H World Group Ltd (HTHT) 2013 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the China Lodging Group's 2013 Q2 earnings conference call. (Operator instructions). I must advise you that this conference is being recorded today, 16 August 2013.

I would now like to hand the conference over to your speaker today, Ms. Ida Yu. Thank you, please go ahead.

Thank you. Hello everyone and welcome to our second quarter of 2013 earnings conference call. Joining us today is Mr. Qi Ji, our Founder, Executive Chairman and CEO, Mr. Xie Yunhang, our COO, Jenny Zhang, our CFO, and our Director of Strategy and Capital Markets, Bonnie Bao. Management will elaborate on our Company's development strategy and performance for the second quarter of 2013 during this call. Following their prepared remarks they 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 provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainty. 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. China Lodging Group does not undertake any obligation to update any forward-looking statements except as required under (inaudible) law.

On the call today we will also mention adjusted financial measures during the discussion of our performance. Recalculation of those measures through comparable gap information can be found in the earnings release that was distributed earlier today. As a reminder, this conference call is being recorded. The webcast of this conference call as well as the financial slides presentation are available on Investor section of China Lodging Group's website at ir.HuaZhu.com.

Now I would like to turn the call over to Mr. Qi, who will be speaking in Chinese. His statements will be translated into English. Ji Qi, please.

(interpreted) Good morning everyone. Thank you for joining our earnings conference for today. During the second quarter we maintained our robust growth of high quality. Net revenues for Q2 increased by 30% year-over-year, exceeding the high end of our quarterly guidance by about 1%. Net income for Q2 increased by 37% year-over-year. At the end of the second quarter of 2013 we had more than 130,000 rooms in operation, an increase of 39% from a year ago. Our same-hotel RevPAR remains stable in spite of the soft macro environment.

In the last earnings call we shared our strategy of fast expansion. Today I'd like to move one step further to talk about our focus on delivering better experience to our guests. Hua Zhu always places the most emphasis on each and every aspect of the details to make sure guest experience is our first and foremost priority. In addition to providing basic service of good grace, we expanded our service offerings to free Wi-Fi coverage and (inaudible) of digital booking, especially on the backdrop that the mobile internet is changing our hotel industry dramatically.

First, page 4 presents Hua Zhu's continued efforts to respond to guests' rising demands. We aim to provide free Wi-Fi in rooms and lobbies across all of our hotels. The whole project is expected to be fully implemented by the end of 2013. As of today, Wi-Fi coverage is available at more than 70% of our hotel portfolio. This value added service is free for all our hotel guests.

Secondly, as shown on page 5, to cope with our guests' ever-changing consumer behavior we have extended our digital booking channels from website booking to smart phones and pads, which we believe can better satisfy younger generations' needs, providing more than just stay experience. We have extended our service to the whole value chain.

With that I will turn the call over to Xie Yunhang, our COO, who will walk you through the detailed measures we take in response to guests' evolving needs, and Q2 operational highlights. Yunhang, please.

(interpreted) Thank you Ji Qi, and good morning everyone. As mentioned by Ji Qi, we engage our guests in new ways. They can make reservations through digital booking channels. Upon arrival our guests can enjoy speedy, intelligent check-in service. On the day of departure our guests can enjoy express check-out, a simplified process which is already well established.

Change in consumer behavior motivates us to innovate new ways to engage them. As shown on page 7, we have set up an interactive LED screen at the airport terminal to involve travelers with popular mobile games. This is an innovative marketing approach to better attract our target guests through high technology such as wireless dancing and GTRS positioning. The winners can collect our discount coupons in QR code and eventually become our guests at hotels, which is a process from offline to online to offline. Two months since its launch, we've had more than 60,000 participants and about 10,000 coupons have been bundled with guest accounts. The conversion rate of coupon usage is estimated as high as 80%.

In similar way, Hua Zhu led the way in creating more innovative measures to enhance guests' experience prior to and upon arrival. Online DIY room selection is a privilege and priority we offer to our guests who reserve rooms through our own channels. As shown on page 8, our integrated digital booking system presents a hotel floor map for guests to select their favorite room price and room location prior to arrival. In this way guests will feel more engaged throughout the process. Now this well-received service is available for more than 95% of our hotels.

