Thank you for standing by, and welcome to the Meituan First Quarter 2024 Earnings Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Scarlett Xu, VP and Head of Capital Markets. Please go ahead.
Thank you, Operator. Good evening and good morning, everyone. Welcome to our first quarter of 2024 earnings conference call. Joining us today are Mr. Xing Wang, Chairman and CEO, and Mr. Shaohui Chen, Senior Vice President and CFO of Meituan. For today's call, management will first provide a review of our first quarter of 2024 results and then conduct our Q&A session. Before we start, we would like to remind you that our presentation contains forward-looking statements, which include a number of risks and uncertainties that may differ from actual results in the future. This presentation also contains unaudited non-IFRS accounting standards financial measures that should be considered in addition to, and not as a substitute for, measures of the company's financial performance prepared in accordance with IFRS accounting standards.
For a detailed discussion of risk factors and non-IFRS accounting standard measures, please refer to the disclosure documents in the IR section of our website. Now I will turn the call over to Mr. Xing Wang. Please go ahead, Xing.
Thank you. Hello, everyone. Since the beginning of 2024, China's local commerce industry continued to grow steadily, along with the consumption improvement during Spring Festival. We effectively captured the industry rebound and invigorated the local consumptions, leading to our robust performance in the first quarter. During the first quarter, our total revenue increased by 25% year- over- year to RMB 73.3 billion. Adjusted net profit increased by 36.4% year- over- year to RMB 7.5 billion. Growth of our user base and merchant base accelerated for 4 consecutive quarters and both reached new highs. Annual transaction frequency of annual transaction user also increased steadily to over 50x . The development of local commerce has brought changes to the livelihood and consumption habits of Chinese people.
As an industry leader, Meituan continually led the digital transformation process and innovation of the industry. Thanks to years of refined operations and strong execution, we continue to cultivate the Everything Now lifestyle through our on-demand retail and satisfy the diverse consumption needs across consumption categories and scenarios through our in-store business. In addition, we streamlined and optimized our organizational structure for the core local commerce segment at the beginning of this year. This will drive further synergies between on-demand delivery and in-store, hotel, and travel, and improve the overall efficiency of our platform. We will continue to work closely with all the participants in our ecosystem, create more jobs opportunities, realize more social value, and fulfill our mission to help people eat better, live better. Now, let me walk you through each business in more details.
First, our on-demand delivery business posted another healthy growth in the first quarter. As we face new macro environments and shifting consumer habits, we see both opportunities and challenges in 2024. For food delivery, amid the changing consumer preference, many merchants face challenges in balancing consumer demand with cost cutting. We work closely with millions of merchants and brands, penetrate deeper into the industry value chain, and actively explore innovative business models. We launched branded satellite stores , a new model that focuses on efficiency for well-known chain restaurants. In the branded satellite stores, merchants do not offer in-store dining, but rather, rather they only provide high quality and value for money food delivery services. Through this model, merchants can not only leverage their existing brand value, but also benefit from better cost structure of food delivery.
Thanks to the cost advantage, merchants can offer significantly lower price than in-store dining, while ensuring meal quality and bring consumer high quality options at affordable prices. We also provided the traffic support and AI-empowered services for the participating merchants and helped the merchants quickly ramp up their business after new store openings. For Pinhaofan, we expanded coverage to broader cities during the quarter. In addition, we elevated the consumer experience in Pinhaofan with an ROI-oriented approach and continued to improve our order dispatching system and operational capability. As a result, peak daily order volume from Pinhaofan reached a new high in the first quarter. For the Shenqiangshou program, we improved our supply quality and variety and introduced more popular SKUs from chain restaurants. We further refined our subsidy strategy to encourage consumers to order premium quality meal from Shenqiangshou.
Moreover, we enhanced our marketing solutions to satisfy the growing needs from restaurant merchants and help them acquire customers with a higher efficiency. Subsequently, the number of annual advertising merchants posted robust growth, increasing by more than 20% year-over-year. On the consumer side, we launched the various marketing campaigns with a high-quality restaurant to stimulate demand during holidays, such as the Spring Festival, New Year's Day, and in potential consumption scenario, including weekends, cross-city travel, and late-night snacks. We also offered a wide selection of coupon packages and discounts for mega hit products. These initiatives help us further strengthen consumer mindshare in our low-price offerings, while incentivizing demand for premium quality and discretionary consumption. Annual active users of food delivery also continued to grow to almost 500 million, and transaction frequency increased notably as well.
