GreenTree Hospitality Group Q3 2023 Earnings Call Transcript

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Provided by Quartr
November 21, 2023

There are 9 speakers on the call.

Operator

Hello, ladies and gentlemen. Thank you for standing by for GreenTree's Third Quarter 2023 Financial Results Release. At this time, all participants are in 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.

Operator

I would now like to turn the meeting over to your host for today's call, Mr. Rene Van Gisten of Christensen, Raintree's Investor Relations firm. Please proceed, Rene.

Speaker 1

Thank you, MJ. Hello, everyone, and thank you for joining us. GreenTree'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 through the same IR website. On the call from GreenTree are Mr.

Speaker 1

Alex Xu, Chairman and Chief Executive Officer Ms. Selina Yang, Chief Financial Officer Ms. Megan Huang, Vice President of Sales and Marketing and Ms. Ellen Zhao, Financial Director. Stepping in for Mr.

Speaker 1

Bill Zhou, who is not available today. Mr. Xu will present the company's performance overview for the 3rd quarter of 2023, followed by Ms. Wang and Ms. Zhao, who will discuss business operations, and then Ms.

Speaker 1

Yang and Ms. Zhao will discuss financials and guidance. They will be available to answer your questions during the Q and A session, which follows. 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.

Speaker 1

Private Securities Litigation Reform Act of 1995. These forward looking statements can be identified by terminologies 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 expectation 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.

Speaker 1

Further information regarding these and other risks, uncertainties or factors is included in the company's filing with the U. S. Securities and Exchange Commission. All information provided, including the forward looking statements made during this conference call, are currently 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.

Speaker 1

It is now my pleasure to introduce our Chairman and Chief Executive Officer, Mr. Alex Xu. Mr. Xu, please go ahead.

Speaker 2

Thanks, Renee, and hello, everyone, and thank you for joining us today. We had a good Q3 with a strong recovery in our hotel business year over year as tourism and the business travel continued to rebound. RevPAR increased 30.5% year over year, reaching as high as 110% of its Q3 of 2019 levels in July August, with a surge in the number of tourists during the summer vacation. The pace of recovery of RevPAR slowed slightly in September, but remained stable. We will continue to implement our long term strategic development plan, focused on helping franchisees to maintain high quality service and operation and expand our hotel network and the sales channel, provide stable operating profitability and maintain long term stable growth.

Speaker 2

Please turn to Slide 5. Compared with the Q3 of 2022, hotel RMB156, up 30.5 percent and restaurant ADS, that is average daily sales per store was RMB6548, up 7.4%. Total revenues were RMB 460.9 million, up 15.3%. The increase was partially due to the recovery in RevPAR, the increase in the number of hotels and the increase in the ADS, offset by the closure of 85 restaurants over the past 12 months. Income from operations increased to RMB137.8 million with a margin of 29.9 percent.

Speaker 2

Net income was RMB117.4 million with a margin of 25.5 percent. Adjusted EBITDA, that's non GAAP, was RMB173.4 million, that's up 2 15 percent, with a margin of 37.6%. Core net income, that's non GAAP, was RMB127.2 million with a margin of 27.6%. Cash provided by operating activities was RMB154.8 million. Slide 6 shows detailed numbers for hotel, total revenues, income from operations, net incomes and adjusted EBITDA.

Speaker 2

On Slide 7, operating performance was great. RevPAR was RMB156. At the bottom of the slide, you can see the weekly RevPAR performance in the Q3 of 2023 compared with 2019. RevPAR gradually recovered to more than 110% of its pre pandemic levels in July August, then slowed down gradually in early September. During the mid autumn festivals and the National Day, we ushered in a new round of development and growth.

Speaker 2

Slide 8 shows the operating performance of restaurant with ADS continuing an upward trend and reaching highest level in a long time. Now starting with Slide 10. We will review our strategic execution across our businesses. In our hotel business, we further expanded in the mid to upscale segment and increased our penetration in Tier 3 and the lower cities in South China. As you can see on Slide 11, we continue to grow our mid to upscale segment with 455 hotels.

