H World Group Ltd (HTHT) 2013 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the China Lodging Group 2013 Q3 Earnings Conference Call. At this time all participants are in a listen only mode. There will be a presentation followed by a question and answer session. (Operator Instructions). I must advise you this conference is being recorded today, November 13, 2013. I would now like to hand the conference over to your speaker today, Ms. Ida Yu. Thank you, please go ahead.

Thank you Regan. Hello everyone and welcome to our Third Quarter of 2013 Earnings Conference Call. Joining us today is Mr. Qi Ji our founder, Executive Chairman and CEO, Mr. Xie Yunhang our COO and Jenny Zhang our CFO and CSO, who will elaborate on our Company's development strategies and performance for the third quarter of 2013.

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 provisions of the United States Private Securities Litigation Reform Act of 1995. Forward looking statements involves 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 filing with the SEC. China Lodging Group does not undertake any obligation to update any forward looking statement except as required under applicable law.

On the call today, we will also mention adjusted financial measures during the discussion of our performance. Reconciliations of those measures to comparable GAAP 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 a supplementary slide presentation are available on the investor section of China Lodging Group's website at ir.huazhu.com.

Now, I would like to turn the call over to Mr. Ji who will be speaking in English directly. Qi Ji, please.

Good morning everyone. Thank you for joining our Earnings Conference Call today. During the third quarter, we're maintaining our [faster] growth momentum from the first half of the year.

Net revenue for Q3 increased by 28% year-over-year, exceeding the high end of our quarterly guidance by about 2 percentage points. Net income for Q3 increased by 30% year-over-year. At the end of our third quarter 2013, we've had more than 140 (inaudible) in operation, an increase of 40% from a year ago.

Our same-hotel RevPAR grew by 1% with a same-hotel ADR increase of 3% in the third [consecutive] quarter.

We are delighted to deliver another strong quarter. We further fortified our leading position in China hotel industry. Hua Zhu is becoming a brand and a management company. Our core strengths are to build it and grow new brands and to manage the hotels efficiently through a large platform.

With the introduction of Manxin and the upscale resort brand, the Company now has six different brands covering economic, midscale, and upscale markets. Each of the brands has a unique growth opportunity. The development of new brands will continue to change Hua Zhu's growth in network, sales and profit.

Move on to page 5. Over the past two years, Hua Zhu has changed from a [lease driven economic] hotel chain to an asset light hotel group.

We've placed our [extension] for new brands in 2013. We expect to open up another 8 hotels [under] new brands, or about 20% of our total new openings in 2013.

Our new brands, I expect to account for about 14% of our revenue in 2013, compared to 10% two years ago, as shown on page 6.

As shown on page 7, we have reduced our reliance on lease hotel (inaudible) 2013. At the end of the third quarter, about 58% of our hotels is under manachise model.

As shown on page 8, manachised hotel has become our main growth [driver]. We expect about 75% hotels open this year is a manachised model, which is higher than 50% in 2011. In this way, we are more resilient to the pressure from cost inflation and the economic [surplus].

As shown on page 9, manachised hotels contributed 40% of our hotel income in the first nine months of 2013, up from 32% in the same period of 2012.

Last but not the least, I would like to announce the appointment of Chief Strategy Officer to Jenny Zhang, on top of her existing role as CFO. As the CSO, Ms. Zhang shall be responsible for developing this Company's early-stage brands, and the leading other strategic initiatives.

With that, I will hand the call over to Yunhang, our COO, who will walk you through Q3 operational highlights. Yunhang please.

(Interpreted) Thank you Ji Qi, good morning everyone. In Q3, as shown on page 11, we opened 24 net new leased hotels and 98 net new manachised hotels. At the end of Q3, we had 1341 hotels in operation, among which 40% were leased hotels, 58% 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 fuel our growth with 76 leased hotels and 379 manachised hotels contracted for development.

As shown on page 12, in Q3 2013, blended occupancy was 94%, a decrease of 3 percentage points year-over-year, mainly due to a weak performance this September as a result of the complicated national holiday schedule that had interrupted some business travelling arrangements.