What we feel most proud of is speedy check-in, our proprietary technique initiative. The check-in process can be completed within 40 seconds at its fastest, as shown on page 9. With online DIY room selection and online payment already done, when guests arrive at the hotel they only need to scan ID for confirmation and collect room key. Currently our guests can enjoy this new initiative at 10 selected hotels in Shanghai, Beijing and Nanjing.

Our new process also makes guests feel more convenience at check-out. Just drop room keys at the front desk and leave with no waiting in line. This process not only saves time for guests, but also shows Hua Zhu's respect and trust to guests. This is called zero second check-out or express check-out for all Hua Zhu guests. To deliver a faster experience to guests through our whole process makes our business more resilient, even during a soft macro economy. This is our 13th consecutive quarter in leading our peers' RevPAR. Now I will move to Q2 operating results.

In Q2, as shown on page 11, we opened 30 new leased hotels and 93 new manachised, hotels, our highest opening recorded during one quarter since induction. At the end of Q2 we had 1216 hotels in operation, among which 42% were leased hotels, 56% were manachised hotels, and the remaining 2% were franchised Starway hotels. At the same time we are pleased to see that we still have a very strong pipeline that can further our growth, with 70 leased hotels and 362 manachised hotels contracted for development.

As shown on page 12, in Q2 2013 blended occupancy of 91%, a decrease of 6% year-over-year, mainly due to the soft macro economy and (inaudible) in Q2, and also because our fast expansion has led to a higher percentage of new hotels at the RevPAR stage compared to a year ago. In Q2 2013, the new hotels in operation for less than six months contributed 19% of our total hotel room nights available for sale, compared to 15% in Q2 last year.

ADR was RMB182, an increase of 0.7% year-over-year, mainly due to an increase in same hotel ADR of 3% and partially offset by a gradually decreasing share of our hotels in tier 1 cities with our hotel network expansion. As a result, in Q2 RevPAR was RMB167, decrease of 6% year-over-year.

Page 13 provides a detailed view of the growth trends of our same-hotel RevPAR for the hotels in operation for at least 18 months. In Q2 2013 our same-hotel RevPAR remains flat with 3.4% increase in ADR and a 3.5 percentage points decrease in occupancy. This is mainly attributed to China's soft macro environment and a higher base in Q2 2012, which was a 7% increase.

With that I will turn the call over to Jenny, our CFO, who will walk you through our Q2 financial results.

Thanks Yunhang. Hello everyone. In Q2 2013 we were delighted to see a strong revenue growth and a significant improvement in profitability. Let me walk you through the details. As shown on page 15, our Q2 net revenues increased 30% year-over-year, exceeding the high end of our quarterly guidance by 1%. Leased hotels revenue grew 28% and the manachised hotels revenue grew 28% and the manachised and franchised hotels revenue grew 64% year-over-year. This quarter our manachised and franchised hotels revenue reached 12% of our total revenue, compared with 10% in the same quarter last year.

Page 16 shows the adjusted quarterly operating margin which increased by 2.2% in Q2 of 2013 when compared with a year ago. Since the beginning of this year we have implemented measures to further control costs at hotel level, leading to savings of personnel costs and consumable costs. Our staff productivity has been improved by the technology-based service initiatives, as Yunhang introduced earlier. Thus we are able to reduce the staff to room ratio further. Our revenue mixtures towards higher percentage of higher margin manachised revenue also helped improve our margin.

Pre-opening expenses as a percentage of net revenue saw a 1.6% decrease due to our enlarged revenue base. On top of that we also have seen a shortened conversion period. Our SG&A expenses as a percentage of net revenues remain unchanged due to a decrease in sales and marketing expenses but offset but a slightly higher G&A expenses. For the first six months of 2013 adjusted G&A expense ratios decreased by 0.3% from the same period of 2012.

Now I'll move on to cash position as shown on page 17. Our cash balance closed at RMB312 million at the end of the second quarter. We have positive credit facility of RMB699 million. For the second quarter we have a net cash inflow of RMB128 million, mainly due to expanded revenue base, improved profitability, and less cash spent on investments. We believe that our cash balance, our operating cash flow, and our available credit facility will be sufficient to fund our expansion plan in the near future.

Last but not least, as shown on page 18, we expect to achieve net revenues in the range of RMB1110 million to RMB1125 million in the third quarter of 2013, representing a 24% to 26% year-over-year growth.