Nowadays, more and more high-quality users from food delivery have converted into Meituan Instashopping users. In the first quarter of 2024, annual active users of Meituan Instashopping posted a high-teens year-over-year growth, and transaction frequency increased even more notably. We precisely capture the increasing needs from consumers for diversity and quality, and refined our operational strategy to satisfy consumers' surging demand for holiday gifting and traveling. During Spring Festival, an increasing number of consumers ordered holiday products and gifts via our on-demand retail channel. GTV from categories such as liquor and beverage, holiday gifts, and daily necessities experienced remarkable growth, bringing higher revenue to offline retailers, especially for many KA merchants. We worked with the high-quality brands and merchants during our Women's Day marketing campaign. Growth from flowers, beauty products, and mom and child products were particularly high.
We also collaborated with many top-tier brands in electronics and apparel, and jointly launched Super Brand Day promotion. The participating merchants have had a significant GTV growth from the on-demand retail channel, and they have become more willing to advertise on our platform. In addition, we continue to expand the coverage of our new supply format. At the end of first quarter, we had around 7,000 Meituan InstaMart, and its order contribution further increased. Meituan InstaMart accelerated the online penetration in lower-tier markets, bringing diversity and competitive pricing to our platform and effectively elevated the consumer shopping experience in on-demand retail. Additionally, categories offered by Meituan InstaMart continued to expand. Besides convenience store, Meituan InstaMart also specialize in categories such as beauty products and FMCG. These categories posted a rapid growth during the first quarter.
Over the past years, our continuous iteration on the supply side have brought a visible improvement in user experience and purchase frequency. We firmly believe that there are substantial growth opportunities across broad product categories in the on-demand retail market, which we will explore collectively with our business partners. And thanks to holiday consumption peak, such as New Year's Day and Spring Festival, our in-store hotel and travel business experienced a strong year-over-year growth. In the first quarter, GTV grew by over 60% year-over-year. Annual transacting users grew by over 37% year-over-year, and annual active merchants reached a record high. As consumers increasingly favor value for money, we further iterated our products, improved our marketing ability to promote mega hit products and enhanced our pricing competitiveness.
For live streaming, we leveraged the major holiday marketing windows, such as New Year's Day, Spring Festival, Women's Day, and launched dedicated live streaming campaigns. We extended our Meituan platform live streaming, Meituan Guangfang Zhibo, to broader regions and continued to increase its frequency. During the first quarter, more than 400,000 merchants from over 200 cities participated in the Meituan platform live streaming. For merchant live streaming, we stepped up our merchant support measures and launched the online, offline joint promotion to help them attract user traffic for live streaming. As a result, the number of participating merchants increased rapidly. We offered a Special Deals , which is expanded from our traditional shelf-based model, aiming to promote mega hit products. After continuous iterations for the past year, we have accumulated strong know-hows in deep discount offerings.
On the one hand, Special Deals help deepen consumer mindshare in our value for money offerings. On the other hand, merchants' willingness to offer deep discounts on our platform also increased. For Special Deals, we iterated our product selection criteria, enhanced the product control standards, and improved our algorithm to capture consumer stratified consumption demand. These measures both allowed us to offer merchants tailored operational recommendations on product selections and pricing, thereby helping the participating merchants significantly boost their sales. In the first quarter, we continued to refine our operational strategies to capitalize on major consumption scenarios, such as holiday outings, family reunions, and group gatherings. Subsequently, business volume during holidays and weekends grew rapidly.
During Spring Festival, we collaborated with over 10,000 restaurants from tourist attraction areas, thousands of restaurants from our Must-Eat List, Bi Chi Bang, and nearly 6,000 high-quality merchants in the lower-tier markets. By utilizing Special Deals , such as Tuan-gou, live streaming, and themed promotions, we offered consumers wider selections of combo deals. In addition, we launched a variety of marketing program to promote the high growth in-store categories, such as spa and massage, KTV, pet care, and escape room, and etc. Additionally, after implementing our direct operation model nationwide, we were able to better seize the opportunities from both online penetration and strong consumption potential in the vast lower-tier markets.
