GreenTree Hospitality Group - Q3 2023

Transcript

Operator (participant)

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. I would now like to turn the meeting over to your host for today's call, Mr. Rene Vanguestaine of Christensen, GreenTree's investor relations firm. Please proceed, Rene.

Rene Vanguestaine (Chairman and CEO)

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.greentreeinns.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 Ms. Helen Zhao, Financial Director, stepping in for Mr. Bill Zhou, who is not available today. Mr. Xu will present the company's performance overview for the third quarter of 2023, followed by Ms. Huang and Ms. Zhao, who will discuss business operations, and then Ms. Yang and Ms. Zhao will discuss financials and guidance.

They will be available to answer your questions during the Q&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. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as may, will, expect, anticipate, 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. 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.

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

Alex Xu (CEO and Chairman)

Thanks, Rene, and hello, everyone, and thank you for joining us today. We had a good third quarter with a strong recovery in our hotel business year-over-year, as tourism and business travel continued to rebound. RevPAR increased 30.5% year-over-year, reaching as high as 100% of its third quarter of 2019 levels in July and 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'll 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 a stable operating profitability, and maintain long-term stable growth. Please turn to slide 5.

Compared with the third quarter of 2022, hotel RevPAR was 156 RMB, up 30.5%, and the restaurant ADS, that is average daily sales per store, was 6,548 RMB, up 7.4%. Total revenues were 460.9 million RMB, 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 137.8 million RMB, with a margin of 29.9%. Net income was 117.4 million RMB, with a margin of 25.5%.

Adjusted EBITDA, that's non-GAAP, was RMB 173.4 million, that's up 215%, with a margin of 37.6%. Core net income, that's non-GAAP, was RMB 127.2 million, with a margin of 27.6%. Cash provided by operating activities was RMB 154.8 million. Slide 6 shows detailed numbers for hotel total revenues, income from operations, net incomes, and adjusted EBITDA. On slide 7, operating performance was great. RevPAR was RMB 156. At the bottom of the slide, you can see the weekly RevPAR performance in the third quarter of 2023 compared with 2019. RevPAR gradually recovered to more than 110% of its pre-pandemic levels in July and 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. Slide 8 shows the operating performance of restaurant, with ADS continuing an upward trend and reaching the 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. That is 10.9% of our total portfolio at the end of the quarter, up from only 50 in 2017.

While the mid-scale segment remains the core of our hotel business with 70.8%, we continue our expansion into the higher end segments. The economy segment remains stable at 18.3%. Please turn to slide 12. 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 franchise and managed the restaurants, and expanded the number of street stores.

On slide 14, during the third quarter of 2023, we closed 10 restaurants in areas of decreasing economic activities, helping improving the profitability. On slide 15, you can see the growth in the proportion of our franchise and manage the restaurants since the acquisition of Da Niang Dumplings and Bellagio during the first quarter of 2023. We opened the 6 F&M restaurants in the third quarter 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. Now, let me turn the call over to Megan and Helen Zhao. Megan?

Megan Huang (VP of Sales and Marketing)

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 third quarter of 2023, RevPAR for our LO hotels increased to 212 RMB. RevPAR for our FM hotels increased to 155 RMB. ADR for our LO hotels increased to 268 RMB, and ADR for our FM hotels increased to 190 RMB. Occupancy at our LO 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 million, up from 77 million a year ago, and corporate membership grew to 2.02 million, up from 1.92 million a year ago. Now, please turn to slide 20. In the restaurant business, the number of individual members grew to 2.67 million.

Helen Zhao (Financial Director)

... up 1.6% year-over-year. ADS increased 7.4% to 6,548 RMB in the third quarter of 2023, compared to one year before. With that, I will pass the call over to our CFO, Selina Yang.

Selina Yang (CFO)

Thank you, Helen. First, I will review our hotel business. Please turn to slide 21. In the third quarter, 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 the number of hotels. Total hotel revenues increased at 9.2% to RMB 339.1 million, compared to the second quarter of 2023. Total revenues from FM hotels were RMB 186 million, up 20.8% year-over-year, while total hotel revenues from LO hotels increased 83.1% to RMB 151.8 million.

