Q1 2024 H World Group Ltd Earnings Call
After the Speakers' presentation, there'll be a question and answer session.
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Speaker Change: Please be advised that today's conference is being recorded I would now like to hand, the conference over to your first speaker today, Jason Chin Senior invested director. Please go ahead.
Maggie: Thank you Maggie.
Morning, and good evening everyone.
Speaker Change: Thanks for joining us today.
Speaker Change: Welcome to <unk> Group 2024 first quarter earnings Conference call.
Speaker Change: Joining us today is our chairman Mr Chi Chi.
Speaker Change: Our CEO, Mr. Jim <unk>, and our CFO, Mr Don't Dream.
Management: Following their prepared remarks management will be available to answer your questions.
Speaker Change: 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.
Speaker Change: Forward looking statements involve inherent risks and uncertainties.
Speaker Change: As such our results may be materially different from the views expressed today.
Speaker Change: A number of potential risks and uncertainties outlined in our public filings with the SEC.
Speaker Change: That's what group does not undertake any obligations to update any forward looking statements, except as required under applicable laws.
Speaker Change: On our call today, we will also mention adjusted financial measures during the discussion of our performance.
Speaker Change: Reconciliations of those measures to comparable GAAP information can be found in our earnings release that was distributed last Friday.
Speaker Change: As a reminder, this conference call is being recorded the webcast of this conference call as well as supplementary slide presentation is available at IR Dot <unk> Dot com.
Speaker Change: With that now I will hand over the call to our CEO, Mr. Jim <unk> to discuss our business performance in the first quarter of 2024, Mr. Jing. Please.
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Speaker Change: We had a relatively good start for 2024.
Firstly review, our legacy Hot tools operational performance during the quarter. Please.
Speaker Change: Please turn to page three in.
Speaker Change: In the first quarter of 2020 for legacy <unk> blended Revpar reached RMB 216, representing a growth of three 1% on a year over year basis.
Speaker Change: ADR grew by 1% to RMB 280, and occupancy rates grew by one six percentage points to 77, 2%.
Speaker Change: Business performance was stable during the quarter and was within our expectations at the beginning of the year.
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Speaker Change: In terms of hotel network expansion, we are happy to see that some important strategic adjustments and the changes we made in the past few years, such as organizational upgrades as published months of original headquarters and a sustainable quality expression strategy are rapidly achieving positive.
Speaker Change: <unk> outcomes, please turn to page four.
Speaker Change: Our hotel opening front <unk> opened 569 hotels in the first quarter.
Speaker Change: The number of hotel closures was 148 in the first quarter by 61 hotels declined from the same period of last year.
Speaker Change: Excluding low quality economic softer brand and hunting 1.0, we closed only 72 hotels.
Speaker Change: <unk> hotels less than the same period of last year.
Speaker Change: Our future hotel closure should gradually reach a more normalized level after rapid cleanup and upgrade process over the last few years and our sustainable quality growth strategy.
Speaker Change: More importantly, our pipeline further grow to a record high of 3138 at the quarter end, despite our 569 new openings during the quarter.
It further demonstrated our strong brand power and increasing attractiveness to franchisees.
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Our limited service document, which serves the mass market remains our key strategic focuses.
Speaker Change: Our economic and a middle scale products continuously to be the key driver for our rapid network expansion.
Speaker Change: Breaking down our hotels in operation hotels in pipeline and hotel openings in the first quarter of 2024.
Speaker Change: Proportion of economic and middle scale hotels, we're at 92%, 84% and a 92% respectively.
Speaker Change: Franchise revenue share basis.
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Speaker Change: It is critical to constantly upgrade products in a timely manner in order to further meet and satisfy customers needs. As we are seeing our customers consumption behavior preference and it tastes are changing rapidly and frequently nowadays.
Speaker Change: It is also one of the most important building blocks to enhance the competitiveness of our brand and again attractions from franchisees.
Speaker Change: In the past three years, we constantly introduce new upgraded versions of our major brands using our iron triangle brands in the limited service segment as examples please turn to page six the <unk>.
Speaker Change: Propulsion of hunting three five and above steadily increased from 11.
Speaker Change: 11, 8% as of 2020 to 29, 8% as of 2023 and a further 233, 2% as of the first quarter of 2024.
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Speaker Change: Please turn to page seven for our two hotels in operation the proportion of <unk> hotel for zero and above products increased from 30% as of 2020 to 65, 7% as of 2023 and a further rose to 69% in the.
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Speaker Change: Please turn to page eight as of the first quarter of 2024. The latest Aloha versions of Orange brand accounted for 75, 7% in its pipeline increased from 58, 4% as of 2023.
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Speaker Change: As we continued penetrating into lower tier cities and new markets, some new demand and a new group of customers emerged. Therefore in addition to our iron triangle, Brian as we mentioned above we are also constantly developing new products to better meet the needs of different customer group and the market conditions.
Brian: In the first quarter of 2024 based on our very mature and our successful experiences of hunting, we launched a new version of new haul hotel.
Speaker Change: Union, how his position as a complementary brands for hunting in the economic segment ASP.
Speaker Change: Especially in the lower tier cities and it is also positioned to cater to the accommodation needs of the younger generations. Please turn to page nine the.
Speaker Change: The brand new Nihon <unk> zero integrates traditional Chinese color and texture of singles with contemporary.
