Good day, and welcome to the GreenTree Hospitality Group Limited Fourth Quarter and Fiscal Year 2024 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, today's event is being recorded. I would now like to turn the conference over to Rene Vanguestaine with Christensen. Please go ahead.

Thank you, Rocco. Hello everyone and thank you for joining us. GreenTree's earnings release was distributed earlier today and is available on our IR website at ir.998.com, as well as on PR Newswire services. We also posted a PowerPoint presentation that accompanies our comments to the same IR website. On the call from GreenTree are Mr. Alex Xu, Chairman and Chief Executive Officer; and Ms. Selina Yang, Chief Financial Officer. Mr. Xu will present the company's performance overview of the fourth quarter and fiscal year of 2024 and Ms. Yang will then discuss financials and guidance. They will both be available to answer your questions during the Q&A session which follows. Before we begin, I'd like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended and as defined in the US Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as may, will, expects, anticipates, aims, future, intends, plans, believes, estimates, continue, target, is, or, are, likely to, going forward, confident, outlook and similar statements. Any statements that are not historical facts including statements about the company and its industry are forward-looking statements. Such statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known and unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements. 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 US Securities and Exchange Commission. All information provided including the forward-looking statements made during this conference call, are current as of today's date. The company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law. It is now my pleasure to introduce our Chairman and Chief Executive Officer, Mr. Alex Xu. Mr. Xu, please go ahead.

Thanks, Rene and hello everyone and thank you for joining us today. Our performance in the fourth quarter was negatively impacted by the closure of 12 leased and managed hotels during the year and lower RevPAR compared to a higher base last year and the continued optimization of our restaurant business. In our Hotel business, we are simultaneously accelerating the opening of new hotels, with a planned 480 in 2025, that's an increase from 405 in 2024 and upgrading our existing portfolio with an absolute focus on quality to ensure higher standards of products and services. We believe that rejuvenation of our portfolio that was slowed down by the pandemic will be completed by the summer of 2026. While mid-scale remains our core segment hotel openings in 2024 and our pipeline highlights our strategic commitment to expanding our mid to upscale segment, where we expect the growth over the next two years to deliver a significant economy of scale. Finally, we'll continue the phased closure of leased and managed hotels, especially, in the lower-tier cities retaining only select flagship properties in key cities to serve as a showcase of our capabilities for the prospective franchisees. The strategic transformation of our Restaurant business made further progress on our two priorities. At the end of the quarter, Franchised and Managed stores accounted for almost 90% of all stores. That's up from 78% a year ago and the Street stores that benefited from more stable consumer traffic accounted for 50% of all stores up from 40% a year ago. Additionally, we have been rightsizing many of our stores reflecting the new economic reality to improve overall profitability. We believe we now have a strong foundation to build on and will grow the overall numbers of restaurants in 2025 with a particular focus on…

Thank you, Alex. I will first review our Hotel business. Please turn to slide 16. In the fourth quarter, total Hotel revenues were RMB 240.2 million, a 17.1% year-over-year decrease. The decrease was mainly attributable to our L&O hotels segment and a 9.8% decrease in RevPAR in our F&M hotels segment. Our L&O hotels segment was impacted by the closure of 12 hotels in the year of 2024, while in 2023 it benefited from a one-time revenue recognition of recognitioned rooms and a successful lawsuit against the sublease. Total revenues from L&O hotels were RMB 91 million, a 27.5% year-over-year decrease. Excluding the impact of the above-mentioned factors, same L&O hotel revenue in the fourth quarter of 2024 decreased by 2.4% year-over-year. Total revenues from F&M hotels were RMB 148.2 million, a 9% year-over-year decrease, mainly due to a 9.8% decrease in F&M hotels RevPAR. On slide 17, total Hotel operating costs and expenses decreased 10.5% year-over-year to RMB 225.7 million. Operating costs decreased 9.5% to RMB 139.9 million year-over-year. The decrease was mainly attributable to the closure of 12 L&O hotels in 2024, which resulted in lower rental consumable food and beverage and staff-related costs. Selling and marketing expenses were RMB 13.5 million, a year-over-year increase of 61.7%. The increase was mainly attributable to the reclassification of selling staff-related expenses previously recorded as G&A expenses. Excluding this factor, selling and marketing expenses increased by 22.2% year-over-year. General and administrative expenses were RMB 39.7 million, down 20.1% compared with the same quarter of 2023. The decrease was mainly due to lower consulting fees, lower bad debt due to accounts receivables and lower G&A staff-related expenses. Turning to slide 18. The decline in revenue resulted in a decrease in profitability for our Hotel business despite lower operating costs and expenses. Cash…

Thank you. [Operator Instructions] Today's first question comes from Bruce Mi with UBS. Please go ahead.

Hi, Alex. Hi, Selina. Thanks for taking my question. So I have a question on the Hotel RevPAR. So may I know what's your assumption -- RevPAR assumption on your full year flat Organic Hotel revenue forecast? And secondly, what's your observation on the recent RevPAR trend? And what's your expectation on the business travel demand outlook in this quarter and the rest of the year? Thank you.

Okay. Thank you. And the RevPAR trend our expectation for the year of 2025 is going to be flat because we observed the first quarter we have down about 5% in RevPAR. And we expect the -- that's compared with a little bit higher base of last year. And the second and third quarter we see a gradual recovery and to be flat on the RevPAR for the year. So in terms of the demand we do see more cyclical demand that is more from leisure side, and especially, during the weekend and also during the holidays. So we do observe a tick-up in terms of the leisure travelers than the business travelers. So those are the two observations we have. And that's why we expect that the -- for the full year the RevPAR, we expect in our company we should maintain -- we should be maintaining at a flat level.

