Good day and welcome to the Meituan Dianping Q1 2020 Earnings Conference Call and Webcast. All participants are in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Scarlett Xu, VP and Head of Capital Markets. Please go ahead, ma'am.
Thank you, Operator. Good evening and good morning, everyone. Welcome to our Q1 2020 Earnings Conference Call. Joining us today are Mr. Xing Wang, Chairman and CEO, and Mr. Shaohui Chen, SVP and CFO of Meituan Dianping. For today's call, management will first provide a review of our Q1 2020 results and then conduct a 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, and may differ from actual results in the future. This presentation is based on our management accounts, which have not been audited or reviewed by our auditor.
This presentation also contains an audited non-IFRS financial measure that should be considered in addition to and not as a substitute for measures of the company's financial performance, prepared in accordance with the IFRS. For a detailed discussion of risk factors and non-IFRS measures, please refer to the disclosure document in the IR section of our website. Now, I will turn the call over to Mr. Xing Wang. Please go ahead, Xing.
Thank you, Scarlett. Hello, everyone. Welcome to Meituan Dianping Q1 2020 Earnings Call. As we enter 2020, the world is confronted with the challenges of the COVID-19 pandemic, which has caused tremendous near-term shocks across industries. Inevitably, the local service industry has also been significantly impacted in many ways. As a consequence, during the Q1 of 2020, we faced challenges on both the supply side and demand side, significantly dampening our operating results for the period. During the quarter, total revenue decreased by 12.6% year-over-year to RMB 16.8 billion. Adjusted EBITDA barely broke even, decreasing by 91% year-over-year. Adjusted net profit turned negative, coming in at a loss of RMB 0.2 billion for the quarter. Annual Transacting User on our platform increased to 448.6 million, up by 8.9% year-over-year, while Annual Active Merchant increased to 6.1 million, up by 5.0% year-over-year.
Average number of transactions per transaction user increased to 26.2 times, up by 5.3% year-over-year. However, despite the obvious short-term disruptions, I would like to underscore that our long-term strategy and targets have not changed. We have always maintained a long-term perspective when developing our business strategies and investing in our business growth. We remain focused on building a leading e-commerce platform for services in China. Meanwhile, we have shouldered our social responsibilities as the industry leader. Even in some of the most impacted regions, we did our best to maintain stable business operations and continue to provide value for both consumers and merchants. Moreover, we also ensured the adequate supply of daily necessities to restore consumers' consumption confidence while launching a series of supportive measures to help merchants overcome difficulty.
In the long run, we believe that this pandemic will help to better cultivate consumer habits, accelerate online penetration, improve the operational efficiency of merchants, and ultimately expedite the digitization process of the entire local service industry. Now, let me give you an overview of our performance in each business segment for the Q1 of 2020. My colleague, Shaohui, will then talk about our Q1 financial performance in more detail. Starting with our Food Delivery business, due to the impact of COVID-19, the GTV of our Food Delivery business decreased by 5.4% year-over-year to RMB 71.5 billion, while the daily average number of food delivery transactions decreased by 18.2% year-over-year to 15.1 million in the Q1.
In particular, this segment was hit the hardest from January the 20th to February the 20th, as the strict control measure issued by local governments led to a shortage of service supplies and a dramatic drop in our food delivery order volume. Shortly after February the 20th, as work began to resume in an ordinary manner across the country, an increasing number of restaurants started to resume their operations, while consumer demand also gradually recovered, driven by the government's progressive lifting of travel restrictions as well as the steady flow of people returning to work. The food delivery industry recovered rapidly during March, with the daily order volume returning to around 75% of its pre-pandemic level by the end of the quarter.
In spite of the short-term negative impacts, we strongly believe that the outbreak of COVID-19 will play a positive role in the development of the industry over the long term. On the consumer side, this pandemic has further accelerated the cultivation of consumption behavior in a positive way, helping to further educate a portion of target users. Under the mandatory home quarantine, our Food Delivery service has become extra important and convenient, with a substantial number of consumers increasingly realizing that food delivery could become their primary channel to receive daily meals. The consistently good experience and diversified supply of our platform sufficiently meet the demands of most people, especially average order value increased by 14.4% year-over-year in the quarter.
We also saw increasing preference from consumers for more high-ticket type categories during the pandemic due to the increasing adoption of food delivery for formal meals, further diversification of high-quality supplies on our platform, and the growing demand for branded restaurants as a result of rising hygiene concerns. In the Q1, for example, the percentage of snacks and fast food orders volume to total order volume decreased meaningfully, while the proportions of barbecue, local flavored dishes, and hot pot order volumes to total order volume each increased on a year-over-year basis. Moreover, the contribution from delivery orders with a distance in excess of 3 km, for which consumers are charged a higher delivery fee, also increased on both quarter-over-quarter and year-over-year basis during that period.
On the Merchant side, the pandemic has further accelerated the digitization process, especially for many branded restaurants that provide a high-quality supply and were traditionally more focused on In-Store Dining than Delivery services. In the Q1, we witnessed a large number of premium restaurants, highly rated food restaurants, chain restaurants, sector-listed restaurants, as well as five-star hotel restaurants, essentially build up their process for Food Delivery operations for the first time. Some of these high-quality restaurants, which used to ignore online penetration operations or only generate a small portion of revenue from online orders, have started to view food delivery as their primary vehicle for business operations in the midst of the pandemic's turmoil. In fact, as of March 31st, more than 50% of the restaurants from our must-eat list had opened Food Delivery operations, compared to only 30% in December 2019.
The decision to open online Food Delivery operations not only helped these restaurants to navigate through the crisis, but also increased our platform's high-quality supply over the long term. For the substantial number of small and medium-sized independent restaurants, Food Delivery came close to being their sole source of income during the pandemic. We expect these small and medium-sized restaurants to continue deepening their cooperation with Food Delivery platforms and to allocate more resources to online channels going forward. The restaurant industry in China was severely disrupted in the Q1. During this period, we worked closely with the restaurants, promptly updated our products and operations to assist in their digitization process and help them to recover more quickly, mitigating the negative impact of the pandemic on their business.