In those lower-tier markets, we accelerated the merchant onboarding process and provided a broad selection of products and deals, which has satisfied both daily needs from local residents and the diverse demand from tourists and homecoming people during holiday seasons. In the first quarter, people's willingness to travel remained high. Despite a strong base in the same period of last year, we achieved the robust year-over-year growth in both the massive hotel room nights and GTV, far exceeding the pre-pandemic level. We continued to enhance our platform supply, pricing, product capabilities, and marketing strategies, and solidified our competitive advantages. Recently, consumer preference for travel destinations has gradually evolved, with niche destinations, such as some smaller towns and lower-tier cities, becoming increasingly popular. We swiftly adapted to this consumption change, thanks to our first-mover advantage in penetrating into lower-tier cities and their continuous operational iterations.
Our growth in those niche travel destinations is notably higher than the industry average. On the product side, we leveraged our unique edge to satisfy one-stop consumption need for travel and local services, including where to stay, 住 哪 , where to visit, 玩 什 么 , and provided recommendations on local food, drinks, and entertainment deals. On the marketing side, we stepped up branding promotion around the New Year's Day, Spring Festival, and Qingming Festival to strengthen the consumer mindset. In addition, we leveraged the popular IPs and launched dedicated live streaming sessions. During these sessions, the number of user visits, GTV from Hotel Plus SKUs, and mix from new users all hit new highs. In the first quarter, we continued to experience fast growth in high-star hotels, while further solidified our market share in the lower star domain.
For low-star hotels, we focused on merchant services, enhancing their customer acquisition ability and offering them diversified room renovation solutions to help them improve overall operational efficiency. Moving on to our new initiative segment now. For Meituan Select, we refined our business strategy and focused more on operational enhancement and high-quality growth in the first quarter. Q1 is usually the peak season for Meituan Select because of the Spring Festival. We stepped up our price markup ratio and improved fulfillment experience for consumers. We also optimized our warehouse operations in selected brand properties, leading to further improvement in the average fulfillment cost per item. In addition, we enhanced the resource allocation and achieved a higher marketing efficiency. Thanks to all these measures, operating loss narrowed significantly on both quarter-over-quarter and year-over-year basis.
For the rest of the year, we are determined to further improve efficiency for Meituan Select by building our core competence in product selections and fulfillment. Besides Meituan Select, most of our other new initiatives have made a healthy progress during the first quarter, including Kuailv, RMS, and bike sharing, power banks, and et cetera. We have not only achieved the market leadership in terms of business scale, but also enhanced the operational efficiency. These new initiatives embed strategy value and synergies with the core local commerce segment, and we will be able to gradually unlock more financial value in the future. Amid the current macro environment, we have been proactively adapting to the latest trends and consumption habits to strengthen our competitive modes.
We will continue to refine our product offerings and operational strategies, and provide merchants with diverse marketing tools and effective online operational solutions. Concurrently, we will continue to enrich the consumer experience by offering wider selections of our value-for-money products and services. With our organizational restructuring, we will further iterate our growth model, strengthen collaborations among different business units, and integrate our operation in the core local commerce segment more cohesively. These measures will enable us to provide a better user experience for both our merchants and consumers, and fulfill our company's mission to help people eat better, live better. With that, I will turn the call over to Shaohui for an update on financials.
Thank you, Xing. Hello, everyone. I will now go through our fourth quarter financial results. During the quarter, our businesses sustained healthy growth, with our total revenue increasing by 25% year-over-year to RMB 73.3 billion. Cost of revenue ratio decreased 1.3 percentage points year-over-year to 64.9%, primarily due to the improved gross margin of our goods retail businesses, partially offset by the higher delivery cost as a percentage of revenue in our on-demand delivery business as a result of the decrease in average order value. Selling and marketing expenses ratio slightly increased 1.2 percentage points year-over-year to 19%, mainly due to our increased promotion and employee benefits. R&D expenses ratio decreased year-over-year to 6.8%, primarily benefiting from improved operating leverage. G&A expenses ratio was 3.1%, remaining stable on a year-over-year basis.
