Thank you for standing by, welcome to the Meituan First Quarter 2023 earnings conference call. All participants will be in a listen-only mode. There will be a presentation, followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the 1 on your telephone keypad. I would now like to hand the conference over to Scarlett Xu, VP and Head of Capital Markets.
Thank you, operator. Good evening, and good morning, everyone. Welcome to our first quarter 2023 earnings call. Joining us today are Mr. Xing Wang, Chairman and CEO, and Mr. Shaohui Chen , Senior Vice President and CFO of Meituan. For today's call, management will first provide a review of our first quarter 2023 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 the actual results in the future. This presentation also contains unaudited non-IFRS financial measures and should be considered in addition to, but not as a substitute for, 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. Xing Wang. Please go ahead, Xing.
Thank you, Scarlett, good evening, everyone. Since the beginning of 2023, China has experienced gradual consumption recovery. We are glad to see that the recovery of local services has been outpacing many other sectors, particularly during festival and holidays. As a Retail + Technology platform that deeply rooted in the on-demand retail and local services, Meituan has captured consumers' diverse demand for goods and services during the consumption recovery, with the various businesses posting healthy growth. For the first quarter of 2023, our total revenue reached a 26.7% year-over-year to RMB 58.6 billion. Adjusted EBITDA is RMB 6.3 billion, and adjusted net profit RMB 5.5 billion. Especially, on-demand delivery has become increasingly popular among consumers, covering not only restaurant food, but also broader retail categories.
We have continued to expand our categories and selections to deliver almost everything to the consumer's doorsteps. We have explored and developed diversified operating solutions and marketing tools that allow millions of merchants in local services to seize the post-pandemic recovery opportunities, increase their revenue, and improve their operating efficiency. We are firmly committed to creating more value for all the participants in our ecosystem. We will continue to fulfill our mission to help people eat better, live better. Let me walk you through each business in more details. The food delivery business has continued to recover since the beginning of this year. During the first quarter, we committed to helping new merchant start their businesses and empowering all merchants to improve online operations.
We finalized all the growth by better understanding the diverse consumer demand, dynamically iterating our operational strategies, and providing consumers with the better products and services. We believe that food delivery is not simply moving in-store dining supply online and providing for consumer services, but the restructuring of restaurant and product supplies to match and create consumer demand. In the first quarter, the number of active merchants and transacting users for our platform continued to grow steadily for our food delivery business. On the supply side, we further expanded our high-quality merchant base to enlarge the high-quality supply on our platform. During the quarter, the number of newly on-boarded tier accounts and city tier account merchants increased year-over-year. We supported chain restaurant in their new store openings and existing store upgrades.
Meanwhile, at the end of March, we piloted a brand new promotional event called Shenqiangshou for merchants in Shenzhen and later expanded to Beijing in May. Shenqiangshou is a promotional event that integrates live streaming, short-form videos, and other formats to sell discounted high-quality products. In April, we also upgraded our monthly marketing campaign, Shenquanjie. In these events, merchants could offer deep discounted deals through flash sales, live streaming, or short-form video to promote low-price, high-quality dishes. These events help merchants market their mega-hit products and enhance their growth potential in combination with our existing shop-based model. On the demand side, as the food delivery industry experienced a rapid recovery. We swiftly adjusted our marketing strategy and user incentive schemes to align with the regional recovery pace and holiday demands.
This resulted in notable order volume growth in travel scenarios and mid to high AOV orders in the first quarter. We continue to explore traffic growth and stimulate non-instant demand, incentivize consumers to stockpile attractive coupons in our live streaming events. Meituan Instashopping maintained its high growth momentum during the first quarter. We reinforced the consumer mindshare of Meituan being able to deliver almost everything to their doorstep. Driven by growth in both use case and transaction frequency, Meituan Instashopping order volume increased by about 35% year-over-year in the first quarter. Leveraging the various marketing events, we further expanded the quality and diversity of supply on our platform. Annual active merchants on Meituan Instashopping increased by over 30% year-over-year, with non-food and specialty stores, liquor, beverage, and flowers maintaining high growth.