ADR was RMB186, an increase of 1.5% year-over-year, mainly attributable to an increase in same-hotel ADR of 3%, and partially offset by a gradual decreasing share of our hotels in tier 1 cities with our hotel network expansion. As a result, in Q3, RevPAR was RMB175, a decrease of 2% 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 Q3 2013, our same-hotel RevPAR increased by 1% with 3% increase in ADR and a 2 percentage point decrease in occupancy.

The increase in same-hotel ADR was driven by price increase to enhance yields. The decrease in same-hotel occupancy rates was mainly due to the [interrupted] business traveling arrangements as a result of the complicated national holiday schedule this September.

With that, I will turn the call over to Jenny, our CFO and CSO, who will talk you through our Q3 financial results.

Thank you Yunhang. Hello everyone. In Q3 2013 we were delighted to see a continuously strong growth of revenue and a significant improvement in profitability. Let me walk you through the details.

As shown on page 15, our Q3 net revenues increased 28% year-over-year, exceeding the high end of our quarterly guidance by 2%. Leased hotels revenue grew 26% and the manachised and the franchised hotels revenue grew 48% year-over-year.

This quarter, our manachised and franchised hotels revenue reached 12% of our total revenue, compared with 11% in the same quarter last year.

Page 16 shows the adjusted quarterly operating margin, which increased by 1.4 percentage points in Q3 of 2013 when compared with a year ago. Our pre-opening expenses as a percentage of net revenue saw a 2.5% increase due to our enlarged revenue base and our shortened construction cycle.

Our SG&A expenses as a percentage of net revenue also decreased by 0.2 percentage point due to a decrease in G&A expenses partially offset by a higher selling and marketing expenses as a percentage of revenue. Our revenue mix shift was higher percentage of higher margin manachised revenue, also helped improve our margin to some extent.

Most importantly on the hotel opening management front, our investment efforts improved operational efficiency. As shown on page 15, we shortened the construction cycle by 31 days through better management of construction preparation, construction period, fire safety certificate and the pre-opening preparation. This has contributed significantly to our reductions in pre-opening expenses.

Last but not the least, move on to cash position as shown on page 18. Our cash balance closed at RMB370 million at the end of the third quarter. We had a total credit facility of RMB699 million. For the first quarter we had a net cash inflow of RMB48 million, mainly due to extended revenue base, improved profitability and [the less] cash spent on investments. We believe that our cash balance, our operating cash flow and our available credit facilities will be sufficient to fund our expansion plans in the near future.

Finally as shown on page 18, we expect to achieve net revenues in the range of RMB1095 million to RMB1113 million in the fourth quarter of 2013, representing a 24% to 26% year-over-year growth.

Our revenue growth is expected to be around 28.5% to 39% for full year 2013, which is the high end of our annual revenue guidance.

With that, let's open the floor for questions. Operator, we are now taking questions.

Lin He from Morgan Stanley.

Hi, good morning everyone, thanks for taking my question. A couple of questions. Firstly two questions for Xie Yun. One is recently announced in last month's (inaudible). Xie Yun, can you please tell us about what is the rationale behind this investment and what is the expected return or expected benefit for China Lodging from this investment?

The second question is about the new products you have been developing, the JI Hotel and the Hi Inn and other new brands. I want to understand what is the ability of developing these new hotels and sustainable and competitive advantage? In other words, what part of these new brands you have developed is easier for your [competitor to copy] and what are the aspects you think it is difficult for your competitor to copy?

The third question from me is for Jenny. I noticed on the cash flow statement there is a RMB31 million cash outflow spend on acquisition. Can you remind us what acquisition is that? That's all my questions, thank you.

(Interpreted) So first of all, these investments were in (inaudible), it's basically a financial investment. You can see the total value is about RMB100 million. Of course (inaudible) is a brand with its value and especially in the restaurant industry, still very much related to the people's life and which is also the direction for the China's national direction for development in the future years as we announce our guidelines from the CPC conference recently. Also, the restaurant is also a very major extension of our hotel business.

Basically, this is a financial investment and after this investment you can see the (inaudible) price of (inaudible) actually increase. We consider this is as a one-time transaction.

