Franchise News

• A total of 2,757 hotels with 221,529 hotel rooms were in operation as of December 31, 2018, compared to 2,558 hotels and 209,463 hotel rooms as of September 30, 2018, and compared to 2,289 hotels and 190,807 hotel rooms as of December 31, 2017.
• Total revenues increased 20.8% from the fourth quarter of 2017 to RMB249.9 million (US$36.3 million)^[1] for the fourth quarter of 2018. Total revenues increased 21.4% year-over-year to RMB945.0 million (US$137.4 million)^[1] for the full year 2018.
• Adjusted EBITDA (non-GAAP) increased 35.2% from the fourth quarter of 2017 to RMB160.1 million (US$23.3 million)^[1] for the fourth quarter of 2018. Adjusted EBITDA (non-GAAP) increased 30.5% year-over-year to RMB609.7 million (US$88.7 million)^[1] for the full year 2018.
• Net income was RMB53.8 million (US$7.8 million)^[1] for the fourth quarter of 2018. Net income increased 38.1% from the same quarter of 2017 to RMB393.6 million (US$57.2 million)^[1] for the full year 2018.
• Core net income (non-GAAP) increased 33.4% from the fourth quarter of 2017 to RMB115.9 million (US$16.9 million)^[1] for the fourth quarter of 2018. Core net income (non-GAAP) increased 31.8% year-over-year to RMB445.3 million (US$64.8 million) ^[1] for the full year 2018.
• Basic and diluted net income per ADS were RMB0.53 (US$0.08)^[1] for the fourth quarter of 2018. Basic and diluted net income per ADS were RMB3.97 (US$0.58)^[1] for the full year 2018.
• Basic and diluted core net income per ADS (non-GAAP) were RMB1.14 (US$0.17)^[1] for the fourth quarter of 2018. Basic and diluted core net income per ADS (non-GAAP) were RMB4.49 (US$0.65)^[1] for the full year 2018.
• As of December 31, 2018, the Company had a strong pipeline with a total of 430 hotels contracted for or under development. For the fourth quarter of 2018, the Company opened 224 hotels of which all are F&M hotels, compared to 171 hotels of which all are F&M hotels for the fourth quarter of 2017. For the full year 2018, the Company opened 554 hotels, compared to 425 hotels for the full year 2017.
• As of December 31, 2018, the Company had approximately 29 million individual loyal members (of which approximately 21 million are paid members) and over 1,270,000 corporate members, compared to approximately 26 million individual loyal members (of which approximately 20 million are paid members) and over 1,020,000 corporate members respectively, as of September 30, 2018.
• For the fourth quarter of 2018, the Company sold approximately 94.5% of its room nights through its direct sales channels, including its individual loyal members and corporate members, while all other third parties reservation channels, contributed approximately 5.5%. For the full year 2018, the Company sold approximately 95.0% of its room nights through its direct sales channels.
• The Company provided guidance for growth in total revenue of 20%-25% from 2018.

GreenTree Hospitality Group Ltd. (NYSE: GHG) ("GreenTree", the "Company", "we", "us" and "our"), a leading franchised hotel operator in China, today announced its unaudited financial results for the fourth quarter and fiscal year of 2018.

