbreak has being you know after two years things.
Initial outbreak back to Tucson Party. So it has been two years.
That franchisees are suffering as well as the potential investors after hotel industry. So basically they're a coffee does their cash flow has significantly.
Impacted over the last two to three years.
As I mentioned in my prepared remarks, so we have been seeing the new signings the market sentiment.
Investors' confidence level has been declining in April .
Although we asked you.
Striving very hard to penetrate into some of the ratios, which has lasted impacts from the outbreak such as the middle part of China, Southern part of China. However, the overall confidence level or the market sentiment is relatively weak at this moment.
As well as some of the negative impacts from the real estate industry.
So we cannot deny those facts.
In terms of the Shanghai AR.
Starting from Tomorrow.
Everything should be gradually.
Gradually resume to normal I believe along with the supply chain.
Along with the supply chain transportation gradually resume the construction work should be gradually resume as well.
Starting from next month.
However in terms of the new signings I think it's going to take a much longer because that's not directly related to the pandemic because it takes more time for reviewed.
Investors' confidence level. So I think my best estimate for now I believe it's going to take a run at linked quarter to resume to normal. Thank you.
How does this year.
Well anyway, good win T Susana wouldn't be H E come on the beautiful game.
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I'll need a breathtaking deepens on cowboy two supply chain drew dialogues.
When do you see you will attend the sitting out on the journey of the EBITDA, we John and Jim zoom onto the DH. It's idea do 13 lungs yourself.
Oh, sorry.
My My second question related to the H.
If I you know based on the company guidance for the second quarter.
Suppose the needs you know D D. H guidance will revenue gonna grow at about three times on a year on year basis, and that's rough honest. It exceeds you know about $70 $0 and under these circumstances. If achieved would you be able to achieve EBITDA positive in the second quarter with four D. H. Thank you.
Okay.
Yeah.
Yes, certainly I think our you know the DH is on a very healthy recovery trajectory.
By quarter I think we are we are budgeting like a growth line toward probably toward the Q4 of the Tucson, starting 2020, we're targeting like a 90% recovery compared to 2019. So I think there's a chance for us from a year the whole.
Year perspective, we think there's a chance for us to you know.
Back to the EBITDA positive line.
But certainly that's our target.
So you are seeing that.
Not only would you see EBITDA positive in the second quarter that might actually be a possibility that you guys got to possibly of EBITDA for the full year for <unk>.
Yes.
I'm, just talking about our full year target, but for the Q2.
As you know, it's still a recovery mode. So it's it might be a little bit early to say that yeah, we will disclose more details once already.
Okay understood. Thanks alone on these on tissue.
Yeah.
Great. Thank you. Our next question comes from Lou <unk> from CLSA. Please go ahead.
Hey, let's just yet.
One, it's our stringent gem hotel, you'll love it.
Once again that you when you go into you know Johnson George that you it sounds in the AR on the tiny juggernaut.
I'll, let you choose.
Choose them watch LNG bullish in general tend to watch if I'll, yes, I'll Miss you shouldn't see Johnny you can choose.
And then the mentorship that because he got to choose whether you keep it yesterday it seemed like quite yet.
And my question is about the hour.
Uh huh.
Especially like in Shenzhen Chengdu.
Hey, Jonathan I'm colors.
Thanks.
Thank you.
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All of us into the quarter enrollments, you are causing cool collagen.
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So you're going to of course, you don't need the money.
So it sounds though hasn't changed at all she chooses to this elite.
That's a positive opinion argue to send you to.
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Tabulation, Jeff Chu.
Cheap money.
They are running most of it to be as anything Jeff Let me handle.
But unless it gets you to that figure out.
Sorry.
Of the total.
Thanks for your questions as you May know that the hotel management, there so actually hotel business, a very localized business.
With our strategy, we're just trying to forecast we are trying to penetrate.
No.
In every market in China.
And not only the hotels, but also the brands. So we want to be as close as possible to our targeted market, our customers and our franchisees as well as other employees. So actually last week, we have just to establish some new regional headquarters and.
In the remaining of this year, especially during the pandemic period.
We are adjusting we will be more using the original base management mode.
And we we are seeing that escape becomes more efficient, especially doing during the pandemic period. Thank you.
If you're talking she actually ship or the wind came on my left.
Great. Thank you we have reached the end of the question and answer session. I will now turn the call back to the management team for closing remarks.
Thank you everyone for taking your time with US today, and we look forward to connect with you again in upcoming quarter. Thank you bye bye.
Thank you that does conclude our conference for today. Thank you for participating you may all disconnect.
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