We have introduced quite a few new brands to the market in the past couple of years. I want to emphasize that there are (inaudible) of them, they cover a wide range from [how many] hotels midscale and upscale hotels. Our focus has clearly been the economy hotels and midscale hotels which represent the majority of demand in the China market.

For midscale hotels, we have two brands, JI Hotel and Starway Hotels. JI Hotel is our standardized hotel which represents a [series of them] and we feel it's very much welcomed by the mid-class consumers. We are already in the process of rolling out this brand in multiple cities.

The Starway is our more diversified product. We intend to use the Starway brand to consolidate the existing three to four star hotels in the market. There (inaudible) needs -- the various tastes and the needs of consumers.

In the economy hotel segment, we introduced Hi Inn which is our lower priced economy hotel compared with our HanTing brand.

In the market, there is a large supply and also demand for the lower priced small hotels and the guest houses. Hi Inn is designed to consolidate this part of the market and the upper scale brands like Joya and Manxin are still in the pilot stage.

We intend to use manachised models to develop them in the future. The newly introduced Manxin is not our typical resort, it has a combination of history culture and [a natural view] into this brand. We believe that through leveraging our management capability and a strong marketing platform, we will be able to manage upscale hotels successfully in the future.

So despite that, we have six brands on the plate. Our near term focus is very clear, our main efforts will still be on HanTing and the JI Hotel, both to a large extent in our portfolio. As the other brands move forward through their life cycle, we are going to see them bear more fruit in the coming years.

For the third question being you asked about the RMB31 million cash outflow under the acquisitions net of cash (inaudible) line. That represents a small acquisition we made to our hotel chain in Zhejiang province called (inaudible) with a part -- these hotels under this brand. We have consolidated the (inaudible) to our HanTing Hotels brand (inaudible).

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

Thanks Mr. Ji, Jenny and Yunhang, thanks for taking my questions. I have three questions. The first one is indeed a follow up on your new investment on the strategic initiatives in [Quanjude]. From the investors' view, should they consider this as one-off happened or should we expect more to come in the future when you see opportunities in the consumer market or related to the [SOE] co-operations? That's the first question.

As for Quanjude, I think that our result (inaudible) taps into the restaurant market. Currently we don't have any large scale entry plan into the restaurant industry. We want to accumulate experience in this transaction.

We mainly act as a financial investor, at the same time we believe by sharing our experience in building brands as well as expanding the network and also introducing a more modern management system to this very well-known restaurant brand, we can add some value to their existing operation. So that's, I think, a very unique case for us and this brand, because of this long history and a very wide recognition in the China market, also is a very unique investment opportunity for us.

Thanks. My second question is regarding the hotel openings. Looking at the strong delivery this year and also the all-time high pipeline under contract, what's the opening target for this year and next year? Also, do you mind if you give a little bit more sense on the brand split in terms of how many of them will be in JI or Starway or in Hi Inn?

Because particular for Hi Inn, you also -- I think Mr. Ji also discussed the positioning of the product earlier in the call, is that I think earlier in the year the management was guiding that they are now reconfiguring the Hi Inn and more focusing on JI Hotel, but if you look at this quarter, you also opened more than 20 Hi Inns during the quarter.

So have you -- has the Company already found the right price point on investment mix for the Hi Inn product and do you expect more to come, I mean more faster delivery in the coming two years? Thanks.

This year our guidance was to open around 400 hotels. (Inaudible) the number of hotels we have opened so far is we are very likely to exceed that guidance this year. Next year, hotel opening targets we will communicate in the next earnings call. We believe we will also be above 400 hotels.

More specifically to JI Hotel and Hi Inns, JI Hotel we expect next year we are going to open around 45 to 55 new JI Hotels with a [solid mix] between this and the manachise also. The Hi Inn, we have seen a lot of enthusiasm from franchise leases here. That has contributed to the acceleration of opening of Hi Inns. So next year likely we are going to open 60 to 80 new Hi Inns in the form of fairly small room counts for each hotel and they will primarily be a manachised hotel.

Okay, thank you. Just my last question is on the RevPAR run rate. On your same-hotel RevPAR you delivered a 1% improvement year-over-year and also you mentioned that actually during the quarter you see a tougher comms because of the difference in holiday season in September. I just want to get a sense on the single hotel RevPAR if you were to exclude September, just looking at July and August, what was the average and what are you seeing now in October and November? Thanks.

