Good day and thank you for standing by. Welcome to the MAITI 1 First Quarter of 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.
Please press star 0. I would now like to hand the conference over to your first speaker for today, Ms. Scarlet Chu. Thank you. Please go ahead.
Thank you, operator. Good evening and good morning, everyone. Welcome to our Q1 2021 earnings conference call. Joining us today are Mr. Xin Wang, Chairman and CEO and Mr.
Shao Hui Chen, Senior Vice President and CFO of Meikuan. For today's call, management will first provide a review of our Q1 2031 results and then conduct a Q and 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 it may differ from actual results in the future. This presentation is based on our management accounts, which has not been audited or reviewed by our auditor. This presentation also contains unaudited non IFRS financial measures that should be considered in addition to and not as a substitute all measures of the company's financial performance prepared in accordance with IFRS.
For a detailed discussion of risk factors and non IFRS measures, please refer to the disclosure documents in the IR section of our website. Now, I will turn the call over to Mr. Xin Wang. Please go ahead, Xin.
Thank you, Scarlett, and hello, everyone. Welcome to Meijuan's Q1 2021 earnings
call.
For the Q1 of 2021, our total revenue increased by 120.9% year over year to RMB37 1,000,000,000, adjusted EBITDA and adjusted net loss we're negative RMB2.4 billion and RMB3.9 billion, respectively, in 20 21Q1. Annual transaction in users on our platform increased to 500 69,300,000, while the number of annual active merchants increased to 7,100,000. The average number of transactions per transaction user increased to 30.5 times for the 12 months of 2021 from 26.2x in 2020Q1. This year, Chinese New Year was a special to prevent the COVID outbreak. Citizens were encouraged to travel less and stay in their walking cities during the holiday period.
In response to these special arrangement, we launched the Chinese New Year Open for Business at the initiative and arrange for merchants to work throughout the holiday period to supply a diverse range of quality foods and services to our consumers, during this period, we also provide delivery riders with Medicare benefits and incentives. We are proud that our governments have effectively contained COVID in China, which led to a strong recovery in demand for local services growth across the different segments on our platform has been strong. With total annual transacted users close to 570,000,000 Merchants reaching $7,100,000 for an increase of 16.9% year over year at the end of Q1. We are pleased to see that our platform has continued to generate more quality services and value for consumers and merchants, we are also reinforcing our strong brand influence as the leading local service platform in China. In Q1, our total food delivery orders grew by more than 110% year over year with a full year CAGR of 32% as measured from Q1 of 2019, the strong order growth will be mainly driven by 2 factors.
First, there would be ongoing change we can introduce the consumption habits and lifestyles. The second will be increasing diversity of supplies on our platform as we improve the merchant operation and services. On the consumer side, we were pleased to see that Huizhirib is not only a necessity and the service needed directly during workdays, but also a high quality source of we are good for family gathering events during important festivals such as the Chinese New Year. As some people prefer to stay at home rather than dine out during the holidays, we launched the Open for Business initiative, we cooperated with millions of merchants to provide consumers with deliveries of Chinese New Year products for dining, liquor, snacks and grocery during the holidays, we are glad to see that our consumer challenge the convenience and quality of our services. Naturally, this initiative brought commendable growth to our full delivery orders, the number of orders recorded during the 7 day holiday period increasing by 116% for the same period in 2019 with a 2 year CAGR of 47%.
Our full delivery DAU and transaction users also grew substantially on a year over year basis. With many merchants open for business during Chinese New Year, we dedicated more resources to a wider range of marketing and promotional events, incentivizing consumers to bring more new users onto our platform increasing our user conversion rates. Notably, the user addition and transaction frequency of high quality users increased meaningfully during the Chinese New Year holiday. During Q1, we also expanded our food delivery consumption scenarios we better meet the increasingly diverse and constantly evolving demands of consumers. With order contribution from the breakfast, afternoon tea and late night snacks categories further increasing long distance orders become a more meaningful part of our total order composition.
As a result of our increasing differentiated specialized merchant operations strategies, both annual active merchants advertising merchants for food delivery grew to record highs in Q1. Meanwhile, sales from high quality merchants also increased, comprising a larger proportion of our total orders. To help merchants optimize their digital operations, we continue to train more digital savvy talents the trend of restaurant merchant digitization has raised. The restaurant industry has evolved into 1 we are dining out and order in services are equally important to restaurant merchants and collaboratively constructive for each other's growth. With the merchant survey data analysis and modeling, we have drawn some preliminary conclusions.
For example, Fen Food Delivery orders comprise roughly 30% of the total order volumes of lunch and dinner restaurants roughly 50% of
our live new
restaurants, these restaurants can best maximize their average revenue per restaurant worker and average revenue per square foot of restaurant space, that achieving a fine balance between their online and offline operations, going forward, we have merchants better manage their digital operations. We will continue to invest in our new restaurant manager program, improve our ability to serve and grow the merchants and put better talent training system in place. Our on demand delivery network, we believe providing ample delivery capacity consistent service quality are both key to ensuring operating model user experiences. Therefore, during this year's special Chinese New Year period, we preemptively strategize around our operations to better satisfy consumer demand, in particular, we focused on providing sufficient delivery services I'm properly managing delivery riders working during the period. Our delivery rider benefits project, a condo project, that means in assembled, we roll out the project we rolled out new incentives and benefits designed specifically for the Chinese New Year.
