Earnings Call: Q1 2021

Jul 29, 2021

Hello, ladies and gentlemen, and thank you for standing by for GreenTree's First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. After management's prepared remarks, there will be a question and answer session. As a reminder, today's conference call is being recorded. I would now like to turn the meeting over to your host for today's call to Mr. Rene Vanguenstein of Christensen's GreenTree's Investor Relations firm. Please proceed, Rene. Thank you, Melanie. Hello, everyone, and thank you for joining us. Grade 3's earnings release was distributed earlier today and is available on our IR website at ir.998.com as well as on PR Newswire services. As a reminder, we also posted a PowerPoint presentation that accompanies our comments to the same IR website. On the call from GreenTree are Mr. Alex Xu, Chairman and Chief Executive Officer Ms. Selina Yang, Chief Financial Officer Ms. Megan Huang, Vice President of Sales and Marketing and Mr. Nicky Zhang, IR Manager. Mr. Xu will present the company's Q1 2021 performance overview, followed by Ms. Wang, who will discuss business operations, and Ms. Yang will then discuss financials and guidance. They will be available to answer your questions during the Q and A session, which will follow. Before we begin, I'd like to remind you that this conference call contains forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended and as defined in the U. S. Private Securities Litigation Reform Act of 1995. These forward looking statements can be identified by terminology such as may, will, expects, anticipates, aims, future, intends, plans, believes, estimates, continue, target, is or are likely to, going forward, confident, outlook and similar statements. Any statements that are not historical facts, including statements about the company and its industry, are forward looking statements. Such statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known and unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward looking statements. You should not place undue reliance on these forward looking statements. Further information regarding these and other risks, uncertainties or factors is included in the company's filings with the U. S. Securities and Exchange Commission. All information provided, including the forward looking statements made during this conference call, are current as of today's date. The company does not undertake any obligation to update any forward looking statement as a result of new information, future events or otherwise, except as required under applicable law. It is now my pleasure to introduce our Chairman and Chief Executive Officer, Mr. Alex Xu. Mr. Xu, please go ahead. Thanks, Renee, and thanks everyone for joining our 2021 Q1 earnings call today. In this report, we will highlight our Q1 hotel developments and the performance. Then, we will go into the details of our operations and the financial performance. Because of the impact of COVID-nineteen on our operations in 2020, particularly in the Q1. We will also occasionally provide Q1 2019 numbers for a more meaningful comparison. Please turn to Slide 5. We are glad to see our outstanding performance continue in the Q1 Compared with Q1 2020, RevPAR increased 35.1% to RMB95.5. Total revenues increased 53.3% to RMB241.2 million. Income from operations increased 64.9% to RMB61.4 million with a margin of 25.4 percent. Net income turned positive to RMB66 1,000,000 with a margin of 27.4%. Non GAAP adjusted EBITDA increased 74.3 percent to RMB64 1,000,000 with a margin of 26.5 percent and core net income, non GAAP increased 58.3 percent to RMB43.9 million with a margin of 18.2%. Earnings per share increased to RMB0.68 and the total revenues exceeded Q1 2019. However, income from operations and adjusted EBITDA were half of Q1 2019 with reasons outlined later. On Slide 6 shows considerable progress we have made since the pandemic began in January 2020. Total revenues, income from operations, adjusted EBITDA and the non GAAP core net income all increased markedly compared with Q1 2020. Both revenues were up over Q1 2020 because of new hotel openings, but this was partially offset by lower RevPAR from existing hotels. The lower income from operations and adjusted EBITDA compared with Q1 2019 resulted from cost related to newly opened all hotels and the increasing consulting fees, while RevPAR recovery was slowed down by the resurgence of COVID-nineteen in most part of China and recovered to only 75% of Q1 2019. Let's now turn to Slide 7. The Q1 saw a robust recovery in occupancy rate and the RevPAR compared with Q1 2020. We outperformed the industry by leveraging our strategic advantages, including continued deployment of hotel management systems