Earnings Call Transcript - HTHT Q1 2021

Operator, Operator

Good day, and thank you for standing by. Welcome to the Huazhu Group Limited Q1 2021 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Jason Chen. Thank you. Please go ahead. Thank you, Linda. Good morning, and good evening, everyone. Thanks for joining us today. Welcome to Huazhu Group's 2021 First Quarter Earnings Conference Call. Joining us today is our Founder and CEO, Mr. Qi Ji; our President, Mr. Jin Hui; our Chief Digital Officer, Ms. Liu Xinxin; our CFO, Ms. Chen Hui; our Deputy CFO, Mr. Li Dong and Mr. Ye Fei. Following their prepared remarks, management will be available to answer your questions. Before we continue, please note that the discussion today will include forward-looking statements made under the safe harbor provision of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the views expressed today. A number of potential risks and uncertainties are outlined in our public filings with the SEC. Huazhu Group does not undertake any obligations to update any forward-looking statements, except as required by applicable laws. On the call today, we will also mention adjusted financial measures during the discussion of our performance. Reconciliation of those measures to comparable GAAP information can be found in our earnings release that was distributed yesterday. As a reminder, this conference call is being recorded. The webcast of this conference call as well as supplementary slide presentation is available on Huazhu Group's website at ir.huazhu.com. With that, now I will turn the call over to Mr. Ji Qi. Mr. Ji, please.

Qi Ji, Founder and CEO

Good morning, and good evening, everyone. Thank you for joining us today. As you all know, at the beginning of this year, the resurgence of COVID-19 in several cities posed challenges to the lodging industry and the related state and local guidance by the government before the Chinese New Year holiday. After these months, January and February, we are very pleased to see a strong recovery in March, especially after the National People's Congress meeting in Beijing. Huazhu's RevPAR recovered to 95% of the 2019 level in March compared with only 56% in February, and the good news continues in April and May. During the Labor Day holiday, our RevPAR recorded 25% growth compared with the same period of 2019. In terms of the macro economy, despite the impact of COVID-19 resurgency, we saw China's economy remain resilient with GDP in the first quarter, achieving 19.3% growth compared with 2020 and 10.3% growth compared with 2019. As the vaccination process is taking place smoothly in China, we are confident that China's economy will further recover from the pandemic and drive growth of business travel. Meanwhile, we have observed more diversified demands for the travel experience, especially regarding leisure travel and upscale hotels. We are exploring different opportunities, of which some details will be discussed by Jin Hui later. With that, I will turn the call to Jin Hui to update our recent business development. Thank you.