Our benefits and incentives for the new riders surpassed RMB500 1,000,000 during the 7 day holidays. We also continue to hold more panel sessions with the delivery riders on their long term career paths and personal growth, we'll be more than 98 session as of now. In these sessions, delivery riders could freely offer us their feedback, complaints and suggestions, which we will then appropriately incorporate into our business planning and improvements. We also offered free online medical consultation services to delivery riders in 100 cities during Chinese New Year. We provide riders with instant and helpful advice.
In addition, we upgraded the hardware used by the reriders, including smart helmets and delivery pickup lockers at the restaurants in some pilot areas. Now moving on to our second segments. On the back of effective counter measurement for COVID-nineteen, our in store hotel and travel segment had fully recovered in the Q1. During Chinese New Year, as people were encouraged to stay good in their working cities, we captured the explosive demand for in store services. We strategized for providing an the selection of merchants and supply of services and our open world business initiative.
During Q1, we paid our theme based marketing and promotional events to different festivals and service categories, further elevating our in store transaction numbers, GTVs and number of merchants, this go to show that we maintain a distinctive and strong consumption consumer management at the Yijing platform, we help consumers explore local lifestyles as well as quality merchants and value for money services. For in store dining, our 2 year GTV pay gap was nearly 30% in Q1 during the same period of 2019, during Chinese New Year, our GTV and transaction volumes growth both accelerated to reach historical highs. At gathering dining fully recovered, the live meal options also maintain high growth rate. On the supply side, we continue to penetrate more high quality chain restaurants are upgrading our service quality. In March, we announced the 2021 version of our Black Pearl list, which covers 22 cities in China 3 cities overseas.
By now, our Blackbird is well established among both consumers and merchants as a compass for reputable culinary and other recommendations. Essentially the mission guide for China. For other installed services, our 2 year revenue CAGR was over 30% in Q1 from the same period of 2019. New categories such as medical aesthetics we achieved consistently strong growth, while our entire leisure and entertainment category, which was severely impacted during the pandemic, also resumed its pre COVID growth momentum, with a 2 year CAGR of nearly 30%. Besides the promotion during the Chinese New Year, we also helped to lift our merchant advertising budget Launching various marketing and promotional festivals such as the wedding festival and back to school festivals Our competitive advantage in serving high quality merchants and fast expanding coverage of small to medium merchants continued to ramp up in Q1.
For our hotel business, the government's recommendations For people to stay put during Chinese New Year, net to less traveling during the holiday season as compared to the Chinese New Year holiday in 2019. Nevertheless, as we look past the COVID, consumer demand for hotels continue to rise in Q1, we achieved over 100,000,000 domestic room nights in the quarter, representing a 2 year CAGR of 13 point 3% is measured from Q1 of 2019. As we continue to see improvements across hotel selections, product experiences and customer services, our focus on expanding the high end market remains, especially for 5 Star Hotels, for example, in Q1, domestic aluminates for 5 Star Hotels grew by more than 163% year over year, while the contribution of room nights from high end hotel further improved to 16.7%, growing by nearly 4% Thank you. For our new initiative segment, we continue to invest in our retail business. We view retail from a long term perspective building out our capabilities across distribution, supply chain, product selections, SKU management and so on.
Similarly, through marketable business models, we hope that consumers from all parts of the country with different spending powers, they enjoy our services or having the diverse demand met on our platform. Our community e commerce business may translate further expanded its geographical coverage more than 2,600 cities and counties in Q1, particularly in rural areas, radically completing our nationwide expansion objective. Despite the seasonally quieter period for retail in February due to the Chinese New Year holiday, our overall business performance and growth was strong. We also explored new ways of acquiring users on our platform to achieve commendable growth in new user additions, both in terms of our Meituan Select business and larger Meituan platform, we were pleased to see that Meituan Select aggregated transaction users exceeding 100,000,000 in Q1. Importantly, we are focused on strengthening various capabilities for the long term.
In Q1, we designed a more differentiated operating strategy for group leaders, while improving our incentive system to increase group leader efficiency and normalized group leader commission rates. In addition, we continue the nationwide expansion of our warehousing and logistic network our community e commerce business, as we explored and upgraded our next day delivery registered on that network. We provide the midlife net user with a greater access to a wider range of quality goods, especially in less developed areas. Last, we continue to improve our product selections and quality management, and we are now working with more suppliers to further diversify our range of value for money products. As a result, during Q1, both user retentions and transaction frequency steadily increased.
Going forward, we plan will further improve our operating efficiency as we continue to explore improving our capability across other important aspects. For Meituan Instant Shopping, to capture the rising demand and further drive growth. We channeled more resources into certain activities, such as supermarkets, flowers and prepared fruits. We also set up our marketing efforts on the back of the demand that arose from this special Chinese New Year as people stay put in their cities. Additionally, the Chinese New Year shopping spree takes the basis takes place days ahead of Chinese New Year's Eve.
However, for the younger generations, this is no longer practical as they are often busy working in the days leading up to the festival. With Meituan Insta Shopping, these individuals can conveniently order their desired goods and gifts and have them delivered on the same day. Consumers widely appreciate gift service. Also during the week leading up to Valentine's Day, flowers and gifts sales exploded. Roses, watches and icons were all popular gifts sold on our platform, we had sales multiplying by double digits week over week in the period.
At the same time, our number of high ticket sized items also grew exponentially. We are delighted to see that as we continue to obtain consumer management and the platform that delivers everything to consumer store staff, more food users used our Meizan inter shopping service for the first time ever. As a result, in Q1, quarterly transacting users reached over 70,000,000, significantly increasing both sequentially and year over year. And now, on demand delivery consumption scenarios have extended beyond pure prepaid food deliveries to larger selection of groceries and other goods, resulting in higher transacting frequency and stickiness to our platform. For Meijan Grocery, we continue to expand and optimize our operations in the 4 Tier 1 cities with more people staying at home and shopping in their cities during the festival this year, we actively adjusted our supply strategy to meet this growing demand.