With that, let's open the floor to questions.

Ladies and gentlemen, we will now begin the question and answer session. (Operator instructions).

Your first question comes from Justin Kwok from Goldman Sachs. Please ask your question.

Hi, good morning. Thanks for taking my question. I have a couple of questions on the revenue side and some of the cost side. I just want to get a sense on your feel of the quarter to date same-hotel RevPAR performance or demand, because one of your competitors is saying that they saw July -- the performance seems to be moving better than what they had seen in the first half of the year. That's the first question. The second question is on your cost. I saw that you have very good cost savings in the second quarter performance. I just want to see how much of that is one-off because, say, on the variables there is a performance link compensation, or how much of that is permanent that you are already taking off from your cost structure? The same thing also on G&A, because there seems to be some jump on the G&A. How was that -- the background or the color on why would there be a jump on a sequential basis.

Sure. On your first question on the revenue side, in July we also have seen a more favorable change on the same-store RevPAR growth. So I think it has demonstrated a strong seasonality in Q3 when leisure travel peaks. On the cost side, our hotels operating costs decrease I think is largely due to our cost control measures. Starting from April of this year we have formally reduced staffing ratio at all hotel levels, so a majority of those cost savings is sustainable. On the G&A side, the comparison year-over-year has some tweaks because last year in Q2 we received some refunds from government and the same kind of refund was received in Q1 this year. So that has caused a small fluctuation in the year-over-year comparison. Overall speaking, our general expenses is well under control.

Yeah, okay. May I follow on, just one additional question to Chairman Qi. I think in the last two quarters in your prepared remarks and presentation you have highlighted the longer term three to five years outlook of how the Company's going to go ahead with the multi-brand strategy in terms of the size of big brands for each of the portfolio. I just want to see in view of the soft macro that you have mentioned, would you be tweaking or shifting any of these opening schedules at the current pace, or would you be going ahead with the relatively high-end hotels like Joya or the Ji Hotel at full speed at this point? Thanks.

(interpreted) Your first query -- question, in regard to Ji Hotel, our general view is the midscale hotels and economy hotels are not very sensitive to the macro environment, therefore we would not expect, you know, any change to our plan relating to Ji Hotel. And in terms of Joya, which is positioned as a limited service upscale hotel, I think, you know, we have also a lot of alternatives in that segment. As everyone is aware, the soft macro economy has caused a lot of luxury and upscale hotels into difficulties.

How do we view the current difficulties this segment is experiencing is what I want to explain to you guys. There is a famous story about selling shoes in India. There's one group of people who said, you know, Indians don't wear shoes, they like barefoot so there's no room for selling shoes. But there are also people seeing huge opportunities in India because nobody is wearing shoes at that moment so we could sell a lot. Clearly I'm one of those taking the second view. In the past in China the government and the real estate developers have invested hugely to developing those luxury expensive hotels, and they didn't really figure out, you know, how to generate a good return on those huge investments.

And as the economy gets fast they are facing the question, you know, how to make their hotels more profitable and more sustainable. And the positioning of our Joya Hotel is to demonstrate that by careful calculating and a sophisticated design on services and products we can generate a decent return on the upscale hotel. Therefore we are very determined that we are answering this segment of market with a unique value proposition. We are going to take a careful and a cautious view when we make investments into this segment but it doesn't change our determination to become one of the leaders in the future in this segment.

Your next question comes from Ella Ji from Oppenheimer. Please ask your question.

Thank you. Good morning everyone and congratulations on a strong quarter. First I want to ask about the occupancy performance in 2Q. Mature hotel occupancy was down 3.5%. Can you -- is it evenly distributed by geographic regions, or do you see any regions that are particularly weak? And also given the pick-up in July, what's your expectation for the mature hotel occupancy in third quarter?

In light of the current macro-economic situation we have seen two different trends in the customer demand. We clearly see some softness in the business travelling but at the same time we're also seeing very fast growth in leisure traveling. And due to that, you know, the hotels located in major cities with high traffic [on board] are still doing well, such as Beijing and Shanghai. But the cities, you know, heavily reliant on business traveling are facing more difficulties in general. And you know, the -- and when we are facing this environment we have taken the standing that, you know, we would rather -- you know, to achieve the same RevPAR it would be more profitable for us to have a slightly higher ADR and slightly lower occupancy.