For example, to help a restaurant open their online operations at a faster pace, we introduced the Green C hannels, which effectively created a more efficient procedure for the verification and approval process. By March the 31st, over 100,000 merchants had leveraged our Green Channel system. In addition, we provided restaurants with a series of replaced subsidies and free traffic supports in order to relieve some of their operational burdens. At the same time, our continuous innovation on products has boosted the marketing capability and operational efficiencies of merchants. According to our survey, in the last week of March, over 70% of restaurants had achieved a recovery of 60% or more in terms of order volume, while the remaining 30% had achieved recoveries exceeding their pre-pandemic order volume. On the Delivery front, the pandemic has accelerated the adoption of new delivery models and stimulated technological innovation.
As a leader and promoter of On-Demand Delivery, we pioneered the launch of our contactless delivery service, which received widespread acclaim and recognition from consumers, merchants, and local governments. The contactless delivery model not only mitigates the hygiene risk for both consumers and delivery riders but also improves our delivery efficiency while creating more opportunities for the exploration of our diversified delivery models. We are delighted to see that other platforms on both domestic and global fronts have followed suit. As of March the 31st, the percentage of contactless delivery order volume to total delivery order volume exceeded 80%, while the percentage of consumers who always opted for contactless delivery to our total consumer group reached 66%. In addition, we further expanded the adoption of our Intelligent Locker to cope with contactless delivery.
We also began displaying safety and sanitary information on our platform, such as the health status of chefs, packers, and delivery riders. This practice provides consumers with a traceable safety information and effectively reduces virus transmissions. After the pandemic, we expect the percentage of consumers choosing contactless delivery to go down, but we believe that this model has the potential to improve our delivery efficiency over the long term. We have also continued to increase our investments into the frontier of delivery technology. In the Q1, for example, we piloted the launch of Automated Delivery Vehicles for the first time in Shunyi District of Beijing. We plan to consistently invest in autonomous delivery technology over the coming years.
In summary, high-quality restaurants' increasing adoption of online platforms, extension of food selection on our platform, and our continuous refinement of the delivery experience will help to better and cultivate consumer habits. At the same time, high-quality traffic, improved marketing products, and a comprehensive suite of supporting services for merchants will help to create an increasing amount of value for our merchants. In the aftermath of the COVID-19 pandemic, we believe that both consumers and restaurants will view food delivery as an increasingly important channel, which will benefit the industry in the long run. Next, let me turn to our second segment, In-Store, Hotel and Travel, in which Q1 revenue was Fown by 31.1% year-over-year. In comparison to the Food Delivery segment, this segment was more rigorously challenged during the pandemic, but its pace of recovery is still noticeably lagging behind that of our food delivery segment.
As the majority of our In-Store services categories are classified under Discretionary or Entertainment, which usually involves some combination of close contact with others and not close, both supply and demand remained sluggish in the Q1 due to the consumers' hygiene concerns as well as the local government restrictions. In the Q1, we launched various supportive measures to directly help small and medium-sized merchants solve their short-term liquidity problems and restore their operations. Such measures included commission exemption, extension for subscription-based services periods, access to business loans with favorable interest rates, and more. To stimulate consumption, we utilized our online capabilities to establish safety programs such as Safe QR Code at Anxin Ma, Safe Dining at Anxin Chi, and Safepay at Anxin Wan, to guide merchants in streamlining, standardizing, and digitizing their safety measures.
We also led the establishment of industry safety and sanitation standards in order to help restaurants develop their own measures. As of March 31st, over 350,000 restaurants had joined our Safe Dining program at Anxinchun , and we certified the label to be displayed on our platform interface. Notably, the average sales volume for those participating restaurants was significantly higher than for those restaurants that did not participate. As the leading e-commerce platform for local services, we began to work with local governments in March to launch the Safe Consumption Festival at Anxin Can, Beijing, and issue vouchers to consumers to be used for local services, especially for restaurant dining, which was impacted the most during the pandemic. In the city of Yuncheng, for example, within only two hours of distributing the vouchers online, all vouchers for the day had been registered.
According to one restaurant owner from March 25th, which was just the fourth day after the restaurant had resumed its operation, 80% of consumers used the vouchers at checkout. In addition, the restaurant's daily sales returned to 60% of its pre-pandemic level, far exceeding everyone's expectations. Although this is just one example, our observation is that consumers' vouchers can not only stimulate single-time consumptions but also have strong leverage effects that are capable of bolstering the recovery of overall consumption demands in relevant regions and industries. As a platform that connects 448.6 million annual transaction users and 6.1 million local merchants, we can effectively direct consumers to merchants and service categories, showcasing the ability of our platform to distribute traffic, allocate subsidies, and energize consumptions with both accuracy and effectiveness.
As of May 15th, we had successfully launched our Safe Consumption Festival in more than 50 cities and are currently in the process of working with more local governments to distribute additional consumer vouchers. Our Hotel business also experienced enormous impact during the pandemic, with quarterly domestic room nights decreasing by 45.5% year-over-year. As a result of government-issued travel bans, self-quarantine policies for travelers, and a general fear of virus infection, many consumers canceled their travel plans during the period. Even after the peak of the pandemic had subsided, consumers still took conservative measures, postponing travel-related activities and expenditures. Nevertheless, in comparison with industry peers, our Hotel business has recovered at a faster rate in the Q1, thanks to our limited exposure to outbound travel and structural advantages in local accommodation consumption scenarios, where the rebound in demand has come relatively faster.