and technologies, an expensive footprint in Tier 3 and the lower cities and our industry leading loyalty program, as well as the hard work of our franchisees and staff. Slide 8 shows our monthly RevPAR recovery as a percentage of 2019. We remain very encouraged by the strong recovery in China. While our occupancy rate declined in January February 2021 due to the implementation of travel restrictions and the government's state local policy during the Chinese Spring Festival, it rebounded quickly after this, as with more people get vaccinated and the more pent up demand in China as travel restrictions are lifted. We saw a substantial month over month sequential increase in RevPAR in March, April May, especially during the palm sweeping holiday and Golden Week. As we expected, these holidays really ushered in a resurgence in travel with 230,000,000 domestic tourists traveling during the Golden Week. According to the report from the Ministry of Culture and Tourism, this represent 103.2 percent of the numbers of domestic tourists in the same period in 2019 and a year over year growth of 119 point 7%. Please turn to Slide 10. To begin the discussion of our strategic focus and to share with everyone what we have done in the Q1 in new hotel developments besides technology related research and development, member development. Our current growth strategy focuses on 3 key parts. 1st, we're adding L. O. Hotels in strategic locations. 2nd, we are further expanding in Tier 3 and lower cities. And 3rd, we are further penetrating the mid to up scale segment. Let's take a look at Slide 11. During the quarter, we accelerated our expansion into the mid to high end markets in Central China, Southeast China and the Southwest China. We opened 3 L. O. Hotels and have 20 L0 hotels in our pipeline, all well located around transportation hubs, central business districts and the government centers. Please turn to Slide 12. Over the past 4 years, the vast majority of our new hotel openings have been China's thriving Tier 3 and the lower cities. 68.5 percent for all new hotels in our current pipelines are located in these cities. As a testament to the soundness of this strategy, during the pandemic, the pace of recovery at our hotels in such cities was consistently faster than in other cities until the end of 2020 when business recovery in Tier 2 cities accelerated. This combination of our existing footprint and our strong performance in these cities give us a real competitive advantage to capture future opportunities in China's booming hospitality industry. Now please turn to Slide 13. We have been continuously growing our high end segment over the past few years. And by the end of the Q1 of this year, hotels in this segment increased to 9.2% of our total portfolio, compared to only 2.2% in 2017. This year, we plan to open more hotels in the mid to upskills and the luxury segments. Slide 14 shows the impressive growth in both our individual and the corporate membership programs, which accounted for most of the 92.2% of all direct sales in the Q1. Individual memberships grew to 59,000,000 from 46,000,000 and the corporate memberships grew to 1,700,000 from 1,500,000 year over year. In closing, I would like to thank our franchisees and shareholders for their tremendous efforts and support throughout the quarter. We achieved steady growth and opened more hotels in new strategic locations despite some resurgence of COVID in China. We are optimistic that travel will continue to recover as vaccine rollouts accelerate. This would help us deliver even better results next quarter. I will now pass the call over to Megan Huang, who will summarize our business operations for the Q1. Megan, please go ahead. Thank you, Alex. Please turn to Slide 16, which highlights the rebound in our operating metrics year over year from the impact of COVID-nineteen. Blended ADR increased 0.8 percent to RMB151. Occupancy rate increased 16.1% to 63.4% and RevPAR increased 35.1% to RMB96. We accelerated the expansion of our market presence across China, opening 201 new hotels in the Q1. Moving to Slide 17, at the end of the Q1, we had 4,464 hotels in operation, 11.7% more than the year before. 43 of these hotels are leased and operated or LLO Hotels and 4,421 were franchised and managed or FM Hotels. While the midscale segment remains the core of our business with 64.2% of all our hotels. Last year, we continued our expansion into both the higher end and economy segment. This expansion accelerated in the Q1 as the number of mid to upscale and luxury hotels now account for 9.2% of our total we also solidified our already dominant position in Tier 3 and lower cities. And at the end of the Q1, 67.3 of our hotels were in these cities. This strategic advantage enhanced our cross marketing efforts. On Slide 18, you can see that in the Q1, we opened 2 0 1 hotels compared to 60 2 in the Q1 2020. 