We also further expanded the coverage of Meituan InstaMarts, [Foreign language] , and order mix from Meituan InstaMarts continued to grow. We are delighted to see the consumption categories and scenarios continued to rise. During our Chinese New Year shopping festival, [Foreign language] , more and more consumers chose on-demand delivery for purchasing holiday gifts for friends and families. Categories such as liquor and beverage, fruits, seafood, dairy products, and small appliances were quite popular among consumers. Ahead of Valentine's Day and Women's Day this year, demand for categories such as flowers, beauty and personal care products, electronics, and home appliances, et cetera, all surged. In addition, we strengthened the consumer mindshare for consulting doctor and buying medicines on Meituan.
During the Chinese New Year, we offered incentives and traffic support for pharmacies as they opened for business, while providing free online consultation service for people in certain regions. We also promoted our online consultation services for seasonal epidemic diseases, driving high growth in order volume and consumer base in the medicine category this quarter. Demand restores, offline consumption and travel activities have gradually recovered since the beginning of the year, with particularly robust growth during the Chinese New Year. Merchants' willingness to hold online promotions recovered very rapidly, so as consumers' demand to find local stores and discounts. We proactively capture the offline consumption demand recovery, collaborating with the local governments and merchants to stimulate demand for local services and satisfy consumers' diverse needs.
In the first quarter, GTV of the In-store, Hotel & Travel business increased by more than 52% year-over-year, with the year-over-year GTV growth in March exceeding 100%. Merchants' willingness to open new stores has gradually picked up, and the number of annual active merchants reached a new high. For the in-store business, both GTV and revenue growth accelerated month-by-month. We captured the consumption demand for group gathering and family meals during the Chinese New Year holiday and launched preset in-store menus, package deals, and more. We helped millions of merchants across services categories, including catering, karaoke, hair salons, and packaged as "Open for Chinese New Year," [Foreign language] and promoted keyword search, such as "Go-to place for Chinese New Year," [Foreign language] .
As we continue to expand our merchant supply, we also enriched our marketing and content format, curated our product operating strategy, and optimized the service capability of our business development team. We improved our merchant service quality and enhanced synergies across different business lines and providing merchants with more promotional channels. For example, leveraging holiday promotion, such as Labor Day, [Foreign language] , we launched a comprehensive Meituan platform live streaming program to incentivize participants, participation from many high-quality merchants, providing consumers deep discounted high-quality products. To cope with the evolving consumption trends, we supported small and medium-sized merchants with a featured characteristic that makes creative ideas with traditional culture, such as flower arrangement, tea houses, magic clubs, to operate online and standardize their services.
On the consumer side, we continue to strengthen our content capability and integrate short-form video content. Through pilot programs such as Special Deals at Meituan Go, we provided the merchants with the new marketing tools to promote mega hit products through flash sale, while offering the consumer higher quality services at deeper discounts, and strengthen the consumption, consumer mindshare for finding the best deals on Meituan. In future, leveraging our competitive advantage in organizational capability and consumer mindshare for merchant service, we will further iterate our operations and diversify our products and services offerings for both merchants and consumers, and ultimately, drive online penetration of the in-store industry. Demand for travel recovered strongly during the first quarter, with a significant growth in both, hotel room nights and GTD.
During Chinese New Year holiday, year-over-year room night growth versus 2022 and 2021, both exceeded 40%. As the weather become warmer during the Chinese New Year, local accommodations and short-distance travel scenarios continued to recover and peak for several consecutive weekends. We closely followed the consumption trends in which our product mix and leveraged holiday promotions to enhance brand awareness. We seized the post-pandemic industry recovery opportunity and adopted various new marketing tactics, including an optimized subsidy strategy and increase in live streaming frequency. In the high-star hotel branch, we expanded supply, optimized our pricing mechanism, improved the merchant information available on our platform, and explored in-depth collaboration with high-star chain hotels. We also optimized our package deal products and enhanced distribution channels.
We further diversified our Hotel+X product offerings and onboard high-star hotel restaurants on our food delivery platforms. As a result, room night contribution from high-star hotel reached 19% in the first quarter to a record high. We launched the outbound hotel and travel sales event, and worked with the Hong Kong authorities to distribute travel consumption coupons to mainland visitors. On the low-star front, we continue to optimize our room renovation program and further develop our CIM tools and marketing solutions. These tools have helped the merchant enhance their pricing mechanism to better match market demand, allowing them to capture the industry recovery opportunity and satisfy diverse consumer needs. On the alternative accommodation side, we continued to focus on user experience, operating efficiency, and growth in supply.