Speaker Change: As a static show showcasing the Chinese ethnic coffee dose and providing consumers with additional choice for different aesthetics at the same times through reinvention of new servicing areas Niehaus Hotel has integrated many value added services such.
Speaker Change: House preservation contact popular modern Chinese tea and snacks into the self service model us at the hotel lobby. This is in line with the current consumption philosophy of young customers, who seek good value for money products, but with good experiences the new knee, how we're strongly aligned.
Speaker Change: With our flagship brand hunting to further solid defy our leading position in the economic hotel market.
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Speaker Change #104: In terms of our geographic expansion, we keep penetrating into lower tier cities in China. Please turn to page 10.
Speaker Change #105: As of the first quarter of 2020 for 40% of our hotels in operation were located in tier three and below cities, representing a one percentage point increase year over year.
Speaker Change #105: At the same time, 54% of the hotel in pipeline, we are located in tier three and below cities.
Speaker Change #106: Ocean of tier three and below cities in pipeline was a bit lower compared to the same period of last year, while the proportion of the tier one cities was a bit higher year over year.
Speaker Change #107: It was mainly due to a much faster new signings in upper mid segment as well as in our southern regions.
Speaker Change #108: In fact, the pipeline in tier three and below cities was still growing absolutely number 10.
Speaker Change #109: As of the first quarter of 2024, the number of city coverage was 1290.
Speaker Change #110: 158, new cities added compared to the same period of last year <unk> This year.
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Speaker Change #116: Please turn to page 11, our upper mid scale segment development is continuously progressing.
Speaker Change #117: As of the first quarter of 2024, there were 686 upper mid hotels in operation, representing a 28% year over year increase and a 6% quarter over quarter increase and that there were 430 upper mid hotels in pipeline representing an eight.
Speaker Change #118: 81% year over year increase and 11% quarter over quarter increase the fast growing pipeline further demonstrated that our upper mid brands, especially our key brands, including inter city and Crystal Orange, we're increasingly gaining recognition and popularity among customers and franchisees.
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Speaker Change #124: Since last year the business traveling has been recovering relatively slower due to weaker than expected macroeconomic.
Speaker Change #125: Nonetheless, our direct <unk> business was growing quickly, which partially offset some recovery gaps from individual business travelers.
Speaker Change #126: <unk> turn to page 12 in the first quarter of 2024, the number of room nights booked directly via our <unk> platform was more than five 5 million, representing a 34% year over year increase the.
Speaker Change #127: The number of active corporate clients surpassed 2700, representing 57% year over year increase.
Speaker Change #128: We believe that by continued strengthening our direct <unk> sales capability, we could better coupe with the potential volatility of business traveling and achieved a modest tenant both business development in the long run.
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Speaker Change #134: Moving to our overseas business, please turn to page 13.
Speaker Change #135: <unk> blended revpar grew four 5% year over year to 58 Euro in the first quarter of 2024, which was driven by 0.2% increase in ADR to 104 Euro and a two three percentage points increase in occupancy rate too.
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Speaker Change #142: Last quarter, we mentioned that one of our <unk> strategy strategic focus in 2024 is to seek growth opportunities internationally.
Speaker Change #143: We are pleased to see that the edge has made some initial progress please.
Speaker Change #144: Turn to page 14 as of the first quarter of 2024, 53% of hotels in operation were located in Germany. However, only 38% of pipeline hotels were located in Germany, and the remaining hotel located in other European countries APAC regions.
Speaker Change #145: In Africa, which accounted for 50, 141%, 15% and 6% respectively.
Speaker Change #146: As a part of our announced <unk> Samuelson enrollments airports, losing with either answer parts of Argos and <unk> hotels.
Mr. <unk>: All above conclude our first quarter 2024 business updates now I will hand over the core to our CFO, Mr. <unk> to discuss our operational and financial performance during the quarter.
Mr. <unk>: Thank you <unk> good morning, and good evening to everyone. Let's go through our operational and financial review for the first quarter of 2024.
Mr. <unk>: Please turn to page 16.
Mr. <unk>: In the first quarter, we continued to expand our hotel network. Our overall number of rooms increased 17% year over year to over 955000 rooms as of first quarter.
Mr. <unk>: Compared to over 820000 rooms as of first quarter last year.
Speaker Change #148: Our hotel turn over for the first quarter of 2024 with RMB 19 7 billion.
Speaker Change #148: Presenting a 21% increase compared to first quarter last year.
Speaker Change #149: Excluding th legacy <unk> hotel turnover grew 22% year over year to RMB 18 1 billion.
Speaker Change #150: Now please turn to page 17.
Speaker Change #151: In the first quarter of 2024, our total revenue for the group increased 18% year over year to RMB, five 3 billion exceeding our previous guidance of 12% to 16% year over year growth.
Speaker Change #151: Legacy <unk> achieved 18% year over year revenue growth to RMB, four 2 billion and.
Speaker Change #152: And th grew 17% year over year to RMB 1 billion.
Speaker Change #153: The revenue growth of legacy <unk> surpassed the high end of our guidance, mainly driven by a higher than expected the hotel openings.
For the H.
Speaker Change #154: Revenue growth was attributable to market recovery and favorable exchange rate.
Speaker Change #155: Please turn to page 18.
Speaker Change #156: Hotel operating costs.
Speaker Change #157: RMB three 6 billion in the first quarter of 2024.