3 hotels were in the luxury segment, 33 in the mid to upscale segment, 136 in the mid scale segment and 30 in the economy segment, 9 were in Tier 1 cities, 65 in Tier 2 cities and the remaining 127 in Tier 3 and lower cities in China. 17.4% of newly opened hotels in the Q1 were in the mid to upscale and luxury segments of the market. We closed 77 hotels, 6 due to brand upgrade, 30 due to non compliance with our brand and operating standards and 41 due to property related issues. So net net, we added 124 hotels to our portfolio during the quarter. Slide 19 shows the growth in our pipeline of new hotels. Despite COVID-nineteen, our pipeline increased from 1186 on December 31, 2020 to 1265 on March 31, 2021. Around 41% of these new hotels are in the midscale segment, about 32% in the economy sector and around 27% in the mid to upscale and the luxury segment. Slide 20 shows our quarterly operating performance trend. In the Q1, RevPAR for our LO Hotels increased to RMB95. RevPAR for our SM Hotels increased to RMB96. ADR for our LO Hotels hotels increased to RMB184 and ADR for our FM hotels increased to RMB150. Occupancy at our L. O. Hotels increased to 51.7% and occupancy rate at our SM Hotels increased to 63.7%. As mentioned earlier, performance in the Q1 was negatively impacted by the implementation of travel restrictions and the government's stay local policies during the Chinese Spring Festival. With that, I'll pass the call over to our CFO, Linhue Yang. Thank you, Megan. Please turn to Slide 21. Total revenues increased 53.3% year over year to RMB241.2 million. Total revenue from F and M Hotels increased 51.2 percent to RMB177.9 million, while total revenue from L. O. Hotels increased to 66% to RMB56.1 million. On Slide 22, total hotel operating costs were RMB197.7 million, a 43.8% year over year increase and 51.6% increase compared with the Q1 2019, which are mainly attributable to higher rents and the increases in other costs due to the expansion of our FM and ARO hotels. In the Q1, hotel operating costs were RMB122.2 million, that's up 52.8 percent compared with the Q1 2019. The increase was related to higher rents due to more LRO hotels, both newly opened and in our pipeline. Besides, hotel operating costs in the Q1 2021 included costs from ARGAR and Urban that were not consolidated in the first quarter 2019 numbers. Excluding these factors, hotel operating costs increased by 3.5% compared with the Q1 2019, which is mainly attributable to the increasing number of our staff. Selling and marketing expenses were RMB18.1 million, a year over year increase of 1.6%, a decrease of 26.6% compared with the Q1 2019. General and administrative expenses were RMB56 1,000,000, up 117.5 percent compared with the Q1 2019. The increase was mainly attributable to increased the consulting fees and factored that in the Q1 2019, G and A expenses for AGGAR and Urban were not consolidated in our performance. Excluding these factors, G and A compared with Q1 2019 increased by 5.3%, mainly due to the increasing investment to research and development and newly added staff. Turning to Slide 23. Income from operations defined as revenues minus total operating costs and expenses totaled to RMB61.4 million, representing a year over year increase of 64.9%. The increase was mainly due to the sustained recovery in RevPAR, the higher number of hotels and better control of costs and expenses during this quarter. Operating margin was 25.4% compared to 23.6% a year ago. Compared with the Q1 2019, income from operations decreased by 45.1% and margin decreased from 47.5% to 25.4%, mainly attributable to costs related to newly open air hotels and impact from travel restrictions in January February during the Chinese Spring Festival. On the same slide, net income increased to RMB66 1,000,000 and net income margin increased to 27.4%. Adjusted EBITDA increased 74.3 percent to RMB64 1,000,000 and the adjusted EBITDA margin increased to 26.5% year over year. Core net income increased 58.3 percent to RMB43.9 million And core net margin was 18.2%. Compared with the Q1 of 2019, adjusted EBITDA decreased by 43.2 percent and the margin decreased by 21.3%. The core net income decreased 52.4% and the margin decreased by 21%, which are mainly attributable to lower RevPAR across the board and LRO Hotels newly opened in the pipeline. Please turn to Slide 24. Net income per ADS was RMB0.68 that's $0.10 up from the loss of RMB0.11 1 year ago and down from RMB1.33 at the Q1 2019. Core net income per ADS, that's basic and diluted non GAAP was RMB0.43, that's US0.07 dollars up from RMB0.27 in the