GreenTree Hospitality Group, a leading hospitality management group in China, today announced its unaudited financial results for the fourth quarter and fiscal year of 2019.
• A total of 3,957 hotels with 290,026 hotel rooms were in operation as of December 31, 2019, compared to 3,102 hotels and 245,705 hotel rooms as of September 30, 2019, and compared to 2,757 hotels and 221,529 hotel rooms as of December 31, 2018.
• Total revenues increased 20.4% to RMB289.4 million (US$41.6 million) for the fourth quarter of 2019. Total revenues increased 20.6% to RMB1,091.8 million (US$156.8 million) for the full year 2019.
• Adjusted EBITDA (non-GAAP) increased 11.4% to RMB162.3million (US$23.3 million) for the fourth quarter of 2019. Adjusted EBITDA (non-GAAP) increased 12.1% to RMB594.1 million (US$85.3 million) for the full year 2019.
• Net income increased 48.9% to RMB74.5 million (US$10.7 million) for the fourth quarter of 2019. Net income increased 17.9% to RMB437.8 million (US$62.9 million) for the full year 2019.
• Core net income (non-GAAP) increased 15.8% to RMB129.9 million (US$18.7 million) for the fourth quarter of 2019. Core net income (non-GAAP) increased 16.7% to RMB482.7 million (US$69.3 million) for the full year 2019.
• The Company expects total revenue for the full year 2020 to decline 10%-15% from 2019, with consideration of COVID-19.
Fourth Quarter of 2019 Operational Highlights
• As of December 31, 2019, the Company had 34 leased-and-operated ("L&O") hotels and 3,923 franchised-and-managed ("F&M") hotels in operation in 339 cities across China, compared to 29 L&O hotels and 2,728 F&M hotels in operation in 290 cities as of December 31, 2018. The geographic coverage increased by 16.9% year over year.
• During the fourth quarter of 2019, the Company opened 190 hotels, a decrease of 34 comparing to 224 hotels in the fourth quarter of 2018. Among the hotels opened, 29 were in the mid-to-up-scale segment, 81 in the mid-scale segment, and 80 in the economy segment. Geographically speaking, 14 hotels were in Tier 1 cities, 37 were in Tier 2 cities and the remaining 139 were in Tier 3 and other cities in China. During this quarter, the Company closed 41 hotels, 9 due to brand upgrade, and 20 due to their non-compliance with the Company's brand and operating standards. The remaining 12 were closed for property-related issues. The Company added a net opening of 149 hotels to its portfolio.
• As of December 31, 2019, the Company had a pipeline with a total of 949 hotels contracted for or under development, among which 54 hotels were in the luxury hotel segment, 181 in the mid-to-up-scale segment, 364 in the mid-scale segment, and 350 in the economy segment.
• The average daily room rate, or ADR, for all hotels in operation, was RMB170 in the fourth quarter of 2019, an increase of 3.6% year-over-year.
• The occupancy rate or OCC for all hotels in operation was 78.2% in the fourth quarter of 2019, compared with 80.4% in the fourth quarter of 2018.
• The revenue per available room, or RevPAR, which is calculated by multiplying our hotels' ADR by its occupancy rate, was RMB133 in the fourth quarter of 2019, representing a 0.9% year-over-year increase.
• As of December 31, 2019, the Company's loyalty program had more than 44 million individual members and over 1,510,000 corporate members, compared to approximately 39 million and over 1,450,000 corporate members as of September 30, 2019. The Company had approximately 93.0% of room nights sold directly.
2019 Full Year Operational Highlights
• For the full year 2019, the Company opened 607 hotels, an increase of 9.6% comparing to 554 newly opened hotels in the full year 2018. Among the hotels opened, 4 were in the luxury hotel segment, 84 in the mid-to-up-scale segment, 287 in the mid-scale segment, and 232 in the economy segment. Geographically speaking, 43 hotels were in Tier 1 cities, 129 were in Tier 2 cities and the remaining 435 were in Tier 3 and other cities in China. During this year, the Company closed 140 hotels, 34 due to brand upgrade, and 75 due to their non-compliance with the Company's brand and operating standards. The remaining 31 were closed for property-related issues. The Company added a net opening of 467 hotels to its portfolio.
• The average daily room rate, or ADR, for all hotels in operation, was RMB170 in the full year 2019, an increase of 3.6% year-over-year.
• The occupancy rate or OCC for all hotels in operation was 80.9% in the full year 2019, compared with 82.1% in the full year 2018.
• The revenue per available room, or RevPAR, which is calculated by multiplying our hotels' ADR by its occupancy rate, was RMB137 in the full year 2019, representing a 2.0% year-over-year increase.
• The Company had approximately 93.5% of room nights sold directly in the full year 2019
• The Company has completed the consolidation of Argyle Hotel Management Group (Australia) Pty Ltd ("Argyle") in the second quarter of 2019 and of Urban Hotel Group ("Urban") in the fourth quarter of 2019.
• With the introduction of branded restaurant to hotels, the Company's Food and Beverage services can bring additional revenue and attract more guests to hotels.
• The Company have been working with several major banks in joint marketing activities to cross-promote each other's membership programs.
