GreenTree Hospitality Faces Crossroads Ahead of Q4 Earnings: Can It Stabilize Amid Sector Struggles?

GreenTree Hospitality Group (NYSE: GHG) is set to report its fourth-quarter and full-year 2024 financial results on April 24, 2025, a critical juncture for the Chinese hospitality giant as it battles persistent headwinds in its core businesses. The company’s recent performance has been marked by steep revenue declines, margin compression, and operational challenges, raising questions about its ability to stabilize amid a sluggish recovery for the travel and dining sectors.

Financial Struggles: A Decelerating Engine

GreenTree’s third-quarter 2024 results, released in October 2024, painted a grim picture. Total revenue fell 22.5% year-over-year (YoY) to RMB357 million ($50.9 million), with hotel revenue dropping 15.4% and restaurant revenue plummeting 42%. The decline in RevPAR (Revenue Per Available Room) to RMB135—a 13.6% YoY drop—signaled weakening demand in the hospitality sector. Meanwhile, net income collapsed 44.5%** to RMB65.2 million, with margins squeezed to 18.3%, reflecting foreign exchange losses and cost pressures.

Industry Context: A Sector in Transition

The company’s struggles are emblematic of broader challenges in China’s hospitality and dining markets. Post-pandemic demand has yet to fully rebound, with consumers shifting to “normal” spending patterns. Price competition in hotels—driven by oversupply and discounting—pushed average daily room rates (ADR) 6% lower YoY, while restaurant segments faced a shift toward casual dining, squeezing margins.

GreenTree has responded by pivoting toward an asset-light model, closing underperforming leased-and-operated (L&O) hotels and restaurants. By September 2024, franchised-and-managed (F&M) segments accounted for 55.5% of its restaurant portfolio, up from 44.6% in 2023. Yet this shift, while reducing capital intensity, has also slowed revenue growth.

Q4 Preview: More of the Same?

Analysts anticipate further declines in Q4, with full-year 2024 revenue projected to drop ~8% YoY. Key risks include:
- Hotel RevPAR recovery: Occupancy rates fell to 74.6% in Q3, down from 81.2% a year earlier, suggesting weak demand.
- Restaurant stabilization: While the division achieved its second consecutive profitable quarter, Average Daily Sales (ADS) dropped 25.6%, indicating ongoing consumer caution.
- Margin pressures: Adjusted EBITDA fell 32.1% in Q3, and foreign exchange volatility remains a threat.

Analyst Sentiment: Caution Dominates

Investor sentiment is cautiously negative. Despite a slight beat on Q4 EPS estimates (RMB0.11 vs. consensus RMB0.07), the 44% YoY drop in net income and weak revenue trends have led analysts to trim forecasts further. Key concerns include:
- Lack of growth catalysts: GreenTree’s hotel pipeline of 1,085 new properties faces execution risks in a sluggish market.
- Cash reserves: While RMB1.88 billion in cash (as of September) provides a buffer, it may not offset prolonged declines.
- Membership leverage: A 100 million-strong individual membership base and 2.1 million corporate clients offer long-term potential, but short-term gains are elusive.

Conclusion: A Fight for Stability

GreenTree’s April 24 results will hinge on whether it can demonstrate stabilization in RevPAR, restaurant performance, and margins. The data is clear: revenue has declined for five consecutive quarters, and net income has fallen 37% over two years. While its asset-light strategy and membership growth offer hope, the near-term outlook remains fraught with challenges.

Investors should watch for two key metrics:
1. Q4 RevPAR recovery: A rebound to pre-pandemic levels (or closer) would signal demand resilience.
2. Restaurant profitability: Sustained positive net income in the segment could offset hotel headwinds.

Until then, GreenTree’s stock—down 30% over the past year—is likely to remain under pressure. The company’s survival will depend on navigating a sector in flux, balancing cost discipline with growth investments. For now, the path to stabilization remains narrow.