To further support industry recovery, we leveraged our platform capabilities and launched our Safe Stay program at Anxin Zhu. In this program, we partnered with hotels, including well-known hotel groups such as Huazhu, Home Inn, and Jinjiang Inn, to provide consumers with suitable accommodations for quarantine and other purposes. As part of our Safe Stay program, we worked with our partner hotels to establish preventative measures and increase hotel service capabilities. Such work included the adoption of strict health precautions for all employees and consumers, close tracking of consumer information, pre-booking cancellation, and discounts for additional nights. So far, we have achieved noteworthy progress, successfully engaging about 100,000 hotels in over 300 cities nationwide to participate in this program.
Although COVID-19 has severely impacted our In-Store Hotel and Travel segment in the short- term, and we estimate that our business will take a while to recover, we are very confident in the long-run opportunities and transformations that this pandemic will bring. We believe that the pandemic will accelerate supply-side digitization and encourage merchants to further enhance their online operation in the future. As a leading local service platform, we are committed to continuing diversifying our product and service offerings, as well as building and optimizing our digital infrastructure for millions of local merchants, allowing these merchants to reach a vast group of target consumers, improve their online operation, and better adapt to a digital society. Now, let's move to New Initiatives.
Our investment strategy for the new initiative segment, which is based on our long-term philosophy, has not changed in light of the pandemic. In the Q1, revenue from our new initiative segment increased slightly, growing by 4.9% year-over-year. We are proud that many of our New Initiatives were crucial to ensuring people's livelihoods during the pandemic. Our grocery retail business, for example, continued to provide a stable supply and efficient delivery of high-quality fresh produce, as well as other daily necessities to consumers. The pandemic has served as an opportunity to educate consumers regarding the value and convenience of using our on-demand delivery service to purchase many other things besides just meals, helping to better cultivate consumer habits at a relatively low marketing cost.
Although we expect a high order volume of our Grocery Retail business in the Q1 to normalize in the near future, we firmly believe in the massive potential of our Grocery Retail business, as well as our ability to leverage our leading position in the On-Demand Delivery network to grow this business. Therefore, we will continue to explore and iterate the business models, optimize our operations, and improve the quality of our products and services. We will also continue to invest in both our marketplace and self-operated models. Fresh Produce will be one of the categories that we most prioritize, owing to its tremendous market size, high transaction frequency, and relevance to our core business strategy. In particular, under our marketplace model, we have also launched a separated brand known as Caidaquan to enable traditional farm markets to operate online more efficiently.
We help local offline markets to digitize their operations and provide high-quality fresh produce to consumers. For the self-operated model, we will continue to expand geography coverage through supply chain capabilities and enhance operational efficiencies. This pandemic has disrupted both the demand and supply side of the local service industry in the short- term. Looking into the next three quarters, we believe there will still be challenges, as there are still uncertainties and the potential downside from the ongoing evolution of the COVID-19 situation. Meanwhile, a large number of local service merchants are still struggling for survival. Short-term profitability is never our top priority. For the rest of this year, we will remain focused and allocate a sufficient amount of resources towards helping these merchants to resume business, improve their efficiencies, and digitize their operations.
We will also work to provide consumers with higher quality products and services and restore consumer confidence. The outbreak of COVID-19 has brought significant changes to society in terms of production, lifestyle, and consumption habits. In order to thrive, companies must be able to swiftly adapt to these changes, further optimize their business models, and capture new opportunities accordingly. The pandemic has encouraged us to be more determined in strengthening our core elements and competitive advantages in the local service space. Going forward, we will continue to provide better experiences to consumers and enable local merchants to operate online more efficiently through innovative technology and products.
We will further improve our marketplace capabilities and better leverage our delivery network to seize more opportunities. While the digitization of the entire industry value chain is still at a very early stage, we will continue to be an important promoter, leader, and long-term beneficiary of these underlying trends. With that, I will turn the call over to Shaohui for an update on our latest financial results.
Thank you, Xing. Hello, everyone. I will now go through our Q1 financial results. In the Q1, total revenue was RMB 16.8 billion, down by 12.6% year-over-year and down 40.5% quarter-over-quarter, primarily driven by the decrease in the number of transactions across all major segments during the pandemic. Cost of revenue decreased to RMB 11.6 billion in the quarter, which represented a year-over-year decrease of 18.1% and a quarter-over-quarter decrease of 37.3%.
Cost of revenue, as a percentage of total revenue, decreased to 69% from 73.6% in the prior year period, an increase from 65.5% in the Q1 of 2019. The quarter-over-quarter increase of 3.5 percentage points was mainly due to the increase in fixed costs, including depreciation expenses. The year-over-year decrease of 4.6 percentage points was mainly driven by our food delivery segment's improved gross margin, a decrease in depreciation expenses for bikes, and the change in revenue mix for our new initiative. Selling and marketing expenses decreased to RMB 3.2 billion in the quarter from RMB 3.7 billion in the same period of 2019 and from RMB 5.3 billion in the Q4 of 2019.
The significant decrease on a sequential basis was primarily attributable to less incentives for our food delivery and hotel transacting users, reduced spending on promotional campaigns during the pandemic, and a decrease in sales commission, which was in line with the overall decrease in revenue. Selling and marketing expenses as a percentage of revenue remained stable on both year-over-year and quarter-over-quarter basis. In addition, R&D expenses as a percentage of revenue increased to 13.7% from 10.6% in the prior year period, while G&A expenses as a percentage of revenue increased to 6.4% from 5.3% in the prior year period, mainly due to decreasing operating leverage. Operating loss in the Q1 of 2020 expanded on a year-over-year basis from RMB 1.3 billion- RMB 1.7 billion in the quarter.