On slide 22, total hotel operating costs and expenses decreased 14.7% year-over-year to RMB 212.4 million, and total hotel operating costs and expenses decreased 0.5% compared to the second quarter. Total costs and expenses are composed of hotel operating costs, selling and marketing expenses, general and administrative expenses. Operating costs were RMB 159.9 million, increased 12.1% year-over-year. The increase was mainly due to the higher personnel costs, higher consumables, 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% to RMB 159.9 million compared to the second quarter of this year.

Selling and marketing expenses were RMB 14.3 million, a year-over-year increase of 24.9%. The increase was mainly attributable to higher sales channel commissions and higher sales staff salaries. Selling and marketing expenses increased to 3.7% compared to second quarter of this year. General and administrative expenses were RMB 26.7 million, down 15.9% 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 to 40% to compared to the second quarter of this year. Turning to slide 23, income from hotel operations increased from RMB 1.3 million to RMB 127.5 million year-over-year. Net income of hotels turned positive year-over-year at RMB 108.5 million.

Adjusted EBITDA increased 221.1% to RMB 164.3 million, and core net income increased from RMB 5.4 million to RMB 118.1 million year-over-year. Next, let me turn this call over to Helen, the Financial Director.

Helen Zhao (Financial Director)

Please turn to slide 24. In the third quarter of 2023, total restaurant revenues were CNY 121.8 million. You can also see the revenue breakdown for FM restaurants and LO restaurants. On slide 25, total operating costs and expenses decreased 29.6% year-over-year to CNY 111.8 million, and decreased 2.6% sequentially. You can also observe the down trends in materials costs, personnel costs, and the rents. Turning to slide 26, income from restaurant operations was CNY 10.3 million. Net income was CNY 8.8 million. Adjusted EBITDA increased 134.4 to CNY 9.1 million year-over-year. Core net income was CNY 9.1 million. Next, Selina, please introduce the profitability of our group.

Selina Yang (CFO)

Please turn to slide 27. Group net income per ADS, basic and diluted, was RMB 1.15. Group core net income per ADS, basic and diluted, non-GAAP, was RMB 1.21-1.25. 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, investment equity securities, and time deposits of RMB 1,331.4 million, compared to RMB 1,440.1 million as of June 30, 2023. 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 first 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%-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%-19% over the 2022 levels, reflecting the impact of the closure of restaurants. Finally, a word about our share repurchase program.

In October this year, the company repurchased 554,158 of its ADSs from a single investor at a price of $4.14 per ADS, for a total consideration of $2,438,295.20, in a private negotiated transaction. The repurchase was made under the auspices of the company's share repurchase program for a total of $10 million, authorized by its board of directors for two years on October thirteenth, 2023. This concludes our prepared remarks. Operator, we are now ready to begin the Q&A session.

Operator (participant)

Great. Thank you very much. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Today's first question comes from Dan Xu with Morgan Stanley. Please go ahead.

Dan Xu (Analyst)

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. My first question is about RevPAR outlook. From slide 7, I observed that 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 90, around 95%, which was back to, I think, April levels. I'm just wondering what was happening in the beginning of November. Was it due to a low season or weakness of business? Was it due to timing, calendar differences?

What are, what is the management's outlook for the remaining of the fourth quarter, and possible, possibly, if you can, any outlook for 2024, please? Thank you. That, that was my first question.

Selina Yang (CFO)

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 eight 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 the very beginning of the holiday till the last day, and also compared since from the third, the third of the holiday period, the last day. So when we compare the third base, the third date of the holiday till the end, we find our RevPAR increased by 20% over the year of 2019.

If we compare the whole period, that means since from the first date till the end, we find the increase over 2019 is about 7%. Okay.

Dan Xu (Analyst)

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?