Moreover, by focusing on providing a consistent user experience and executing multiple promotional events, we acquired more new users we increased our user transacting frequency. As such, quarterly transacting users grew by more than 400% year over year, with the GGB also up nearly 2 50% year over year. Finally, as we quickly expand the scale of our business with higher operating and warehousing efficiency, we also improved our unit economics in turn. As the leading local service provider in China, our full delivery and in store services achieved strong growth in Q1, thanks to government's effective containment of COVID. This growth also reflects the strong mindshare that we have participated in both consumers and merchants the platform for on demand delivery services and the go to destination for local service operations.
We are also actively expanding our retail businesses, such as Meitai Select and Meitai Insta Shopping, we're optimizing our on demand delivery network, but also building new next day delivery logistic network across the country in lower tier markets, through these new initiatives, we hope to bring an ever increasing and diverse number of categories to consumers to improve to a broader range of general merchandise. Equally, we will also work towards better serving our small and medium merchants I'm providing a more holistic range of merchant services, such as advertising products, B2B food distribution services, restaurant management services
to
we are committed to helping merchants improve their operations through the better use of technology and providing consumers with more and better goods and services, we are always open to and ready for changes. We are fully committed to our social responsibilities, which remains at our top priority, we will support the national development strategy of domestic circulation will help further stimulate domestic consumption and boost the rural revitalization, servicing a larger group of consumers or merchants across different markets with diverse needs. This year, we have more feedback from the regulators, consumers, merchants and delivery riders. Their voices served as a warning for us, helping us adjust our existing practices and optimize our operations to the best we also served as a motivation, inspiring us to do the right thing for the long term development we will always create value to our consumers, merchants, our shareholders and society at large as we continue to fulfill our mission, we help people eat better, eat better. With that, I will turn the call over to Xiaohui for an update on our latest financial results.
Thank you, Xin. Hello, everyone. I will now go through our Q1 financial results. In the Q1, our total revenue reached RMB37 1,000,000,000, increasing by 128% year over year. On a year over year basis, all business segments achieved growth as we recovered from the COVID-nineteen pandemic.
Our ongoing investment in new initiatives, particularly in our retail business, drove the increase in cost of revenues. As a percentage of total revenue, the cost of revenue increased to 80% this quarter from 69% in the prior year and 75% in the prior quarter, selling and marketing expenses as a percentage of total revenue were 19.5% this quarter, increasing from 15.1% in the prior year and decreasing from 20.2% from the prior quarter. Year over year increase was mainly due to the increase the expenditure for user subsidy, employee benefit as well as promotion and advertising, while the sequential decline was primarily attributable due to a decrease in user subsidy for our food delivery business during the holiday season. R and D expenses as a percentage of total revenue were 9.4% this quarter, decreasing from 13.7% in the prior year as a result of our improved operating leverage increasing from 8.6% from the prior quarter due to our new business expansions and higher average salary for R and D employees, G and A expenses as a percentage of total revenue were 4.7% in this quarter, representing percentage point decreases of 1.7% year over year and 0.4 percentage points quarter over quarter, primarily due to our improved operating efficiency.
Q1 is usually a slow season for our food delivery and instant hotend travel segments. These two segments continue to demonstrate healthy growth as they benefit from a strong recovery from COVID-nineteen and will further enhance the business operations. During this quarter, the 2 segments combined to achieve an aggregate operating profit of RMB3.09 billion, increasing from RMB609 1,000,000 in the prior year and RMB3.7 billion in the prior quarter, respectively. Similarly, we recorded total operating loss of RMB4.8 billion this quarter, primarily due to the rapid expansion of new business, especially the repair businesses. On a consolidated basis, our adjusted EBITDA and adjusted net profit both experienced negative growth to negative RMB2.4 billion and negative RMB3.9 billion respectively.
Now moving on to our second reporting, starting with food delivery. During this spring festival, we have witnessed stronger consumers' demand for food delivery compared to the same period in previous years as people increasingly prefer to have food delivery for our effective promotional campaign, especially the open for business initiatives with millions of merchants also helped to drive order volume growth during the in addition, we continue to allocate sufficient resources to our effective membership program, as a result, both quarterly transaction users and repurchase frequency achieve healthy growth year over year, especially in the high quality consumer base we are less price sensitive and more willing to pay for high value orders and long distance deliveries. We were able to achieve 32.1 percent 2 year order volume CAGR and 37.4 percent 2 year GTV CAGR in this quarter. On a sequential basis, amortization rate grew by 0.6 percentage mainly due to our lower user subsidy ratio throughout the holiday season. Similarly, our monetization rate improved 1.1 percentage points from the same period last year as a result of the overall recovery of the dealer business.
Notably, during the Q1 last year, we launched a series of merchant support initiatives in response to the COVID-nineteen outbreak, such as commission rebate, commission discounts and more, which significantly lower our monetization rate. Kokomo Food Delivery revenue increased by 116.8 percent year over year to RMB20.6 billion, representing a 2 year CAGR of 38.6 In terms of cost, delivery cost to order increased on a sequential basis and maintained at a similar level as compared to the same period of last year. During the Q1 of 2020, we provided more incentives for delivery riders we work at the height of the outbreak and incur additional costs for providing COVID-nineteen preventive measures for delivery riders. During the Q1 of this year, small orders were fulfilled during the holiday period as a result of the Facebook guidance by the government, we increased incentives and improved the wellfare for delivery riders to ensure sufficient capacity during the holiday season. Year over year increase in operating margin was mainly attributable to the overall recovery of fixed delivery business, partially offset by the lower average value per order.