Hui Jin, President

Thanks, Ji Qi. Moving to our business updates. I would like to take the opportunity to introduce again our new finance management team. Chen Hui is the CFO of Huazhu Group. She was the CFO of Cjia Group Limited, Huazhu's affiliated company, from March 2018 to February 2020. From 2014 to early 2016, she served as Huazhu's Executive Vice President of Finance, responsible for internal financial management and Chief Financial Officer. Her previous work experiences also include the CFO of Home Inns Group and Financial Director of Ctrip.com. She has deep financial management expertise in the travel and hotel industries in China. Next, Li Dong, our Deputy CFO, has served as Chief Accounting Officer of Huazhu since June 2020, and as Chief Financial Officer of Huazhu China region since December 2020. Before joining Huazhu, he was the financial planning and analysis head of Asia Pacific, Middle East and North Africa regions of PepsiCo, Inc. Ye Fei, our Deputy CFO, has served as Huazhu's Vice President of Strategic Investment and Capital Markets since March 2016 and is in charge of Huazhu's investment and portfolio management globally. Prior to joining Huazhu, she was the Director of CITIC Capital's direct investment team. Moving to our business update, I would like to emphasize again our quality hotel expansion strategy. It is very important for Huazhu to have a super large-scale growth capability based on the quality hotel expansion strategy. It is the backbone to support Huazhu's long-term sustainable growth. Last quarter, we announced a very detailed definition of our quality hotel. Since the third quarter last year, we started to clean up those low-quality hotels in our portfolio, especially those softer brands. This year, we will not only continuously improve standards of quality for the hotels in operation, but also gradually improve the quality requirements and standards for pipeline and new signings, specifically for our non-standardized brands due to the low standardization rate. We observed some inconsistencies in the quality standards for both construction and new signings. Therefore, we will further improve quality standard for our non-franchised brand by requiring them to review the construction as we found some quality issues and actively review our pipelines to detect and remove those unqualified hotels. I need to emphasize again that Huazhu's development is certainly around the customer-centric principle. Therefore, we will not only chase hotel expansion speed by sacrificing quality. Now, I will move to our current updates in terms of the recovery. As mentioned by Ji Qi earlier, our RevPAR recovered strongly after travel restrictions were removed in late March. RevPAR started to turn to positive growth in late April. The full month of April recovered to the same level as 2019. The trend continues in May. As of May 23, RevPAR grew by 7% compared to the same period of 2019. Both business and leisure traveling are recovering steadily. But I still need to remind you that there are still some resurgence of COVID-19 in China. Therefore, we will keep our provisions and hope the situation improves for our healthy growth in the future. We observed that the recovery trends differ among different city tiers. In March, RevPAR in Tier 3 and below cities exceeded the 2019 level, and in April, RevPAR in Tier 2 cities also exceeded the 2019 level, while Tier 1 cities are slightly lagging behind. Our lower-tier cities penetration strategy is further progressing. At the end of March, 38% of our hotels in operation are located in the Tier 3 and below cities, and 54% of our pipelines are from lower-tier cities, which could lead to more contribution from the lower-tier cities in the future. As of March 24, we have penetrated into 741 cities in China. Apart from lower-tier cities penetration, we are further exploring new opportunities in the lifestyle hotel segment. Firstly, for our own brand, the Crystal Orange, its new flagship store will soon open in Shanghai. This is the new Crystal Orange 2.0 version. We would like to provide new products to business travelers from the lifestyle perspective with better and warmer services. The product will provide customers unique, elegant, and exquisite lifestyle experiences during their journey. We are also pleased to announce that we recently completed the negotiation of CitiGo Hotel. Such acquisition will further enrich our lifestyle brand portfolio. CitiGo's brand positioning is a lifestyle hotel with fun, targeting younger generations, creating a new concept space with functions of accommodation, catering, leisure, shared office, and social networking in the center of the city. The brand was established in 2017. As of May 1, it has totaled 28 hotels in operation with over 4,800 hotel rooms, covering 13 cities. From the latest operating data in April 2021, CitiGo's RevPAR in Tier 1 city achieved RMB 384 and RMB 217 in Tier 2 cities. We believe that Huazhu's strong platform capability could further enhance and accelerate CitiGo's future development. In return, the brand could help further enrich Huazhu's lifestyle brand and create more opportunities for Huazhu to explore in the lifestyle segment. Moving to our high-end hotel development, we are pleased to update you that there will be 2 hotels from our joint venture with Sunac soon to open in May. One will be the first Steigenberger brand hotel in China, and another one will be the Song Hotel. We have continuous progress in our high-end hotel segment penetration not only from the joint venture but also for other brands.