Selina Yang (CFO)

Okay. Okay, and then, and more words about your first question. So, the RevPAR for the October, compared with 2019, that is a 5% decreased compared with 2019. Okay, so for the next for the second, second question, why the whole period for the national holiday, the increase, is less than 10%? Because we observed the first holiday of this year, that is, less than that first day of 2019.

Dan Xu (Analyst)

Got it. Thank you.

Alex Xu (CEO and Chairman)

Let me continue-

Dan Xu (Analyst)

Oh, yeah.

Alex Xu (CEO and Chairman)

Add on the comments then to Selina's comments. After the national holidays, we typically experience a slowdown period, and then the business travels and work 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. But at this moment, our November trend, we do see a slightly you know 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, you know, the pricing structure and to offset this downward pressure. Okay, so with regard to the 2024, we believe the economic recovery will continue, but maybe, you know, a little bit uncertain, we do not know. It might be uncertain. So our business model in the past, then you have, you know, we have observed and dealt with to deal with this future changes. So, we will, you know, we'll report in the next quarter what we observed for the earlier part of next year. Thank you.

Dan Xu (Analyst)

Thank you so much, Alex and Selina, for your detailed explanation. My last question is regarding your share repurchase program or share repurchase transaction. Can you share a little bit more of the details or rationale on this transaction in October? We know that the 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 perspective? Thank you so much.

Alex Xu (CEO and Chairman)

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, you know, 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, you know, structure so that we may be able to help to increase the volume of the shares. And that's as far as the the this transaction, the board believe this private investors that a block sales would benefit the entire, you know, shareholders. And so that's all I can share with you.

Dan Xu (Analyst)

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

Operator (participant)

Thank you. As a reminder, to ask a question, you may press star, then one. Again, to ask a question, that's star one. The next question comes from Bruce Mee with UBS. Please go ahead.

Bruce Mee (Managing Director and Senior Equity Analyst)

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. So, actually we have observed very strong leisure travel demand in the summer travel season and also the National May Day Golden Week. But some investors worry that it may be a one-off pent-up demand after 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.

Selina Yang (CFO)

Okay. Thank you for your question. Okay, maybe I can answer the first question. Actually, for this year, we have shared the number of signed contracts last time. That is 600 till the end of this year. And hope for, we are likely to open more than 400 hotels this year. And for the next year, we plan, we plan to sign more than 650. That is about 650-680 hotels in the year of 2024, and we are likely to open 450-470 hotels in the next year.

That means about 12% increase of this year to 15% increase of this year.

Alex Xu (CEO and Chairman)

Okay. So with regard to the RevPAR projection, as we discussed earlier, the remaining of the fourth quarter of 2023, we believe the pressure is there, and the RevPAR comparing with the 2019, you know, we were trying to make the stable and reach the same level, and we do not see a significant increase that will be the same as the third quarter, like during the summer vacation, because that is driven by a 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.

There will be, you know, I think, still continued demand in the leisure tourism you know, the segment, especially on the affordable segment, due to the large, you know, portion and the larger percentage increase in the retirees and their, you know, their demand for the leisure travels. And also, we believe there will be gradually a 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, and meanwhile, we will, you know, system-wide, we're closing down certain, you know, that lease expired hotels. And so, because of the weighted change, we'll see the system RevPAR, system-wide RevPAR continue to an upward increasing trend for 2024.

Bruce Mee (Managing Director and Senior Equity Analyst)

Okay. Thank you, Selina. Thank you, Alex. Very clear.

Operator (participant)

Thank you. And again, to ask a question, that's star one. The next question comes from Simon Cheung with Goldman Sachs. Please go ahead. Mr. Cheung, your line is open.

Alex Xu (CEO and Chairman)

Hello, Simon.

Simon Cheung (Managing Director)

Sorry, can you hear me? Hi, sorry. So I was just, you know, referring to... I have two questions. One is just on the hotel opening numbers that Selina was sharing. I kind of missed that. Is that 650 or 680? And then there were another 450 and 470. Was that one is gross and the another one is net?