On a sequential basis, higher AOV and lower safety ratio we have to offset the increased delivery cost per order, which allow our operating profit and operating margin to both grow on a sequential basis to RMB1.1 billion and 5.4 percent respectively. Now turning to our second segment. The sequential decline in revenue from our in store hotel and travel business was mainly due to seasonality. In addition, more people were encouraged to stay put during the holiday period, which resulted in decreased consumption from our hotel business around the Chinese New Year. However, on a year over year basis, we are pleased to see that the segment's revenue bounced back, achieving triple digit growth in the quarter.
For our in stock business, we leverage our expanded merchant base, diversify transaction based products, optimize operational capabilities and in based promotional campaigns to capture the explosive demand from consumers for local services in the quarter. We continue to be the preferred channel for local service merchants to reach their customers during the recovery period, especially the medium, small and macro sized merchants, the merchant adoption rate of both our CPC advertising product and the subscription based services continue to grow year over year. More notably, our CPC advertising revenue achieved a 2 year CAGR of more than 14%, while our subscription based services revenue achieved a 2 year CAGR of more than 30%. With respect to our hotel business, consumer demand for Health continues to grow on a year over year basis as a result of China's effective control measures, with our domestic room nights achieving a standout 130 8.8% year over year growth this quarter. With regard to low stock hotels and low tier cities, we further solidify our existing advantage, enhance the brand awareness and improve offline traffic condition.
Meantime, we also made solid progress in the high stock market this quarter I'm trading further into the high star, especially 5 star hotels. Operating profit for our in store hotel and travel business we are unlikely on a quarter over quarter basis to RMB2.7 billion due to seasonality, while operating margin increasing by 2 point 2 percentage points to 41.7%, which was mainly attributable to the reduction in user incentives in our hotel business due to seasonality. As a result of strong recoveries from COVID-nineteen, both operating profit and operating margin improved meaningfully on a year over year basis. Let's now turn to our 3rd segment, new initiatives and others. During the period, revenue in this segment increased by 136.5 percent year on year to RMB9.9 billion, driven by the recovery from COVID-nineteen well as our business expansion to satisfy consumers' growing needs, our increased revenue in this segment was mainly from our retail business, B2B's distribution services and the ride sharing business.
Operating loss from our new initiatives and other segments was negative RMB8 1,000,000,000 in this quarter, increasing significantly on both a year over year and quarter over quarter basis. Our retail business, especially our community e commerce business, continued to be our largest investment area this quarter. It's worth noting that the business is still at an early stage and therefore operating loss further widened during this quarter as we ramp up our community e commerce business nationwide. Additionally, while we continue to make substantial upfront investments in warehousing and the fulfillment infrastructure during this quarter. We also continue to cultivate consumer habits and expand our group leader base through incentives.
The combination of these investments and the naturally higher cost that we incurred during the holiday season led to a noticeable increase in our community e commerce business losses during this quarter. We are pleased to see that we achieved meaningful improvement in operating efficiency, which led to gradual improvement in our overall unit economics our community e commerce business is during this quarter. Looking ahead, we remain committed to investing more in our community e commerce business to accelerate this growth, we are also further improving our own operating efficiency. Now turning to our cash position. As of March 31, 2021, our cash, cash equivalents and short term investments totaled RMB53.1 billion.
Additionally, our operating cash flow decreased to negative RMB4.4 billion this quarter, which was primarily attributable to our loss before income tax. In summary, during the quarter, our business continued to we will further optimize and enhance our segment operations and benefit from the effective control of COVID-nineteen. Our 2 primary business segments continue to deliver solid quality results. Moreover, their quick recovery from the impact of the pandemic has displayed not only our business resilience, but also our effort in making online consumption more convenient, I can maintain merchant business growth and digitizing the entire local service value chain. While we experienced an operating loss expansion in this quarter, this was in line with our long term commitment to the sustainable development of our new initiatives.
Today, we have already witnessed positive growth our new initiative, especially in our retail business. As we continue to allocate resources to these new and innovative areas, particularly for community comments, we will also expand our TAM, accelerate growth and most importantly create more value for all industry participants. Looking ahead, we remain committed to better serving consumers and merchants through the satisfaction of our service and the digitization of the entire industry we will always follow our philosophy of prioritizing long term rewards over short term profitability. With that, we are now open for Q and A.
Thank you. First question is from the line of Ronald Keung of Goldman Sachs. Your line is open. Please go ahead.
Thank you. Thank you, Xing Ke, Xiaohui, Scarlett and team. On food delivery regulations, I want to ask about the SA MR's recent investigation into our company for the potential anti monopolistic practices Of our exclusive contract with merchants, can I just ask how do we see the potential impact on Meituan's business? How would this impact our competitive advantage on the merchant side? What have we adjusted so far during the self assessment process and in addition, just what would be the potential impact also on the recent Social Security regulation for flexible employment on future rider costs.
Thank you, management.
Okay. Thank you, Ronald. Thank you for bringing up this very important question. We believe that the government supervision on monopoly practices will benefit the healthy development of the whole Internet industry. We will promote the fair competition and prevent misconduct.
In response to the investigations, we have set up a dedicated team to fully cooperate with the regulators' investigation, we will review our existing business strategies and internal management and also improve our compliance standards. This is a firm wide strategic priority for our company. We have conducted a comprehensive self assessment of the issue brought up in the past from merchant defects, regulatory notices, media reports and more. We will fully respect merchants' independent choices. We have prohibited any use of exclusive partnership and we're firmly against it.