Speaker Change #158: The year over year increase was primarily attributable to increase of staff costs from our continued network expansion and reduced the rental relief in China.
Speaker Change #159: The increase of hotel operating costs was slower than our revenue growth, reflecting operating leverage of our business.
Speaker Change #160: Pre opening expenses remained at a low level as we continue to focus on our asset light expansion strategy and become more selective opening leased and owned hotels.
Speaker Change #161: SG&A expenses were RMB $769 million in the first quarter of 2024 and accounted for 14, 6% of total revenue.
Speaker Change #161: The year over year increase in both absolute number and percentage of revenue SG&A expenses was primarily due to continued business growth.
Speaker Change #162: As well as return to a normal level of selling and marketing expenses.
Speaker Change #163: That number and the compensation from the relatively low base of the same period of 2023.
Speaker Change #163: Especially our for our legacy hardware business.
Speaker Change #164: As a result, our income from operations in the quarter achieved RMB one.
Speaker Change #163: Zero.
Speaker Change #163: Representing a 51% year over year increase.
Speaker Change #165: Now please turn to page 19.
Speaker Change #166: In terms of our profitability and cash flow during the quarter.
Speaker Change #167: I'd like to firstly highlight that we have redefined our non-GAAP measure of adjusted EBITDA and adjusted.
Speaker Change #167: Net income in the quarter in order to better reflect the profitability.
Speaker Change #168: Our call business operation.
Speaker Change #169: The new adjusted EBITDA and net income now exclude share based compensation expenses gain or loss from fair value change of equity securities Foreign exchange gain or loss net gain loss on disposable of investments.
Speaker Change #170: Finally, we also have restated our adjust EBITDA and adjusted net income for the first.
Speaker Change #171: Fourth quarter of 2023 to provide a comparable basis.
Under the new definition.
Speaker Change #172: In the first quarter of 2020 for legacy <unk> adjusted EBITDA achieved a 32% year over year increase to RMB, one 5 billion.
Speaker Change #173: Thanks to continued with growth in RF and <unk> strategy.
Speaker Change #174: Our th business reported a loss of adjust EBITDA of RMB $66 million, which narrowed down from a loss of RMB $98 million in the first quarter of last year.
Speaker Change #174: Adjusted EBITDA margin for the group and legacy <unk> achieved 27%.
Speaker Change #174: And 35% level.
Speaker Change #175: Representing four.
Speaker Change #176: <unk>, 4% and three 5% year over year improvement respectively.
Speaker Change #177: Our group adjusted net income were RMB 771 million in the first quarter of 2024, representing a 101% year over year increase.
Speaker Change #177: Our first quarter operating cash flow decreased year over year, mainly due to increase in payable to franchisees.
Speaker Change #177: First quarter of last year post reopening.
Speaker Change #177: The quarter over quarter decrease was due to timing difference of compensation and franchisee fee payment.
Speaker Change #178: Now please turn to page 20, our liquidity position.
Speaker Change #179: <unk> first quarter 2019 for the group had RMB eight 9 billion in cash cash equivalents or restricted cash and time deposits.
Speaker Change #180: And it was in a solid cash position with RMB three 1 billion.
Including time deposit.
Speaker Change #181: Our cash balance the net cash decrease compared to the previous quarter, which was primarily driven by payment of dividend in the first quarter 2024.
Speaker Change #182: We also had RMB two 4 billion Unutilized bank facility it off.
Speaker Change #182: First quarter 2024.
Speaker Change #182: No.
Turn to page 21.
Speaker Change #183: During the first quarter 2024, we paid roughly RMB 300 million cash dividend and repurchase of roughly 70.
Speaker Change #184: $75 million worth of shares from the market.
Speaker Change #185: As we become more F&I 10, cash rich will continue to reward our shareholders through dividends and buybacks.
Speaker Change #186: Finally, please turn to page 22, and our guidance.
Speaker Change #187: For the second quarter of 2024, we expect our.
Speaker Change #187: Revenue to grow.
Speaker Change #187: 7% to 11% compared to second quarter of last year.
Speaker Change #187: 711%, excluding the H.
Speaker Change #187: With that.
Speaker Change #188: We're ready to take your questions operator, please open the line for Q&A.
Thank you.
We will now conduct a Q&A session as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to assure your question. Please press star one again please.
Speaker Change #189: Please standby.
Speaker Change #190: While the Q&A roster.
Speaker Change #190: Our first question comes from Rowland Leung of Bank of America. Please go ahead.
Speaker Change #191: Oh, why monetize that somehow so Jamie gave you guys.
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Speaker Change #193: One is I'm sorry to do that.
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Speaker Change #198: This has more questions sorry about that yeah, we will.
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Speaker Change #203: Let me translate my questions in English.
C J: Two questions.
C J: My first question is about Ralph Paul.
Speaker Change #204: So what is management expectations.
Speaker Change #205: Ralph power growth.
Speaker Change #206: Domestic China basis into Q.
Speaker Change #207: Second question is on VH for.
Speaker Change #208: BH management targets to adjust the business to asset light basis.
BH management: And target to sell the asset heavy business.
Speaker Change #210: So how's the progress after disposal.
Speaker Change #211: Thus management.
Speaker Change #212: Bye bye.
Speaker Change #213: Disposal. Thank you very much.
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Speaker Change #226: Okay.