Our focus on stimulating quality growth and improving operating efficiency drove substantial year-over-year growth in total segment operating profit and operating margin. Total segment operating profit increased from RMB 4.4 billion to RMB 6.9 billion, and operating margin increased from 6.1%- 7.5%. On a consolidated basis, our adjusted net profit increased significantly year-over-year, reaching RMB 7.5 billion this quarter. Turning to our cash position a s of March 31st, 2024, we maintained our strong net cash position with our cash and cash equivalents and short-term treasury investments totaling RMB 138.6 billion. Given the high base of operating cash inflows as a result of the reopening impact from last Q1, cash generated from operating activities declined year-over-year to RMB 6 billion this quarter.
Now, let's look at our segment results, starting with core local commerce. Our core local commerce segment's revenue increased by 27.4% year-over-year to RMB 54.6 billion. Operating profit increased year-over-year to RMB 9.7 billion. Operating margin was 17.8% this quarter. Our on-demand delivery businesses further solidified their leadership and delivered healthy results during the quarter. On-demand order volume growth achieved 28.1% year-over-year this quarter. Food delivery, thanks to our continuous acceleration on the supply side and a refined marketing strategy. Transaction frequency of mid-to-high frequency users further increased year-over-year. Meanwhile, the further expansion of Pinhaofan has allowed us to better meet the needs of more mass market consumers for low-ticket-size meals, thereby promoting the engagement of less frequent users.
Meituan Instashopping delivered a fast growth than food delivery, with its year-over-year order volume growth rate more than doubling that of food delivery. Daily average order volume reached 8.4 million this quarter. On-demand revenue growth lagged behind the order volume growth on a year-over-year basis. Given the substantially high AOV, average order value, in Q1 last year and changes in consumption trend, AOV of both food delivery and the Meituan Instashopping declined year-over-year. However, we observed strong marketing demand from restaurants, traditional offline retailers and top brands during the quarter. The expansion of both advertising, merchant base, and the increase in their app, resulted in a remarkable year-over-year growth in online marketing services revenue for both food delivery and the Meituan Instashopping.
On-demand operating profit achieved about 20% year-over-year growth this quarter, thanks to the improved advertising monetization and enhanced economy of scale, which helped partially offset the decline in AOV. We are pleased to see that Meituan Instashopping has demonstrated its economics flexibility, with UE turning positive this quarter. Apart from the improved advertising monetization on the operating leverage, the improvement in UE was also driven by the optimized subsidy efficiency and increase in the proportion of orders for high-margin category, such as flowers during holiday seasons. However, in the short term, we still prioritize its growth over profitability. We aim to further enhance the synergy between Meituan Instashopping and the food delivery in terms of user scale, marketing efficiency, and the delivery network. Now, let's turn to our In-store, Hotel and Travel business. Growth momentum in service retail remained strong during this quarter.
We persistently supported merchants, enhanced product and content capabilities, and penetrate into lower-tier cities to capture growth opportunities. Meanwhile, our refined marketing strategy allow us to accurately cater to peak demand, facilitating rapid business growth during holidays and weekends. GTV for Instant Business continued its rapid growth trajectory this quarter, with both the number of transaction users and merchant base hitting new records. Our hotel and travel business also achieved healthy growth in both the room night scale and the ADR this quarter. Revenue of In-store, Hotel and Travel grew at a slower pace than GTV, mainly due to the increase in merchant incentives and lower subscription-based service charges, but merchants on a year-over-year basis. However, net revenue growth and GTV growth significantly narrowed compared to the last quarter.
The year-over-year growth momentum of transaction-based service revenue remained robust, driven by high consumption demand and the accelerated digitization of various local service industries. Growth of online marketing services revenue lagged behind commission revenue growth. However, the rapid expansion of advertising merchant base of performance-based ads drove strong year-over-year growth of ad revenue this quarter. Despite our strategic investment in lower-tier cities throughout Q1, our enhanced marketing efficiency led to a sequential increase in operating profit margin. We will continue to evaluate and adjust our investment efficiency to optimize our ROI. Turning to our New Initiative segment. During this quarter, revenue in this segment increased at 18.5% year-over-year to RMB 18.7 billion, mainly due to the development of our goods retail businesses, particularly from Kuailv and Xiaoxiang Supermarket.