Meanwhile, operating margin decreased from negative 6.8% in the prior year period to negative 10.2% in this quarter, which was mainly attributable to the fair value loss on an equity investment during the Q1 of 2020, partially offset by the operating margin improvement in our Food Delivery business and New Initiatives and other segments. For consolidated business, our adjusted EBITDA and adjusted net loss were positive RMB 41.3 million and negative RMB 216.3 million, respectively. Adjusted EBITDA margin decreased to positive 0.2% in the quarter from +7.7% in the previous quarter and + 2.4% in the prior year period. Adjusted net margin turned negative in the quarter at 1.3% from + 8.1% in the previous quarter, improved 4.2 percentage points on a year-over-year basis. The quarter-over-quarter decline in adjusted EBITDA margin and adjusted net margin were attributable to decreased operating margins across all segments.
The year-over-year decrease in adjusted EBITDA margin was mainly due to the fact that our In-Store Hotel and Travel segments' revenue contribution and operating margin both significantly decreased compared to the same period last year, despite the operating margins of both our food delivery segment and New Initiatives and other segments improving on a year-over-year basis. The improvement in adjusted net margin was mainly due to the significant reduction in depreciation expenses for our Mobike, partially offset by the decrease in revenue contribution and operating margin of our In-Store Hotel and Travel segment for the period. Before going through our segment reporting, I would like to highlight the changes that we have made to our disclosure for this quarter.
From this quarter on, we will present operating profit and loss by segment instead of gross profit and loss by segment, as we believe this new presentation can help both management and investors better understand and track each segment's operating results. Meanwhile, we are no longer disclosing GTV for both our In-Store Hotel and Travel segment and the New Initiatives and Other segments, as we believe that the changes in GTV do not actively reflect the business performance and growth potential of these two segments. More specifically, the growth of In-Store Hotel and Travel revenue is not entirely correlated with the growth in transaction volume due to the increasing contribution from advertising revenue in the segment. Meanwhile, according to our definition, GTV of our new initiative disclosed in the previous quarters only included transaction volume of our 2C businesses, consumer-related businesses.
However, our 2B services are contributing an increasing portion of revenue of our new initiative segment. However, we will continue to disclose the same operational metrics as before for our Food Delivery business and Hotel Booking business to ensure that investors are able to track the development of these businesses. Let's now take a look at our segment reporting, starting with our Food Delivery segment. Order volume for our Food Delivery business declined significantly on a quarter-over-quarter basis due to the strict control measures implemented by the government across the country as a result of the pandemic, as well as the seasonality of Chinese New Year. In particular, from January 20 to February 20, a severe supply shortage and reduced demand led to extremely low transaction volume.
As a result of heightened concerns, the ongoing closure of university and schools and work-from-home policies, which apply to many of our high-frequency consumers, consumer demand continues to be negatively impacted, with our order volume only recovering to around 75% of its pre-pandemic levels by quarter end. As a result, the order volume of our Food Delivery business experienced negative year-over-year growth, with the daily average number of food delivery transactions decreased by 18.2% year-over-year to 16.1 million. On a positive side, the average order value experienced a visible increase, with an uptick in contribution from high-ticket size orders, especially those orders from branded restaurants, which was partially a result of the more diversified and high-quality supply during the pandemic. As such, Food Delivery GTV decreased by 5.4% year-over-year to RMB 71.5 billion.
Meanwhile, merchants' marketing demand reduced significantly during the pandemic outbreak and holiday season, leading to a 46.9% quarter-over-quarter decrease in online marketing revenue. However, throughout the recovery process, we saw a revival in the online marketing demand of merchants, which partially offset the significant reduction in advertising needs during February, contributing to a 20.9% year-over-year increase in online marketing revenue in this quarter. The monetization rate of our Food Delivery business decreased to 13.3% in the quarter from 14.2% in the same period of 2019, as a result of the adoption and implementation of policies in support of merchants, as well as the change in our order mix. As a result, Food Delivery revenue in the Q1 declined by 11.4% year-over-year to CNY 9.5 billion.
Although delivery capacity was not a bottleneck for our Food Delivery business during the pandemic, delivery costs per order increased both on a quarter-over-quarter and on a year-over-year basis. This uptick was the result of the increased incentives paid to delivery riders both during the Chinese New Year and in the height of the outbreak. Additional costs relate to COVID-19 preventive measures and the decline in order density. In terms of profitability, our Food Delivery business experienced an operating loss of RMB 17.9 million in the quarter, compared to an operating profit of RMB 482.8 million in the Q4 of 2019, while operating margin turned to negative 0.7% in this quarter from positive 3.1% in the Q4 of 2019.
The sequential decrease was mainly due to the decline in the monetization rate, as well as the increase in both delivery costs and operating expenses per order, partially offset by the increase in average order value. However, our Food Delivery business operating loss narrowed on a year-over-year basis, while its operating margin improved by 0.7 percentage points year-over-year. This year-over-year improvement was mainly due to the higher average order value, increasing contribution from online marketing revenue, and improved marketing efficiency. Now, turning to our second segment, In-Store Hotel and Travel, the pandemic has already caused severe disruptions to both the demand and supply sides of this segment. As a result, revenue in the segment decreased by 31.1% year-over-year to CNY 3.1 billion.
Due to the strict pandemic containment measures and hygiene concerns, consumer demand for In-Store consumption, especially for those categories of discretionary consumption, which normally only occur in social or entertainment scenarios, declined significantly, as a substantial portion of local merchants suspended their operation during the outbreak. Meanwhile, our Hotel business was severely affected in the Q1 due to the dramatic increase in tourism and leisure demand for the entire month of February. As such, domestic room nights in this quarter decreased by 45.5% year-over-year and by 61% quarter-over-quarter to 42.8 million, while the average daily rate per room night experienced a year-over-year decline in the quarter. Although local accommodation and business travel activities have started to gradually rebound at a quicker pace, especially in lower-tier cities, the recovery of leisure and business travel between cities in China is expected to take a longer time.