Speaker 2

That is 10.9% of our total portfolio. At the end of the quarter, up from only 50 in 2017. While the midscale segment remains the core of our hotel business with 70.8%, we continue our expansion into the higher end segments. The economy segment remained stable at 18.3%. Please turn to Slide 12.

Speaker 2

Over the past 5 years, most of our new hotels have been in China's thriving Tier 3 and the lower cities. As we pursue greater penetration in Tier 3 and the lower cities, 73.7% of hotels in our current pipelines are in such cities and we will further capitalize on the substantial opportunities in such locations. On slide 13, we continued to focus on increasing profitability in our restaurant business. We closed unprofitable stores, increased the proportion of franchised and managed restaurants and expanded the number of street stores. On Slide 14, during the Q3 of 2023, we closed 10 restaurants in areas of decreasing economic activities, helping improving the profitability.

Speaker 2

On Slide 15, you can see the growth in the proportion of our franchised and managed restaurants since the acquisition of Danyang Dumplings and Bolaji during the Q1 of 2023. We opened 6 F and M restaurants in the Q3 of 2023. Slide 16 shows the restaurant breakdowns by location. Most of our restaurants are currently in shopping malls. However, we believe there is a substantial potential for street stores and we intend to grow this segment.

Speaker 2

Now let me turn the call over to Megan and Ellen Zhao. Megan?

Speaker 3

Thank you, Alex. Please turn to Slide 18 to start reviewing the operating and financial highlights. Slide 18 shows the trend in our quarterly operating performance. In the Q3 of 2023, RevPAR for our L. O.

Speaker 3

Hotels increased to RMB212. RevPAR for our FM Hotels increased to RMB 155. ADR for our LO Hotels increased to RMB268, and ADR for our FM Hotels increased to RMB190. Occupancy at our L. O.

Speaker 3

Hotels increased to 79% and occupancy at our FM Hotels increased to 81.3%. Slide 19 highlights the growth in our membership programs, which accounted for most of our direct sales. Individual memberships grew to 88,000,000, up from 77,000,000 a year ago and corporate membership grew to 2,020,000, up from 1,920,000 a year ago.

Speaker 4

Now please turn to Slide 20. In the restaurant business, the number of individual members grew to 2,670,000, up 1.6 percent year over year. ADS increased 7.4% to RMB 6,548 in the Q3 of 2023 compared to 1 year before. With that, I will pass the call over to our CFO, Selina Yang.

Speaker 5

Thank you, Alan. First, I will review our hotel business. Please turn to Slide 21. In the Q3, total hotel revenues increased 40.4% year over year to RMB 339.1 million. The increase was primarily due to the recovery in RevPAR and the increase in number of hotels.

Speaker 5

Total hotel revenues increased 9.2% to RMB339.1 million compared to the Q2 of 2023. Total revenues from F and M Hotels were RMB186 1,000,000, up 20.8% year over year, while total revenues from LRO Hotels increased 83.1% to RMB151.8 million. On Slide 22, total hotel operating costs and expenses decreased 14.7% year over year to RMB212.4 million And total hotel operating costs and expenses decreased 0.5% compared to the 2nd quarter. Total costs and expenses are composed of hotel operating costs, selling and marketing expenses, general and administrative expenses. Operating costs were RMB159,900,000, increased 12.1 percent year over year.

Speaker 5

The increase was mainly due to the higher personnel costs, higher consumer goods and higher utilities as business rebounded as well as higher depreciation and amortization with increase in assets, partially offset by the consolidation of Argyle and Urban. Operating costs increased 6.5 percent to RMB159.9 million compared to the Q2 of this year. Selling and marketing expenses were RMB14.3 million, a year over year increase of 24.9 percent. The increase was mainly attributable to higher sales channel commissions and higher sales salaries. Selling and marketing expenses increased 3.7% compared to Q2 of this year.