Fourth Quarter of 2018 Operational Highlights

• As of December 31, 2018, GreenTree had 29 leased-and-operated ("L&O") hotels and 2,728 franchised-and-managed ("F&M") hotels in operation in 290 cities across China, compared to 30 L&O hotels and 2,528 F&M hotels in operation in 278 cities as of September 30, 2018, compared to 26 L&O hotels and 2,263 F&M hotels in operation in 263 cities as of December 31, 2017. The geographical coverage of cities grew by 27, with a year-over-year increase of 10.3%.
• The Company opened 224 hotels of which all are F&M hotels, 28 in the mid-to-up-scale segment, 86 in the mid-scale segment and 110 in the economy segment. Of the hotels opened, 20 hotels were in Tier 1 cities^[2], 49 in Tier 2 cities^[3] and the remaining 155 hotels in other cities in China, while the Company closed a total of 25 hotels in the quarter.
• As of December 31, 2018, the Company had a strong pipeline with a total of 430 hotels contracted for or under development.
• The average daily room rate, or ADR, for all hotels in operation, was RMB164 in the fourth quarter of 2018, an increase of 3.8% from the same quarter of 2017.
• The occupancy rate for all hotels in operation was 80.4% in the fourth quarter of 2018, a decrease of 1.0% from the same quarter of 2017.
• The revenue per available room, or RevPAR, which is calculated by multiplying our hotels' ADR by its occupancy rate, was RMB132 in the fourth quarter of 2018, representing a 2.3% increase from the same quarter of 2017.

Operational Highlights for the Full Year 2018

• For the full year 2018, the Company opened 554 hotels, of which 553 are F&M hotels and one L&O hotels, 60 in the mid-to-up-scale segment, 271 in the mid-scale segment and 223 in the economy segment. Of the hotels opened, 47 hotels were in Tier 1 cities^[4], 121 in Tier 2 cities^[5] and the remaining 386 hotels in other cities in China, while the Company closed a total of 86 F&M hotels and one L&O hotel in this year.
• The average daily room rate, or ADR, for all hotels in operation, was RMB164 for the full year 2018, an increase of 4.5% year over year.
• The occupancy rate for all hotels in operation was 82.1% for the full year 2018, a decrease of 0.5% year over year.
• The revenue per available room, or RevPAR, which is calculated by multiplying our hotels' ADR by its occupancy rate, was RMB135 for the full year 2018, representing a 3.8% year-over-year increase.
• The Company sold approximately 95.0% of its room nights through its direct sales channels, including its individual loyal members and corporate members, while online travel agencies, or OTAs, only contributed approximately 5.0%.
• The Company added one more brand called Wumian in the mid-scale segment during the third quarter. Wumian aims to provide comfortable, intimate, simple and stylish space to business travelers for "a deep sleep" experience.
• The Company started its apartment business during the second half of the year, and opened one hotel in 2018.
• The Company's App was ranked 2^nd in terms of user activity on the "Intelligent Mobile Observatory" in hotel sector, a famous mobile big data query platform launched by TalkingData, as of December 31, 2018.

"We remain committed to a steady and stable growth strategy as we explore the growing consumption trends in the second and third tier cities and expand our geographical coverage across China, covering 290 cities at the end of December 2018, " commented Mr. Alex Xu, Chairman and Chief Executive Officer of GreenTree. "We are investing in select companies to develop strong partnerships that will enhance each other resources, particularly technology and talents, in order to create more value for our customers and franchisees.  We will continue to explore similar investment opportunities and we remain interested in exploring appropriate value-enhancing acquisitions to help strengthen our hotel platform and increase long-term shareholder value."

Total revenues for the fourth quarter of 2018 were RMB249.9 million (US$36.3 million)^[1], representing a 20.8% increase over the fourth quarter 2017. The increase in the fourth quarter of 2018 was primarily attributable to the 199 F&M hotels net addition to our network during this quarter, the addition of a new L&O hotel and the conversion of three F&M to L&O hotels during last quarter, improved RevPAR for both F&M and L&O hotels as well as membership growth; and was partially offset by the renovation of six L&O hotels since last quarter and the conversion of one L&O to an F&M hotel during this quarter.

Total revenues for the full year 2018 were RMB945.0 million (US$137.4 million)^[1], representing a 21.4% increase over full year 2017. The year-over-year increase was primarily attributable to RevPAR growth of 3.8%, and the 468 hotels net addition, compared to 325 last year, as well as membership growth. Membership fee were divided into L&O and F&M revenues.