year of 2020 and down from RMB0.91 at the first quarter 2019. Now let's take a look at Slide 25. As of March 31, 2021, the company had total cash and cash equivalents, restricted cash, short term investments, investments in equity securities and time deposits of RMB1.7 billion, compared to RMB1.9 billion as of December 31, 2020. The decrease from the 4th quarter was primarily attributable to loans to franchisees, higher amount of prepaid rents and deposits and acquisition costs of our ARO hotels and offset by the drawing down of bank facilities. The cash and cash equivalents provide us with enough capital as we continue to execute our growth strategy, including potential acquisitions and support our franchisees. On Slide 26, you can see the significant impact with COVID-nineteen has had on our business. Assuming the pandemic remains uncontrolled in China, we expect total revenues for the full year of 2021 to grow 48% to 53% over 2020 levels and 25% to 30% over the year of 2019. This concludes our prepared remarks. Operator, we are now ready to begin the Q and A session. Thank you. We will now begin the question and answer Your first question comes from Praveen Chaudhry with Morgan Stanley. Please go ahead. Hi, thanks very much for taking my call. Hi, Alex. How are you? I have a couple of questions. The first one is, would you talk I understand this is Q1 result, but would you tell us anything about the current outlook in terms of how the RevPAR is trending as well as the opening since the Q1 ended? And also if you can talk about any particular reason for the Q1 results to be a little bit later than usual? Thank you so much. Okay. Thanks, Praveen. You can see from the paragraph in Slide 8, the Q1 RevPAR was only about 75% of the pre COVID level. But after the April, pretty much RevPAR increased to 100% level and sometimes even higher in a couple of cases, more than 108% or 6% higher, but the level of the pre COVID. So, as the COVID resurgence is controlled, the RevPAR recovery is very rapid. So we're pretty confident the recovery will continue. So the Slide 8, you can refer to that all the way, I think to the end of June. So the second issue is we have hired consultant. We have accessing the situation because in the past many, many investors ask us what we should do with more Chinese companies are seeking alternative listings. So we hired a consultant accessing the situation and that I think as a result of that, the numbers of the Q1 get delayed and that's basically the only reason. Thanks Praveen. Thanks, Alex. That's helpful. Can I ask you one more question about lower tier cities where you have been normally more dominant compared to your peers? But lately, we are hearing and seeing that many other of your peers are also trying to grow in lower tier cities. So first, do you think the competition is heating up in lower tier cities? How are you going to manage that competition? And second is, do you think there are any competitive advantage that you have developed over time in lower TSOPs, which will help you more than your peers? Thank you. China has a lot more lower tier cities than the first and second tier cities. So as the economy grow and the Chinese lifting the economy across the board, we feel again the opportunities of the growth opportunities are going to be more in the 3rd and other third tier and other tier cities. And we have been adding resources to those Tier 3 and the lower tier city for many years. And that to manage across the wide range, wide areas of networks requires a lot of resources. Some companies in the past have tried to quickly expand it into the lower end and upper tier cities. As you can see, the results are not that easy. So I think we have some advantages in getting and accumulating the experience and resource in the system in managing effectively in those areas. I think that gave us a real advantage over the many, many months ahead. However, I think a lot of other people realize also there are opportunities in those cities and the competition are heating up everywhere, not only the 3rd tier city, but also in the 1st and the second tier. As the urban development reached to a peak, the development has started to spreading into the lower tiers and other tier cities. But we still are confident, Pradeen, that we will have a real competitive advantages in these areas. And as I said, managing a wider networks requires a cumulative resources experience system. Thank you, Alex, and all the best. Thank you, Praveen. Your next question comes from Billy Hsuan with Bank of America. Please go ahead. Hi, good morning. Hi, good morning, Alex. Good morning, Selena. And I have two questions. First question is, I'm just can you provide a little bit more information about our