Speaker 5

General and administrative expenses were RMB 26 700,000 down 50.9% compared with same quarter of last year. The decrease was mainly due to lower bad debts, lower staff related expenses and lower consulting fees. General and administrative expenses decreased 40% to compared to the Q2 of this year. Turning to Slide 23. Income from hotel operations increased from 1,300,000 dollars to $127,500,000 year over year.

Speaker 5

Net income of hotels turned positive year over year at RMB108.5 million. Adjusted EBITDA increased 221.1 percent to RMB164.3 million, and core net income increased from RMB5.4 million to RMB118.1 million year over year. Next, let me turn this call over to Alan, the Financial Director.

Speaker 4

Please turn to Slide 24. In the Q3 of 2023, total restaurant revenues were RMB121.8 million. You can also see the revenue breakdown for F and M Restaurants and AO Restaurants. On slide 25, total operating costs and expenses decreased 29.6% year over year to RMB111.8 million and decreased 2.6% sequentially. You can also observe the downtrends in materials costs, personnel costs and the rents.

Speaker 4

Turning to Slide 26, income from restaurant operations was RMB10.3 million. Net income was RMB8.8 1,000,000. Adjusted EBITDA increased RMB 134.4 million to RMB9.1 million year over year. Core net income was RMB9.1 million. Next, Selina, please introduce the profitability of our group.

Speaker 5

Please turn to Slide 27. Group net income per ADS basic and diluted was RMB1.15 million. Group core net income per ADS basic and diluted non GAAP was RMB1.25. Let's now take a look at Slide 28. As of September 30, 2023, the company had total cash and cash equivalents, restricted cash, short term investments, investments in equity securities and time deposits of RMB1331.4 million compared to RMB1440.1 million as of June 30, 2023.

Speaker 5

The decrease was primarily due to repayment of bank loans and investment of property, partially offset by cash from operating activities and repayment from franchisees. On Slide 29, based on our performance in the 1st 9 months of this year, we revised our full year 2023 guidance for the total revenues of our organic hotels upwards. We now expect them to grow 36% to 38% year over year. We expect total combined revenues from our restaurant and organic hotel business for the full year of 2023 to grow 17% to 19% over the 2022 levels, reflecting the impact of the closure of restaurants. Finally, a word about our share repurchase program.

Speaker 5

In October this year, the company repurchased 554,158 of its ADS from a single investor at price of US4.40 dollars per ADS. For a total consideration of 2,448,295.20 in a private negotiated transaction. The repurchase was made under the excesses of the company's share repurchase program for a total of US10 $1,000,000 authorized by its Board of Directors for 2 years on October 13, 2023. This concludes our prepared remarks. Operator, we are now ready to begin the Q and A session.

Operator

Great. Thank you very much. We will now begin the question and answer session. Today's first question comes from Dan Chi with Morgan Stanley. Please go ahead.

Speaker 6

Hi, good morning. Thank you for the presentation, Alex and management. It's good to hear from you again. I have two questions. Maybe let me present my first question.

Speaker 6

My first question is about RevPAR outlook. From Slide 7, I observed that since the beginning of since mid autumn festival, there was a very linear decline in terms of the RevPAR as a percentage to 2019. And I think by beginning of November, it went to around 95%, which was back to, I think, April level. I'm just wondering is this a big what was happening in the beginning of November? Was it due to low season or weakness of business?

Speaker 6

Was it due to timing, calendar differences? And what is the management's outlook for the remaining of the Q4? And possibly, if you can, any outlook for 2024, please? Thank you. That was my first question.

Speaker 5

Okay. Thank you, Dan. Thank you for your question. For the first question about the RevPAR comparison for the National Holiday, actually this year, we have 80 days for the national holiday and for the year of 2019, we have 7 days. So when we compared with the RevPAR with the year of 2019, we compared the first since very beginning of the holiday here the last day and also compared since bronze the third of the holiday here the last day.

Speaker 5

So when we compare the 3rd date of the holiday, the 3rd date, we find our RevPAR increased by 20 percent over the year of 2019. But if we compare the whole period, that means since from the 1st day till the end, we find the increase over 2019 is about 7%.