Our strong performance in the first quarter demonstrated our ability to capture the industry recovery and meet the diverse accommodation needs of consumers, while continuing to optimize our operating efficiency. Now, moving on to our new initiatives. Meituan Select maintained a leading position and continually improved operation efficiency. We continued to optimize our pricing and product management capability, while maintaining high-quality standards. We provided consumers with a wider, more diverse selection of price for value products through our nationwide next-day logistic and self-pickup network that covers cities, counties, and vast rural areas. At the end of March, the accumulated number of transaction users had reached 450 million, with consumer habits further cultivated. In addition, we actively promoted the circulation of agricultural products and helped the farmer increase their income.
During the first quarter, agricultural products accounted for more than 40% of total sales for Meituan Select. We established partnerships with many local governments and suppliers in the products' place of origin, and expanded our efforts in the direct procurement of high-quality agricultural products. The centralized procurement of fresh fruits and vegetables accounted for more than 20% of total sales, with some categories even exceeding 50%. Our initiatives have helped us bring high-quality products directly from farms to consumers' dining tables. Our engagement in rural areas also allow us to offer more employment opportunities locally. With the number of pickup stations in lower- tier city markets now exceeding 1.3 million. Another business, Meituan Maicai, Meituan Grocery, recorded over 50% year-over-year GTV growth in the first quarter, and continued to lead the growth of the industry.
During the quarter, we continued to focus on controlling costs and improving efficiency, achieved a notable year-over-year enhancement in operational efficiency. Thanks to our digitized system, cold chain logistics, and on-demand delivery capability, we accelerated our product circulation efficiency and elevated the consumer experience, which was yesterday, shop today. In addition, the increase in SKU offerings and improved delivery experience also strengthened our consumer mindshare. AOV and order frequency both increased compared to the same quarter last year. We continue to deepen our partnership with the government authorities and farmers in the product space of origin, offering more seasonal, locally sourced and selected products. This effectively diversified our platform supply and helped the farmer increase their income.
We also established in-depth collaboration with brands and launched a joint branding program in selected categories to match our differentiated and customized marketing campaigns, helping brands increase sales. As the macro economy recovers further through the rest of 2023, we will continue to incentivize consumption recovery and increase demand by optimizing our products, content offerings, and fulfillment network. We will continue to enrich our marketing tools to better meet merchants' diverse needs and increase their revenue and profit. We will actively support merchants in expanding their service coverage, facilitating new store openings, and enabling the vast number of small and medium-sized merchants to benefit from online operations. Especially as a company that integrates retail and technology, we firmly believe that technology will bring new advancements and growth opportunities to retail in the long run.
We will increase our investment in technology and solutions, and actively explore the implementation of cutting-edge solutions. Whether this will be AI, autonomous delivery, or something else, we seek to capture the tech-enabled industry growth. In the meantime, we remain committed to our mission to help people eat better, live better. With that, I will turn the call over to Shaohui for an update on financial results.
Thanks, Xing. Hello, everyone. I will now go through our first quarter financial results. During this quarter, total revenue increased by 26.7% year-over-year to RMB 58.6 billion, boosted by strong local consumption recovery post the reopening and our effective marketing measures. Cost of revenue ratio decreased on both year-over-year and a quarter-over-quarter basis to 66.2%, primarily due to the improved gross margin of our food delivery, Meituan Instashopping, and the goods retail business. Selling and marketing expenses ratio, R&D expenses ratio, and the G&A expenses ratio all remained flat sequentially, but decreased on a year-over-year basis to 17.8%, 8.6%, and 3.4% respectively, primarily benefiting from improved operating leverage.
Driven by our focus on high-quality growth and improving operating efficiency, total segment operating profit and operating margin increased remarkably to RMB 4.4 billion and 7.5% respectively, compared to operating loss on the operating margin of RMB 3.7 billion and a -8.1% for the same period of 2022. On a consolidated basis, our Adjusted EBITDA and adjusted net profit were RMB 6.3 billion and RMB 5.5 million for this quarter, turning from loss to profit on a year-over-year basis and further increasing on a sequential basis. Turning to our cash position. As of March 31st, 2023, we continue to maintain a strong net cash position with our cash and cash equivalent in short-term treasury investments totaling RMB 111.4 billion.