In July, clearly we have seen a very strong growth trend of later travel and the July and August, the [single] hotel RevPAR appreciation was between 2% to 3%. We have seen similar kinds of the same-hotel RevPAR appreciation in October.

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

Hi, thank you for taking my questions. We noticed that recently there were some HanTing Hotels being converted to Seasons or JI Hotel. I wonder can you talk about is that going on at a larger scale or how many of the conversions is going on right now?

We don't have a specific plan and I don't think we have done this in any large scale. The only one case that was put through that was a hotel in Shanghai near the (inaudible). Currently that's unique location, I think make us -- make up their mind to invest further to operate the brand. Currently we are not planning to do this in any large scale.

Then you mentioned that you're occurring higher portion for reservation with third party agencies. What is the exact percentage that you have with third party agencies now and is it because of the migration to mobile reservation and given that, what do you plan to do going forward to deal with this situation?

In the third quarter, third party agencies accounted for 7% to 8% of all room nights sold, which is a [record time] if look at recent quarters. So I think there are two reasons behind the increase in their contribution. One is probably a long term factor which relates to our introduction of new brands, especially our mid-tier brands and also our expansion into the lower-tier cities. So agencies are helping us to introduce new customers into the new hotels and especially new brands. We have seen them as a very valuable supplementary, especially in our hotel ramp-up process.

The second part I think relating to the (inaudible) program which has come to a halt by now, in the [third] quarter that was still a very dominating factor and that has (inaudible) their demand through the OTA becomes stronger than most. We believe the percentage of OTA going forward will gradually come down from the peak number during first quarter this year.

Great, thank you for taking my questions.

Thank you Ella.

Your next question comes from the line of Billy Ng from Bank of America Merrill Lynch. Please ask your question.

Hi, good morning. I have two questions. The first one is can you provide some color, I know maybe it's a bit early, but in terms of 2014 outlook, how do you see in terms of the demand, RevPAR and also do you still see more room for margin expansion by doing more of the improving of the operating efficiency? That's my first question and I will follow up with another question. Thanks.

We still need some more analysis to give us more visibility into 2014. I think China is at a crossroad and people have various expectations around ongoing [contract meetings]. In general, we have seen the Chinese economy stabilize and we have observed some [up-taking] trends in the first quarter. With this trend, we believe in (inaudible) RevPAR, and will be also stabilized and also has some potential to still some growth in 2014.

Currently all internal (inaudible) is around 2% (inaudible) hotel RevPAR appreciation in 2014 and margin expansion would be a more complicated analysis. We will (inaudible) balance of a few different factors. One is over renting out hotels. We have introduced quite a large number of JI Hotels recently and we plan to also introduce more going forward. The JI Hotel would take a longer period to ramp up, so that will give us some pressure on the lease hotel margin. Of course we also face the cost inflation on the (inaudible) side.

On the other hand, in general over a number of mature hotels, as the percentage of total portfolio is increasing and our contribution from the manachised hotel is also increasing. So we are yet to analyze and to see where the blended margin number (inaudible). We expect to provide a more specific guidance in next quarter's earnings release.

Thanks and my second question is, I think you mentioned one of the slides in the presentation is how almost 40% of the income coming from the manachised hotels. I just want to go through how do we calculate that? So I just wonder, in terms of the fixed cost allocation, what kind of assumption, let's say for example when we look at the call centers, how do we allocate the cost between the manachise and the lease and operated hotel to come up with the 40% contribution of the manachised hotel to the overall profitability?

Firstly, the hotel income calculations does not involve any allocation of shared cost. It's basically revenue then the direct costs. In the case of leased hotel, we deduct all the hotel level direct expenses. For the manachised business, we deduct the direct expense such as the general manager of payroll and that's how we come to the hotel income.

Costs such as the call center as well as the development teams, or HR systems, IT platforms, the shared costs are included in SG&A which is not allocated as a hotel income level yet.

Okay, I understand, thanks. Thanks a lot. Thank you.

You're welcome.

Your next question comes from [Long Lin] from Brean Capital. Please ask your question.