Speaker 6

Thank you, Selina. How about for November, early November, it seems that it has weakened a little bit to below 100% for the weekly data. Do you think that was a one off or was there any calendar event also going on just like Golden Week?

Speaker 5

Okay. And then more words about your first question. So the RevPAR for the October compared with the 2019, that is 5% decrease compared with the 2019, okay. So for the next for the second question, why the whole period for the national holiday, the increase is less than 10% because we observed the 1st holiday of this year that is less than that 1st day of the 2019.

Speaker 2

Got it.

Speaker 7

Thank you.

Speaker 2

Let me you. Let

Speaker 6

me continue to

Speaker 2

add on the comments then to Selena's comments. After the national holidays, we typically experience a slowdown period and then the business travels will resume before the end of the year. But on the November, we do see a slightly downward trend on the RevPAR. Traditionally, our business model has been more resilient than the downward or upward challenges of the fluctuation of the hotel market. So we will observe and to see whether before the year end, whether there is going to be a major shift in upward trend.

Speaker 2

But at this moment, our November trend, we do see a slightly below the 2019 levels. So that is our projection at this moment because we have a relatively higher occupancy to begin with. So we may be able to adjust and our the pricing structure and to offset this downward pressure, okay? So with regarding to the 2024, we believe the economic recovery will continue, but maybe a little bit uncertain. We do not know.

Speaker 2

Might be uncertain. So our business model in the past, Dan, you have we have observed and dealt with to deal with future changes. So we will report in the next quarter what we observed for the earlier part of next year. Thank you.

Speaker 6

Thank you so much, Alex and Selina for your detailed explanation. My last question is regarding your share repurchase program or share repurchase transaction.

Speaker 5

Can you share

Speaker 6

a little bit more of the details or rationale on this transaction in October? We know that our trading volume, daily trading volume and liquidity has been relatively lower compared to our peers. So I'm just wondering, is this a one off transaction, so just one time? Or does the company actively seeking from investors to do share repurchase in this sort of transaction? And is there any concern on our liquidity from the management's perspective?

Speaker 6

Thank you so much.

Speaker 2

With regard, Dan, the purchase of this privately negotiated transactions, since it is not an open market transaction, so it has not impacted the daily volume of our hotels of hotel ADS. We have a relatively lower volume because the number of floating shares, the percentage of things is much smaller. And besides, I think that our shares has also concentrated. We are making efforts to increase trying to structure so that we may be able to help to increase the volume of the shares. And that's as far as this transaction, the Board believe this private investors that a block sales would benefit the entire shareholders.

Speaker 2

And so that's all I can share with you.

Speaker 6

Thank you so much, Alex. That's it for my questions. Thank you.

Speaker 5

Thank

Operator

you. The next question comes from Bruce Emmi with UBS. Please go ahead.

Speaker 8

Thanks, Alex and Selina for taking my questions. So I actually have two questions. And first one is regarding the hotel openings. So could you please share with us about your hotel opening plan for 2024 and your long term hotel operation target? And the second question is still on RevPAR.

Speaker 8

So actually we have observed very strong leisure travel demand in the summer travel season and also the National Mid Day Golden Week. So but some investors worry that it may be a one off pent up demand after the China's reopening. So do you worry that this leisure travel demand could be sustainable in next year? And what's your RevPAR assumption for 2024 and the Q1 next year? Thank you.

Speaker 5

Okay. Thank you for your question. Maybe I can answer the first question. Actually for this year, we have shared the number of signed contracts last time that is 600 tiers end of this year. And we are likely to open more than 400 hotels this year.

Speaker 5

And for the next year, we plan to sign more than 6 50, that is about 650 to 6 80 hotels in the year of 2024. And we are likely to open 450 to 4 70 hotels in the next year. That means about 12% increase of this year to 50% increase of this year.

Speaker 2

Okay. So with regard to the RevPAR projection, as we discussed earlier, the remaining of the Q4 of 2020 3, we believe the pressure is there and the RevPAR comparing with the 2019, we were trying to make that stable and reach the same level. And we do not see a significant increase that will be the same as the 3rd quarter like during the summer vacation because that is driven by leisure tourism. And regarding the next year, because our hotels are primarily priced at the most affordable value driven. And we do not believe that our system, system wide RevPAR will be impacted that much.