lease and operator hotel? And the presentation is we noticed that there were 3 major ones opened during the Q1. Would you mind to share about the operating metrics in terms of RevPAR and roughly about their profitability after ramp up? I think they've been in cooperation for like 4, 5 months now. What kind of margin and profitability should we expect? And then secondly, also we are seeing about 20 more leased and operated hotel in the pipeline. And what kind of P and L impact should we expect for this year's and in terms of pre opening costs and in terms of CapEx and how should we budget that for the rest of the year? And then finally, one more question on that is like we see about 1200 hotels in the pipeline. So should we assume most of them will be able to open in the next 6 to 12 months? Billy, thank you. And the first question, I will give you is our reasons and to make those decisions of adding all hotels We have been continuously trying to expand into a Southeast to Southwest area. In the past, our stronghold is in China Central region and especially the Shanghai Delta area. And we have been trying to accelerate our growth into those our weak area, our white space through franchise and managed. And last year and this year, there is new opportunities emerged where we are able to find some and especially existing hotels that impacted by the COVID, which we were able to acquire or invest with much, much lower costs than we alternatively we are able to just secure a new site and start building those hotels. And most of them are in the city, we feel, even during And most of them are in the city we feel even during the current timeframe, they may be impacted by the COVID and more probably heavily than in China Central area. But eventually with COVID crisis gone, those hotels will further benefited from the opening of the borders, for instance, in Nanning, which is a site next to the Southeast Asia. And so that's the rationale behind it and we're selecting those strategic locations in the strategic cities, which can help us to penetrate quickly into the weak and white space of GreenTree in the past. So the performance of our hotels are very, for instance in Wuhan, performance are really good. In the Nanning, because the board to the south stage of countries are still closed. And so Nanning is more heavily impacted Guangxi. It's more I think that than other cities, but we think with time passed that those hotels will perform really well. Selena? Okay. Thank you, Alex. I can share more information in terms of all our Air All Hotels. Here the Q1, we have 43 Air All Hotels and the RevPAR, if we compare with the Q1 of 2019, the RevPAR decreased by 20%. And for the total portfolio, our RevPAR decreased by 24.5%. So that means the LRO hotels outperformed our total portfolio. And for the Q2, we will have another more than 10 LRO hotels added into our portfolio. And now we can see that the RevPAR of our LRO hotels for the 2nd quarter increased by more than 5%, if we compare with the year of 2019. So that also outperformed the total portfolio. Thank you, Billy. Thanks a lot. When we turn the hotel into GreenTree and I think there will be some impact of occupancy during the conversion period. I think that you can see the numbers. The Q1, the L. O. Hotel's occupancy is lower than the F. M. Hotels. On the other side, we have all the costs included the hotel opening cost in our numbers. So we have traditionally not separating the opening cost, newly opened cost from the reporting numbers. So we didn't we will not see I don't think that we should be able to see a lot of a major impact from hotel opening cost drag down the net operating income. And in terms of the opening pipeline, what should we expect the opening pace for the next 6 to 12 months? We I forgot to ask you answer that question. Yes, most of the 1200 hotels will open in the next, I think, 6 to 18 months. Why we use 18 months, because there are some hotels are newly built and so it takes much longer time than before the conversion hotels. But we should expect the majority of them should be opened up from the 6 to 12 months, with some extended further. And so we'll continue to see I think the 2nd quarter openings is about 1 is a little bit less than the Q1, but still substantially higher than the same period last year or the year before. I think what is the exact number? Because Selena has a better. Yes. The opening for the Q2 will be more than 170. Thanks a lot. Thank you. Your next question comes from Ingrid Jang with UBS. Please go ahead. Hi. My name is Alex, Selina and Megan for taking my question. I have two questions about the recent trends. The first is, could you please comment a little bit about the impact from the Holland flood and