Speaker Change #227: Let me answer your first question.
Speaker Change #228: As you May know that last year, the second quarter actually was a bit high base, especially during the May holiday as you may know that the May holiday last year was the first the long holidays posted a recovery a posted a reopening from the Colgate. So there is a lot of you know.
Speaker Change #229: Revenge traveling pent up demand in the second quarter and also on the supply side. The supply recovery was slower at a time in the second quarter of last year.
Speaker Change #230: Therefore, given high basis of last year's second quarter, we are facing challenges for the revpar in the first quarter in the second quarter of this year.
Speaker Change #231: Therefore, we are expecting the revpar for this quarter will be flattish to slightly negative.
Speaker Change #232: As of now however, given the traveling activities, especially the number of travelers during the holidays, we are skewed quite confidence.
Speaker Change #233: <unk> the population number of travelers are still growing quite healthily during the holiday and in the second quarter, as well, which gives us more confidence that the leisure traveling demand is at.
Speaker Change #234: Actually sustainable in the longer term perspective, and it becoming.
Speaker Change #235: In elastic demand.
Speaker Change #236: For the Chinese consumers.
Speaker Change #237: And even though the revpar might have.
Speaker Change #238: Slightly negative in the second quarter, but through the hotel network expansion, we still could achieve a 77% to 11% year over year revenue growth.
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Speaker Change #243: The third quarter, it seems that a lessor money.
Speaker Change #244: LNG the Chinese vaccine.
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Speaker Change #245: So it seems that our Houghton.
Speaker Change #246: I've got that momentum.
Speaker Change #247: So she knows or ipads.
Speaker Change #248: Joe you did at the time, but we will wait until you know what.
Hudson: These again go with Hudson So awesome.
Speaker Change #250: The asset life strategy for our <unk> business, which we mentioned in last quarter is our long term target <unk> we want.
Speaker Change #251: Want the th becomes a more international brands.
Speaker Change #252: Hotel brand and the management company.
Speaker Change #253: But as you may know that.
Hudson So: Transforming from asset heavy to light takes a bit longer time and.
Speaker Change #255: A lot of complicated and complex negotiation with potential counterparties, but the long term strategy won't change.
Speaker Change #256: So far the progress is still within our expectation so in terms of the closure time so <unk>.
Speaker Change #257: A milestone that we will just released to the market on time.
Thank you.
Speaker Change #257: Thank you.
Dan <unk>: Our next question comes from Dan <unk> of Morgan Stanley. Please go ahead.
Dan <unk>: Yeah.
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Speaker Change #278: It sounds about right.
Speaker Change #279: So we saw without <unk>.
Speaker Change #280: So when you have one <unk> that you said you'll be at least at Chicago, you've got you've got it you got it.
Speaker Change #281: You too.
Speaker Change #282: She demo fleets are being about <unk>.
Speaker Change #282: <unk> will that Youll see a shift to the adhesion.
Speaker Change #282: No.
Speaker Change #283: Please allow me to do that translation.
Speaker Change #284: Management for the opportunity and congratulations on first quarters.
Speaker Change #285: I have two questions.
Speaker Change #286: Question is about.
Speaker Change #286: Lisa operated hotels, we saw the <unk> all hotels operating performance outperformed.
Speaker Change #287: The franchise business.
Speaker Change #288: And with no revpar growth rate year on year.
Speaker Change #289: After that the group revpar growth rate by six percentage points, the things happening to same store revpar growth.
Speaker Change #289: So outperformed.
Lisa: Franchise Hotel and also the group overall.
Speaker Change #291: Overall performance with <unk>.
Speaker Change #291: Wondering.
Speaker Change #292: What has management to improve both occupancy and ADR, especially occupancy.
Speaker Change #293: For lease and on the hotel and its sustainability at easy replicable towards the franchise Hotel management.
Speaker Change #294: Second question is about franchise hotel business, we saw that take rate for <unk> at the NIM increased by 7%, which is about a <unk> five percentage point, we know that sometimes get impacted by seasonality.
Speaker Change #295: We weren't doing.
Speaker Change #296: Is this particular increase sustainable any other reasons such as recurring up in China.
Speaker Change #297: Oh, yes.
Speaker Change #298: All my questions.
Speaker Change #299: Associated with or without <unk> bye.
Speaker Change #299: Indiana.
Speaker Change #300: Yes sure.
Speaker Change #301: <unk> told you that.
Speaker Change #302: So she went on to time charter a little funny.
Speaker Change #303: So, it's India, Italy, the jewelry accordingly.
Speaker Change #303: Lending.
Speaker Change #303: <unk>.
Speaker Change #304: Towards achieved.
Speaker Change #305: Sheila I'm, a dosing plenty, they're going to do I need to try and do the one thing you can see that.
Judy Harding: This is judy.
Judy Harding: England.
The R&D, which equal increases in ICU and I'm quoting him either pizza.
Speaker Change #307: Trim in season sell edits and everything else equal.
Speaker Change #308: Immuno modulator treatment.
Sundar: And then Sundar chairman of genes.
China has agreed.
Speaker Change #310: A woman in humans.
Speaker Change #311: So the shutdowns and government.
Did you put on chew that gene sort of assumed in there to.
Speaker Change #312: Two quick ones here.
Speaker Change #312: Okay.
Speaker Change #313: In terms of the leased and owned hotels. They are performance actually is better than the group of franchisees.