The segment's operating loss and operating loss ratio both narrowed significantly on both quarter-over-quarter and year-over-year basis to RMB 2.8 billion and 14.8% respectively. The loss reduction was primarily attributable to the substantial efficiency improvement on Meituan Select. Starting from February, we have implemented several efficiency improvement measures for Meituan Select, such as raising price markup ratio, lowering user subsidy, and closing underperforming warehouses. Meanwhile, many of our other new initiatives continue to make good progress, enhancing their operating efficiency. To conclude, our core business once again grew resiliently, setting new records across multiple performance metrics. Meanwhile, our attention, our dedication towards efficiency enhancement in our new initiatives result in a significant reduction, thus a remarkable improvement in Adjusted EBITDA this quarter. As we move forward, we will proactively accelerate our core business to enhance long-term growth.
We will focus on quality growth and balanced growth with profitability. We believe there will be more synergy among core business to come in future. We will also for our new initiative and continuously improve operating efficiency. Our confidence in our business fundamentals and the long-term growth potential remains intact. With that, we are now open for Q&A.
If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Ronald Keung from Goldman Sachs. Please go ahead.
Thank you. Thank you, Xing Wang, Shaohui Chen, and Scarlett Xu. And so on your recent reorganizational restructuring, just wanna hear, are there any operational changes for the on-demand delivery and in-store hotel and travel segment that you can share any operational changes there? And when do we expect to see the synergies from this reorganization? And, specifically, how will these synergies be reflected on the top line revenue profit margins for the core local commerce segment? Could you give us some pointers on how to quantify that synergies? Thank you.
Thank you, Ronald. We are still in the process of reordering our structure and to better support and integrate our core local commerce segment. As we move forward, we will gradually roll out more operational changes. Like I mentioned the last quarter, we hope to cover all categories and scenarios of local services, and we want to provide a closed-loop solution from demand discovery to service fulfillment. We want to ensure high quality and comprehensive experience for each and every service we provide. So our organizational restructuring is not only about putting only moderately and in-store hotel travel together, they are both on the supply side. What's more important is that we, the change will allow our Meituan platform and our infrastructure platform to work better with our core businesses.
That is to put our demand side and supply side together. In future, we will review business performance and operational strategy and product development and resource allocation of our whole core local commerce from an integrated perspective. We hope to empower each business with effective traffic support from our Meituan platform and mostly the Meituan App, and foster deeper collaborations and synergies across different business units. We hope to better align consumer needs and our platform supply reshape our brand mission in the local services industry. For example, we are exploring integrated marketing solutions and comprehensive operation solutions for merchants to broaden their marketing and customer acquisition channel. This will help them generate higher operational efficiency and transaction conversion on our platform.
What's more, we are also exploring more structured approach in subsidies and promotions to better capture user demand in different consumption scenarios. Starting from mid-May, we upgraded our Shenhuiyuan membership in a few pilot cities. We expanded our membership benefit from on-demand delivery only to also cover in-store, hotel, and travel. We intend to introduce this enriched membership program to broader regions progressively. Over the past few years, we have accumulated over 100 million members through our on-demand delivery membership program. It has not only enhanced user transaction frequency for our on-demand delivery, but also brought a substantial growth for restaurant merchants and helped them improve marketing efficiency.
As we continue to integrate marketing initiatives, membership program across different businesses, we expect to strengthen our collaborations with an expanded network of merchants. Subsequently, our members will have access to more diverse selection of value for money products and services across all the consumption categories in the local commerce domain. To conclude, all the business unit in core local commerce, together with our Meituan platform, will work together to explore innovative approaches to create synergies. Our continuous iteration on products and services will bring a well-rounded experience for every category to both merchants and consumers. We do believe the synergy can help enhance our revenue growth and profitability in future. It will take a few more quarters to unlock the potential, so it is still too early to quantify at this stage. Thank you.
Thank you, Xing Wang.
Thank you. The next question is from Thomas Chong from Jefferies. Please go ahead.
Hi, good evening. Thanks, management, for taking my questions. I have a question about on-demand delivery. Could management share some color about the latest development of food delivery and Meituan Insta shopping? In light of the current macro environment and consumer sentiment, how should we project all the growth and financial performance for these two businesses in Q2 and also throughout, 2024? Thank you.