Consumers still prefer to avoid travel for entire work or vacation purposes until the pandemic has run its course. The combination of these negative factors caused In-Store Hotel and Travel transaction-based commission revenue to decline dramatically, decreasing by 50.6% year-over-year and 62.6% quarter-over-quarter. Moreover, In-Store merchants' demand for online marketing solutions was significantly impacted by the pandemic. In particular, this created headwinds for CPC product sales, which accounted for the majority of our In-Store online marketing revenue in 2019. In comparison, Subscription-Based online marketing revenue was much less affected and made up the majority of our online marketing revenue for this segment in this quarter. As a result, online marketing revenue for this segment declined by 8.2% year-over-year and by 39.8% quarter-over-quarter.
Operating profit for our In-Store Hotel and Travel business decreased by 57.3% year-over-year and by 70.8% quarter-over-quarter to positive RMB 680 million in this quarter, while operating margin decreased by 13.5 percentage points year-over-year and by 14.7 percentage points quarter-over-quarter to 22% in this quarter. Both the year-over-year and the quarter-over-quarter decrease in operating margin was due to the decrease in both commission revenue and online marketing revenue as a result of the pandemic's impact, partially offset by the decrease in expenses which occurred as a result of less incentives for transacting users, as well as less promotion and advertising expenses. Let's now turn to our third New Initiatives and Others. in the Q1, revenue in the segment increased to RMB 4.2 billion, up by 4.9% year-over-year, mainly due to the increase in revenue from Meituan Instashopping.
The Shopping and our Macro Loan business, partially offset by the decrease in the revenue from Car-hailing services and B2B food distribution services, all of which were affected by the pandemic. Operating loss from New Initiatives and other segments expanded by 3.4% to RMB 1.4 billion in the quarter from RMB 1.3 billion in the Q1 of 2019, remaining relatively stable on a sequential basis. The quarter-over-quarter decrease was primarily attributable to the decrease in most of our New Initiatives' operating margins, which occurred as a result of the pandemic's negative impact, as well as the change in revenue mix. Operating margin decreased to negative 32.7% in the Q1 of 2020 from negative 21.7% in the Q4 of 2019. Operating loss from the New Initiatives and Other segments narrowed on a year-over-year basis, while operating margin improved by 32.3 percentage points.
Year-over-year improvement was primarily attributable to the significant decline in depreciation expenses, as well as the segment's change in revenue mix. Now, moving on to our cash position. As of March 31, 2020, our cash and cash equivalents and short-term investments totaled RMB 56.5 billion, decreasing from RMB 62.8 billion as of December 31st, 2019. Our operating cash flow turned negative in the Q1 at RMB 5 billion from positive RMB 3.1 billion in the Q4 of 2019. The sequential decrease in operating cash flow was primarily due to the RMB 5.5 billion in net working capital changes on the balance sheet date and the net changes in profit or loss before income tax.
Due to seasonality and the pandemic, the number of transactions across all the segments declined dramatically, leading to a significant decline in GTV and not a decrease in the balance of payables to merchants and the advance from transacting users. Meanwhile, the payment for annual bonus caused a decline under payables and accruals. The combination of these factors accounted for most of the changes in working capital during this quarter. Thanks to the government's effective containment of the pandemic, the Chinese economy has started to reopen. Local service consumption has begun to pick up, and our business has continued to gradually recover since March. However, we are taking a more cautious view for the remainder of 2020.
This view takes into account the ongoing pandemic precautions, the insufficient consumption confidence of consumers in certain local service categories, and the potential risks of merchant closures, which could have a negative impact on our core business in the remainder of 2020. Nevertheless, across both food delivery and In-Store Hotel and Travel segments, we remain committed to working closely with our merchants, supporting them along the path to recovery further, optimizing our products and improving our operational capability to create more long-term value for their continuing success.
Despite the negative impact that these supporting initiatives may have on our short-term financial performance, we will remain committed to our social responsibilities. We believe that the pandemic will help to accelerate the digitization for both the demand and supply sides, and at the same time, we remain optimistic about the industry's growth trajectory and potential in the long term. With that, we are now open for Q&A.
Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star and the number one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key. Once again, to ask a question, you may press star and the number one on your telephone keypad. Your first question comes from the line of Eddie Leung of Bank of America Merrill Lynch. Please ask your question.
Hey, good evening, guys. Thank you for taking my question. I have a question on your Food Delivery business, which performed quite well in the Q1 despite the epidemic. So just wondering, what's the trend we have seen in the Q2? In particular, are we seeing a decline in the average order value of people returning to work? And when do we expect the business to return to a kind of more normal growth path and margin profile? Any factors for the recovery? Thank you.
Thank you, Eddie, for the question on food delivery. For the order volume in Q1, the result was better than our original expectation. First, we had a healthy growth momentum in the first 20 days of January, with more than 30% GTV and revenue growth year-over-year. Secondly, thanks to the effective containment in China, the scale of Food Delivery business recovered quickly in March. Order volume on 20th February was less than 30% of the pre-pandemic level, and it reached around 75% at the end of March.
On the supply side, the number of active food delivery merchants was more than 90% of its pre-pandemic level at the end of March, and as of late April, we have seen the number of active food delivery merchants fully recovered, including the newly acquired merchants, especially the number of branded and high-quality restaurants on our platform continues to increase, enabling us to further extend our high-ticket side selections, which is for the recovery in the past few months. There are still a certain number of merchants who haven't resumed operations so far, especially some independent and small restaurants. On the demand side, the food delivery daily order volume continues to recover gradually in Q2. We have seen a demand for hotpot, bakery, and other categories that consumers generally cannot cook at home recover at a fast pace.
The consumption recovery for lunch and afternoon tea outpaced the recovery for dinner and night snack, while workday orders continue to recover faster than weekend orders. In general, consumption recovery in lower-tier cities is ahead of higher-tier cities. In the week of May 11, the daily order volume recovered around 90% of the pre-pandemic level. However, the further healthy recovery of food delivery order volume will need further relaxation of the control on many residential communities in northern China, the opening of temples and the further recovery of mid to low-ticket side supply and food delivery demand for dinner and night snack with less hygiene concerns among consumers.