We have set up a more transparent and effective reporting channels for merchant complaints and supervisions. We will continue to proactively cooperate with the regulators going forward and fully respect restaurants' independent choices. In terms of our day to day operations, we have not seen significant impact. We believe that it will not jeopardize our competitive advantage of the food delivery business. In fact, these trends were not we have our own exclusive partnership over the past years.
Instead, we focused on providing merchants comprehensive value, increasing high quality delivery services and holistic digital operation tools and online solutions we will improve their business efficiency. Restaurants choose to work with Meituan as we are a platform that can better understand their a larger higher quality consumer pace. Also, our deep industry insights, leading on demand delivery network an experienced on the ground BD team will continue to help us solidify our competitive advantages on merchant side. On rider benefits, as reported by Midian, the government plans to carry out a pilot program for the occupational injury insurance for flexible employments on the platforms. This joint program by government with platforms and insurance companies could better tailor to flexible workers, including delivery riders, providing them with better security and insurance as different from the traditional worker related injury insurance, our delivery riders I currently covered a commercial insurance for accidents happening during work.
In the near term, we will actively cooperate with the government in terms of purchasing employment injury insurance for all the delivery riders on our platforms and to provide adequate safety nets during their employments in accordance with the regulation and guidance issued by the government and the importance of delivery riders as our business partners cannot be stressed enough by continuously upgrading our support and services for the regulators as well as their welfare, we will work towards ensuring that they are satisfied with their jobs and work experiences. Meanwhile, the social security policy for flexible workers may further evolve in the future. Flexible workers are relatively nascent form of employment in China and are important across different industries. They also have unique characteristics and social profiles. So, we will work towards sufficiently supporting their growth meeting their emerging needs, under the government guidance, we will help to facilitate a better social security system that is more in line with the unique characteristics and needs of delivery riders and other flexible workers in this relatively new form of employment, we are also to promote the healthy long term industry development.
Thank you.
Thank you, Singa.
Thank you.
Our next question is from the line of Eddie Leung Michael O'Meara Lynch. Please go ahead.
Good evening. Thank you for taking my question. I have a question on your food delivery visas. We understand that you launched a tiered service we are structured. So could you share with us any initial feedback from your clients and the impact on your thesis?
And then along the line, given the regulation environment, how do you think about the long term monetization rate and unit economics of the food delivery pieces. Thank you.
Thank you, Eddie. I will take this question. Thank you for paying attention to the fee structure change. So in the past, we charged merchants for all the provided service at a fixed rate and different many other transaction platform to different from other marketplaces, we provide merchants with also on demand delivery service for the first delivery transaction delivery cost actually takes up vast majority of our cost revenue. All alone, the fees collected from merchants are now to cover our delivery costs and other operating expenses.
In Q1, for example, our food delivery business achieved an operating profit of 0.38 per quarter. However, our 1P model for which we organize and provide lever services actually has not reached breakeven in the previous years and in this quarter. We have continuously invest in our self operating on demand delivery network, as we want to serve more small and medium restaurants that do not have their own delivery capacity. And in this way, we can substantially increase the selection available on our platform, bring more value to consumers while helping more merchants grow their business. This quarter, in order to help merchants better understand the services that we provide and our fee charge, we started to adjust our subsidiaries fee structure, breaking down platform service fee into technology service fee and deliver service fee.
We charge technology service fee at a fixed rate in each city, mainly for merchant information, display service and the transaction services. We charge delivery fees, which cover delivery rider costs, cost of delivery rider training, management and more using a shared pricing mechanism, which is calculated based on order value, delivery distance, time of delivery and so on. This adjusted fee structure will gradually be applied to all the cities that we have direct operations in China. After the adjustment, merchants can clearly see the calculation formula for the 2 separate service fees as well as the breakdown for each one. This helps the merchants and consumers better understand our fee structure.
This new structure can also help to optimize operation of the entire food delivery industry and promote a positive structure change for the industry over the long term. Let me give you an example. Under the previous fees arrangement, merchants would accept long distance delivery orders it's AOV below 30 or even RMB 20 during midnight, which does not make much economic sense for merchants, video riders nor our platform. Consumers also need to wait for a longer time. Besides, longer distance orders for high quality and respectable restaurant merchants are generated from consumers who value brands, quality and more selections, AOVs for orders from these consumers are generally higher, we should lead to a better economic for merchants.
As such, we believe this adjustment can promote a more market driven fee mechanism that better our delivery service fee mechanism, they can also choose the distance and hours during which they would like to use our delivery services. The fee rate will decrease for short distance orders under the updated fee structure, which provide better support to small to medium merchants as many orders for these merchants a relatively short distance deliveries and lower ALV. Overall, our fee structure adjustment has limited impact on the blended monetization rate of our 1st dealer business, rendering our fee structure more transparent, there is no change to our business model. We continue to communicate with merchants as our standard operational pinpoint, feedback and support the digitization of merchant operations and also continue to improve our operating efficiency. As I mentioned earlier, in the near term, improving monetization is not our focus in food delivery.
We plan to continue investing into the industry and into this ecosystem for a more sustainable long term growth. Our long term expectation for food delivery remains the same and our long term expectation for monetization rate and unit economics remain unchanged. The main upside for monetization in the long term will come from a lower subsidy ratio and increased monetization rate from both advertising and other value added services, higher economics of scale and our new delivery technology and driven model, we are also happy to hedge potential impact on delivery costs from macro environment as well as allow us to further optimize our operational results.