Thanks, Alex. That’s very clear. Thank you.

Thank you. And our next question comes from Frank Ma with Qixin Capital [ph]. Please go ahead. Hello, Frank Ma, your line is open. Please proceed.

Okay. Okay. Thank you very much. I have two questions. The first one is can you give -- please give us an overview of the strategy for the Hotel business in 2025. And in particular how fast we are making progress in upgrading older hotels? And the second one is can you provide a bit of color on our strategy for the Hotel L&O segment going forward? Why are we closing so many of them? Thank you.

Okay. Thanks, Frank. That Selina will pick up those questions, okay? In terms of our Hotel business in 2025 we do plan and from our pipeline and from our compilation of the interested parties we have planned to open 480 new hotels. That's about 20% more than that of 2024. And that's one of our core focus. The second is upgrading of our existing portfolio the aged hotels. We still have 700 to 800 of those that needs to be upgraded. And hopefully that's going to be done by the summer of 2026. And we are making tremendous amount of progress in terms of incentivizing our hotel owners because right after the pandemic they need a couple of years recovery time to accumulate some capital to start upgrading the existing hotels. And then the third is, we're improving the overall -- the efficiency in terms of our management system and our team and so that we can better support both the new franchisees and existing franchisees for the businesses. So with that, we feel that in 2025, we are able to have a fresher portfolio of the hotels. And in terms of the closing of L&O, Leased and Operated hotels, that's for a couple of reasons. One is a lot of them are because of the lease expired and we feel that those second tier, third tier locations that are no longer ideal to be a flagship hotel locations. So we want to focus on our resources on the Tier one flagship hotels and also on the Franchised and Managed segment. And the closure of Leased and Operated hotels really will depend on the lease term. Once the lease term is up for renewal, we'll carefully review the status to see whether we should make the further investment continue to extend the lease term or terminate. And sometimes, it's a mutual discussion issues. And our focus is going to be bringing the focus into the franchise and manage the sectors. So that's our strategy and our focus in the future and we'll continue to evaluate the L&O hotel segment to make sure it does not consume a lot of additional resources from ourselves.

Okay. Got it. Thank you, Alex.

Thank you. [Operator Instructions] Our next question comes from Alice Xu [ph] with Cowen Capital [ph]. Please go ahead.

Thanks for taking my question. My first question is in our Restaurant business, we're increasing the proportion of Street stores and reducing the number of more restaurants. Do you expect this trend to continue? That's my first question.

Okay. Yes, we do expect that trend to continue. The number of shopping malls and the traffic to the malls I think are changing very fast. So in addition the rent and all the expenses associated to be a renter in the mall is also very high. And plus the mall has certain operating hours that's also limiting sometimes the traffic. And we have not really found the great operating models to operate in the mall. And therefore that we have focused on the opening of the Street stores, where at least we have the stable consumer traffic, foot traffic and we can control our own operating hours. And the results are really showing that in light of the very competitive environment in the Food businesses that we are still maintaining a profitable operation, while we are transforming from the older and existing legacy brand into a fresher and more trendy concept. So, we are making I believe a great progress in that end and we'll continue to focus on that end. And the second is, we're also changing and adjusting the size of the restaurant to make sure, they are the most economic, most efficient and deliver the best profitable result to our franchisees. So that's the overall plan and strategy for our Food business for the 2025.

Thank you. My second question is, at the end of 2024, we had 182 restaurants, the same number as three months earlier. You mentioned that the business transition is over. What can we expect in 2025? That's my second question.

Yes. In terms of net openings, we have not done a good job. And we have not pushed really hard in terms of opening the new restaurants, especially considering the sentiment in the marketplace. But this year, I think that we see with the profitable operation for our existing restaurants, and we feel confident that the trend and also the pipelines, we should be able to deliver 60 new openings of the restaurants for the year of 2025.

Awesome. Thank you.

Thank you. And our next question is a follow-up from Frank Ma at Qixin Capital [ph]. Please go ahead.

Hi. Thank you. Alex, I have one more question. You have talked on previous earnings call about the initiatives to increase the trading liquidity in our shares. Any progress on this? Thank you.

Thank you. We have evaluated a number of options to increase liquidity. And we have planned the reverse merger, which took a little bit longer time than we originally planned. And once that is done, I think that our liquidity should increase substantially. The second is, the last couple of quarters, has been a transitional quarter. We've been trying to uplifting upgrading our existing portfolios opening up new hotels. And so we have focused on really running a profitable operation for both Restaurant and Hotel businesses, and trying to have a strong cash flows and stable dividends. And eventually I think that we will earn the confidence of our shareholders and that they will potentially also increase the share price and liquidity. And we feel that the merger and other available financing will be available to us in the near future. And I would make those announcements as soon as they become available to you.

Thank you for your time, Alex and have a good day.

Thank you. [Operator Instructions] This concludes the question-and-answer session. I'd like to turn the conference back over to Selina Yang for any closing remarks.

In closing, on behalf of the entire GreenTree management team, we thank you for your interest in GreenTree and your participation in today's call. If you require any further information or have plans to reach us please feel free to contact us. Thank you all.

Thank you.

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.