If more restrictions could be lifted in June, we expect the order volume growth of Food Delivery business will turn positive year-over-year in Q2. In terms of your questions on profitability, we expect pressure on operating margin remains in 2020. Positive factors such as higher AOV during the pandemic may normalize. Monetization rate will continue to be impacted by merchants supporting initiatives. User subsidies already pick up again to further drive the consumption confidence.
Therefore, we are still conservative in terms of short-term profitability of Food Delivery business, although it may slightly recover along with the recovery of business scale and order density. Again, further driving the order volume recovery and providing necessary support to our merchants will be our top priority in 2020 for Food Delivery business rather than short-term profitability. Thank you.
Thank you.
Your next question comes from the line of Ronald Keung of Goldman Sachs. Please ask your question.
Thank you. Thank you, Xing, Shaohui, Scarlett, and team. So on food delivery, as we look longer term, with COVID transforming some of the styles and structural changes to industries, can you update us on any change or any things that you think about the view on longer-term market size for food delivery, sustainable growth rates, and kind of profit per order longer term? I'm thinking about the one RMB of operating profit per order, any timetable for that, and the update to reaching the 100 million orders per day, as Xing, you've commented a year and a half ago. Thank you.
Thank you, Ronald. So in the short to mid-term, there are still quite a lot of uncertainty regarding COVID-19 for the next few quarters, such as its involvement in other countries and potential negative impact on the global economy. We all know food delivery and other local services in China are closely related to spending power and confidence. They are not going to be completely immune to the potential global recession. In the long term, in general, we think the COVID-19 pandemic will bring positive structural changes to our food delivery industry. We have elaborated on the supply side. More and more branded and chain restaurants accelerated their migration to online channels. That's good for us. Small and medium restaurants are also making efforts to improve their online operations and improve their service quality.
They are working more closely with us as food delivery becomes their primary revenue source during the pandemic. The quality improvement on the supply side has been speeded up. On the demand side, more consumers realize and recognize the convenience and selection that the Food Delivery platform can offer during the pandemic. So they tend to use Food Delivery for more diversified consumption scenarios, not just for quick snacks, but sometimes for quite formal dinners. And they are willing to pay for higher- quality supplies and place high-ticket size orders. In addition, more and more consumers started to order non-food categories on our platform during the pandemic.
They used our platform to buy almost anything: buying medicine, flowers, anything. And during this accelerated process of digitization for both supply side and demand side, we have become more confident that food delivery service will become the infrastructure service for China's urban population. And we have ample room for growth in the long term.
So despite the short-term setback due to the COVID-19, we believe we continue to be on the track to reach the 100 million orders per day by 2025 and one RMB of operating profit per order in the long term. And we will have even more business opportunities on the journey, leveraging our largest on-demand delivery capacity and solid merchant base and user base. So we will continue to further solidify our leading position in this industry and using technology to continuously create value for both the consumers and the merchants. So yes, we remain quite confident. Thank you.
Thank you.
Your next question comes from the line of David Dai of Bernstein. Please ask a question.
Thank you, Xing, Shaohui, Scarlett, and team. Thank you for taking my questions. My question is around the average order value and average delivery cost for food delivery. We have seen some very positive trends for both metrics during the pandemic. The average order value has increased 14.4% year-on-year in Q1. What will happen to the average order value, the trend of average order value in the future? And also on the delivery cost side, we have launched the contactless delivery measures, which have improved the delivery efficiency. How can we expect the optimization of delivery cost per order in the future? Thank you.
Thank you, David, for noticing the AOV increase. This was primarily due to the change of the structure during the pandemic. A lot of top brands and chain restaurants started to work with us, while a large number of small restaurants extended their business suspension during the pandemic. Especially, small restaurants catering to price-sensitive students remained closed. In addition, consumers also preferred to order from branded restaurants, which were considered to have better food safety and hygiene standards during the pandemic. As a result, the contribution from high-ticket size orders from branded restaurants increased significantly in Q1.
Along with the further recovery in the next few months, we believe more and more small restaurants will resume their operation. Our orders from local restaurants, which usually have much lower ticket size, will gradually pick up. As a result, average order value is expected to fall back and normalize in the short term. In the longer term, we believe that quality improvement of food delivery suppliers will continue to, and more consumers will be willing to pay premium for high-quality food. The positive structural change driven by the pandemic will continue and will provide us with more upside for average order value in the future.
For the delivery cost per order for our 1P model, it increased by more than 10% on quarter-over-quarter basis in Q1 due to the incentives paid to the delivery riders for working during the holiday season and pandemic situation, the extra cost associated with virus containment, as well as the decrease in order density. However, it only increased by about 1% on a year-over-year basis in Q1. Overall, we think delivery cost in Q1 was well under control despite the impact from the pandemic. First, most orders in February and March were fulfilled under contactless delivery model, which brought considerable efficiency improvement to mitigate the negative impact from order density decrease during the pandemic. Second, the segmentation and flexible mobilization of delivery riders were further improved in Q1.
Third, we did not need to pay additional incentives to our riders since late February when the capacity of delivery riders recovered faster than the supply and demand of the delivery. Extra training in the short term, delivery cost per order has shown seasonality, and we expect a similar trend this year despite the impact from the pandemic. In addition, the orders for contactless delivery will decrease from over 80% during the pandemic to a much lower percentage when the control in residential communities further lifted. Some consumers will still prefer to receive orders at their home door.
From a long-term perspective, we believe the pandemic brings us more opportunities to explore diversified delivery models. We will also continue to invest in the cutting-edge technology for autonomous delivery. Along with the further increase of business scale and order density in the long term, we believe that delivery efficiency still has room to improve, and delivery cost per order may decrease accordingly.