Speaker Change #314: Because over the last two years, we have been investing quite a lot of you know management resources to the leased and owned hotels because are running at least in on in terms of the operation and the management is quite complicated therefore front in <unk>.
Speaker Change #315: Actual investment period to the operational period for the entire lifecycle of this hotel business. We have been investing a lot of you don't management capability. For example, we have assigned a good staff. Our hotel manager. For example, this is basically in conclusion is the improvements of our managed.
Speaker Change #316: <unk> capability for running a hotel and we believe that the discount off capability, which has been demonstrated from the leased and all can be replicated to other hotels, which is as you mentioned in the franchise to augment it tries to hotel.
Speaker Change #316: Why.
Speaker Change #317: Joe When you acquired <unk> 17 that voice out.
Speaker Change #318: She has always had a union.
Speaker Change #318: Okay great.
And he said no.
Two sides and the possibly of course, he may entail some elements as you say.
Speaker Change #319: These are four cohort G suite at overnight you redeemed it.
Speaker Change #320: He is in the inks.
Speaker Change #321: They are in that just the woman articulating in province.
Speaker Change #322: So the so chooses.
Speaker Change #322: So you could even go into the center, you'll see a quick one.
Speaker Change #322: <unk>.
Speaker Change #323: New energy Civil My Tc.
Speaker Change #323: <unk>.
Speaker Change #324: Quantity and its Andy.
Speaker Change #324: Great.
Vince: Vince would you.
Speaker Change #326: So call it <unk>.
Speaker Change #327: One was that in Europe, I mean, no we're making some news out James on the difference for sure.
Speaker Change #328: You quantified switch off but that said as having changed in Dubai, Islamic England with James Alitalia.
Or is it <unk>.
Tom Glenn: Sure Tom.
Speaker Change #330: Considering within the home sustained under Putin Sundance He goes with our nieces understanding who they are.
Speaker Change #330: Yeah.
Speaker Change #331: Okay in terms of increasing take rates there were mainly three reasons. Firstly is continuously increasing this year as we continuously focus on our direct sales capability through our towards App.
That's a that's just a one off the reason secondly is because of.
Speaker Change #332: The wage increase or the staff cost increase, especially at the hotel level for both our leased and owned and the franchise hotel, which is the hotel managers and certainly is.
We are we are doing a more deep diving and go into more details in terms of the management for our management.
Speaker Change #333: <unk> hotel, which we reduce the discount rate for our management fee as well as onetime franchise fee, which is also contribute a little bit to the improvements of the take rate So, particularly at Inc.
Increase.
Speaker Change #334: If the results from manufacturers.
Speaker Change #334: <unk> cost to increase this kind of.
Speaker Change #335: Not able to avoid because the salary.
Speaker Change #336: Increases in general are trailing the market. Thank you.
Speaker Change #336: Yes.
Speaker Change #337: Thank you for putting in place.
Simon <unk>: Thank you. Our next question comes from Simon <unk> of Goldman Sachs. Please go ahead.
Simon <unk>:
Simon <unk>: CCA at Boddington.
Simon <unk>: Sure.
Simon <unk>: <unk>.
Simon <unk>: And on the <unk>.
Simon <unk>: Hi, Dan this is Shawn.
Dan <unk>: Do you see a hallmark.
Dan <unk>: The belief and then Jenny Sogou, China, and Doug you can ballpark it yes.
Dan <unk>: <unk>.
Dan <unk>: Tableau <unk>, Sandra Yu sung <unk> songs.
Speaker Change #339: One is in C&I tight in China in Q Haas as W. E.
Speaker Change #339: <unk> sure.
Speaker Change #340: <unk> Nikko Revpar.
Speaker Change #340: <unk>.
Speaker Change #340: Robot.
Josh: So Josh and Sean.
Ian: It's Ian.
Speaker Change #343: Youll suddenly Tunis always Bob I'll sure I'll go about sandbox.
Speaker Change #343: Yes.
Speaker Change #343: Wendy.
Speaker Change #343: <unk>.
Speaker Change #344: You saw <unk> women, who choose <unk>.
Speaker Change #345: I'm counting dollars ensure to leisure.
Speaker Change #346: I actually think that sandy there quite a bit on that.
Speaker Change #347: How do you think now Niemann talk <unk> question was China.
Speaker Change #348: Can you tell us on the Democrats stop on its Amit.
Speaker Change #349: I think that <unk> seen today.
Speaker Change #349: <unk>.
Speaker Change #350: Custom download on Albertsons oil, which I'll talk to you I don't know how to acquire.
Speaker Change #351: No the Doj in Argentina.
Speaker Change #352: Tuesday, Nalco, Wendy let me translate into English so my first questions.
Speaker Change #351: In relation to the.
Speaker Change #353: Stronger than expected hotel Edison 569 hotel ads in the first quarter already representing over 40% after our original guidance of 1844 year old regionally.
Speaker Change #354: On top of that we have a revpar. According to management in the second quarter it would be unlikely can be softer.
Speaker Change #355: So wondering whether they would have any revised guidance for both the hotel as well as 8% to 12% full year revenue guidance.
Speaker Change #356: And my second question is.
Speaker Change #357: For the business travel we've been hearing.
Speaker Change #358: The operator.
Speaker Change #359: Sharing that business travel, so far stoping youre being quite weak.