• Total revenues from leased-and-operated hotels for the fourth quarter of 2018 were RMB56.8 million (US$8.3 million)^[1] , representing a 6.1% increase from the same quarter of 2017.
• Total revenues from leased-and-operated hotels for the full year 2018 were RMB213.2 million (US$31.0 million)^[1] , representing a 10.1% year-over-year increase.
• Total revenues from franchised-and-managed hotels for the fourth quarter of 2018 were RMB193.0 million (US$28.1 million)^[1] , representing a 26.0% increase from the same quarter of 2017. Initial franchise fees increased 2.0% in the fourth quarter of 2018 from the same quarter of 2017, primarily due to the gross opening of 224 hotels in the fourth quarter of 2018 as compared to 171 hotels opened in the fourth quarter of 2017, as well as a temporary waiver of initial franchisee fees for Shell hotels, which opened since the third quarter of 2018. The 29.3% increase from the fourth quarter of 2017 in recurring franchisee management fees and others was primarily due to RevPAR growth of 2.3% as well as growth in membership fees, and central reservation system ("CRS") usage fees, annual IT, marketing fees, hotel manager fees, which in turn resulted from the increased number of hotels and hotel rooms in operation.
• Total revenues from franchised-and-managed hotels for the full year 2018 were RMB731.8 million (US$106.4 million)^[1], representing a 25.2% year-over-year increase. Initial franchise fees increased 18.2% year over year for the full year 2018, primarily due to the gross opening of 553 hotels for the full year 2018 as compared to 425 hotels opened for the full year 2017. The 25.9% year-over-year increase in recurring franchisee management fees and others in full year 2018 was primarily due to RevPAR growth of 3.9% as well as growth in membership fees, and central reservation system ("CRS") usage fees, annual IT, marketing fees, hotel manager fees, which in turn resulted from the increased number of hotels and hotel rooms in operation.

Hotel operating costs for the fourth quarter of 2018 were RMB74.1 million (US$10.8 million)^[1] , representing a 25.5% increase from the same quarter of 2017. The increase in the fourth quarter of 2018 was mainly attributable to the increased number and the increased salary of general managers in our hotel network and other costs associated with the expansion of our F&M hotels, and higher rental costs, utility costs, consumables and personnel costs associated with the four new L&O hotels added to our portfolio since the third quarter of 2018; and was partially offset by reduced utility costs due to the renovation of six L&O hotels since the third quarter, and also offset by reduced depreciation and amortization and operating costs related to the conversion of one L&O hotel.

Hotel operating costs for the full year 2018 were RMB281.0 million (US$40.9 million)^[1], representing an 20.2% year-over-year increase. The year-over-year increase for the full year 2018 was mainly attributable to the increased number of general managers in our hotel network and other costs associated with the expansion of our F&M hotels, and higher rental costs, utilities, consumables and personnel costs associated with the GreenTree Eastern L&O hotels and the four new L&O hotels added to our portfolio since the third quarter of 2018.

Selling and marketing expenses for the fourth quarter of 2018 were RMB16.2 million (US$2.4 million)^[1] , compared to RMB15.7 million in the fourth quarter of 2017. The increase of 3.0% from the fourth quarter of 2017 was mainly attributable to model room construction, increased personnel, compensation and other costs (i.e. travel expenses) of business development personnel, as a result of the increased opening of hotels.

Selling and marketing expenses for the full year 2018 were RMB50.4 million (US$7.3 million)^[1], compared to RMB45.0 million for the full year 2017. The year-over-year increase of 11.9% for the full year 2018 was mainly attribute to model room construction, exhibition and other advertising and promotion expenses related to our three new mid-to-upscale brands, increased personnel, compensation and other costs (i.e. travel travelling) of business development personnel, as a result of the increased hotel openings and wider geographic coverage.

General and administrative expenses for the fourth quarter of 2018 were RMB34.8 million (US$5.1 million)^[1]. Excluding the one-time grant of GTI's shares to certain of our directors in the fourth quarter of 2017, G&A in the quarter increased by 35.3%, compared to the same quarter of 2017. The increase was primarily attributable to the increased salary and share-based compensation.