So that's driven through a more sophisticated new management's decision. And as you have seen, you know, despite that the RevPAR hasn't increased at a same store level the margin has expanded. And back to July, I think the trend is consistent with what I have just described. The cities receiving major leisure traveling traffic is seeing, you know, is performing stronger in general.

So with regards to the mature hotel RevPAR expectation for the third quarter, Jenny, could you also comment on what's management's expectation?

Currently we are seeing, you know, a low single-digit improvement so it will be better than Q2, but you wouldn't bounce back too significantly to what we have achieved last year.

Okay. And then second question is with regards to your new digital booking channel. Those offerings are very interesting and are customer-oriented. I wonder how much of the bookings right now are coming from those digital channels. Are you able to attract new customers by offering these digital channels or is it still mostly within your own customer pool?

I will forward this question to our COO Xie Yunhang. (Spoken in foreign language).

(interpreted) We have two objectives (technical difficulty) those, you know, new technology to serve our customers. The first objective of course is to, you know, provide better experience for our existing customers and the second part is to use the platform, you know, to acquire more new customers.

(Spoken in foreign language).

(interpreted) To answer the first part of the question, currently we have 40% of the bookings are coming through those e-channels. And secondly, as you can see our membership base has been quickly growing and by the end of the second quarter it has exceeded 11 million and the acquisition of new members is completed through both offline and online channels. On the online channels, you know, we also gave you examples, you know, how we are -- through advertising [reports] as well as the promotion, you know, in the -- through various, you know, internet channels. And those have clearly attracted a quite significant number of new members into our pool.

Got it, thank you. My last question is a follow-up. With regards to your staff ratio per room, I wonder if you can share with us what's your current rate versus let's say one year go? So what's your total headcount versus one year ago?

Currently our staff to room ratio is brand-specific. (Technical difficulty) is around 0.2% compared with 0.22% to 0.23% a year ago.

Your next question comes from Jamie Zhou from Macquarie. Please ask your question.

Hi, morning Management and congratulations on the very good set of results in a tough quarter. My first question is a follow-up. The internet innovation that you guys have been putting to your customers, have we seen a meaningful pick-up in terms of leisure travel? That's the first part of my question, and the second part is what are the economics of leisure travel versus business travel on a like-to-like basis on both margins and seasonalities? That's my first question.

Jamie, I'm sorry but I cannot hear you very clearly. Could you repeat the question?

Okay, I'm sorry. So I see that you guys are putting through a lot of innovation of internet and mobile apps attracting new customers. Now, my question is whether there has been a meaningful pick-up in leisure travel and can you share with us what percentage of your revenue is now coming from leisure travel and whether there are any differences in operating profitability on a like-to-like basis in a strong leisure market versus business market as well as the seasonality implied in leisure travel. That's my first question.

Jamie, you know, we have -- you know, we don't have all the data to answer, you know the whole question, but let me share what I have on hand. First of all, you know, the fast growth of the leisure traveling has made it more important for us to be able to connect to the customers on the individual level. Therefore, you know, the mobile application is playing a very, very important role in that connection process. So clearly, you know, this is helping us to adjust to the trend of fast pick-up of leisure travel. Currently nearly half of our room nights are sold to non-business travel purpose trips, therefore, you know, we believe we are having a very well-balanced customer base today.

Okay, just a follow-up to that. What are you guys seeing in terms of customer loyalty in your leisure travel members versus your business travelers?

Actually you know, people visit our hotels, the members visit our hotels sometimes for business purpose and sometimes for leisure purpose. It's actually fairly difficult for me to tag one customer and call them a business traveler and tag someone else as a leisure, because they could visit our hotels at different occasions.

Okay, I see. Thanks. My second question is on the RevPAR performance for the same-hotel which was asked earlier, but I want to further ask, I noticed that in the first two quarters of this year, despite the tough macro environment you guys were able to push through a remarkable 2% to 3% organic ADR growth and achieve positive, slightly above positive RevPAR growth. Are we expecting the same magnitude of ADR growth into the second half of this year? Is this, our strategy to maintain ADR growth, a slight sacrifice of occupancy to achieve higher profitability?

You know, our general strategy is to maximize the RevPAR and under today's circumstances, you know there are clearly some softness in the business traveling. And by achieving the same amount of RevPAR that we would prefer slightly higher ADR and slightly lower occupancy. So that's our general principles in our use management practice. So with that, you know, in Q3 we continue to expect that we will have some improvement on the ADR side.