Speaker Change #359: What is the trend.
Speaker Change #360: Looking into the second half.
Speaker Change #361: Because they obviously doing quite well on the <unk> strategies.
Speaker Change #362: 2007 hundred.
Speaker Change #363: <unk> up 60% almost.
Speaker Change #364: How do you think.
Speaker Change #365: Think about the long term opportunity on the business travel that will be to be.
Speaker Change #366: In general Thank you.
Speaker Change #366: Yes.
Speaker Change #366: Sure.
Speaker Change #367: Whatever it is.
Speaker Change #368: With our deal went into China with him.
Speaker Change #369: Through the tonnage trends.
Speaker Change #369: Great.
Speaker Change #370: He says from others.
Speaker Change #371: <unk> essentially without the cost of them.
Speaker Change #370: E.
Credit Suisse: Credit Suisse.
Speaker Change #373: I'll Miss you all of them in the future.
<unk> gentlemen, can go to the government projects.
Speaker Change #374: As you all know.
Speaker Change #375: So he said some good financial returns or <unk> consists of two children.
Speaker Change #376: Parts will remain challenged for the extended addressing those as Shuang parcels is one where you can go without going hubs again on the Yahoo.
Speaker Change #377: It's only the 23 to <unk>.
Speaker Change #377: <unk>.
Speaker Change #378: To achieve our cost to deposits unify them in sandy.
Speaker Change #378: Sure Bob was a more modest without Sudan.
Speaker Change #379: So you aren't sensitive with larger when they do we'll acquire.
You can go to.
Speaker Change #380: Does it seem that tells us only ETA.
Speaker Change #381: On April <unk>.
Speaker Change #381: No.
Speaker Change #381: Okay.
Speaker Change #382: So in terms of the hotel openings before answering this question. So we want to remind you guys that.
Speaker Change #382: Yes.
Speaker Change #383: Two years ago.
Speaker Change #384: We started our sustainable high quality quality expansion strategy. So our hotel network expansion will be only focusing on our flagship hotels as well as the high quality expansions.
Speaker Change #385: And this year as you remember last quarter. We also introduced our service excellence strategy further abstracted from the quality of high quality expansion and to be more focus on both product quality and service quality improvements so for etch what in terms of the networks pension we.
Again, we will focus more on the quality and better service instead of only focus on the scale. So therefore.
Speaker Change #386: Even though we have a pretty good quarter.
Speaker Change #387: There are openings in the first quarter, we still maintain our full year gross opening target unchanged. Thank you.
Speaker Change #388: Glenn with solid consolidated <unk>.
Speaker Change #389: Announced EMEA you guys from other Sunday.
Speaker Change #390: Couldn't you called out John Soto with.
Speaker Change #391: <unk> she is a woman into the pool.
Speaker Change #392: When she did some good fujitsu genes.
Speaker Change #393: <unk> Twosies would often talk with you.
Speaker Change #393: Some of the names.
Speaker Change #393: Thanks.
Speaker Change #394: Sales in local shoot.
Speaker Change #394: Danielle.
Speaker Change #395: Suddenly the GG.
Speaker Change #396: As usual this issue she needs Huntington.
Speaker Change #397: Sure sure pulpwood CIT in mice.
Speaker Change #398: This year, we could shoot with has sent on what's assumed for the current bill started in March.
Speaker Change #398: She lives in that cohort.
Speaker Change #399: What would you do within the Xeon D to find out how they want you to.
Speaker Change #400: As it relates unions and <unk>.
Speaker Change #401: <unk> issued its injectable rule cooling the tupperware.
Speaker Change #402: Anyway, it's a demand.
Jacob.
Speaker Change #402: Yes.
Speaker Change #403: And the challenge with it this year.
Speaker Change #404: I mean, she that safety net.
Speaker Change #405: Do you have at the end of the southern Kusama Union, who can do that.
Speaker Change #406: Okay in terms of the <unk> business. So firstly, if youre talking about Tao business travel in market, we have to say the business traveling market is a bit slower in terms of the recovery. This is mainly due to the impacts from there'll be current expected macro economic developments since the reopening last year.
Speaker Change #407: However over the last two years, we have been putting a lot of efforts on the <unk>.
Speaker Change #408: Direct sale business and catching up some of the new demands and using areas such as the mice and the conferences, which we were not very good at previously we have been continuously improve our capability in this front and are trying to as much as new customers through.
Speaker Change #409: Our you know continuously enhanced BGP sales capability.
Speaker Change #409: Really is.
Speaker Change #410: It's a hotel centric on the ground the sales capability enhancement.
Speaker Change #411: We will use the hotel itself as the offline.
Speaker Change #411: Panel to attract more and more local small business clients just to over as we mentioned to the volatility of the Intel business travel market.
Speaker Change #412: Thank you.
Speaker Change #412: Thank you.
Speaker Change #412: Thank you.
Speaker Change #412: Our next question comes from Lydia.
CIC: CIC. Please go ahead.
Lydia: Lydia Please go ahead.
Oh go.
Tony: Tony <unk> with <unk>.
Tony: Yes.
Lydia: Just go ahead and I'll just use with <unk>.
You bet John.
Speaker Change #416: Well most of my questions.
Speaker Change #416: Okay.
Speaker Change #417: Now my point.
Speaker Change #418: You show up it would be easy to do that.