Speaker 2

There will be, I think, still continued demand in the leisure tourism segment, especially on the affordable segment due to the large portion and a larger percentage increase in the retirees and that there are demand for the leisure travels. And also, we believe there will be gradually recovery of the economic activities resulting in more business travels. But we certainly do not see the leisure travels will be as strong as the last summer. So in our own assumptions, the same store, the same hotel RevPAR and our goal is to maintain the same and our system wide RevPAR increase will be an upward because we'll continue to open more mid to upscale segment hotels and that's right now around 11%. We'll continue to increase that percentage.

Speaker 2

And meanwhile, we will system wise, we're closing down certain that lease expired hotels. And so because of the weighted change, we'll see the system wide RARPU continue to an upward increasing trend for the 2024.

Speaker 8

Okay. Thank you, Selina. Thank you, Alex.

Operator

The next question comes from Simon Cheung with Goldman Sachs. Please go ahead. Mr. Chen, your line is open.

Speaker 2

Hello, Simon. Sorry.

Speaker 7

Can you hear me? Hi, sorry. So I was just referring to I have two questions. One is just on the hotel opening numbers that Selena was sharing. I kind of missed that.

Speaker 7

Is that 6 50 or 680 and then there were another 450 and 470 was that one is gross and another one is net? That's on next year and this year. And perhaps, maybe just more broadly, given that you have given guidance for specifically the hotel as well as the restaurant segments over this year, perhaps you can give us a sense of your assumption for Q4. What's the RevPAR are you expecting? What's the hotel?

Speaker 7

And then similarly for restaurant? That's the first question. And then the second question is, when I look at your costs, particularly on a sequential basis, there's quite a bit of a cost saving across restaurant and hotel business. Can I and then I've observed that your hotel EBITDA margin back to what 47%, 48%, pretty much back to 50%? Just wanted to get a sense how you're thinking about scope for cost saving and the magnitude or potential further margin expenses if any?

Speaker 7

Thank you.

Speaker 2

Thanks, Simon. I'll answer the first question. Okay, regarding the margin, I'll leave that to Selina. So Simon, the $650,000,000 to $608,000,000 I believe that's what we shared with you. That's the signing up of the hotels.

Speaker 2

And the 450 to 480, and so we have internal projection that's the opening of the hotels. So that's the number quarter's RevPAR and we just reiterated that I think that we continue to project and continue to work hard to achieve at least the same level of that of 2019. And so that's on the Q4 of 2023. Okay. So with regarding the margin, I'll leave that to Selena.

Speaker 5

Okay. Thank you, Simon. Here, I wrote down 2 questions for you. The first one is about the hotel. The restaurant margin, why is better why was better than before?

Speaker 5

Because in this quarter, the restaurant net income of the restaurant was nearly RMB10 1,000,000, so that's much better than before, I think for several reasons. The first one is for the seasonality reason and as the recovery of the industry, the performance of the restaurants was better than before. 2nd reason for Danyao, we closed 85 unprofitable

Speaker 3

stores

Speaker 5

over the past 12 months. And so the profitability of the remaining hotels was much better than before. And the third reason is that we changed the franchised model. We have already begun to change the franchise model. We begin to open more street stores and the CapEx at the very beginning, I mean, at the very beginning, the investment and profitability from the it was much better than before.

Speaker 5

And for LUKA, we can see the trend, the profitability trend was always stable. So that's why in the Q3, we also the Lugan brand is also make money, okay? So your second question is about the Q4. Yes, after entering October, yes, we can find, yes, the profitability was a little downwards than the Q3. However, for Danyang brand, just as we I just explained because of the model of our franchise model has begun to be adopted.

Speaker 5

So we can expect the profitability of Danyang brand in the 4th quarter as well. Although the sales I mean the revenues decreased much year over year speaking, okay.