Okay, thanks. And my last question is on the overall margin outlook for this year. I remember at the beginning of the year you told investors that you are not expecting a meaningful margin improvement, and now due to your first -- strong first two quarters of results we have seen a meaningful increase in the EBITDA margin. Can we expect a slightly more positive outlook on the whole year's EBITDA margin outlook? And that's my last question. Thanks.

At the beginning of the year we have guided our stable EBIT margin, and at the first half year we clearly we have done better than our original forecast. There were two things that I think we particularly did better. One is on the control of personnel costs and the other is on improving the conversion speed of our hotels. Both of those, you know, contributed to the improvement of the overall margins. And on top of that, you know, the expansion of our manachised hotel also was stronger than we have originally forecasted, that's clearly also helping improve the overall margin. So with those factors I think, you know, it's stabilized and as a consequence I think we are expecting to see a full year margin improvement.

Your next question comes from Fawne Jiang from Brean Capital. Please ask your question.

Thank you for taking my questions. I just want to follow up on your digital booking. Jenny, you mentioned that as of now it's around 40% of your total booking. Just wonder what's the growth rate in the past quarters and how fast should we expect the penetration of digital booking going forward? And the related question to that is also like margin implications. I just wonder whether you have any data point or any analysis associated with the digital booking and what's the potential I think cost saving or margin improvement it could provide over time?

The digital booking has been picked up very quickly. We have launched [app] booking just about a year ago, and before that our only digital booking channel was internet. It was -- a year ago the internet booking was, you know, slightly above 20% and within a year, you know, we were able to increase the overall digital booking to around 40%. So the pick-up has been very fast. And we expect this ratio, you know, to continue to rise although, you know, it may not be as dramatic as the first 12 months. On the cost side, I think the benefit of app booking mainly comes from the more stickiness from the customer side. Cost saving is really a byproduct. The direct, you know, cost saving on that is mainly in the shrinkage of our call center. You know, we have maintained the call center currently at a fairly, you know, stable size despite we have significantly increased the transaction amount at the hotel level.

Got it. That's very helpful. Secondly, just regarding the overall operating performance of your different brands, currently the macro is fairly weak and ahead, I think, the lodging sector across the Board from a higher category to a lesser extent your budget hotel. I just wonder, how are your -- how have your main-scale hotels as well as your Joya performed so far?

You know, the Ji Hotel has been, you know, performing fairly solidly, especially in the tier 1 cities and so we're on track to expanding and we have a very strong pipeline for our Ji Hotel. And on Joya, the first Joya hotel will be launched in the second half of the year and it's also, you know, on schedule for the opening.

Got it. Thank you very much, Jenny.

You're welcome.

Your next question comes from Yaoxin Huang from China International Capital Corporation. Please ask your question.

Thanks for taking my questions. I have two questions that goes to Mr Ji. (Spoken in foreign language).

(Spoken in foreign language).

Let me translate the question briefly and then I will also translate the answers from Mr Ji.

The first question is you know, in comparison with the last same store RevPAR, and we have seen the general blended RevPAR decrease. That means, you know, the RevPAR of the new hotels seems to be lower than the mature ones. Why is that, and what we can do about it?

Mr Ji explained, you know, the RevPAR, of course you know it has some correlation with the soft economy. And in regard to the new hotels in particular, we have a heavier portion of them are in the third, fourth tier cities and naturally, you know, those newer hotels will have a lower RevPAR compared with the hotels in the first and second tier cities. And also, you know, a lot of them are doing the ramping up stage as quoted in the sixth page, you know we had 19% of room nights available for sale in the second quarter are during the first six months RevPAR period compared with 15% a year ago.

On the -- the second question was about the customer experience that, you know, there is some observations on the older hotels that the environment and that their facility seems a little bit tired. Mr Ji responded that first of all, our hotels all have been -- have very high occupancy and as a result, you know, they need constant maintaining and repairs to keep them at a fresh, you know, stage. And we also noted that especially in our, you know, most mature regions, such as Suzhou, Shanghai and Hangzhou, we have hotels on average older than three years. That means going forward we need to pay more attention and also invest more in upgrading those hotels. The maintenance and upgrades has been a commonly observed matter for all economy hotel chains across the world. We clearly have also faced these issues, but we are fairly determined that we will do our due to maintain our positioning as a better economy hotel.