the recent resurgence of COVID cases? And the second is, if possible, can you please share with us when do we expect our RevPAR to return to the 2019 level? Many thanks. Okay. So, I didn't get a thank you so much for the question. I didn't get quite the first question. You said the impact from 2019? Yes, the comp impact from first the Hohner flood and importantly the recent resurgence of COVID cases, yes, the COVID outbreak starting from Nanjing. Okay. Thank you. The COVID cases, COVID management, I think in the past, we have indicated that we've been prepared for the occasionally, the certain city resurgence of this COVID. We have checked from both out of the flood crisis in Henan. We quickly after as soon as we saw the newscast, our company's policies immediately alert not only the Henan, but every potential affected hotels to be prepared for the flood control and to prepare ourselves. And so for our hotels in the region, we have not been affected other than the hotels are hosting some of the local our local residents. And I think for the next couple of weeks and the business will we hope will resume back to normal. But with the 19 COVID, the same thing, some of our hotels will be or in the process being taken by the government as the COVID hotel. And so that's I think in terms of revenue and in terms of the income impact is going to be probably offset by that. But the good thing is that none I think none of our guests and our employees get impacted by the resurgence. And that is still relatively speaking compared with the broad numbers, there is a very, very small number of people get impacted in 2019. So we think the government is taking a very, very strong measure to prevent the crisis from spreading. So we are very confident and that crisis will be controlled in 2 to 3 weeks and typically as the time period and then just like Guangzhou a couple of months ago and the business will go back to normal. I think that China has a very strong and very effective COVID control and mitigation policy. As soon as potential impacted person gets identified and they will be having a stay quarantine stay home policy and that people are getting checked every very often. And so we do not at least we do not think this will have a major impact on our company's performance. So please allow me to answer your second question. Actually, we observed that since April, our RevPAR began to turn to the level of the year of 2019, especially in May, our RevPAR increased by 3% if we compare with the 2019 levels. And in June, our RevPAR still gets positive if we compare with 2019. Even in the Q3, I mean, from the very beginning of July to now, our RevPAR performed almost the same level of the 2019. Your next question comes from Simon Young with Goldman Sachs. Please go ahead. Hi, everyone. Thanks for taking my question and also the presentations. I think I have 3 questions here. One, just on earlier on you mentioned about Q2 you're adding the 170 hotels also. Can you give us a sense about the full year numbers? And if you can perhaps give us a sense about the breakdown between L0 and franchisee, that would be very helpful. And then the second question is just wanted to get a sense about your EBITDA margins between the LO and the franchisees because as you add more LO, I suppose that's going to be dilutive to the margins, particularly as in Alex, as you mentioned that it would take some time for your project to ramp up. And then thirdly, you mentioned about hiring a consultant to consider leasing elsewhere. Just wondering whether you can share anything with us. What are the conclusion or if you were to list it elsewhere, what are some of the key consideration here? Thank you. Okay. So the first question please allow me to share you with more detailed information. For the full year, our plan, the number of new hotels will be more than 700 and we are likely to open almost 800 hotels this year. And between them and still most of them are franchised and managed hotels. Only we have opportunity to open these operating hotels in the strategic position and only that way we will catch opportunity to add more new and more A and O hotels. And for the second question, here the second quarter, we can observe the EBITDA margin was approaching 40%. That means they recovered better than the 1st quarter. And normally our EBITDA margin is above 50%. So that's my target for this year. And the third question, Simon, that we our consultants are working really hard and that we will report to you at progress being made. And that's the to the extent I'm able to report to you. Understood. Okay. Thanks a lot everyone. Thanks. This concludes our question and answer session. I would now like to turn the conference back to Selina for any