Thank you. Thank you.
Thank you. Yes, our next question is from the line of Alex Yao of JPMorgan. Please go ahead. Your line is open.
Thank you, management, for taking my question and congrats on the strong quarter. I have a question on the our channel check suggests that the daily volume of Clementi Group purchase industry growth rate seems to slow down a bit in Q1. Is this because of the weak seasonality or because of the regulatory environment? And then what do you think of the recent competitive landscape given the platform leader in e commerce space are entering the space. Would you adjust your investment C.
Wei:] PACE and strategy given the evolving regulatory environment and the intensifying competition in China's community group purchase market.
Thank you, Alex. So, in Q1, we further expanded our Meipan Select to more than 2,600 cities and counties and deepening our reach into the rural areas I'm completing our targets on nationwide coverage. So, the first page is over. Expansionary results have been solid. Our volume growth and efficiency improvement was temporarily impacted during the Chinese New Year due to seasonality.
And during the holidays, group leaders spend time with family and were less willing to run their daily operations. Transactional activity from consumers was also lower as they preloaded their shopping preholiday. Demand gradually recovered after the Lenten Festival and sales volume were affected in February. If we look at the whole quarter, Q1 still maintained a very positive growth trajectory. We also continue to enhance our capability on the supply chain and fulfillment, including SKU selection reinforcing our long term core competencies.
Through various measures, our operational efficiency across central and satellite warehouses, the whole fulfillment chain improved with better unit economics sequentially.
In terms of
regulation, recent guidelines are actually very positive for the development of the industry they promote healthy sustainable growth and fairer competitions against the industry big players from selling below cost we will strictly abide by the rules and focus on improving our operational efficiency and innovation. We will work harder to build a stronger foundation and core competencies for this business, we are providing consumers with a more high quality and value for money products and better user experience. As we said before, we are confident on the long term growth potential of the main e commerce. We have to deal with the long term. Opportunities like this are very rare and probably come up only once or 5 or 10 years.
So, it will really help us get into the physical goods e commerce business and into the broader consumer retail market. That's a business with a TAM over RMB40 1,000,000,000,000 in China. And more importantly, it truly creates more value for both consumers and suppliers across the whole value chain, and it will also help create more employment opportunities in the less developed markets, compared to some of the key players in the mini e commerce, historically, we did not have the comparable experience and resulted in supply chain and distribution, we will continue to build this core competencies for long term growth and continuous improve of our operating efficiency, we are very committed and we will stay patient for long term results. We will not just simply adjust our long term oriented strategy to be more specific, our operation focus in the next few quarters include: 1st, we'll continue to leverage on our experience and trends in offline business development to increase group leaders coverage, increasing user growth and enhancing penetration, especially in the rural areas in the next phase. We will deploy differentiated operational strategies to better motivate the group leaders, further increasing group leader efficiency and better converting user traffic.
And second, we will strengthen supply chain capability, build better relationship with the suppliers and brands more direct sourcing where relevant. We will focus on SKU optimization for the quality control, in order to build a reputable brand for quality and services among the consumers. And search, we will expand the scale and improve the efficiency and service quality of our warehousing and logistical network, continuous operation optimization along the fulfillment chain we not only help us ensure timely delivery and good user experience, but also bring wider range of products and value for money groups to the less accessible and rural areas. Meanwhile, recognizing that frozen food delivery is usually more challenging in the summer, we will continue to enhance coaching capability to ensure consistent service quality. All in all, our business conviction and strategy for the long term growth of community e commerce have not changed, And we will continue to invest widely into this business, especially around building our long term competencies we are continuously improving unit economics.
Thank you.
Thank you. Next question is from the line of Thomas Chong of Jefferies. Your line is open. Please go ahead.
Hi, good evening. Thanks management for taking my questions. I noticed that your annual transacting users increased meaningfully over the past two quarters, especially in Q1, was this mainly attributable to Meihuan Select? Can management breakdown the contribution for mei, Huang Select and other main business to the overall new user addition, do we expect to maintain such a high growth as you have almost completed a geographical expansion and with current competitive and regulatory dynamics, do we have any internal objective on the user growth? Thank you.
Thank you, Thomas. And our annual traffic users increased to around 570,000,000 as of as of the end of Q1, a quarterly increase of over RMB 58,000,000, that's a record high. We have an increase of close to 100,000,000 net addition over the past two quarters. User transaction frequency growth also accelerated during this period. So indeed, Meituan Select was very effective in helping us to quickly penetrate into lower tier markets, while acquiring a larger number of new users of our platform, it also that contributed half of our new user growth in Q1, not only adding new users, also attracting some repeated users back to our platform.
MeitenstaVax user quality also continued to rise with higher user retention and transaction frequency, a reflection of our improved supply chain and logistic capabilities comparing to food delivery, many transit that have already we executed better user retention and transaction frequency metrics. Other than May Transylact, food delivery and other new initiatives also contributed meaningfully to new user addition in Q1. Food delivery expanded deeper into lower tier markets and to younger generations, with the majority of new users from lower tier markets and close to 85% of new users younger than 30 years old. Our other new initiatives continue to widen the scope of products and services provided to users in more consumption scenarios, in line with our overall strategic focus. In the past, warehousing and infrastructure for physical e commerce in the last year, especially the rural areas were insufficient.