Thank you, Thomas, for your question on on-demand delivery. As mentioned, on-demand continued to grow healthily in the recent months, despite the impact from macro environment on demand side. However, as we enter Q2, we no longer benefit from a low order base of last year. So the year-over-year order volume growth rate in Q2 is expected to trend down to a normal level, which will reflect the current consumption environment. For food delivery, we will continuously refine our operation to cope with different consumption scenarios, which should lead to a steady increase in the base of medium- to high-frequency users and their purchase frequency. In Q1, orders from medium to high-frequency users continued to grow faster than the average. In addition, our acceleration on Pinhaofan model will enable us to better satisfy demand from price-sensitive users with higher efficiency.
Pinhaofan has significantly expanded over the past few quarters. Both user base and purchase frequency increased rapidly, and the unit economics continued to improve. We will continue to improve supply, innovate our business model, and refine operation to capture demand across all scenarios. For Meituan Instashopping, we expect with all the volume growth in Q2 and for the full year to be much higher than food delivery, possibly more than double. We believe on-demand retail will continue to benefit from digital transformation. On the supply side, we are partnered with more premium brands and offline retailers, enriching the quality and variety across product categories. This will allow us to better meet consumer demand in certain scenarios, such as urgent needs, travel, and more. Moreover, we will continue to broaden selection in long-tail categories.
On the consumer side, we will convert more high-frequency food delivery users to Meituan Instashopping users and boost their frequency during efficiency promotions and enhance pro-platform supply. The macro environment will continue to weigh on AOV for our on-demand delivery business. However, we think that the year-over-year change in AOV should gradually normalize in the second half of the year. We have confidence that we can balance growth with profitability in this business. We expect a healthy increase in operating profit for both Q2 and the full year. We see stronger appetite for advertising from restaurants, offline retailers, and brands, so we believe there is further potential for ads and monetization. Additionally, we will continue to optimize our subsidy strategy, and we see more operating leverage as the business scale up. Thank you.
Thank you.
Thank you. The next question is from Kenneth Fong, from UBS. Please go ahead.
Hi, good evening, management. Thanks for taking my questions, and congrats on the strong set of results. I have several questions for in-store, hotel, and travel business. First, would consumption downgrade impact for the growth of our in-store business going forward? Can we maintain high GTV growth over the next few years? And I noticed that Douyin has recently adjusted their organization structure in local service. Would Meituan make any strategic changes as well, and how should we forecast the OP margin of the in-store, hotel, and travel business in 2024, as well as the medium and longer term? Thank you.
Thank you, Kenny, for your question on in-store. Under the current macro environment, consumers have become more price sensitive. As a result, AOV of our in-store hotel travel business declined year-over-year in each vertical category. However, consumer demand across local service categories remains strong. In fact, some young people are willing to allocate more budget for experience and travel. Even people are price sensitive, they are more eager to find stores and discounts from online channels, thus helping to deepen online penetration in in-store and boost industry growth. Our platform offers over 200 in-store categories, so that we can effectively meet diverse consumer demand across categories and price bands. For our traditional share-based model, we will continually expand our merchant base, enhance price competitiveness, and introduce more diverse packages and deals to meet consumer demand.
We also launched live streaming and Special Deals to incentivize impulse purchase and to satisfy consumer needs for deep discounts. Meanwhile, we changed our agency model to direct operation model for our in-store business to better capture the growing demand in lower-tier cities. Overall, online penetration for in-store business is still at an early stage. We believe that as the leading player in this space, our user base, transaction frequency, and GTV will continue to maintain healthy growth in the next few years. As industry competition evolves to a certain stage, we think major players will gradually shift from a subsidy-driven growth strategy to a rational ROI-driven growth strategy. Although we do keep close watch on our competitors, our strategy is centered on fortifying our long-term competitive advantage rather than market share. On the merchant side, they're increasingly focused on the ROI of their online promotion and customer acquisition spending.