... That's for next year and this year. Perhaps, you know, maybe just more broadly, given that you have given guidance for specifically the hotel as well as the restaurant segments overall for this year, perhaps you can give us a sense of your assumption for fourth quarter. What sort of RevPAR are you expecting? What sort of hotel? And then similarly for restaurant. That's first question. And then the second question, 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, you know, scope for cost saving and the magnitude or potential further margin expansion, if any? Thank you.

Alex Xu (CEO and Chairman)

Right. Thanks, Simon. I'll answer the first question. Okay, regarding the margin, I'll leave that to Selina. So Simon, that the 650-680, I believe that's what we shared with you. That's the signing up of the hotels. And the 450-480, and so we have an internal projection. That's the, you know, the opening of the hotels. So that's the number I want to clarify with you. Regarding the next quarter's RevPAR, and we just reiterated, 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 fourth quarter of 2023. Okay. So with regard to the margin, I'll leave that to Selina.

Selina Yang (CFO)

Okay. Thank you, Simon. Here, I wrote down two questions for you. The first one is about the hotel. The restaurant margin, why was better than before? Because in this quarter, the restaurant, the net income of the restaurant, was nearly CNY 10 million. So that's much better than before. I think for several reasons. The first one is the seasonality reason, and as the recovery of the industry, the performance of the restaurants was better than before. Second reason, for Da Niang, we closed 85 unprofitable stores over the past 12 months. Yeah, and so the profitability of the remaining hotels was much better than before.

The third reason is that we changed the franchise model. We have already begun 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 was much better than before. And for Lu Gang, we can see the trend, the profitability trend was always stable. So that's why in the third quarter, we also for the Lu Gang brand, it also make money. Okay. So your second question is about the fourth quarter. After entering October, we can find the profitability with little downwards than the third quarter. Yeah.

However, for Da Niang brand, just as we, I just explained, because of the model of our franchise model has begun to be adopted. So we can expect the profitability of Da Niang brand in the fourth quarter as well, although, the sales, I mean, the revenues decreased much year-over-year speaking. Okay.

Alex Xu (CEO and Chairman)

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 maintain that level, with the increase of our brand quality overall in terms of products and services. We'll continue to do, 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.

Therefore, on the top line level, we'll see a, you know, 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. So to go back to achieve the optimum margin. So that is our goal. So we have observed, we still need, you know, the, I think considering the uncertainty, and we have to work really hard to achieve that.

Simon Cheung (Managing Director)

Thanks, Alex and Selina. That's very thorough. 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... 'Cause, you know, from our perspective, I thought that, you know, the market environment has actually been very conducive to a new hotel signing. But yet you did you say that you lower your fee or something? How competitive is the market just more broadly?

Alex Xu (CEO and Chairman)

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 three years. So in other words, they not only have the current obligations, the rents, the salaries, and their, you know, the current 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 three 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 profitabilities. So we feel it is still urgent for us to help them, and to increase their own profitability by, by, you know, adjusting some of our ongoings while continuing to maintain our healthy profit margin. 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 a 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 more brands and companies are competing in this area. So, that is current our own assessment, Simon.

Simon Cheung (Managing Director)

Sorry, can I just, just to clarify? So you're saying that you lowered the fee, is that only for restaurants? I pick up, was it restaurant only, or is it in general, wherever you see difficulty, whether it's hotel and restaurant, you generally have lower your fee across the board and out of that?

Alex Xu (CEO and Chairman)

No. No, this is a... We're only talking about the hotel segment-

Simon Cheung (Managing Director)

I see.

Alex Xu (CEO and Chairman)

- for the central reservation-

Simon Cheung (Managing Director)

Okay.

Alex Xu (CEO and Chairman)

you know, the central reservation fees. For the restaurants-

Simon Cheung (Managing Director)

I see.