Xinxin Liu, Chief Digital Officer

Thanks, Jin Hui. Good morning, and good evening, everyone. As we know, direct sales and technology capabilities are critical elements of Huazhu's 3-in-1 super component business strategy. We continuously put in a lot of effort to grow our member base and strengthen our direct sales capability together with full digitalization in our hotel operation. Our hotels remain the key channels for us to acquire new members. By the end of March 2021, our total members increased by 12.5% to 174 million compared to last year. More importantly, our central reservation system (CRS) contribution achieved a historical high at 57% after COVID, improved by 8 percentage points compared with the first quarter of 2020. We are pleased to see our CRS contribution further enlarge, which was migrated from the offline traffic such as working customers. During the first quarter, we successfully launched our H-World app version 3 on March 28. After that, we saw our monthly active users (MAU) increase by 5% in April, compared to one month ago. Furthermore, we are in a domain-leading position compared to our peers, and our monthly active users are 2x higher than all other 9 hotel groups' accumulated MAUs. With more membership privileges provided to our members in the new version of the app, we believe it will further improve our user experience and customer loyalty, hence drawing in many more active members and increasing the repurchasing rate. In H-World version 3, we also embedded a creative and advanced online check-in function for members. This online function is integrated with our 30-second check-in and zero-second checkout kiosks in the hotel. Such function would create a very convenient check-in and checkout service for customers, helping them save a lot of waiting time and improving their overall hotel stay experience. Importantly, with further usage penetration of this function, our hotels could significantly improve our operational efficiency, and we will need fewer staff for front desk assistance for check-in and checkout procedures. We could use this manpower saving to further enhance our hotel services. The technology application could also lower the stress load of staff recruitment. For example, with the self-check-in kiosk, computer skills may not be a requirement for recruiting front desk staff. As of May 23, over 4,500 hotels had already installed the self-check-in kiosk. The percentage of orders check-in within 30 seconds attributed to 55%. We are targeting this service department in all hotels within 2021. Considering the impact of the COVID-19 resurgence and the state and local policy, we still achieved a very strong performance in our B2B billing. Room nights contributed by corporate customers reached over 3.5 million with a contribution rate of 9.7% of total room nights sold. In the longer term, we believe that our corporate customers not only contribute additional room nights but also provide opportunities for new user acquisition. Additionally, we got many customers who use their corporate account to book our hotels and are not yet our members personally. Therefore, we see we have many opportunities to convince such customers to become individual members. On the right-hand side of this slide, our new experiment of B2B2X Alliance, the fourth traffic strategy launched last quarter, also started to yield initial outcomes. We have partnered with eight large traffic aggregator platforms in the first quarter, such as China Mobile, Jingdong, and Didi. We are pleased to see this new experiment start contributing room nights to us with roughly 3,200 orders per day on average during the first quarter. Going forward, we will seek more opportunities for cooperation with various target traffic platforms to further attract new members and more room nights to contribute.