Thank you.
Your next question comes from the line of Alex Yao of JPMorgan. Please ask your question.
Thank you, Management, for taking my question. I have a couple of questions regarding the monetization rate trends. So for Q1, if we leave aside your self-inflicted demonetization initiatives such as commission revenue rebate, etc., etc., I think some of the interesting there were some interesting dynamics that might have a longer-term impact. Number one, you guys mentioned more and more top brands and chain restaurants are joining our platform. Are they coming with a higher or lower monetization rate than our current platform average? And your thoughts on the longer-term trend?
And then number two, we also noticed that recently you guys had the negotiation with the Restaurant Association of the Guangdong Province. Will it have a further negative impact on the monetization rate in the medium to longer term? And are there any similar events emerging in other regions? So overall, can you talk about your thoughts on the monetization rate trend over the medium to longer term? Thank you.
Okay. Thank you, Alex. So as you have noticed, during the pandemic, we launched a series of merchant initiatives such as commission rebates, subsidies, and free traffic, etc. That lowered our monetization rate in Q1. And we'll continue to have some pressure on the monetization rate in Q2. And in addition, in general, we provide a discount on the commission rate to certain high-quality restaurants, as we think they could provide more diversified quality supplies to our consumers. The increasing portion of branded restaurants will modestly bring down the average monetization rate of Food Delivery business in the short term. In the long term, we believe that the higher portion of high-quality restaurants will give us more potential to monetize from high-ticket size orders, which we think will offset the modest impact on monetization rate.
Moreover, restaurants generally decreased their marketing budget during the pandemic, and advertising revenue at a percentage of GTV decreased in Q1 on quarter-over-quarter basis. That further decreased the monetization rate in the short term. In the future, we expect the advertising revenue will gradually get back to the normal track along with the recovery of merchants, and in fact, merchants found our advertising process very effective to boost their order volume during the recovery. In the remainder of 2020, the monetization rate of our Food Delivery business may slightly recover as advertising needs for merchants will rebound.
It is still expected to be at a lower level as compared to 2019, and providing more support to the merchants and driving the order volume recovery will definitely be our top priority this year. We remain confident about the monetization potential of our Food Delivery business in the long term, and for your second question, for the news you mentioned, yes, the communication with the Guangdong Restaurant Association went quite well. We will have more communication and collaboration with high-quality restaurants in the future, in addition to the constructive advice from these restaurants and associations, and we will better understand their pain points and needs and continuously optimize our products and services to create more value to our restaurant merchants.
So we believe the more value we create for merchants, the more opportunities that we are going to have to again have to share from their success. So we are going to try our best. Thank you.
Your next question comes from the line of Thomas Chong of Jefferies. Please ask a question.
Hi. Good evening. Thanks, Management, for taking my questions. I have a question relating to the In-Store business. In general, the recovery of the In-Store business is behind the food delivery in Q1. Have we seen the recovery accelerating in Q2 for some of the verticals of the In-Store ? And also, could you please also give some updates about the expectation of In-Store recovery for the full year of 2020? Thank you.
Yeah, you are right that the recovery of the In-Store segment is much slower than the delivery segment. And different service categories are experiencing different recovery speeds. For In-Store Dining, the number of transactions on our platform recovered to around 80% of the pre-pandemic level in the week of May 11, from around 45% at the end of March. However, average order value for In-Store Dining dropped meaningfully on a year-over-year basis, given the recovery of formal meals or other things. Dining lagged much behind the recovery of fast food or light meal dining. For the other In-Store services, the number of transactions on our platform recovered to around 60% of the pre-pandemic level in the week of May 11, from around 30% at the end of March.
Especially, services that are discretionary and may involve a big crowd recover much slower. For example, medical, aesthetic, beauty, pets, etc. recover faster. However, parent and child activities and karaoke had much slower recovery due to the hygiene concerns from consumers, as well as crowd control from local governments. We continue to notice the operating pressure of our In-Store merchants. In general, merchants of our In-Store services only reserved working capital for about three months. If the recovery continues to be slow, they will likely shut down their business at the end of Q2 or the beginning of Q3. For the Q2 of 2020, we expect the recovery for our In-Store business may encounter a bottleneck for a while. It will take a relatively longer time to fully rebuild the consumer confidence and the supply for those most impacted discretionary services categories.
Transaction-based commission revenue and the CPC advertising revenue of the In-Store segment, which decreased by more than 50% and 40% year-over-year respectively in Q1, need to gradually come back in line with the transaction volume recovery. At the same time, contract renewal for subscription-based services may continue to be tempered by the potential shutdown of many merchants in the next few months. We expect the revenue growth for the In-Store business will still be negative in Q2. As the leading commerce platform for local services, we will continue to optimize our products and operations to help merchants.
We will further stratify our merchant base and adopt a tailored approach to better testing. We will also strengthen the collaboration with local governments on consumer vouchers, which are effective for the recovery of consumer confidence in the next few quarters. Overall, challenges and uncertainties remain, but we will be committed to work closely with our In-Store merchants along with recovery. Thank you.
Thank you.
Your next question comes from the line of Gary Yu of Morgan Stanley. Please ask your question.
Hi. Good evening, and thanks for the opportunity to ask a question. My question is more related to your hotel booking business. You have previously mentioned some of the structural advantages on the recovery, but we also observed some favorable data points coming out during the May long holiday. So could you share more details on the recovery pace for different types of cities and different kinds of hotels and your view of the forecast for the full year this year? And a related question is also on your Hotel business. Are you seeing any risks of intensifying competition on the domestic side in the next few quarters as the opportunity of outbound markets seems very limited? Thank you.