Okay, thank you.

You're welcome.

Your next question comes from Jianning Lu from Flowering Tree. Please ask your question.

Hi, thanks for taking my question. The first question is about the Ji Hotel. I think in Q1 the report announced the same-hotel RevPAR performance but in Q2 I don't find the information. Can you tell us a bit about the Xie Hotel's same-hotel RevPAR performance? That's the first question. The second question is about the pre-opening expense. When I compare the leased and operated hotel opening numbers in Q2 this year against Q2 last year, it's almost similar. I think this year we have more Xie Hotel openings and also we are opening a Joya Hotel. So I expect the pre-opening expense to be higher when actually it's almost blank. So I just want to know why the pre-opening expense can be kept at such a low level. That's it.

Sure. In terms of Xie Hotel, you know, the same-store RevPAR growth in Q2 is about 2%. For pre-opening expenses there are two factors coming into that result. One is that we have shortened the conversion period. That has helped lower the pre-opening expenses. Secondly, in terms of the absolute number of hotels within the pipeline, actually our number of hotels in the pipeline for leased hotels is slightly lower than what we had about a year ago.

Okay. A follow-up question is on the labor cost side. In this year have you hired any (inaudible) and salary yet? If not are you going to hire in the second half of this year?

Sorry, I didn't hear you very clearly.

It's about the salary, employee salary. In the first half of 2013 did you raise any -- did you raise the salary? If not are you planning to raise salary in the second half and by how much?

Most of the cities already have raised their minimum wage, so most of our hotels also have already completed the salary increase process.

In the first half?

In the first half, yes.

Okay, understood. Thank you.

You're welcome.

Your next question comes from the line of Shang Koo from One North Capital. Please ask your question.

Yes, hi, congratulations on a good set of results and thanks for the call. I have two broad questions. Basically -- maybe three actually. One relates to the follow-up of the new hotel openings. Maybe you could just help us understand for 2013 what is the split between hotel openings in tier 1 and tier 2 cities versus tiers 3 and 4? The second question relates to the new hotel openings from the perspective of greenfield hotels versus a conversion of an existing hotel. That's the first broad set of questions.

The second relates more to the cost side, maybe you could just help us understand a little bit more on how you are able to reduce the staff ratio at the hotel level? Thirdly maybe Mr. Xie could kindly give us some insights into the implications of the rise of leisure travel for your current business model and what can you do to capitalize on the opportunities. Thank you.

Sure. On the question about new hotel openings, currently we have around 74% of our leased hotels are within -- sorry, 84% are in tier 1. We expect that ratio to decrease by 5% to 10% a year later given our pipeline situation. That means we are going to increase the number of third-tier city hotels. In terms of new hotels versus conversions, about half of our projects are from conversions. So that then means, you know, all of those hotels are new supplies to the market. On the cost side, as we explained a little bit earlier, we have applied new technology in managing the hotels. Therefore we were able to reduce the workload and simplify the process within the hotels. That has led to a lower staff ratio.

Thank you. Just on the cost side, maybe you could just give us some guidance on how we should think about marketing costs going forward? Also if you could -- Mr. Xie could comment on the implications of the rise of leisure travel, the benefits and also the risks of that to your business model. Thanks.

We expect our (technical difficulty) marketing expenses as a percentage of revenue to remain either stable to more decrease given our expanding scale. In terms of leisure travel, I think that has opened up a lot of new opportunities for our business, especially given our expanding portfolio of brands. We are seeing brands such as HanTing Hotel as well as Hi Inn particularly are popular among leisure travelers. We also are considering introducing new brands to specifically address the leisure travel market. So I think the booming of the leisure travel will be a long-term trend, and we are ready to embrace it.

There are no further questions at this time. Please continue.

Thank you everyone for joining our call today. Before closing the call I would like to advise that if you are coming to China Lodging's investor events, we will conduct a roadshow in the US during the week of 3 September 2013. Additionally we will participate in the CICC China Conference in London on 10-11 September. Interested parties please contact us at ir@huazhu.com. Once again, thanks to everyone for making time. We look forward to talking to you at the next quarter earnings call. Goodbye.

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.