General and administrative expenses for the full year 2018 were RMB95.3 million (US$13.9 million)^[1]. Excluding the one-time grant of GTI's shares to certain of our directors in the fourth quarter of 2017, G&A for the full year 2018 increased by 13.9% year over year,

Gross profit for the fourth quarter of 2018 was RMB175.8 million (US$25.6 million)^[1] , representing an increase of 19.0% from the same quarter of 2017. Gross margin in the fourth quarter was 70.3%, compared to 71.4% a year ago. Gross profit for the full year 2018 was RMB664.1 million (US$96.6 million)^[1], representing a year-over-year increase of 22.0%.

Income from operations for the fourth quarter of 2018 was RMB123.1 million (US$17.9 million)^[1] , representing an increase of 89.0% from the same quarter of 2017. Operating margin in the fourth quarter increased to 49.3%, compared to 31.5% a year ago. Income from operations for the full year 2018 was RMB535.0 million (US$77.8 million)^[1]  representing a year-over-year increase of 38.1%.

Adjusted EBITDA (non-GAAP) for the fourth quarter of 2018 was RMB160.1 million (US$23.3 million)^[1], an increase of 35.2% from the same quarter of 2017. The adjusted EBITDA margin, defined as adjusted EBITDA (non-GAAP) as a percentage of total revenues, was 64.1% in the fourth quarter of 2018, compared to 57.3% in the fourth quarter of 2017. Adjusted EBITDA (non-GAAP) for the full year 2018 was RMB609.7 million (US$88.7 million)^[1], a year-over-year increase of 30.5%.

Net income for the fourth quarter of 2018 was RMB53.8 million (US$7.8 million)^[1]. Excluding the one-time grant of GTI's shares to certain of our directors in the fourth quarter of 2017, net income in the quarter increased by 91.4%, compared to the same quarter of 2017; net margin in the quarter was 21.5%, compared to 13.6% a year ago. Net income for the full year 2018 was RMB393.6 million (US$57.2 million)^[1]. Excluding the one-time grant of GTI's shares to certain of our directors in the fourth quarter of 2017, net income for the full year increased by 21.8% year over year.

Core net income (non-GAAP) for the fourth quarter of 2018 was RMB115.9 million (US$16.9 million)^[1] representing a 33.4% increase from the same quarter of 2017.The core net margin, defined as core net income (non-GAAP) as a percentage of total revenues, was 46.4% in the fourth quarter of 2018, compared to 42.0% in the fourth quarter of 2017. Core net income (non-GAAP) for the full year 2018 was RMB445.3 million (US$64.8 million)^[1], representing a 31.8% year-over-year increase.

Basic and diluted earnings per ADS for the fourth quarter of 2018 was RMB0.53 (US$0.08)^[1], representing an RMB0.64 increase than one year ago. Basic and diluted earnings per ADS was RMB3.97 (US$0.58)^[1] for the full year 2018, representing a 27.2% year-over-year increase. Basic and diluted core net income per ADS (non-GAAP) was RMB1.14 (US$0.17)^[1] for the fourth quarter of 2018, representing a 20.0% increase from the same quarter of 2017. Basic and diluted core net income per ADS (non-GAAP) were RMB4.49 (US$0.65)^[1] for the full year 2018, representing a 21.4% year-over-year increase.

Cash flow. Operating cash inflow for the fourth quarter of 2018 was RMB152.6 million (US$22.2 million)^[1], due primarily to improved operating performance across our hotel portfolio. Operating cash inflow for the full year 2018 was RMB554.9 million (US$80.7 million)^[1]. Investing cash inflow for the fourth quarter of 2018 was RMB153.5 million (US$22.3 million)^[1], which was attributable primarily to changes in short-term investments, repayment of loan from third parties, and partially offset by purchase of property and equipment and other investments, mainly including short-term investments, long-term deposits, and loan to franchisees. Investing cash outflow for the full year 2018 was RMB181.8 million (US$26.4 million)^[1]. Financing cash inflow for the fourth quarter of 2018 was RMB58.3 million (US$8.5 million)^[1], which was attributable primarily to RMB60.0 million of proceeds from short-term borrowings. Net financing cash inflow for the full year 2018 was RMB662.8 million (US$96.4 million)^[1], which was attributable primarily to proceeds from initial public offering and was partially offset by distribution to the shareholders and payment for initial public offering costs.

