GreenTree Hospitality Group Ltd. Q1 FY2021 earnings call

Performance Recovery

• Compared with Q1 2020, RevPAR increased 35.1% to RMB95.5, total revenues increased 53.3% to RMB241.2 million, income from operations increased 64.9% to RMB61.4 million, net income turned positive to RMB66 million, non-GAAP adjusted EBITDA increased 74.3% to RMB64 million, and core net income increased 58.3% to RMB43.9 million.

Strategic Focus

• Growth strategy includes adding L&O hotels in strategic locations (around transportation hubs, central business districts, etc.), expanding in tier three and lower cities (68.5% of current pipelines in these cities), and penetrating mid to upscale segments (hotels in high-end segment increased to 9.2% of total portfolio by end of Q1 2021 from 2.2% in 2017).

Hotel Openings

• Opened 201 hotels in Q1 2021; at end of Q1, had 4,464 hotels in operation, with pipeline increasing from 1,186 on Dec 31, 2020 to 1,265 on Mar 31, 2021.

Membership Programs

• Individual memberships grew to 59 million from 46 million year over year, corporate memberships grew to 1.7 million from 1.5 million year over year, accounting for 92.2% of all direct sales in Q1.

For L&O (Leased and Operated) hotels: In Q1 2021, RevPAR increased to RMB95, total revenue was RMB56.1 million, up 66% year over year. For F&M (Franchised and Managed) hotels: RevPAR increased to RMB96, total revenue was RMB177.9 million, up 51.2% year over year. Revenue contribution: F&M hotels accounted for approximately 73.8% of total revenues (RMB177.9 million / RMB241.2 million), while L&O hotels accounted for 26.2% (RMB56.1 million / RMB241.2 million).

• Total revenues expected to grow 48% to 53% over 2020 levels and 25% to 30% over 2019 levels. - Full-year new hotel openings expected to be over 700, with almost 800 likely to open.

• Impact of COVID-19 resurgence and local travel restrictions affecting RevPAR. - Increasing competition in lower tier cities. - Uncertainties related to ramp-up of L&O hotels and associated costs.

Q: About current RevPAR trend and first quarter delay reason A: RevPAR was only about 75% of pre-COVID level in Q1, but recovered rapidly after April; first quarter results delay due to hiring consultant to assess situation regarding alternative listings for Chinese companies Q: Competition in lower tier cities A: China has more lower-tier cities, GreenTree has advantages from accumulated experience and resources in managing effectively in these areas, though competition is heating up everywhere Q: L&O hotel operating metrics A: L&O hotel RevPAR outperformed total portfolio in Q2, with more than 10 L&O hotels added in Q2, and majority of 1,265 pipeline hotels expected to open in 6 to 12 months Q: Impact of Henan flood and COVID resurgence A: Prepared for crises, confident in China's effective COVID control measures, and hotels in affected regions are being prepared, with expectation that business will resume normalcy soon Q: Full-year hotel openings and EBITDA margins A: Full-year new hotel openings expected over 700, with EBITDA margin approaching 40% in Q2 Q: L&O return IRR and share price A: L&O investment criteria target less than 4 years payback period; share price to reflect company fundamentals, and board will discuss shareholder returns like dividends or buyback