Fei Ye, CFO

Thank you, Xinxin. Good morning or good evening to everyone. Let's move on to our operational and financial review for the first quarter of 2021. As shown on Slide 19, our hotel rooms expanded by 15% in Q1 2021 to 662,000 compared to 575,000 in Q1 2020. Excluding DH, legacy Huazhu hotels room expanded by 18% year-over-year to roughly 638,000 in Q1 2021. Despite COVID-19 resurgence impacts in China and prolonged lockdown in Europe, our total hotel turnover still grew at 66% year-on-year to RMB 8.2 billion in Q1 '21. This is mainly due to our continuous network expansion as well as the low base for Chinese business last year, but it was unfortunately offset by the high base of DH last year. Excluding DH, legacy Huazhu hotels turnover doubled year-on-year to RMB 7.9 billion in Q1 2021, and recorded a 10% increase when compared to Q1 2019. Turning to Page 20, Legacy Huazhu's blended RevPAR for Q1 is RMB 138, which has recovered to 77% of the 2019 level. The ADR in Q1 2021 has recovered to 95% of the 2019 level to RMB 209, while occupancy in Q1 is 15 percentage points lower compared to 2019. This was mainly due to COVID-19 resurgence and the stay-local policy in January and February. However, our RevPAR started recovering strongly since late March. Turning to Page 21. Our legacy DH business has been negatively impacted by the second and third waves of the pandemic since September 2020. The German government imposed a lockdown from last November, and it may extend to early June this year. Therefore, our legacy DH-blended RevPAR for Q1 2021 declined by more than 70% to EUR 13 compared to Q1 2020. The ADR dropped by 23% to EUR 69, and the occupancy dropped by 33 percentage points compared to Q1 2020. On Slide 22, the total net revenue grew by 16% year-on-year to RMB 2.3 billion in Q1 2021. Excluding DH, legacy Huazhu recorded a 69% year-on-year growth rate to RMB 2.2 billion. The revenue growth was better than our previous guidance, thanks to the strong recovery in late March. Breaking down the revenue of Q1, leased and owned revenue decreased by 8% year-on-year to RMB 1.4 billion, mainly caused by the decrease of leased hotels in Europe. Excluding DH, leased and owned revenue of legacy Huazhu grew by 56% year-on-year to RMB 1.3 billion. Net revenue from managed and franchised hotels grew by 93% to RMB 897 million, mainly driven by year-on-year growth in legacy Huazhu. Due to the significant drop in leased and owned revenue from DH in Q1 2021, managed and franchise revenue contribution enlarged to 39% in Q1 2021 compared to 23% in Q1 last year at a group level. For legacy Huazhu, as our hotel expansion was mainly through an asset-light model, the revenue contribution from the managed and franchised model also expanded to 41% compared with 35% a year ago. Now, let's move to the cost and profitability session on Slide 23. In Q1 2021, the reported operating loss was RMB 575 million, narrowed from RMB 857 million in Q1 2020, but expanded from a quarter ago mainly due to COVID-19 resurgence and the state and local guidance in China along with the prolonged lockdown in Europe. Excluding DH, legacy Huazhu's operating loss in Q1 was RMB 172 million, narrowed by RMB 560 million compared to the loss of RMB 731 million in Q1 2020. The hotel operating costs and other operating costs for Q1 2021 were RMB 2.5 billion, a slight increase compared with last year, during which legacy Huazhu recorded RMB 2 billion in hotel operating costs, indicating a 21% year-on-year growth. The increase was mainly attributable to higher rental costs of new upscale hotels, higher personnel costs as we continue to grow the hotel network rapidly, and higher depreciation and amortization costs, which were related to upscale hotel openings and upgrading of existing hotels. As mentioned in previous quarters, our future expansion of upscale hotels will mainly use the asset-light model. Therefore, opening costs declined by 81% year-on-year and 40% Q-on-Q to only RMB 21 million in Q1 2021. Our SG&A in Q1 2021 increased by 9% year-on-year to RMB 406 million, mainly driven by the increase of legacy Huazhu but offset by cost savings from DH. Excluding DH, SG&A for legacy Huazhu increased by 31% year-over-year to RMB 299 million. The increase was mainly attributable to the rise in selling and marketing expenses related to revenue recovery, and also the increase in headcount for our BD team to support penetration into lower-tier cities, alongside reduced government subsidies booked in Q1 2021 compared to Q1 2020. Turn over to Page 24. Our adjusted EBITDA loss narrowed to RMB 133 million compared to RMB 704 million a year ago. DH was the main drag for this quarter. Excluding DH, legacy Huazhu would have recorded a positive adjusted EBITDA of RMB 207 million compared to a loss of RMB 631 million in Q1 2020. In this quarter, we recorded adjusted net loss of RMB 451 million, narrowed from RMB 1.1 billion a year ago. Excluding DH, legacy Huazhu recorded an adjusted net loss of RMB 150 million compared with a RMB 981 million loss in Q1 2020. The non-GAAP pro forma adjustment excludes unrealized gains or losses from fair value changes of equity related to some of our investments. For example, in Q1, we recorded an RMB 238 million fair value increase of Accor shares we hold. Coming to the cash position, we kept the net debt of RMB 5.2 billion by the end of Q1, and there's no risk of breaching the financial covenants of the USD 1 billion syndication loan. Our cash balance was RMB 5.7 billion, and the unutilized bank facilities were RMB 6.5 billion. These cash and bank facilities will allow Huazhu to further pay down the existing bank debt in 2021 and also to be used for any unforeseen circumstances. The lockdown in Germany has greatly affected our DH business. Therefore, the average occupancy of DH in Q1 was 19%, and the rate further dropped to 15% in April and May. Having said that, daily newly diagnosed figures in Germany are decreasing steadily. As of May 22, about 40% of Germans had received at least one shot of vaccine. In several regions, such as Berlin, the travel restrictions are partially lifted and we expect to see more travel for the vaccinated people in June. To compensate for the business loss, the German government has extended the scope and duration of government subsidies, including short-time worker compensation. As of April 2021, DH has received EUR 12.7 million in short-time worker compensation, which is expected to increase as the lockdown extends. Additionally, DH has applied for a government subsidy to compensate for the loss both in 2020 and 2021. The prolonged lockdown will impose pressure on DH's revenue, but the impact will be partially offset by government subsidies at EBITDA level. We will only record that income upon the receipt of formal confirmation of such cash. We continue to negotiate for rental reductions. Compared with the EUR 5.4 million waiver achieved in 2020, the year-to-date waiver of 2021 has amounted to EUR 4.2 million. We continue to work on rental reductions through the years. The numbers quoted here are related to cash savings, but the P&L impact actually varies depending on the term of the waiver. We have also put our staff on temporary furlough, frozen our headcount, and reduced discretionary spending and CapEx. We are also in discussion with local banks in Germany for additional coronavirus aid loans. The banks have been supportive. Turning to Page 28 for guidance. For the second quarter of 2021, we now expect total revenue to grow by 87% to 89% compared to the second quarter of 2020. Excluding DH, we expect the revenue to grow by 90% to 92%. In terms of meaningful guidance, we expect our total revenue to grow by 27% to 29% when compared to the same period of 2019. Excluding DH, the 2021 revenue is expected to grow by 20% to 22%. For the full year of 2021, COVID-19's resurgence in January and February slowed down our hotel opening plan in the first quarter. Also, echoing Jin Hui's point previously, we put more emphasis on quality hotel expansion. We now plan to revise down our non-standardized hotel brand opening for the full year. Considering the above 2 factors, we lowered our gross opening target of 2021 from 1,800 to 2,000 hotels to 1,600 to 1,800 hotels. However, even with the slight downward adjustment of gross openings, our revenue guidance for legacy Huazhu remains unchanged at 50% to 54% growth compared to 2020 or 15% to 19% growth compared to 2019 due to the better-than-expected RevPAR recovery and the limited impact of hotel openings in the latter part of the year. The prolonged lockdown period in Germany has caused the recovery to be much slower than previously expected. Therefore, we adjusted down the full-year group revenue growth guidance to be in the range of 44% to 48% compared to 2020 or 31% to 35% growth compared to 2019 from the previous guidance of 50% to 54% growth compared to 2020 and 36% to 40% growth compared to 2019. With that, let's open up for Q&A. Thank you.