Cash and cash equivalents, restricted cash, Short-term investments and securities. As of December 31, 2018, the Company had a total balance of cash and cash equivalents, restricted cash, short term investments and investments in equity securities of RMB2,260.5 million (US$328.8 million)^[1], as compared to RMB1,996.3 million as of September 30, 2018, primarily due to net operating cash inflow, offset by investing cash flow for property and equipment and other investments.

Guidance

For the full year 2019, the Company expects growth in total revenues of 20-25% from 2018.

The guidance set forth above reflects the Company's current and preliminary view based on our estimates, may not be indicative of our financial results for the full year ended December 31, 2019 and is subject to change.

Recent Developments

On January 18, 2019, the Company invested in China Gingko Education Group Company Limited, a public company listed on the Hong Kong Stock Exchange ("HKSE"). In the 2017/2018 school year, approximately 10,000 students are enrolled in the college. Gingko is currently ranked as China's number one hospitality university by the "Gaosan Web Association", a website with introductions to and rankings of universities in China. The two companies will work together to cultivate professional talent for us and the hospitality industry in China.

On January 28, 2019, the Company announced it would become a major shareholder of Argyle Hotel Management Group (Australia) Pty Ltd. The Argyle hotel network consists of eight mid-scale and upscale brands, with footprints mainly in South West China, South East China, and some hotels in Southeast Asia. Argyle's highly distinguished brand portfolio and geographic coverage are highly complementary to GreenTree's business.

On March 11th, 2019, the Company acquired 4.95% in Zhejiang New Century Hotel Management Co., Ltd, which was listed on HKSE on March 11, 2019. New Century operates and manages 150 hotels, ranging from mid-scale to upscale brands, with over 34,000 hotel rooms in 22 provinces. The two companies will explore opportunities for future strategic cooperation.  

Dividend Policy

On January 22, 2019, the Company announced the payment of a cash dividend of US$0.30 per ordinary share, or US$0.30 per American Depositary Share ("ADS"). In addition, the company plans to pay a cash dividend of US$0.20 per share per year in the near future, if there is no immediate cash need for the Company's growth or M&A opportunities, to create long-term value and benefits for our shareholders.

Conference Call

GreenTree's management will hold an earnings conference call at 8:00 AM U.S. Eastern Time on March 14, 2019 (8:00 PM Beijing/Hong Kong Time on March 14, 2019). 

Dial-in numbers for the live conference call are as follows:

Participants should ask to join the GreenTree call, please dial in approximately 10 minutes before the scheduled time of the call.

A telephone replay of the call will be available after the conclusion of the conference call until March 21, 2019.

Dial-in numbers for the replay are as follows:

Additionally, a live and archived webcast of this conference call will be available at http://ir.998.com.

Use of Non-GAAP Financial Measures

We believe that Adjusted EBITDA and core net income, as we present it, is a useful financial metric to assess our operating and financial performance before the impact of investing and financing transactions, income taxes and certain non-core and non-recurring items in our financial statements.

The presentation of Adjusted EBITDA and core net income should not be construed as an indication that our future results will be unaffected by other charges and gains we consider to be outside the ordinary course of our business.