closing remarks. Thank you, operator. Another questioner. Your next question comes from Don Lu with China Resistance. Please go ahead. Hi, management. Can you hear me? Yes. Hi, thanks for taking my question. I just have two questions. So the first is like for the Allo hotels we are doing, like what's the project or what's the return IRR we are looking for? That's the first one. So basically what's our return threshold for us to do an L and O investment? That's the first question. And for the second question, so I feel that for the growth target we have on the top line, it's about 25% to 30% for this year. So can I assume that like 20% of it is coming from the hotel the growth of hotel numbers and the other 5% is coming from RevPAR improvement? Thank you. Okay. Thanks, criteria is still roughly about we prefer to be 3 payback period. But at this moment, due to the higher rent, higher improvement cost and higher cost across the board and we're really targeting less than 4 years payback period. So that's our threshold by making investment in the all hotels. That's one criteria. The second criteria is really we have to make those that attracting more sales and marketing helping sales and marketing team and by building the hotels, for instance, in QOD area, transportation hub, and so helping us to gain more brand awareness and also attracting more members. So those are the key factors. So in terms of the 25% to 30% of the revenue growth target over 2019 pre COVID and about 50% that was 2020, you can see the numbers are primarily growing from FM Hotels by more than 7 to close to 700 to 800. And then I think we will we mentioned here we have about 20 hotels in the pipeline, which will also contribute to that number. The and hotel contribution will be a little bit lower because we've been already impacted by the first quarter's 25% loss of the revenue from FM Hotels because RevPAR only recovered 75% to pre COVID level. And so that's the math over there, Don. And so thank you, Celine. Do you have any? Yes, maybe I can share more detailed information. In our forecast, 25% to 30% revenue increase if we compare with the year of 2019. Among them, about 10% contribution from our new added L. O. Hotels and remaining coming from our existing L. O. Hotels and also all our F and M hotels. So in our previous and current forecast for the full year, our wrap up, if everything going smooth, I mean nothing special due to the COVID-nineteen resurgence of the COVID-nineteen, maybe the RevPAR will be recovered to the same level of the 2019 or even a little bit higher than 2019. Otherwise, in the range of minus 2% to positive 2% in terms of the RevPAR increase. And the remaining contribution coming from the number of hotels increase. Thank you. Okay. Very clear. Thank you, management. Your next question comes from Jerry Hynes with WGI. Please go ahead. Hi. I had two quick questions. One is the gross debt of the company increased very modestly, especially relative to the past. Can you talk about what the need of this short term debt is? And then the second question is, the share price of the company has recently hit an all time low and yet you have over $200,000,000 of net cash on your balance sheet. Any consideration to increase shareholder returns either through dividends or share buyback, especially just given where shares are now? Okay. So let me take these questions. Jerry, thank you for the good questions. The debt, the drawdown and Selena mentioned that the bank facilities and those are mainly for maintaining our banking relationships because we may experience the next year the future continue to speed accelerated growth. So we want to make sure we have good banking relationships by occasionally using the facilities. So that's primarily the reason for occasionally drawing down the bank facility, even though we have cash on the balance sheet. In terms of second share price, we understand the market have different sentiment occasionally. But the fundamentals of the company remain to be very sound and solid and we believe. And so we are very much confident that the share price will I think that will eventually reflect the company's fundamental what we've been doing. In terms of the whether the shareholder returns and those various programs, we will have a meeting with our Board Director to discuss about the situation and we'll report to you if the Board of Directors decide to take any actions. Thank you very much. This concludes our question and answer session. I would now like to turn the conference back over to Selena for any closing remarks. Thank you, operator. In closing, on behalf of the entire GreenTree management team, we thank you all for your interest Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.