Cash from operating activities in the first quarter improved significantly to RMB 8.1 billion, compared to cash outflow of RMB 11.7 billion in the same period of 2022. Let's look at our segment results. Starting with core local commerce. Our core local commerce segment revenue increased by 25.5% year-over-year to RMB 42.9 billion. Operating profit increased by 100.7% on a year-over-year basis to RMB 9.4 billion. Operating margin for the segment increased by over 8 percentage points year-over-year to 22%. On-demand delivery achieved 14.9% year-over-year order volume growth this quarter. For food delivery, the overall performance of order volume growth in the first two months of the year was negatively impacted by the home returning effect of Chinese New Year.
During the first two months of 2022, consumer demand for food delivery and merchants' willingness to operate during the holiday season was quite high due to the strict food policy as a result of pandemic control. In contrast, this year, many people, including delivery riders, returned to their hometowns earlier following December's reopening. In addition, many merchants were not open for business during the holiday season this year. However, we have seen rapid recovery in order volume starting in early February, which further accelerated to over 20% on a year-over-year basis in March. With regards to food delivery revenue, its year-over-year growth far outpaced order volume growth, due to high-end supply recovered faster than low-end supply during the quarter. In addition, users were more willing to pay for premium, large ticket size, and long-distance orders during the Chinese New Year.
The favorable order mix drove the year-over-year increase in commission and delivery service revenue. Operating profit and operating margin for our food delivery business both increased meaningfully on a year-over-year basis, primarily thanks to the business scale recovery, favorable order mix change, and abundant courier supply. Turning to Meituan Instashopping, order volume growth in January was also affected by the home returning effect. As work resumed after the Chinese New Year, consumer demand also recovered, with order volume increasing rapidly starting in early February and returning to its high growth trajectory in March. The average order volume for Meituan Instashopping accounted for around 11.1% of our total on-demand delivery orders during the first quarter.
Average order value continued to increase year-over-year because of heightened consumption demand for COVID and the flu-related medicines, as well as increasing demand for high-ticket size, non-essential products such as 3C electronics. The business unit economics improved significantly year-over-year, thanks to an increased order volume contribution from higher margin foods such as flowers, improved economy of scale, better subsidy efficiency, and higher AOV. The improved NUE also driven by a rapid growth of online marketing revenue, primarily contributed by the expansion of online marketing merchant base and merchants increased ARPU. Let's now turn to our In-store, Hotel & Travel business, which achieved strong revenue growth on both year-over-year and quarter-over-quarter basis. On one hand, the benefit from strong demand recovery for local service, consumption, and travel. The strong GTV growth for In-store, Hotel & Travel drove robust year-over-year and quarter-over-quarter growth in our transaction revenue this quarter.
The revenue growth rate for hotel and travel was particularly significant, benefiting from a faster rebound in the scale of room night and increase in ADR. We see also the willingness of merchants to hold online promotion is gradually recovering. Revenue growth was slower than GTV growth, which was mainly caused by the following factors. First, we strategically lowered the threshold of our subscription-based services for selective service categories and lower- tier cities to encourage more merchants join our platform. Second, the regular revenue of hotel booking has boosted GTV growth while contributing to a smaller portion of ad revenue. Third, merchants' willingness to spend on advertising needs more time to recover.
Operating profit, operating profit margin for our In-store, Hotel & Travel business increased on both a year-over-year and on a quarter-over-quarter basis, thanks to the increased operating leverage due to business scale recovery. This was partially offset by a higher revenue contribution from lower margin hotel booking and travel business, and increases in our traffic acquisition expenses and merchant rebates. Let's now turn to our New Initiatives segment. During the quarter, revenue in this segment increased by 30.1% year-over-year to RMB 15.7 billion, mainly due to the development of our goods retail business. The segment operating loss further narrowed down to RMB 5 billion from RMB 6.4 billion in the fourth quarter of last year. For Meituan Select, the continued operating efficiency improvement led to the decrease in operating loss and operating loss margin on a sequential basis.
More specifically, fulfillment costs reduced thanks to more smart warehousing efforts and refined operations. Good leader efficiency improved, attributable to better stock management. Second, expenses as percentage of GPV also went down. For Meituan Grocery, operating loss continued to narrow on a sequential basis, thanks to better operating efficiency. meanwhile, we also continued to improve operating efficiency and cut losses for other new initiatives. In summary, we are pleased to see that our core local commerce segment recovered fast and delivered strong growth, riding on the recovery of local consumption.