Merchants prefer platforms that can provide integrated solutions, and we can fulfill such demand throughout their entire business cycle. We continue to enhance our ability to serve merchants across different tiers, and offer customized marketing solutions to address their diverse operational needs, from daily operation to short-term promotions. In addition, we will actively explore collaborative marketing strategy between food delivery and the in-store dining, integrate transaction allocation, enhance supply quality, and improve operating efficiency. On the consumer side, we started to test our integrated membership program, Shenhuiyuan. We also improved our intelligent recommendations on products and services in a more customized manner to satisfy consumers' diverse needs and enhance the subsidy efficiency. Going forward, we will continue to refine our operating strategy, strengthen synergy with core local commerce, and enhance our recommendation-based algorithm for the in-store hotel and travel business.
The change in competitive landscape has accelerated the industry online penetration. In 2023, we have strengthened our competitive edge and captured more incremental growth. We are confident in maintaining a strong GTV growth in 2024. GTV growth in the mid to long term may be higher than our original expectation, as we continue to launch new products and strategies and accelerate online penetration, especially in lower-tier cities. We do face some profit fluctuation in the next few quarters due to the seasonality and the implementation of our direct operation model in lower-tier cities. In Q2, the gap between revenue growth and GTV growth were narrow due to a more normalized pace of monetization rate. For the full year of 2024, we expect healthy growth in operating profit of in-store hotel and travel, and the operational efficiency should gradually improve.
Thus, we remain confident in the longer term revenue and profitability potential of this business. Thank you.
Thank you.
Thank you. The next question is from Alex Yao from JP Morgan. Please go ahead.
Hi, good evening, guys. Thank you for taking my question. For our hotel and travel business, it's been fairly robust recently, but at the same time, we also noticed that the competitors have experienced a rapid growth recently as well. How do you guys think about competition in this business? What are our strategies in response to the competition? And also considering the recent macro environment and the consumption change, will we have growth pressure in room nights and GTV in this year? Thank you.
Hi, Alex. Thank you. Yes, we agree with you that there is a very big growth potential of the hotel and travel business as a whole. Especially, we see consumers' growing demand for experiential consumption. Hotel and travel being a key category in this space will benefit from growing trade. More and more consumers are willing to allocate a larger portion of their budget to travel, and their demand is not only growing, but also becoming more diverse, which brings substantial opportunity for us. In terms of the competition, other OTA peers and us have quite different value propositions and different competitive advantages. For example, we are strong in lower tier cities, mid- to low-star hotel market, and local accommodations.
We continually enhance our supply offerings, pricing capabilities, and service quality to provide consumers with high-quality selections across all price bands and consumption scenarios, while also satisfying their needs for personalized recommendation and travel experience. Thanks to our strategic focus in the low-star hotels, we have established unparalleled moat in low-star hotels and continue to promote a digital transformation. Amid the shifting consumption environment, consumers now prefer value-for-money products and services. This is particularly evident when they book hotels to make travel arrangements. In response to the evolving trend, we have launched a suite of measures on the supply side. For example, we provide merchants with efficient marketing tools, including operational solutions, help them acquire user traffic and help improve their cost structure and operational efficiency. Additionally, we offer room renovation solutions for the merchants to cater to consumers' demand for quality and diversity.
On the high-star front, we leverage our unique platform advantage in local commerce by continually enriching our Hotel+X extra offerings. We not only meet consumers' rising demand for one-stop travel experience that includes accommodations, dining, entertainment, and more, but also deepen our collaborations with high-star merchants as we help them generate additional revenue beyond accommodations. Looking ahead, we believe there is still substantial room for further online transformation in low-star hotel market. We will focus on both the supply side and demand side to solidify our competitive edge in low-star markets. Meanwhile, we will explore growth opportunity in high-star hotels through ROI-oriented investment. For full year 2024, we have confidence in the healthy growth momentum of this industry and our ability to capitalize on such opportunities. We think growth should normalize because of last year's high base, as well as more balanced supply and demand.
Regardless, we remain optimistic about both growth and profitability in our hotel and travel business for 2024 and for longer term. Thank you.
Thank you. The next question is from Ya Jiang from CITIC Securities. Please go ahead.
Okay. Good evening, management. Thanks for taking my question. My question is about Meituan Select. How has Meituan Select business growth trended since the business streamlining? And how often will we re-assess the strategy or investment scale for this business at this initial phase of loss narrowing? And in quarter one, within Meituan Select posted a notable loss reduction, how should we project the pace in the next two quarters? Thank you.