Speaker 2

The future margin, Simon, that we project that will slightly will continue to improve that margin. And we hope that the previous margin we generated will achieve that and will mark in that level with the increase of our brand quality overall in terms of products and services. We'll continue to do a, I think, a better job in that area. And secondly, due to the market competition, we also lowered some of our fees to our franchisees such as reservation fees, such as the supporting fees in other areas. And therefore, on the top line level, we'll see a slight impact, which will also impact our margin, but we'll continue to improve the internal productivity and efficiency and also using the system and improve the management efficiency.

Speaker 2

So to go back to achieve the optimum margin. So that is our goal. So we have observed we still need I think considering the uncertainty and we have to work really hard to achieve that.

Speaker 7

Thanks, Alex and Celine, that's Subarusaro. Can I just double check one more follow-up question, I guess? And the fact that you think that you have been lowering your fee for franchisee in order to get more sign up, is that what you're saying? So that you are now expecting a step up on your new hotel sign up that is a function of because from our perspective, I thought that the market environment has actually been very conductive to new hotel signing. But yet did you say that you lower your fee or something?

Speaker 7

How competitive is the market is, just more broadly?

Speaker 2

We are not talking about the sign up fees that the sign up for new hotels. We're considering the supporting of our existing franchisees by lowering certain ongoing like central reservation fees and the various fees because a number of our franchisee restaurants, they still have a fair amount of obligations accumulated from the past 3 years. So in other words, they not only have the accredit obligations, the rents, salaries and that they are currently incurring immediate payments, they also have to go back to deal with the liabilities like most of the hotel and restaurants business accumulated from the past 3 years. So as you know, we have shared with you the strength and also the key value system of the GreenTree is to help our franchisees to achieve their profitability. So we feel it is still urgent for us to help them and to increase their own profitability by adjusting some of our ongoings, while continue to maintain our healthy profit margin.

Speaker 2

And with the sign up initial application fees, I think that in the market overall, there is a downward trend in that area. So, and that is given. So I think it's going to be a very, very both the market has full of opportunities in this hotel segment as well as there are also that more brand and companies are competing in this area. So that is the that is current our own assessment, Simon.

Speaker 7

Sorry, can I just to clarify? So you're saying that you lowered the fee. Is that only for restaurants? I think that was it restaurant only or is it in general wherever you see difficulty whether it's hotel and restaurant you generally have lower fee across the board and how does that?

Speaker 2

No, this is we're only talking about the hotel sector for the central reservation fees. For the restaurants, it is more the market is very more dynamic and fluent in a way, because traditionally a lot of our restaurants for instance like Dania Dumplings are located in the supermarket anchored local shopping malls and the traffic to those supermarket malls are down significantly. So the consumer behavior I think trend in that area. So as a result, we are rebalancing the mix. So by focusing on opening in a more stable traffic area, more street from stores, street stores.

Speaker 2

And while that closing down, those I think are primarily the reason in the last 12 months we closed the 80 slowdown traffic areas restaurants. But we think that with the repositioning of the restaurant locations increase the food quality and of our both of our brand, we will continue to achieve the profitabilities. I think that's very, very important in the restaurant sector. And then try to take advantage of the new market opportunities to provide healthy and value driven tasty food for our customers.

Speaker 7

Understood. Thanks a lot, Alex. Thanks for the thorough answer. Thank

Operator

you. Thank you. The next question is from Maoyan Ma with SKU Capital. Please go ahead.

Speaker 8

Hello, management. Firstly, congratulations on the excellent performance in the Q3. Could you give separate updates on the recovery of the hotel and the restaurant business in the Q3? Thank you.

Speaker 5

Okay. Thank you for question, Mr. Ma. Actually in the Q3, yes, we can find our revenue has increased by 40.1% year over year speaking for the hotel business. And for restaurant business, the total revenues decreased by 13% year over year.