Both our Adjusted EBITDA and adjusted net income achieved a remarkable growth, and both operating cash flow and free cash flow increased significantly. We expect the recovery of China's economy to drive strong growth in our core business in the next few quarters. Our business matrix covers a wide range of categories and price bands, helping us meet different consumer needs across different stages of consumption recovery. The frequency of our users has increased over the past years and still has huge potential to grow. Overall, we will remain confident in the enormous growth potential for our core local comm segment. Meanwhile, we will continue to narrow the operating loss of our new initiatives and improve operating efficiency. With that, we are now open for Q&A.
We will now begin the question- and- answer session. If you wish to ask a question, please press star then one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then two. If you are on a speakerphone, please pick up the handset to ask your question. We will pause momentarily to assemble the roster. Your first question today comes from Ronald Keung with Goldman Sachs. Please go ahead.
Thank you. Thank you, Xing, Shaohui, and Scarlett. We recently noticed that Meituan's food delivery and in-store businesses launched some new marketing formats. These include live streaming, short-form videos, and some special deal sessions. Could you share the progress of these attempts and initiatives and future plans? Thank you.
Okay, thank you. The short answer is that we are just getting started. The longer answer is, we started to pilot new marketing formats for both food delivery and In-store, Hotel & Travel business since a few months ago. We launched live streaming, short-form videos, and flash sales that direct user traffic to the products that the merchants want to promote, help the merchant create mega hit products. Our existing shelf-based model that provides the merchant with regular marketing and transaction boost, and our new mega hit product promotion at is an important supplement to satisfy merchants' comprehensive marketing needs. In March, we launched a promotional event for the good food delivery business called Shenqiangshou in Shenzhen, and later expanded it to Beijing in May.
Going forward, we will introduce this event to more regions. Shenqiangshou is a promotion event that integrates a live streaming, short-form video, and other formats to sell discounted high-quality products. On April 18th, we fully upgraded our monthly marketing campaign, Shengquan Xie, and used the live streaming to help high-quality merchant create mega hit products. On April 18th, the event day, we witnessed 50% year-over-year growth in food delivery order volume, and 75% year-over-year growth in daily active users, and then over 30% week-over-week growth in the GTV for our top tier account merchants who participated in the event. Further growth from categories such as tea, coffee, formal meals were quite impressive. On May 18th, merchants who participated in the event once again achieved notable growth, with the categories expanding to non-food.
Going forward, we will continue to provide the merchants with a larger traffic and more visually appealing marketing tools through this mega hit product at the. We will also better serve consumers' need for both instant consumption and stockpiling. A consumer can stockpile coupons and deals in advance, and then separately place orders in multiple times. This will encourage consumer to open our major app more frequently, even during a non-meal time, and incentivize the food delivery demand under non-instant scenarios. We have also noticed that when the consumer validates coupons online, and they tend to add more products to their checkout, thereby driving sales growth for other shelf-based products and the overall ARPU. We will further focus on content creation and live streaming to stimulate consumer demand for both instant consumption and stockpiling.
We believe the mega hit products and shelf-based product formats reinforce each other and have great synergies with the food delivery. This will open up more long-term growth potential for food delivery. We introduced the special deals session for in-store, hotel, and travel at the end of March, expanded across the country in April. We partnered with national and regional chain merchants and city-level high-quality merchants across various categories to provide consumers with high-quality of supply. By directing more traffic to these products, we help the merchant further increase sales. It also helps strengthen consumer mindshare of finding the best deals on Meituan. On April the 27th, we piloted a Meituan Group Buy Meituan Tuangou live streaming campaign. In this campaign, we offered deep discounted coupons for in-store dining categories such as hot pot, tea, and buffet.
We also worked with theme parks, hotels, travel agencies, and other in-store service merchant to provide the consumers with a wide range of high-quality selections. Our visually appealing recommendation helped reduce noise in consumers' decision-making process and provided them with diverse choices. Specifically, during the Labor Day live streaming event, sales of a single product from Mixue Bingcheng and Luckin Coffee sold 1.5 million cups. In the future, we will continue to optimize special deals, such as ongoing and other marketing campaigns, extend from Meituan platform live streaming to merchant live streaming and KOL live streaming. We will also use the content to empower inaudible product promotions, improve our merchant and deal recommendation capabilities to better satisfy consumer demand.
Meanwhile, we will enhance synergies with our food delivery business by offering more coupons that can be used for both in-store consumption and food delivery. This will become more convenient and user-friendly to our consumers. Thank you.
Thank you, Xing.
The next question comes from Thomas Chong with Jefferies. Please go ahead.