So now is a good time for us to help build out a more efficient NextDay delivery network and to better fulfill e commerce needs in these markets, we hope to bring an ever increasing array of high quality and valuable money products consumers in traditionally less accessible areas, as beta select could bring tremendous user growth to our platform and help us reach a wider group of consumers, potentially adding 300,000,000 to 400,000,000 new users over the next few years. And we will also expand our core tech offerings beyond the high frequency food and grocery categories, we more diversify the general merchandise, while cross we are also adding other Meitimes to these new users. Going forward, we will continue to scale up our overall retail efforts, it's actually Mei Zhang Zhejiang, which we believe can help us grow our user base in lower tier markets. We'll explore new user acquisition channels, both online and offline on the back of our strong offline BD capabilities. We are directionally confident of the long term user growth.
We do not want to put down any numbers as our strategy is always long term driven, we will take priority at this stage it's really to build out our foundation and core competencies. We strive to bring better services and products to our consumers, which naturally will increase retention, transaction frequency and ARPU. These user metrics will be closely monitored as we expand the business operations and will ultimately lead to an ongoing improvement of our actual operations. We believe that by continuously creating more value for our consumers in improving business efficiency, we will acquire and retain more consumers with trust. Thank you.
Thank you. Next question is from the line of Kenneth Fong of Credit Suisse. Please go ahead.
Hi, good evening, Shingo, Xiaohui, Scarlett and Jim. Thank you for taking my question and congrats on the strong quarter. I have a question about the in store business. So what we have seen is the momentum for in store business was quite impressive this quarter And we heard the trend continue in the Labor Day holiday. So going forward, how should we think about the future growth for commission as well as advertising revenues, in addition, could you also comment a bit more on the current competitive landscape?
Thank you.
Thank you, Kenny, for your question on install. Overall, we maintain very confident for our industry and stock business and the growth was very much in line with management team's expectation. We are very pleased to see a triple digit percentage year over year growth in Q1 is to reflect a strong recovery consumer demand, if we break down the segment by revenue types for the past two quarters, commission revenue growth in the Insta segment has been we tailor our theme based marketing and promotional events on different festival service categories our merchant types to stimulate rapid GTV and transaction revenue growth. We also continue to fine tune our growth strategy for in store business, including more focus on achieving GTV objectives. Through our transaction based product, we convert more offline transactions online and help merchants better understand user behavior and asset our eye on our platform more effectively.
At the same time, advertising revenue has also recovered from the pandemic We've especially removed some CPT, CPM at large, we leave room for fees on the Dantian app. The change we impact our advertising revenue in the short term, but we believe it will enhance user experience and user engagement in the long term. We also lowered the price for subscription based products to encourage more small and medium merchants to try and use our exciting products. We believe they have the potential to steadily move up to try our CPC ads in the future. Going forward, we will enrich our product types offering more diverse and optimized transaction based and advertisement products.
As merchants see more transaction conversion, they will be encouraged to allocate more marketing budgets to our platform, enabling us to grow our wallet share as a result, we believe that our NSTAR business will continue to maintain its growth momentum with tremendous long term upside potential, even the overall merchant online penetration is still very low for most in stock service category. Meanwhile, we will accelerate the merchant digitalization for wider range of categories into more lower tier cities and parties, driving a steady and healthy growth for our uninstalled business in the long term. For your questions on competition, it's a very large and fast growing business. So we are not surprised that more and more different platforms gained 2 d. We have also noticed the recent move by short video platforms coming to local services.
However, we are highly confident of our competitive advantages. We will continue to innovate and expand our operation, continue to grow the consumer mind share as a go to destination for local services. We have accumulated nearly 5.50 million annual transit users across our platform, we see that we look for a whole range of merchant local services, we are also the more ideal group of consumers that desire our merchants. Our consumers could indulge in a wealth our choices with millions of merchants available across different categories on our platform. So this is create a virtual network effect itself, more consumers attracting more merchants offering more selections and more selections to have more consumer growth.
We are also continuing to bring more high quality premium merchants and launch a series of influential lifestyle guidance for consumers such as our full range lifestyle marketplace, our premium dining list, Black Pearl List, in response to the ongoing consumption upward trend. Additionally, our unique content ecosystem provides more than 10,000,000,000 authentic user reviews and more importantly, real time up to date and trustworthy information our merchant operations will help consumers make more informed decisions. The transaction based products also offer consumers with more desired promotion and discount I encourage more spendings. On our merchant side, through multiple products, we also help merchants to better address their marketing our leading LBS algorithm also accurately met potential consumers to merchants and provide merchants with high quality user traffic. We also plan to tailor more products to merchants to help them reach their ideal user base and convert traffic into transactions.
On the other hand, we also understand that we need to accelerate content innovation, especially to better capture the mass share of younger generation. There is still lots of room to improve. We will diversify our content ecosystem, explore new content formats, adapt to younger generation and improved content quality to solidify our long term competitive edge. Thank you.
Thank you
very much.
Thank you. Our next question is from the line of Jerry Liu of UBS. Please go ahead. Your line is open.
Hey, okay. Thank you. Thanks, management. Yes, maybe let me ask a question on the biggest business we have not touched on yet, Which will be hotels. And here, same thing.
If I look at the Labor Day holidays, I would think the demand also was a lot stronger. And secondarily, I noticed some of the organizational changes that we made in the business, so the question is, could you share a little bit more on the updated strategy here and investments you plan to make in the hotel business, including around the high end hotels. I noticed we talked about 5 stars this time and previously probably was a bit more focused
on the 4 stars. Okay, thank you.
Thank you, Jerry, for the question on hotel. Yes, the demand for hotel booking continues to recover our structural advantage and strategic focus in the domestic market and in localized accommodation scenarios enable us to recover more rapidly during this area. As a result, the number of room nights reached record I will appoint Mr. Dang Quan to lead Houtian Travel Business. Mr.