Speaker 5

That's because the closure of 84 85 lease operated stores over the past 12 years. But for the same store switching, the 3rd quarter's average daily sales per store increased 5% compared with the year of 2019. Yes. So for the EBITDA margin, yes, we can find for the hotel business, actually EBITDA margin has recovered above 40%, has reached to 48%. And for the total, I mean, including the hotel and restaurant, the total margin EBITDA margin has increased more than 13%, has reached to 37.6%.

Speaker 5

Also, there is a negative impact from the negative profitability of our lease operated hotels. Because you know, we have opened more than 20 hotels during the COVID-nineteen And most of these our lease operated hotels turned negative to positive profitability since this quarter. So due to the negative impact of the lease operated hotels to our EBITDA margin, that the impact was about 6.5% to our EBITDA margin. That means if our lease operated hotels continues to recovery to positive, our blended EBITDA margin will likely to increase the other 6.5%. So that's what we observed from the 3rd quarter's performance.

Speaker 8

Okay. Thank

Speaker 2

you.

Operator

Seeing no further questions, this concludes our question and answer session. I would like to turn the call back to Selena Yang for closing remarks.

Speaker 2

Before the operator, there is a earlier question regarding I have looked at the question regarding the liquidity. I think I forgot to answer that question to Dan. Dan, so we only discussed about the privately negotiated block sales in this stock repurchase. Regarding the liquidity, we have also the share price. We have implemented the Board of Directors have implemented a share repurchase program because we think the share price is undervalued and due to various factors.

Speaker 2

Number 1, after we became public traded companies, we made a few merger and acquisitions. And due to the various factors, especially during to the pandemics, Some of the business are not performing, were not performing up to the standard. So trigger that into various resolution dispute resolutions and which also interrupted some of our quarterly reports. And also and consumed some of the management attention and the time. I think those are pretty much all resolved.

Speaker 2

So in the new areas, we will continue to maintain a more frequent and dialogue with our investors and also to share our plan and the growth and the business operations more frequently with the various investors. So secondly, that we'll continue to improve our core efficiencies and to improve the system wide standard of our hotels and the restaurant in terms of basically the products and service consistent qualities improvement. And with the consistent growth and consistent profitability, we believe the performance and also our base of the company's liquidity will demonstrate the value of our companies. And the third, we'll continue to explore ways to benefit our shareholders by deploying our current cash positions by either by resuming the routine dividend and the share repurchase or the continued investment in new opportunities. And we learned accumulated a lot of experience in this area.

Speaker 2

And so we have also demonstrated that we're able to make most of our units performing even under some of the challenging conditions. So the last point I want to make is the largest shareholders and about 90% of the GHDs is held by GTI, a privately held company. GTI has many shareholders in it. So we're also trying to change the structure and so give our shareholders the direct access to the shares of the GHGs to further increase the liquidity? And then lastly, when the opportunity comes, we may also considering follow-up offering of the shares and to further increase again the liquidity.

Speaker 2

So overall, our Board of Directors have discussed many ways in the next few years to increase the profitability of the company and increase the share that liquidity and we hope that the share price eventually will reflect the true value of the company. We're pretty confident that in the next 2 3 years or so, with our many, many new standardized branded hotels in the strategically located areas and in a fast growing, the second and third tier cities and will unleash the new potentials of the company. So that is the answer I would like to address. Ben's, the first question regarding the liquidity, which I forgot earlier. So thank you for raising all those great questions.

Speaker 2

And thank you for all of you for your support and continued that guidance and continued advice to the company. Okay. With that, I'll pass the call I'll pass the microphone to Selena.

Speaker 5

Thank you, Alex. Again, on behalf of our entire GreenTree management team, we thank you for your interest in GreenTree and your participation in today's call. If you require any further information or have a chance to read it, again, thank you on behalf of our entire GreenTree management team, we thank you for your interest in GreenTree and your participation in today's call. If you require any further information or have plans to reach us, please feel free to contact us. This concludes today's call.

Speaker 5

Thank you.

Speaker 2

Thank you, Wang.

Operator

The conference has now concluded. Thank you for your participation. You may now disconnect your lines.

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GreenTree Hospitality Group Q3 2023
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