Hi, good evening. Thanks management for taking my questions. I have a question on the food delivery side. Can management please walk us through the recent performance of the business, including the order volume, recovery, and the growth? How should we think about the order volume and the unit economics for the second quarter? Thank you.
Thank you, Thomas, for the question. We see strong growth on food delivery since March. The March order volume growth exceeds 20% year-over-year, and in April, we see the daily order volume growth continuing to rise on a month-on-month basis. Thanks to the economy recovery and our continued support in merchants' online operations and new store openings, we actually saw 25% year-over-year growth in new store openings in April. Chain restaurants and high-quality merchants were quicker to react to the consumption recovery and ramp up their supply. Small and medium-sized merchants also started to catch up in terms of new store openings. Therefore, supply recovered strongly across all price band. To further incentivize demand, we offer subsidy in certain scenarios and time periods in selected cities.
For example, we subsidize late-night net orders and cross-city orders, especially in popular tourist cities during holidays. We further stimulate consumption through live streaming and other formats, which has brought up additional traffic and order volume growth. Since April, demand from lower-tier cities, low-frequency users, and low AOV orders continue to recover as well. Overall, we believe that food delivery will achieve high order volume growth on a year-over-year basis in the second quarter. We also continue to believe that food delivery will benefit from the overall economy recovery, and we continue to believe 100 million transition orders target remain our new long-term goal. On the unit economic side, starting from second quarter, we have expanded our marketing efforts to increase user acceptance during some marketing events, such as Shenqiangshou and the Shengquan Xie, to incentivize consumption and help merchants sell massive products.
In addition, as I mentioned, demand for low AOV orders continues to rise. We are going to direct marketing resources to this area. Although costs will increase compared to the same period last year, order volume growth will bring economy of scale on the cost structure. From a seasonality perspective, usually second quarter has the best Unit Economics, thanks to favorable weather. We expect the core rate supply will continue to be favorable in Q2. All the factors I just mentioned will help offset the increased intensity. Overall, we will continue to invest to incentivize consumption demand while focusing on high-quality growth and operating efficiency. Thank you.
Thank you.
The next question comes from Gary Yu with Morgan Stanley. Please go ahead.
Hi. Thank you, management, for the opportunity. I have one question related to the in-store business. Could you please share some color on the latest recovery and growth trend, for the In-store, Hotel & Travel business? A related question to that is, to confront competition, what measures has the management taken since the first quarter, and what are the results and performance so far? Based on the current strategy, how should we think about the growth and operating margin for the in-store segment, in Q2? Thank you.
Thank you, Gary, for your question. Local consumption in China continues to recover. Our install, hotel, and travel business also benefit from this strong demand and maintains robust growth on a year-over-year basis, especially during Qingming and Labor Day holiday. April GTV of install, hotel, and travel continues to grow rapidly on both year-over-year and a month-over-month basis, reaching 3 x the scale of last April. During the recent Labor Day holiday, GTV of our install, hotel, and travel business also increased by over 200% compared to the same period in 2022. During the recent offline consumption recovery, we continue to take proactive measures to solidify our competitive advantages. For example, we optimize and enrich our product format and improve the service quality for both merchants and consumers. We customize our online marketing solutions based on city tiers and service categories.
We lower the threshold of subscription-based services for certain service categories and lower- tier cities, and simplify the merchant onboarding process. These measures encourage more merchants to onboard our platform and to use our online marketing services, and help us ensure online penetration in lower- tier cities. In addition, we refine and stratify our operation based on merchant tier, launched a new merchant incentive scheme, and leverage offline BD teams to provide better services and to deepen our partnership with the key merchants. As we mentioned earlier, we launched promotions such as special deal and live streaming events in the second quarter. It's an opportunity for merchants to create and promote next hit products. It satisfy consumer demand to stockpile coupons and incentivize consumption through recommendations.
It further solidifies our leading position, and we will continue to enhance the video content, improve our user review scheme, and optimize our LBS-based look recommendations. We also actively explore new traffic acquisition channels. For example, we work with third-party platforms and broaden our distribution channels, such as WeChat and short form media platforms. We expand our efforts in offline marketing and join trends in promotions. Looking ahead to the second quarter, we will continue to ride on the consumption recovery train, accelerate our operational and marketing strategies, and solidify our advantages. Especially, we will further expand the supply of high-quality, share-based products, while strengthening our capability to promote next hit products through special deals, and the live streaming. We will focus on expanding and maintaining our merchant base and allocate more resources to our merchant incentive program.