The use of Adjusted EBITDA and core net income has certain limitations because it does not reflect all items of income and expenses that affect our operations. Items excluded from Adjusted EBITDA and core net income are significant components in understanding and assessing our operating and financial performance. Depreciation and amortization expense for various long-term assets, income tax and share-based compensation have been and will be incurred and are not reflected in the presentation of Adjusted EBITDA. Each of these items should also be considered in the overall evaluation of our results. Additionally, Adjusted EBITDA and core net income does not consider capital expenditures and other investing activities and should not be considered as a measure of our liquidity. We compensate for these limitations by providing the relevant disclosure of our depreciation and amortization, interest expense/income, gains/losses from trading securities, income tax expenses, share-based compensation, share of loss in equity investees, government subsidies and other relevant items both in our reconciliations to the corresponding U.S. GAAP financial measures and in our consolidated financial statements, all of which should be considered when evaluating our performance.

The term Adjusted EBITDA and core net income is not defined under U.S. GAAP, and Adjusted EBITDA and core net income is not a measure of net income, operating income, operating performance or liquidity presented in accordance with U.S. GAAP. When assessing our operating and financial performance, you should not consider this data in isolation or as a substitute for our net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP. In addition, our Adjusted EBITDA and core net income may not be comparable to Adjusted EBITDA and core net income or similarly titled measures utilized by other companies since such other companies may not calculate Adjusted EBITDA and core net income in the same manner as we do.

Reconciliations of the Company's non-GAAP financial measures, including Adjusted EBITDA and core net income, to the consolidated statement of operations information are included at the end of this press release.

About GreenTree Hospitality Group Ltd.

GreenTree Hospitality Group Ltd. ("GreenTree" or the "Company") (NYSE: GHG) is a leading franchised hotel operator in China. As of December 31, 2018, GreenTree had 2,757 hotels, among which 2,728 are franchised and managed hotels. The Company had the highest proportion of franchised-and-managed hotels among the top four economy to mid-scale hotel networks in China. In 2017, GreenTree was the fourth largest economy to mid-scale hotel group in China in terms of number of hotels according to China Hospitality Association. The Company has built a strong suite of brands including its flagship "GreenTree Inns" brand as a result of its long-standing dedication to the hospitality industry in China and consistent quality of its services, signature hotel designs, broad geographic coverage and convenient locations. GreenTree has positioned its brands to appeal to value-and-quality-conscious business travelers and leisure travelers.

For more information on GreenTree, please visit http://ir.998.com

Safe Harbor Statements

This press release contains forward-looking statements made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and the U.S. Private Securities Litigation Reform Act of 1995.  In some cases, these forward-looking statements can be identified by words or phrases such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to," "confident," "future," or other similar expressions. GreenTree may also make written or oral forward-looking statements in its reports filed with or furnished to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Any statements that are not historical facts, including statements about or based on GreenTree's current beliefs, expectations, assumptions, estimates and projections about us and our industry, are forward-looking statements that involve known and unknown factors, risks and uncertainties that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. Such factors and risks include, but not limited to the following: GreenTree's goals and growth strategies; its future business development, financial condition and results of operations; trends in the hospitality industry in China and globally; competition in our industry; fluctuations in general economic and business conditions in China and other regions where we operate; the regulatory environment in which we and our franchisees operate; and assumptions underlying or related to any of the foregoing. You should not place undue reliance on these forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in the Company's filings with the U.S. Securities and Exchange Commission. All information provided, including the forward-looking statements made, in this press release are current as of the date of the press release. Except as required by law, GreenTree undertakes no obligation to update any such information or forward-looking statements to reflect events or circumstances after the date on which the information is provided or statements are made, or to reflect the occurrence of unanticipated events.

Operational Data

GreenTree

Ms. Selina Yang
Phone: +86-21-3617-4886 ext. 7999
E-mail: [email protected]

Mr. Nicky Zheng
Phone: +86-21-3617-4886 ext. 6708
E-mail: [email protected]

Christensen

In Shanghai
Ms. Constance Zhang
Phone: +86-138-1645-1798
E-mail: [email protected]

In Hong Kong 
Ms. Karen Hui 
Phone: +852-9266-4140 
E-mail: [email protected]

In US 
Ms. Linda Bergkamp 
Phone: +1-480-614-3004
Email: [email protected]