Dang Quan has been and will continue to be in charge of the entire installed hotel and travel segment is also a member of our senior management team. We expect this change to be smooth and sweet. Since day 1, we founded the hotel and travel business unit. We have established a comprehensive suite our talent over the past years, we do not expect any significant switch in terms of business operation or strategy post restructuring. Moreover, having Mr.
Zhang Chuan as a business leader will bring integrated resources that can further enhance the synergies Mr. Guoqing, the former Head of our hotel and travel business, will become our Head of Flight and moped sharing business and we will be committed to building the long term competitive advantage of that business going forward. So overall, our business strategy for hotel remains unchanged. We always view hotel business as part of our overall platform and the growth also part of the overall growth of our platform. In this quarter, we further solidify our advantage in lower tier cities and lower submarkets as we believe that lower tier cities still have tremendous room to grow and the market potential for online penetration.
Going forward, in lower tier cities, we will continue to leverage our platform capabilities as well as brand awareness among consumers and enhanced offline traffic conversion to further expand user base and accelerate the online penetration of the industry, we are very confident that we will remain clear leader in these lower tier cities hotel booking channel. With regard to the high store hotels, we also continue to enhance our competitive advantages. We are glad to see that we have made important progress in the high stock domain during the Q1, thanks to our augmented investments and the improvements in supply management, customer service and user experience, as a result, we achieved stellar room night growth for the quarter with 2 year CAGR exceeding 70% for high stock Hotels compared to the same period in 2019. Quarterly room night CAGR for 5 star hotels even surpassed 130%. Quarterly number of newly onboarded high spec POS increased over 35% year over year, we are only asked to expand supply to meet the demand from consumers.
In addition, we are fully aware that to the consumers who stay in 5 star hotels whose experience and service quality is essential, so we stepped up our investment in customer service for 5 star and the sequentially customer satisfaction rate improved month over month. In the long run, we will continue to focus on the high start domain. We have confidence that Room9's contribution from high start hotels will continue to rise following our continuous endeavors and enhancing our overall EBITDA and the margin upside for the hotel business. Thank you.
Thank you. Our last question is from the line of Natalie Wu of Haitong International. Please go ahead. The line is open.
Hi, good evening, everyone. Thanks for all my question is regarding your off limits, the lever initiated. This is according to the latest announcement in so just wondering, could management help us understand more details on the these absorbent deliveries? Is there any chance that this test could be able to be implemented on a large scale and with the earnings of the product in the future, how should we expect that relates to that and timeline? Thank you.
Thank you, Natalie. Finally, a question that's more related to tech. And while we all know autonomous delivery is a very critical area of focus is very important for us as we explore and research into this cutting edge technology. Over the past few years, we have been actively inventing and designing both autonomous autonomous delivery cars and delivery zones, we think these 2 mobility options could be further integrated in our existing on demand network will enable us to further optimize our delivery efficiency infusion. I'm very pleased to see that we have industry leading research capability in this field in China.
We will continue to institute for its further commercialization. So, in terms of business application, we think autonomous delivery technology to supplement our delivery riders we can effectively improve the overall efficiency infusion. And there are a few main The first is the pickup at the restaurant, when you travel in the open roads, you navigate and get into the as usual, the compound, so the state that we think autonomous degree could help the most it's the second one at traveling on the open road before going to the delivery destination as it's a relatively standard an open, well paid and regulated. It takes the longest proportion of app and time. We think that delivery after pickup and before reaching destination on open road could be complete we completed with Level 4 autonomous vehicles in the future.
As for delivery to end consumer in their buildings for other compounds, I think that the use of other type of robots will also be helpful in fusion. We are looking at our research and development and application of that as well. And although overall, the autonomous fleet in the industry is doing a major stage until very recently, we still mostly R and D stage. We have been doing this for years and we have achieved the samplings in terms of commercialization. For example, during the pandemic last year, in Beijing's district, we started using autonomous delivery vehicles for a meaningful number of on demand delivery orders.
We have continued digital since then. As of last month, we have extended productivity service from near pilot testing to over 20 communities in that area, we are delivering over 30,000 orders in aggregate. This year, we plan to roll out more autonomous vehicles and increase our coverage in some areas in Beijing. And we could also potentially launch In another city, as we refine our technology and operations. And We all know in the past 12 years, a lot of companies have been doing R and D in this area, 1,000,000,000 of dollars have been poured into R and D overall, I think we are in a very good position to put this into commercialization, because we have the largest on demand grid network in China in the world, that will be the real use case.
We have been doing R and D in this for we are relatively quiet. I think we are going to I don't know when you'll be we're supposed to do a really large scale. I think now we have had a very good start. I think we have the resources and the commitment to keep top of priority in the autonomous delivery service. And we are also very actively we have dialogue with the regulators on such matters to ensure we have the best practices and we will broaden such application in certain consumption scenario we hope to really scale up the commercialization in the future.
I believe in the future, this technology will help us total we will need to have technology to achieve that. And this technology will also structurally improve our efficiency. We can improve in our unique economics in the long term. So the better the economics and the lower the cost and the lower the price, there is a big of a scale. So I think that will be a very gradual cycle.
So I think that's the future. We don't know exactly when. Again, we are very patient in this. So we took into the long term. That's all.
Thank you.
Thank you. Ladies and gentlemen, that concludes our question and answer session. Now I'd like to hand the conference back to Ms. Scarlett Hu. Please go ahead.
Okay. Thanks everyone for joining our call. We look forward to speaking with you next quarter, thank you.
Thank you.
This concludes today's conference call. Thank you for participating. You may now all disconnect.