Speaker Change #419: Hi, gentlemen.
John Soto: With that John.
John Soto: No.
Speaker Change #421: Yeah as I mentioned this is <unk> here.
Jason Chin: Thank you Jason.
Speaker Change #424: And job shops.
Speaker Change #423: The company does he have only gotten more attention.
Speaker Change #423: Thank you Qi Jenny you can market. Thank.
Qi Jenny: Thank you yes.
Speaker Change #426: Question is dot.
Speaker Change #427: <unk> expansion in the first quarter.
Speaker Change #428: Actually the management look at.
Speaker Change #429: Industry supply as a whole and also what's actually light background before that new often hiseq and what could be the next after your franchisee road, that's exiting all franchisees.
Speaker Change #430: Little bit more color would be very helpful. And my second question is on expand and resolve that Ajay.
Speaker Change #431: Does that expense increased a lot in the first quarter and as all ICF next.
Speaker Change #432: Next day.
Speaker Change #433: Presentation. So.
Speaker Change #433: Do management look at all like the full year expense trend and also what could be the margin check Oh about $2.
Speaker Change #433: No.
Speaker Change #434: Our luck with us at <unk>.
Speaker Change #434: Cheers.
Speaker Change #435: Got you.
Speaker Change #436: So I'll go to the initial qualify that become quite frankly right now.
Speaker Change #437: Millions of Attic Hugo Mccandless Junior junior in the June quarter. It was initial hardy seasoned totaled thesis however, they.
Speaker Change #438: As I choose sooner there will.
Speaker Change #439: Probably this would do.
Speaker Change #440: Oh, we telecom it wasn't the blooming Brooklyn golfing with Suncor.
Speaker Change #441: So that's unclear to us would require us to fundamentally it's one quarter tiny but quite frankly, we've been choppy. So it's rewarded insofar these targeted with told me for their system. So enrollments in the hernia, its where you get into harder the quietest nasal.
Speaker Change #441: So every quarter. So you could take one institutional solar digital harder to go from me she.
Speaker Change #442: But Tony.
Speaker Change #442: It's actually important.
Speaker Change #442: So.
Speaker Change #443: Sundar Danya Denzel Washington's tech Rep team, which I believe the Colombian peso.
Speaker Change #444: In the in charter deal Joanna can call cohort three.
Speaker Change #445: So you potentially.
Speaker Change #445: And so things are easier.
Speaker Change #445: We honestly.
Speaker Change #446: Beyond this call.
Speaker Change #446: Yeah.
Speaker Change #446: Sheila.
Speaker Change #447: So why don't you jump in on that.
Speaker Change #448: For me, it's I cannot for example, we outlined at the end of June.
Speaker Change #447: Yeah.
Speaker Change #449: A woman if I may squeeze on claims or large Amazon a football league.
Speaker Change #449: <unk>.
Unless you own and what else are you towards pushing so hard because some of them don't even come out easy gotcha.
Speaker Change #450: With us in difficult times.
Speaker Change #451: <unk> seen the channel shift.
Speaker Change #451: Absolutely.
Speaker Change #452: I called them and go to Virginia, diarrhea syndrome, Hypersound solution will either senior journalism cause of your heart syndrome.
Speaker Change #453: So are you trying.
Speaker Change #454: And to.
Speaker Change #455: Their quality GTS, which is good for them as a whole.
Speaker Change #456: I mean.
Speaker Change #457: It's always challenging each other to do it.
Speaker Change #457: Okay.
Speaker Change #458: Let me answer your first questions over the last several years.
Speaker Change #459: <unk> ratio in China has been a rapidly improving in China at the end of last year, the churn ratio firstly exceeded 40% in China.
Speaker Change #460: And we.
Speaker Change #461: Believe that the tie ratio improved from them with even faster in the future because yourself that digitalization is capability the integration of the industrial capability in China whatsoever outstanding.
Speaker Change #462: It has the potential to even higher than the very mature U S market.
Speaker Change #463: Our near future. So a lot of you know China hotel groups, that's been gaining benefits from these trends with continuous to be churn ratio improvement. However in different segments. We are seeing some of the.
Speaker Change #464: Differences for example, the middle skill is as much faster in terms of the charter ratio improvement compared to the until market, but for the economics it might be need for further efficiency operational efficiency improvements to further catch up the deterioration or improvement. So this is the first part the second part.
Speaker Change #465: In terms of the background of the franchisees.
Speaker Change #465: In conclusion, it is quite diversified at this moment.
Speaker Change #466: We focus on two aspects one is for our old franchisees.
Speaker Change #467: We also focus on the repurchase rates fall or the franchisees, we want our franchisees to be profitable wherever they open the old hotel they used to open the hotel Nvidia opening the new hotels, but sometimes when we are penetrating into the lower tier cities. Some new market a new supplement as we are seeing a lot of new franchise.
Speaker Change #468: This new type of franchises for example, with the local government for example, the property developers so.
Speaker Change #469: On both sides from the export from the company's perspective, we take care of both both both part of the franchisees. Thank you.
Speaker Change #470: But the other ones you can plan you will miss on the shelf.
Speaker Change #471: He's a genius.
Speaker Change #472: I don't need help with that.
Speaker Change #473: You will find us then.
Speaker Change #474: Washington thinking back to this issue of the new this is a modern attempt.
Speaker Change #475: And then can do as a kid and Kelsey.