We will stimulate consumer non-instant demand using more video content and more feeds with cup deals, and enhance consumer mind share of finding the best deals on Meituan. Starting from the 2nd quarter, we will roll out these strategies, further regions to accelerate GTV growth. The increase in merchant and consumer incentives will counter revenue. The revenue growth will be lower than GTV growth, and the more marketing expenses will further impact our operating margin. We believe that this investment for the long-term growth of the business is necessary. This investment will not only help us improve in the product traffic and content or format, but also accelerate online penetration and further solidify our leading position in the local service industry. We remain confident in the long-term growth and the long-term operating margin of our Insta, hotel, and travel business. Thank you.
Thank you.
The next question comes from Yang Bai with CICC. Please go ahead.
Thank you, management, for taking my question. My question is about the hotel and the travel. Can you please share more details on the performance of the hotel and travel business in Q1 and its recent recovery? I noticed some recent news that our hotel bookings increased notably during this year's Labor Day holiday versus 2019. How should we think about its growth in the second quarter? What are the key targets and the strategies for this business this year?
Thank you, Bai Yang, for your attention on hotel business. Since the beginning of this year, we have actively captured the industry recovery opportunity and implemented various measures on both merchant and consumer sides to drive the growth. We closely follow the recent recovery trend and continue to strengthen our product and service capability to meet the diverse needs from consumers. We launched promotional campaigns and live streaming events, leverage holidays and special themes such as Chinese New Year or Valentine's Day, and the spring outing to incentivize demand and stimulate consumer booking. We further enhance the synergy between accommodation and other business through our Hotel + X program. We also strengthen our search and recommendation functions to help consumers make booking decisions more efficiently. We are happy to see that consumer mind share and our brand awareness was further elevated.
In the high- start domain, we continue to expand, apply, and optimize the pricing strategy. We actually promoted joint marketing events and joint membership programs with major hotel brands. We provided comprehensive marketing solutions for high stock hotel merchants and helped a few brands with special in-store operations. Our marketing solutions cover broad operating aspects, including branding, catering, membership programs, holiday promotions, and more. By March end, we have signed Hotel+X partnership agreement with over 140 hotel brands and onboarded more package deals on our platform. We also work with travel agency to launch each year package tours to capture marketing opportunities. We capture the growing outbound travel market and launched special campaigns to drive the growth in this domain. We also improve our operating capabilities in corporate travel.
As a result, March hotel bookings from corporate clients increased by over 150% year-over-year. In April, year-over-year growth of room nights and GTV exceeded 130% and 270%, respectively. During the Labor Day holiday, average daily room nights increased by close to 180% versus same period of 2022, and increased by more than 60% against the pre-pandemic level in 2019. Daily room nights also broke record high. Looking forward to Q2 and the second half of 2023, growth will remain as our top priority. We expect the year-over-year growth of room nights in Q2 to further accelerate from the Q1 level.
As the industry further recovers, we will continue to optimize our existing share-based model and, also enhance our capability to create mega-hit products through marketing campaigns and business acceleration. We will continue to penetrate high-quality merchants, high-quality consumers, and further optimize our product and pricing mechanism. Additional, we will continue to diversify our Hotel+X product offerings in the high-stock domain, actively capture the growth potential in the corporate travel and outbound travel areas, explore new opportunities in this industry value chain, and drive the digital transformation of the hotel and travel industry. Thank you.
Thank you.
The next question comes from Alex Yao with JPMorgan. Please go ahead.
Good evening, management team. Thank you for taking my question. It looks like the transaction users have peaked out in late last year. Now that you guys have discontinued to disclose annual transacting user anymore, it would be great to hear management view on how we plan to further grow users and improve user retention. Thank you.
Thank you, Alex. I'm glad you raised a question on our user growth. In 2022, both demand and supply of the local service industry were negatively impacted by the pandemic. In response, we strategically reduced our user acquisition budget. Some of our existing users did not make transactions on our platform during last year because of the pandemic control measures and the weak consumption demand. Due to those reasons, the ATV growth, annual transacting user growth, was negatively impacted. When the pandemic was over, we saw strong rebound in consumer demand for local service, so we are already increased our user incentives to further stimulate consumption recovery. In fact, DAU, daily active users on both our Meituan and Dianping apps, reached a new high in February for the first time, and they broke the record for a second time in late April before the Labor Day holiday.