Hi, good morning, thank you for taking my questions. My question is regarding the competition of manachised or franchised hotel. With your competitors have also increasingly shift to open more franchised hotels, I'm just wondering how the competition has changed here. What are the HanTing's competitor's advantage in attracting new franchisees?

Also, given a soft term macro environment, have franchisees changed their investment objectives in terms of cost and return, like if they ask for any reduce the fees to maintain returns? You also mentioned you see a strong demand in Hi Inn hotels from franchisees, so what's the reason behind that? Any insight would be very helpful, thank you.

I will ask Yunhang to answer this question. Let me translate for Yunhang.

(Interpreted) I think we have a clear competitive advantage in attracting franchisees. There are really two aspects of this. One is our advantage in generating higher returns, higher profits for the franchisees through our management platform and strong brand. The other is the (inaudible) supporting system is very strong, wide coverage of communication platform to various investing and [potential] franchisees. We have individual coverage by (inaudible) and we also have geological promotional conferences to communicate to various franchisees.

Through the early stage of the franchisee's construction period, we have sophisticated supporting team not only providing onsite [instruction] and support, but also provide attracting (inaudible) through our IT platform. During the daily operations, we have both onsite GM to run operations and the headquarter platform in operation IT and marketing (inaudible) to support the operation. So we have built a strong awareness as well as good reputation in both aspects.

Relating to your question on the fees, our principle in the manachise business is to develop a meaningful relationship between us and the franchisee. So what we have done in the past year is [still] providing more in depth services to generate core value for the franchisee such as enhancing the e-booking system to the rolling out of mobile application and we are also planning to package the (inaudible) business to reduce the IT costs of all franchisees.

On the financial side, we are seeing by providing more services, actually the manachisee has been stabilized and is slightly increased. So we're generating more value for the franchisees, thus increasing the loyalty of the franchisee to us. We haven't seen any price decrease of average (inaudible) and so we are not under the price competition in the manachise market.

Relating to your third question on Hi Inn, I think this brand is particularly attractive to small investors. Because of the small size of the Hi Inn as well as the lower CapEx per room, shorter conversion tier (inaudible), this has become quite popular for people who only have a few million to invest.

Okay, thank you very much. So can I follow up on that? So what's the average return for franchisees in HanTing compared to other competitors?

Currently we don't have comparable numbers public available in the market. In general, the majority of our franchisees are seeing a return somewhere between 15% to 25%.

Thank you very much. That's all my questions.

You're welcome.

Your next question comes from Cyrus Ng from Deutsche Bank. Please ask your question.

Hi, thanks for taking my call. I have just two quick questions. My first question would be on your upscale hotel brand, I think it may be too early to ask, but I just wonder if management have any opening plan for the Joya Hotel and (inaudible) managing plan. And when would the first hotel likely to be open? The second question would be on the JI Hotel and the HanTing Hotel. Just wondered what is the number of hotels and upgrade (inaudible) operation as at end of third quarter for these two hotel brands?

I have to apologize, because I cannot hear you very clearly. Could you raise your volume a little bit?

Yes, sure. My first question would be the opening timeline for the upscale hotels, that's the Joya and the (inaudible) and when would the first hotel be likely open, for these hotel brands? Also for the second question would be on just wanted to know does (inaudible), does it operation for the third quarter for JI Hotel and also the HanTing Hotel.

Is the first question about the opening timing of the Joya Hotel?

Yes and the (inaudible).

Okay, we expect that to be open at the end of this year or early next year. It's already at the final stage of the construction. The second question was about JI Hotel and HanTing's operation results in the third quarter, is that -- did I get it right?

Yes, it's JI Hotel and the HanTing Hotel, I just want to ask what is the number of hotels in operation as of the third quarter.

Okay. At the end of the third quarter we had 48 -- 56 JI Hotels, 1,165 HanTing Hotels and 72 Hi Inn in operation.

Okay, thank you. Thank you, thanks a lot, thanks a lot.

You're welcome.

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

Hi, good morning, two questions. First question relates to the results. Can you please help me understand what is the reason for the decline in SG&A on a quarterly basis? That would be the first question.