Operator, Operator

Your first question comes from Billy Ng from Bank of America.

Billy Ng, Analyst

I have 2 questions. First of all, I just want to ask about the current trend, particularly in May. I think from the presentation, you mentioned that the RevPAR already recovered to 107% of the 2019 level. I'm just wondering if we exclude the 5-day May 1 holiday period, do we still see positive growth compared to 2019 for the rest of May? And also, in particular, I would like to know a bit more about the trend of the lease and operator hotel recently. And then my second question is about the new opening target. We understand that the revised downward of the new opening target is a result of the company pursuing higher quality openings and upholding the highest standards for new joiners. When do you expect the opening pace to reaccelerate again? And also, in particular, regarding the new opening target of 1,600 to 1,800, how many of them are still using the soft brand model?

Hui Jin, President

Okay. So the overall RevPAR trends in May, we saw it is very satisfactory. As we mentioned in the presentation, the month-to-date RevPAR has grown by 7% compared to 2019. Even when excluding the 5-day holiday at the beginning of May, the remaining days still achieved positive growth compared to 2019. However, we still have to be cautious that there were still some COVID-19 resurgence events happening in May, such as in Anhui province and Shenyang. Typically, from our observations, when there is a resurgence of COVID-19, it will take roughly 2 weeks to recover for that city. Overall, for the recovery trend, we maintain a conservatively optimistic perspective. For the second question, I just want to mention one number to you that for our Elan brand, in 2019, we opened roughly over 500 Elan hotels, but this year, we are just planning to open roughly 200 Elan hotels, which means a decline of 300. Our overall strategy concentrates on quality hotel expansions. For our lower-tier cities penetration, we are going to utilize more Ni Hao brand as a standardized brand to complement our HanTing brands for lower-tier cities penetration. Thank you.

Operator, Operator

Your next question comes from Sijie Lin from CICC.

Sijie Lin, Analyst

I have two short questions. The first one is still on the hotel opening. I want to know if we are still confident with the 10,000 targets at the end of 2022? The second question is on CitiGo. Why did you decide to acquire CitiGo?

Hui Jin, President

For the 10,000 hotels in 1,000 cities target, we are still progressing towards achieving this target. Currently, despite the impact of COVID-19, we are seeing our new signings steadily improving compared to last year. Therefore, we remain confident that we can achieve this 10,000 hotels in 1,000 cities by the end of 2022 or into the first quarter of 2023. Our penetration into lower-tier cities is progressing quickly. Now we have signed up over 1,000 hotels in lower-tier cities. Regarding our upscale or high-end hotel market, after significant preparation last year, we are also progressing satisfactorily in this area.

Fei Ye, CFO

I wanted to provide a bit more color on CitiGo. The entire enterprise value for this acquisition is RMB 750 million, implying that in terms of ramp-up, the EBITDA level perspective valuation multiple is actually in the range of 8 to 9 times, which is a pretty fair and attractive valuation, considering this brand has a unique position and prospects for future growth. And in terms of the cash source, we noted that we have more than RMB 10 billion cash available, including the unutilized bank facilities. Therefore, there is no problem of financing for this acquisition.

