• Total Revenue: RMB357 million, a decrease of 22.5% year-over-year.
• Hotel Revenue: RMB286.9 million, a decrease of 15.4% year-over-year.
• Restaurant Revenue: RMB70.6 million, a decrease of 42% year-over-year.
• RevPAR (Revenue per Available Room): RMB135, a decrease of 13.6% year-over-year.
• Net Income: RMB65.2 million, a decrease of 44.4% year-over-year.
• Adjusted EBITDA: RMB122.5 million, a decrease of 32.1% year-over-year.
• Income from Operations: RMB106.4 million with a margin of 29.8%.
• Cash and Cash Equivalents: RMB1,883.9 million as of September 30, 2024.
• Number of Restaurants: Stabilized at 182 at the end of the quarter.
• Individual Memberships: Grew to 100 million, up from 88 million a year ago.
• Corporate Memberships: Grew to 2.1 million, up from 2 million a year ago.

• Warning! GuruFocus has detected 5 Warning Signs with GHG.

Release Date: November 21, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• GreenTree Hospitality Group Ltd (NYSE:GHG) reported an improvement in their hotel business in the third quarter compared to the first two quarters of the year, indicating a recovery in the economy.
• The company successfully maintained positive net income in its restaurant business for the second consecutive quarter, with stable consumer traffic.
• GreenTree Hospitality Group Ltd (NYSE:GHG) expanded its mid to upscale hotel segment, adding more hotels in Tier 2 and Tier 3 cities, particularly in South China.
• The company saw growth in its membership programs, with individual memberships increasing to 100 million and corporate memberships to 2.1 million.
• GreenTree Hospitality Group Ltd (NYSE:GHG) has a strategic plan to improve its restaurant business by focusing on areas with greater foot traffic and transitioning to a new business model with F&M stores.

Negative Points

• Hotel RevPAR decreased by 13.6% year-over-year, and restaurant ADS decreased by 25.6%, leading to a total revenue decline of 22.5%.
• Net income decreased by 44.4% with a margin of 18.3%, and adjusted EBITDA decreased by 32.1% with a margin of 34.3%.
• The company experienced a 7.5% decrease in RevPAR for L&O hotels and a decrease in occupancy rates for both L&O and F&M hotels.
• General and administrative expenses increased by 32.5% due to a rise in bad debt provisions for long-aged accounts receivables.
• GreenTree Hospitality Group Ltd (NYSE:GHG) anticipates a revenue decrease of approximately 8% for its hotel business for the full year 2024 compared to 2023, partly due to lower than expected travel in the third quarter.

Q & A Highlights

Q: Can you talk about the trend of the industry and how the company's performance in the third quarter compared to your peers? Also, what do you expect for the restaurant business in Q4? A: Alex Xu, CEO: Our portfolio has a higher percentage of aged hotels, which impacted our RevPAR more severely compared to newer hotels. However, we observed an improvement in occupancy in October and expect Q4 to perform better. For the restaurant business, we have repositioned our model to focus on locations with higher foot traffic and improved supply chain management, leading to better performance than the industry average. We are cautiously optimistic about maintaining profitability.

Q: Could you give us some more color on your expectations for the sector supply and demand landscape going forward? Will the current fast supply expansion continue in 2025? A: Alex Xu, CEO: The industry's competition has intensified, but we expect a more normalized environment. We anticipate better performance in 2025 with new hotel openings, especially in Tier 2 and Tier 3 cities. Our new products will be more competitive, and we are optimistic about our 2025 outlook.

Q: What do you think about your bargaining power with OTAs, given their double-digit growth in the hotel industry? A: Alex Xu, CEO: The growth of OTAs is understandable as we move into a digital era. We are working closely with reputable OTAs to ensure mutually profitable relationships. The trend towards digital reservations is clear, and we are adapting to it.

Q: Do you have any plans to continue paying dividends in the future, given the lower-than-expected performance in Q3? A: Alex Xu, CEO: Despite the drop in net income, we are confident in our ability to continue our dividend policy. The drop was partly due to a foreign exchange paper loss and bad debt provisions, which we expect to recover. Our operating income and EBITDA should improve, supporting our dividend strategy.

Q: How do you plan to improve liquidity in the capital market? A: Alex Xu, CEO: We are undergoing a reorganization where the parent company will merge with GHG, increasing liquidity by making parent company shareholders direct shareholders of GHG. This should boost liquidity in the long run, and we are on schedule with the approval process.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.