The second question is more bigger picture in nature. I just want to understand how the shift was more leisure travel is impacting your strategy in terms of brand or format opening strategy, as well as your expansion into lower tier cities, how is those, the overall change in travel patterns impacting strategies along these two parameters? Thank you.

The SG&A decline as a percentage of revenue is mainly driven by economy of scale. For example, our (inaudible), we don't need to expand it as much as the revenue growth. Then we also achieved higher efficiency this year through a process re-engineering in administrative functions such as HR and finance.

So that has largely contributed to [all the] deductions SG&A's percent of revenue. Also, on the selling side, in general we are moving towards more bookings through the mobile application as well as internet. So our -- the size of the call center has been more or less stabilized recently, so that has also contributing to the decline in our EBIT (inaudible). Of course, you know, the Government reduction in the credit card fees is another significant reason for this year.

On your second question, the shift towards leisure travel I think is a profound change in the market. We have seen that with (inaudible) presenting a more mixed and balanced customer source for our main brand HanTing Hotels. We are seeing more leisure travelers appearing in our hotels and the concentration of leisure travel in particular seasons has created (inaudible) of synergies for us so that's why we are seeing a higher price particularly in July and August.

And there is -- in combination with the leisure travel growth we also have seen a clear moving up of business travelers. That has presented a very good opportunity for our (inaudible) brand.

In relation to the lower-tier cities, we have -- that is to be analyzed in more detail. First off, for (inaudible) frequently travel to cities like (inaudible) we see a unique opportunity to introduce location type of products like (inaudible) and that we also see our HanTing Hotels entering into a lot of those (inaudible) tourism destinations like (inaudible) and so this definitely extends our very scope of coverage in our hotel network.

That would also (inaudible) the trend of fast growing leisure travel will continue in many years to come.

Your next question comes from [Vivian Mao] from (inaudible) Management. Please ask your question. Ms. Mao, your line is now open if you would like to ask your question.

Hi, good morning management. Congratulations on the results. I have three questions here. Number one is regarding the income contributions on manachised hotels. So it has reached 48% in the first nine months this year. I wonder going forward has management done any internal calculation regarding where the [situation] could go in one or two days' time? That's my first question.

We don't have [concrete] guidance for this number in the coming years yet but clearly their contribution to the (inaudible) income will increase because close to 80% of our new hotels opened are going to be under the form of manachise.

So maybe to put it another way, like from last year to this year the portion of income from manachised has increased by eight percentage points, so going forward should we expect this (inaudible) to continue to grow at this speed or it might kind of slow down a little bit in terms of the growth rate?

No, we are going to provide more strategy guidance for 2014 in our next quarter earnings report. We will bear in mind and provide more insight into this perspective.

Okay, thank you and the next two questions are related to JI Hotel. So number one, whether management could break down the HanTing Hotels, same-hotel RevPAR trend versus JI Hotel and JI Hotel same-hotel RevPAR trend in third quarter?

This year the general trend between JI Hotel and HanTing Hotels has been similar.

Okay, and then finally regarding -- I think Jenny just mentioned that for JI Hotel it takes a longer ramp up period before reaching the maturity level. So I wonder after JI Hotel also becomes mature how does the EBITDA margin of JI Hotel versus the HanTing Hotel?

Historically the JI Hotel has a slightly higher EBITDA margin compared with our HanTing Hotel. The full year results (inaudible) confirm once they've reached the maturity level. So this new batch opened in this year and late last year comes to maturity we'll provide more data to everyone. And by the way we have decided to provide more (inaudible) data starting from next quarter such as RevPAR (inaudible) information so to help the investors to understand better how each brand has been evolving.

That will be helpful, thank you.

Thank you.

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

Okay with that, let's conclude the call. I would like to let you be aware that a few upcoming China Lodging investor events. We will participate in the Morgan Stanley Annual Asia Pacific Summit in Singapore on November 14 to 15, and the CICC Investment Forum in Beijing on December 3 to 4 as well as Deutsche Bank Annual DB Access China Conference in Beijing on January 13 to 14 next year.

Interested parties please contact us at ir@huazhu.com. Once again thank you to everyone for making time from your busy schedules to join our call today. We look forward to talking to you in the next quarter earnings call. Good-bye everyone.

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

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.