Well, thank you. So, it's important, each time before I answer questions about Meituan Select, I would like to emphasize two points. The first is, online grocery is very important to Meituan. And the second is, online grocery is very difficult to get right. But we are going to keep working on that. So, to your question, since the year beginning and competition in community e-commerce has become more rational, for Meituan Select, we strictly focused on efficiency improvement and implemented a series of measures since February. And as a result, operating loss has narrowed significantly both quarter-over-quarter and year-over-year, and that has contributed positively to our financial performance of the new initiative segment.
In Q1, we raised average price per item, and reduced subsidies and shut down some underperforming warehouses and pickup stations. Although this measure inevitably brought a short-term impact to the scale, but we are now more focused on natural retention and growing the cohort of our core users, and that will benefit us in the long term. Regarding the loss reduction pace, as I mentioned, we will adhere to a high quality growth strategy, and we will implement loss reduction and efficiency improvement measures throughout the whole year. We expect loss to further trend down in Q2 on a quarter-over-quarter basis. Operating loss of Meituan Select will continue to narrow significantly in the second half of this year.
So how much loss reduction, loss reduction we can realize in the second half still depends on further iterations of the business strategy and the sales volume.
In the long run, I still believe online grocery is the area that Meituan should invest in, because, you know, it's a very big market. It aligns very well with our corporate mission to help people eat and live better. We currently explore this market through a few business models, and Meituan Select is one of them. We will adjust our resource allocation among these different business models based on each business performance and ROI. For Meituan Select, we will dynamically evaluate its progress, and we'll maintain flexibility when iterating our strategies and strengthen our core competence and continue to improve our user experience. Thank you.
Thank you, Xing.
Thank you. The next question is from Alicia Yap from Citigroup. Please go ahead.
Thank you. Good evening, management. Thanks for taking my questions. Also congrats on the solid quarter. My questions is on the new initiative as related to your overseas expansion. We noticed that the company has recently entered the Middle East market. Could management share some thoughts on the development plans of the food delivery business in Middle East? In addition, how should we think about expanding into other regions? What's our assessments and strategies when selecting other regions to explore? How should we view the investment scale of the overseas business this year, and the impact on the operating loss for the new initiative? Thank you.
Thank you, Alicia. Yes, we launched KeeTa in Hong Kong last May. So now it's slightly over one year old. In the past year, we have made pretty good progress in Hong Kong, and it makes us more confident that we have the ability to build a food delivery business from scratch in overseas markets or in markets other than Mainland China. We are already the leading food delivery platform in Mainland China, and that the market is distinguished by quite unique attributes and competitive advantages on both supply side and demand side. The need for food delivery is not limited to China or Mainland China. There's also great need in Hong Kong and many other countries.
So in the long run, our goal is to bring our products and services to a bigger global audience, and offering better services and experience to both consumers and merchants globally. And to this end, we are actively evaluating many different markets, and Middle East or the Gulf countries is one of them. But to be honest, it kind of surprising me that we received immediate coverage of Middle East operation so early. So we haven't really launched anything there. We are just doing some preparation. And also, we are looking into some other markets, including some European countries and also Southeast Asian countries. And our selection of for potential new entry region is based on a thorough analysis of multiple criteria.
Because in most, if not every, country, food delivery market is not wide open. There are already players there, so we need to be very careful to evaluate the total addressable market and the penetration rate right now, the potential for penetration rate in future, and also the competitive landscape and the average order value and cost structure, and so on. And so I must emphasize that we are still at a very early stage for the on-the-ground research, and we have not reached any definitive conclusions. But, there's no doubt that global expansion is going to be a very important direction for Meituan's long-term growth. And we will approach the global expansion with a very measured pace.
So from a financial perspective, we'll be very cautious in assessing the opportunities, and we'll maintain financial discipline and be more ROI-oriented when we deploy the capital. That's it. Thank you.
Thank you.
Thank you. There are no further questions at this time. I'll now hand back to Scarlett for closing remarks.
Okay, thank you for joining our call. We look forward to speaking with everyone next quarter. Thank you for your support.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.