GreenTree Hospitality Group Ltd. Reports Fourth Quarter and Fiscal Year 2018 Financial Results

• 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.

SHANGHAI, March 14, 2019 /PRNewswire/ -- GreenTree Hospitality Group Ltd. (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 2nd 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.

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