Also, our company-level MTU, monthly transacting users, achieved positive year-over-year growth by far, with improving user engagement and user thickness. We also expect a healthy growth in ATU this year as the local service market in China further recovers. In addition, local service market holds great long-term potential, especially in lower-tier cities, which will further plug the growth of our user base in the medium to long- term. In the vast and lower-tier markets, we have good opportunity to deepen user penetration as we continue to enrich supply and benefit from consumption upgrade. Going forward, transaction frequency will be a more important growth driver. We are encouraged to see that annual transaction frequency per ATU has increased sequentially for the past 11 consecutive quarters. This is mainly due to our continuous improvement in platform supply, cross-selling capability, and brand awareness.
In the past few years, we have established unique consumer mind share and delivering everything to consumers' doorsteps, and have become the go-to platform for consumers to find stores and value for money, products and services. Now, our goal is to further enhance the synergy and cross-sell opportunity among various business. To really build Meituan brand as a brand for everything now, we will further strengthen the consumer mind share in not only in the speed and convenience, but also value for money. This will help improve user thickness and frequency. Our cohort data show that users who stay with us longer have higher transaction frequency, and the longer they stay with us, the further increase their frequency become.
... consumer will also cross purchase more category on our platform when they stay longer with us. For example, for users we acquired in 2015, annual frequency increased from 6 x in the first year to 60 x in the 8th year, 10 x growth. The average consumption category also increased from 1 to 2 in the first year to more than 4 categories in the eighth year. We noticed that new users increased transaction frequency at a faster speed than earlier cohort users. Generally speaking, we are very confident in our ability to continue increase our transaction user scale and transaction frequency and users total lifetime value in the medium to long- term. Thank you.
The next question comes from Qingpu Yang with CITIC Securities. Please go ahead.
Good evening, management. I'm Yang Qingpu from CITIC. Could you please share some more information on the latest technology changes, such as AI? Like, what's our progress to it, or what impact it will bring to the whole industry? Does Meituan have any plans to participate in the AI area, and how it's gonna affect our business model? For example, like, will you consider to integrate any AI-generated content if there's any good model available? Thank you.
Thank you. I think by now there should be no doubt that AI is real and coming. In the past seven decades, since the birth of the term artificial intelligence, there have been several waves of highs and lows, this time it's different. It appears a larger language model has finally cracked the program of mastering human language, which is arguably the essence of human intelligence. Now, literally every week or almost every day, there comes some exciting news about AI. Here at Meituan, we are very excited about AI. We believe AI is going to change almost everything. It's definitely bigger than iPhone or internet, and that's saying a lot. There are so many ways we can use AI or more specifically, a generative AI, GAI, and AIGC is just one of them.
AIGC is going to change how people produce and generate content, and it will have an impact on our business. In my opinion, what's more, even more important or more exciting is the new interaction paradigm, conversational AI. These days, people are using smartphones or iPads. Multi-touch is not the most natural way to interact with other people. It's only natural for people to want to order food or book a hotel or air tickets by just talking. I think that is the most natural way. The demand has always been there. The challenge in the past is in the supply of the right technology. Now, with large language model, it seems we are finally getting there. Also, AI is going to have a huge impact on robotics.
In the past four years, we have both in-house development and outside investment in robotics. Now it seems robots are going to get much smarter. Actually, they may even get so smart that they become scary. AI is going to have such a huge impact in both the digital and the physical world, and the regulators globally should get moving and get ready to do their job in working with science and business communities to make sure AI is a good thing for the whole society and the human race. At Meituan, we are open to both external collaborations and investment opportunities. Now we have an internal team working on building our own foundation models and its applications. At this moment, we don't have anything to show. Honestly speaking, we are still playing catch up.
I think the message should be clear enough. We are very committed to building our AI capabilities and applying it to our use cases. Here we have the use cases. We have accumulated a massive amount of proprietary data, and we have the engineering and computer resources to get it started. Of course, the more the better, so that's why we will be very actively investing in this, building our capability and using AI to the benefit of all people and in fulfilling our mission to help people eat better and live better. Thank you.
Thank you, Xing.
There are no further questions at this time. I would now hand the call back to Scarlett Shu for closing remarks.
Okay, thank you for joining the call. We look forward to speaking with everyone next quarter. Thank you for your support.
That does conclude our conference for today. Thank You for participating. You may now disconnect.