Speaker Change #476: So the key learning is it two bushings is harsh in the.
Speaker Change #477: P noticeable in the partnership with.
Speaker Change #478: <unk> Xian and lead towards LNG cogent.
Tianjin Suzhou: Tianjin Suzhou, that's what she said.
Speaker Change #480: Four quarters ago.
Speaker Change #481: I want to know what <unk> and <unk> patents I guess that's helpful.
Speaker Change #482: I think it was on the total enrollment team that tells you that this is helping too.
Speaker Change #482: Yeah.
Speaker Change #482: Okay.
Speaker Change #483: Okay in terms of the increase in sales and marketing expenses in the quarter. So firstly at the because we are penetrating to the new market and we are in.
Speaker Change #483: Hence.
And we are penetrating into the new segments and introduce a lot of new product, so, especially when we opened a new hotel in new markets. We at the very initial period, we need the resources and support from the Otas.
Speaker Change #484: However that should be a temporary impact because on a longer term perspective, we will continuously focus on our direct sales capabilities through our own channels. This is one secondly is we we purposely added some of the budget on the marketing expenses, especially for some of the new <unk>.
Speaker Change #484: And your.
Speaker Change #485: New segments that we want to further improve the brand awareness and the recognitions.
Speaker Change #486: For these particular brands into the market in order to get more attraction from the customers and the franchisees as well. Thank you.
Thank you.
Speaker Change #486: Our last question comes from CG Linde from CIBC. Please go ahead.
Speaker Change #486: Okay.
Juanita: I will say Juanita.
Speaker Change #488: <unk> will now share woman sorry, Jake.
Speaker Change #488: Okay.
Speaker Change #488: Thank you Natasha Tom how would you continue to do that.
Speaker Change #489: And what do you think I think Jonathan Bock.
Speaker Change #489: I know you said, Jason this is how they figure things out.
Speaker Change #490: Yeah, I'm glad you asked me I should have.
Speaker Change #491: When would you think Pseudology Victoria for Ohio.
Speaker Change #492: Kenosha, well aware that's only on metallurgy.
Speaker Change #492: It seems like it was just the only.
Speaker Change #493: It should help ensure that falls out that would pass on these kind of like a T cell. So thank you management I have two questions. The first is that we mentioned before we end to penetrate more into low tier cities and regions with low density. So how has that progressed and is there any operating data in this market you can share with us.
Speaker Change #494: And my second question is that we also mentioned before that one of our key strategy is to upgrade the supply chain and to improve service quality.
Speaker Change #495: The progress is.
Speaker Change #496: An indicator a decade that can prove this progress maybe such as Paypal I'll wrap up thank you.
At our library that <unk> finally boyfriend gardener can digest things elements as it says on the border.
Speaker Change #497: I see what their thoughts with us on what that is.
Speaker Change #497: Core to the union issue to that.
Okay.
Speaker Change #498: Uh huh.
Speaker Change #499: It's been good that he's going to studio city with Macquarie.
Speaker Change #500: So we made a few days would you kind of what's behind me or.
Speaker Change #500: This would you couldn't innocuous in terms of what they can do that through it sounds like Sheila.
Speaker Change #501: Okay in terms of your first questions I'm very happy to let you know that.
We have been progressing pretty good into those previously less penetrated area as well as the weak settlements previously.
Speaker Change #502: Tao improvements and.
Speaker Change #502: The process.
Speaker Change #503: Satisfying a meeting the management's expectation.
Speaker Change #504: They are going through when I went out and talked to them. So it is a bottleneck Egypt on your shoulder and vending machine and quickly mobilize United's onboard.
Speaker Change #505: Other than the timing.
Speaker Change #506: I don't really see a hyper cool two Wheeler who is this one versus an exit.
Speaker Change #507: <unk> aren't doing and you'll come out of the five that wouldnt be familiar with who you once again.
Speaker Change #508: The genius of acquiring them.
Speaker Change #509: Some real Michelle is that to the T cell.
My son, Who's in that idea, that's one of the other Gs.
So we foresee good due diligence and do the pricing.
Speaker Change #510: We'll continue into peloton nowadays you've only done a couple of the type a and b, maybe two of them into <unk>.
Speaker Change #510: Hi, This is bill with you Nancy English here.
Speaker Change #510: John.
Speaker Change #511: And then she quantities with you Jody <unk> never had a <unk> <unk> Sidoti <unk> co.
In terms of the sales excellence.
Mentioned last quarter.
Speaker Change #512: <unk> previously.
Speaker Change #513: Towards views.
Speaker Change #514: High efficiency.
Speaker Change #515: Cost as well as our scale to maintain the leading position, but in the future. If we want to further enhance our strengths our leading positions in China or even in the ward definitely we need to focus on more service more.
Speaker Change #516: Our user experiences and management customer centric management capability enhancements as well. So just give you several examples because of the time limit for the service excellence, we are focusing on the customer satisfaction rate.
Speaker Change #517: And the weather has improved or not but more details we will be sharing in our near future. Thank you.
Speaker Change #517: Thank you.
Speaker Change #517: This concludes the Q&A session I will now hand back to Jason for closing remarks.
Jason Chin: Thank you everyone for taking your time with US today, and we look forward to see you in upcoming quarter. Thank you and bye bye.
Thank you. This concludes today's conference call. Thank you all for participating you may now disconnect.