Alex Xu (CEO and Chairman)

It is more, the market is very more dynamic and fluent in a way. Because traditionally, a lot of our restaurants, for instance, like Da Niang Dumplings, are located in the supermarket-anchored local shopping malls, and the traffic to those supermarket malls is down significantly. So, the consumer behavior, I think, changed 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 front stores, street stores. And while, you know, that, closing down, those, I think, are primarily the reason, in the last 12 months, we closed the 80 slow down 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 the very, very important in the restaurant sector. And then, you know, try to take advantage of the new market opportunities to provide a healthy and value-driven tasty food for our customers.

Simon Cheung (Managing Director)

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

Operator (participant)

Thank you. As a reminder, to ask a question, you may press star then one. Again, that's star one to ask a question. The next question is from Mayan Ma with Fu Capital. Please go ahead.

Mayan Ma (Analyst)

Hi. Hello, management. Firstly, congratulations on the excellent performance in the third quarter. Could you give separate update on the recovery of the hotel and the restaurant business in the third quarter? Thank you.

Selina Yang (CFO)

Okay. Thank you for question, Mr. Ma. Actually, in the third quarter, yes, we can find our revenue has increased by more than 40.1% year-over-year speaking for the hotel business. And for restaurant business, the total revenues decreased by 13% year-over-year. That's because the closure of 85 leased-operated stores over the past 12 years. But for the same store speaking, the third quarter, the third quarter's average daily sales per store increased 5% compared with the year of 2019. Yeah. 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, that means including the hotel and the restaurant, the total margin, EBITDA margin, has increased more than 13%, has reached to 37.6%. Yeah. Also, there is a negative impact from the negative profitability of our leased-operated hotels, because, you know, we have opened more than 20 hotels during the COVID-19, and most of these, our leased-operated hotels, turned negative to positive profitability since this quarter. So, due to the negative impact of the leased-operated hotels to our EBITDA margin, the impact was about 6.5% to our EBITDA margin.

That means if our lease-operated hotels continues to recovery, turn to positive, our blended EBITDA margin, we are likely to increase the other 6.5%. Yeah. So that's what we observed from the third quarter's performance.

Mayan Ma (Analyst)

Okay. Thank you.

Operator (participant)

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

Alex Xu (CEO and Chairman)

Before the operator, there is an 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 purchase repurchase program, because we think the share price is undervalued, and due to various factors. Number one, after we became publicly-traded companies, we made a few mergers and acquisitions, and due to the various factors, especially during the pandemic, some of the businesses are not performing or were not performing up to the standard.

So triggered into various resolution, dispute resolutions, and which also interrupted some of our quarterly reports. And so, and also, and consumed some of the management, you know, the attention and the time. I think those are pretty much all resolved. So in the new areas, we will continue to maintain a more frequent and dialogue with our investors, and to, and also to share our, you know, plan and the growth and the business operations more frequently with the various, you know, investors. So secondly, that we'll continue to improve our core efficiencies and to improve you know, the system-wide standard of our hotels and the restaurant in terms of, basically, the products and service, consistent quality improvement.

And with the consistent growth and consistent profitabilities, we believe the performance and our, and also our, you know, basically, our company's liquidity will demonstrate the value of our companies. And the third, we'll continue to, you know, explore ways to benefit our shareholders by deploying our current, you know, cash positions by either resuming the routine dividend and the share repurchase, or the continued investment in new opportunities. And we accumulated a lot of experience in this area, 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 GHG 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, you know, shareholders the direct access to the shares of the GHG's, and 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. So overall, our board of directors have discussed many ways in the next few years and to increase the profitability of the company and increase the share, you know, the 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 two, you know, three years or so, with our many, many, our new, you know, standardized branded hotels in the strategic located areas and in a fast-growing, you know, the second or third tier cities, and will unleash the new potentials of the company. So that is the answer I'd like to address, Dan's, the first question regarding the liquidity, which I forgot earlier. So, thank you for raising all those good, great questions. And thank you for all of you for your support and continued guidance and continued advice to the company. Okay, with that, I'll pass the call, I pass the microphone to Selina.

Selina Yang (CFO)

Thank you, Alex. And 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. Thank you.

Alex Xu (CEO and Chairman)

Thank you, all.

Operator (participant)

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