"Last year we completed a number of strategic investments which resulted in a number of joint venture investments for our Company," said Mr. Alex Xu, Chairman and Chief Executive Officer of GreenTree. "In Q4, we completed the merger of Urban Hotels in December and restructured our development team. By year-end, our pipeline growth had increased by 120% over 2018. During the first quarter of 2020, we have taken further initiatives to improve our technology for our users, to improve the health and safety of our hotels for our guests and employees, to refine our sales and marketing focus, and to provide flexible franchise terms and support. With these combined efforts, our hotels should be able to continue to outperform in 2020.
"No words can express our gratitude and appreciation for the sacrifices and hard work made by our employees and our franchisees during the COVID-19 crisis. We owe our deepest thanks to our employees, guests, medical professionals, police, firefighters, and community leaders for their heroic support during the crisis. Thanks to all of them, our operations are recovering rapidly.
"Our mission has always been to support our franchisees and employees and to create value for our shareholders. With almost 4,000 hotels in operation and almost 1,000 under construction, our foundation is stronger, our pipeline is bigger, our teams are more focused, and we are better positioned to grow, in spite of the current crisis. We are confident that we will deliver another year of outstanding services to our guests and strong performance to our franchisees and shareholders."
Total revenues for the fourth quarter of 2019 were RMB289.4 million (US$41.6 million), representing a 20.4% year-over-year increase. The increase was primarily due to four factors: the opening of 190 F&M hotels, improved RevPAR, growth in our loyalty membership program, and the consolidation of Urban and Argyle into our financial statements. Growth was partially offset by the renovation of 6 L&O hotels. Total revenues for the full year 2019 were RMB1,091.8 million (US$156.8 million), representing a 20.6% increase.
Hotel operating costs for the fourth quarter of 2019 were RMB92.6 million (US$13.3 million), representing a 28.7% increase from the fourth quarter of 2018. For the full year 2019, hotel operating costs were RMB338.8 million (US$48.7 million), representing a 23.5% increase.
Selling and marketing expenses for the fourth quarter of 2019 were RMB23.2 million (US$3.3 million), representing a 66.9% year-over-year increase. For the full year 2019, selling and marketing expenses were RMB85.0 million (US$12.2 million), representing a 79.3% increase.
General and administrative expenses for the fourth quarter of 2019 were RMB79.6 million (US$11.4 million), representing a 212.4% year-over-year increase. General and administrative expenses for the full year 2019 were RMB185.0 million (US$26.6 million), representing a 94.2% year-over-year increase.
Gross profit for the fourth quarter of 2019 was RMB196.8 million (US$28.3 million), representing an increase of 16.9% from the fourth quarter of 2018. Gross profit for the full year 2019 was RMB753.0 million (US$108.2 million), representing a 19.3% year-over-year increase.
Income from operations for the fourth quarter of 2019 totaled RMB98.8 million (US$14.2 million), representing a year-over-year decrease of 16.3%. Income from operations for the full year 2019 totaled RMB504.6 million (US$72.5 million)[1], representing a year-over-year decrease of 0.1%.
Adjusted EBITDA (non-GAAP) for the fourth quarter of 2019 was RMB162.3million (US$23.3 million), representing a year-over-year increase of 11.4%. Adjusted EBITDA (non-GAAP) for the full year 2019 was RMB594.1 million (US$85.3 million)[1], representing a year-over-year increase of 12.1%.
Net income for the fourth quarter of 2019 was RMB74.5 million (US$10.7 million), representing a year-over-year increase of 48.9%. Net income for the full year 2019 was RMB437.8 million (US$62.9 million), representing a year-over-year increase of 17.9%.
Core net income (non-GAAP) for the fourth quarter of 2019 was RMB129.9 million (US$18.7 million), representing a year-over-year increase of 15.8%. Core net income (non-GAAP) for the full year 2019 was RMB482.7 million (US$69.3 million), representing a year-over-year increase of 16.7%.
Operating cash inflow for the fourth quarter of 2019 was RMB118.5 million (US$17.0 million), primarily due to improved operating performance across our hotel portfolio. Operating cash inflow for the full year 2019 was RMB513.9 million (US$73.8 million).
COVID-19 Updates
Thanks to the Chinese government's efforts to contain the spread of COVID-19, the outbreak is coming under control in China. But the measures that had to be taken, including the lock-down of cities, business closures, and restrictions on travel, disrupted the operations of the Company's hotels. Some were forced to close, and a number of hotels were required to house medical staff, volunteers, and quarantined travelers.
During this crisis, GreenTree's priority has been to keep every guest and staff safe and healthy. The Company took a number of substantial operational and financial measures including rigorous health, safety and hygiene protocols and practices, franchise fee waivers and financial support for its franchisees, self-quarantine rooms for employees and guests, and free COVID-19 health insurance for its members. The Company has actively participated in providing support for medical workers and police officers.
Thanks to the various policies and financial assistance from central and local governments and the abovementioned support measures from GreenTree, most franchisees were ready to resume business operations when shelter-in-place was lifted. As a result, as of March 31, 2020, 93.01% of the Company's hotels were back in operation, and achieved an overall occupancy of 51.6%, up substantially from the low of 21.5% on January 31, 2020.
Guidance
Due to the impact of COVID-19, the Company expects a decline in total revenues in the first quarter of 2020 of 30%-35% year-over-year (37-39% excluding the impact of newly consolidated companies), and a decline in total revenues of 10%-15% for the full year 2020, compared to 2019.