Thank you, Gary. As of late March, the daily number of domestic room nights consumed on our platform was slightly over 50% of the pre-pandemic level. In the week of May 11, it gradually recovered to over 70% of the pre-pandemic level. We have observed several trends along the recovery. First, local accommodation recovered much faster than cross-city travel. We have a larger base of younger generation in both high-tier and low-tier cities, and they have much more demand for local accommodation. At the end of March, we already achieved positive room night growth on a year-over-year basis for local accommodation, while the cross-city room nights still decreased by more than 40%.
Second, the hotels in lower-tier cities generally had better recovery due to early lifting of their containment measures. Third, in general, the comfortable three- to four-star hotels had better recovery as they had better flexibility to provide both attractive hotel and quality services to cover a wide range of demands from our consumers. Fourth, companies are cutting budgets for business travels and embracing video conference tools, which led to the slower recovery of hotels for business travelers. All of these factors gave us structural advantages during the recent recovery. During the May holiday, the consumption of domestic room nights on our platform bounced back faster than we originally expected as some higher-tier cities lifted containment restrictions right before the holiday. However, domestic room nights immediately fell right after the holiday. Overall, we tend to be conservative for the recovery of Hotel business for the full year.
We expect the cross-city travels for both vacation businesses will take much longer time to fully recover as hygiene concerns from consumers are expected to last for a while. We expect the volume and revenue growth for the hotel booking business will continue to be negative in Q2 and may even be negative for the full year of 2020. In terms of competitive dynamics, given the structural advantages we have during the recovery, we believe we could further solidify our leading position in terms of domestic room nights this year.
Our platform provides hotels in lower-tier cities with more efficient channels to do online marketing during the recovery. We will also make further progress on high-star hotels for both four-star comfortable hotels and the five-star luxury ones. These high-star hotels need to do promotions in more channels during the recovery, and we could provide diversified products and valuable traffic to help them. Thank you.
Thank you.
Your next question comes from the line of Jerry Liu of UBS. Please ask your question.
Hey. Thanks, Management. My question is around the New Initiatives segment. We heard some comments just now about some of the newer delivery businesses. I just also want to get an update on some of the other investments we've made in the past, especially for electric bikes, where I see recently there are some orders for as much as one million bikes. Just wondering if this is additional CapEx, and more broadly, what is the rationale and strategy for the bike-sharing business or any of the other non-grocery deliveries businesses? Overall, how might we think about the operating loss for the New Initiatives segment going forward? Thank you.
Thank you, Gary. Yes. About two years ago, we acquired Mobike, and then we put our substantial resources and efforts into the integration, and we further invested in that business, the bike-sharing business. We make those decisions from a very long-term perspective. We believe bike-sharing will be a very important component for the transportation industry in the long term. We believe it could better serve our consumers' high-frequency, short-distance transportation needs, increase their stickiness to our platform, and expand cross-selling opportunities with other local services. In addition, those yellow Meituan bikes will increase our brand awareness, the exposure through millions of yellow bikes all across the country, which will further benefit our platform's overall branding and traffic acquisition.
For the existing bikes, we plan to finish the replacement for the remaining old bikes within this year. More than half of the replacement is expected to be completed in Q2. For the new electric bikes, based on our current assessment, we believe it has good potential in terms of market size and use cases and consumer experience and unit economics. We think other players who already launched the Impact may share the same view. This could be a profit-making business in several years down the road while bringing new high-frequency transaction scenarios to our platform. The information in the media may not be accurate. We plan to launch several hundred thousand Impacts for early-stage exploration in Q2, and we'll continue to monitor the business performance. This means additional capital expenditure to the replacement of existing bikes.
It is material to our cash position and will be well assessed and under control. And we will continue to plan our subsequent investment in bike-sharing business based on a careful ROI assessment. Thank you.
Thanks.
Your last question comes from the line of Kenneth Fong of Credit Suisse. Please ask your question.
Hi. Xing, Shaohui, Scarlett, and team. Thanks for taking my question. For the other New Initiative, except for bike-sharing, could you share any updated investment plan? Will you adjust your investment budget this year given the significant operating cash outflow in the Q1 and the ongoing challenges on the recovery of your business? Thank you.
Thank you, Kenneth. Similar to bike-sharing business that I just mentioned, we always assess our investment for new opportunities from a long-term perspective. And so we will not decrease our investment for the long-term growth just because we are facing business disruption and challenges in the short term. So on the contrary, as a leading e-commerce platform for services in China, we believe we have even better opportunities to increase investment to accelerate the digitization for both the demand side and the supply side this year. We still have sufficient cash balance to support our business development, and we will continue to do careful ROI assessment and actively allocate resources to attractive New Initiatives. So in addition to bike-sharing, we will increase our investment this year in other New Initiatives that we think have important strategic values.
As the demand and potential of Meituan Insta shopping has been further proven in the pandemic, we will further invest to better leverage the marketplace model and our delivery network to enable more diversified merchants in providing on-demand delivery of their goods to our consumers, and at the same time, for self-operated Meituan Grocery business, that's Meituan Maicai, and we will invest to expand geographical coverage where it is going to cover more cities and improve our supply chain capability and do more exploration on different business models, and also for our B2B food distribution business, that's Kuailv, we will invest to continue to improve the supply chain and the integrated service capability, aiming to better serve the high-quality merchants and increase their stickiness and increase the output.
And for our RMS, the Restaurant Management System, the SaaS business, we will further invest in the R&D to improve our products and optimize the business development team coverage to provide better service to more high-quality restaurant merchants. So in summary, I agree that there are challenges. I think the COVID-19 is not going to be the end of the world, so we will keep investing and we will keep building. Thank you.
Thank you very much.
There are no further questions at this time. I would now like to hand the conference back to today's presenters. Please continue.
Thank you for joining our call. We look forward to speaking with everyone next quarter.
Thank you. Ladies and gentlemen, this does conclude our conference for today. Thank you for participating. You may now all disconnect.