Operator, Operator

Our next question comes from Lina Yan from HSBC.

Lina Yan, Analyst

Management, I want to ask a question regarding the new 2021 full year guidance for the Huazhu brand. The total revenue growth versus 2019 remains unchanged at 15% to 19% even though the hotel opening is lower than before. So I want to ask what is the current RevPAR assumptions for Huazhu?

Fei Ye, CFO

We are positive about the RevPAR recovery on the Huazhu side. In our forecast, we project that Q2 will reach about 97% recovery. In Q3 and Q4, it will be 104% and 100% recovery compared to the 2019 figures. It's on the same hotel level perspective, as blended RevPAR is a little harder to compare with 2019 on the same hotel level. Therefore, overall, it will be a 4 to 5 percentage increase in general.

Lina Yan, Analyst

Okay. Great. So may I clarify, for our same hotel RevPAR basis, it's 97% in Q2, 104% in Q3, and 100% in Q4.

Fei Ye, CFO

Yes. That's a general guidance, but we will certainly keep updating this number.

Lina Yan, Analyst

Okay. And does this guidance for revenue growth include the contribution from CitiGo acquired in May?

Fei Ye, CFO

It does not.

Operator, Operator

Our next question comes from Tian Hou from TH Capital.

Tian Hou, Analyst

I have a couple of questions. First, looking at the tier city expansion plan, it appears that lower-tier cities will make up the majority part of the pipeline. By the end of the year or next year, what portion of the Huazhu legacy hotels will come from lower-tier cities and Tier 3 and below? What are the differences between the ARPU and potential occupancy rates in Tier 3 and below versus Tier 1 and Tier 2? Secondly, how many hotels does Steigenberger plan to open in China this year? Lastly, what is the company's outlook regarding the contribution from corporate customers to total revenues?

Hui Jin, President

For the lower-tier cities, it’s actually on Slide #5 of our presentation. We provided some of the numbers in terms of our breakdown of hotel operations and pipeline. Given our efforts last year in lower-tier cities, over 50% of our pipeline comes from Tier 3 and below cities, which will help us enlarge our hotels from lower-tier cities by this year. In terms of the RevPAR differences compared to lower-tier and higher-tier cities, we have observed that lower-tier cities have recovered better than higher-tier cities. However, after the ramp-up period, lower-tier cities would have slightly lower RevPAR compared to higher-tier cities. Still, our take rate will be the same for all hotels, whether they are in higher or lower-tier cities. As for the joint venture with Sunac, we are further cooperating to develop primarily on the Steigenberger and Song Hotel brands. Currently, we have over 30 hotels in the pipeline. As you may know, leisure travel is recovering and growing strongly in China, and we believe it will continue booming in the longer term. Therefore, we are very optimistic about our high-end brands such as Steigenberger and Blossom Hills under this joint venture. For corporate customers, it’s a crucial source for our growth. We remain optimistic regarding corporate customer growth in the future. Currently, corporate customers contribute roughly 10% of the total room nights. Of that 10%, over 60% of the room nights are sold through an online channel. This is very favorable for us. For future development, we will leverage our technology to deepen our connections in this area.

Operator, Operator

Your next question comes from Melody Chan from Jefferies.

Melody Chan, Analyst

I have two short questions. Can management share if we have any other acquisition plans to align with our high-quality hotel strategy? Also, what is our view on the market consolidation post-COVID?

Hui Jin, President

For the first question regarding our M&A plans, we always keep our eyes open and maintain an open attitude. We have been discussing many potential partnerships, but no clear target deals have been finalized yet. We will update you as soon as there’s something confirmed. Regarding market consolidation and competitive landscape, for the economic segment, we are performing well compared to our peers because lower-tier cities have plenty of room for improvement. For the middle scale, we will leverage consumer upgrades and various brands such as JI Hotel, Orange, and the newly acquired CitiGo lifestyle brand to further increase market share. In the high-end and upscale segment, we are competing with international hotel groups and will use our core competencies such as technology and operational capability to diversify competition and capture market share.

Operator, Operator

There are no further questions at this time. I would like to hand the conference back to our speakers.

Unidentified Company Representative, Management

Thank you, everyone, for taking the time with us today, and we look forward to connecting with you again in upcoming quarters. Thank you, and goodbye.

Operator, Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.