GreenTree Hospitality Group Navigates Turbulent Waters Amid Revenue Slump and Strategic Overhaul

GreenTree Hospitality Group Ltd., one of China’s largest hotel and restaurant operators, reported a challenging fiscal year 2024 marked by steep revenue declines, strategic pivots, and a focus on cost discipline. While the company’s unaudited Q4 results highlighted a stark 18.2% year-over-year drop in revenue to RMB304.5 million (US$41.7 million), management framed the figures as part of a deliberate shift toward sustainable growth. This article examines the financial underpinnings of GreenTree’s performance and evaluates whether its restructuring efforts can deliver long-term value.

Revenue Declines Reflect Structural Challenges

GreenTree’s Q4 revenue slump was driven by a combination of factors, including the closure of 12 leased-and-operated (L&O) hotels and a 9.8% year-over-year drop in RevPAR for franchised-and-managed (F&M) hotels. The decline in RevPAR—now at RMB116—reflects broader industry pressures, such as oversupply in mid-tier hotel segments and shifting consumer preferences. Meanwhile, the restaurant division faced steep declines, with average daily sales per store falling 16.8% to RMB4,234, as 24 L&O locations were shuttered.

While top-line metrics were weak, adjusted net income—a key profitability measure excluding non-recurring items—rose 26.8% to RMB77.3 million (US$10.6 million). This improvement stemmed from cost-cutting, including a 25.8% reduction in general and administrative expenses, and the strategic exit of underperforming L&O assets. The company’s cash reserves, though down slightly to RMB1.8 billion (US$252 million), remain robust, providing a buffer for operational flexibility.

Strategic Shifts: Franchising, Scaling Back L&O

GreenTree’s operational adjustments signal a clear pivot toward franchising and managed properties, which now account for 90% of its restaurants. This move reduces capital intensity, as franchised locations rely less on upfront investment while generating recurring fees. In hotels, the company plans to open 480 new properties in 2025, focusing on mid-to-upscale segments to capitalize on rising demand for quality accommodation.

The restructuring extends to its L&O portfolio. GreenTree aims to retain only “flagship” hotels to showcase its brand standards, while offloading marginal properties. This strategy aligns with broader industry trends, as hotel groups globally prioritize franchising to boost margins and reduce risk.

Risks and Opportunities Ahead

The company’s 2025 revenue guidance—expecting flat hotel revenues compared to 2024—underscores cautious management. Key risks include lingering economic uncertainty in China’s travel and dining sectors, as well as intense competition from rivals like Huazhu Hotel Group and the ongoing need to rejuvenate its pipeline.

However, GreenTree’s pipeline of 1,214 hotels under development, paired with its mid-to-upscale expansion plans, could position it for growth as consumer spending recovers. The shift to franchising also aligns with the sector’s long-term trend, where franchised hotels typically offer better margins than L&O operations.

Conclusion: A Company in Transition, but with Potential

GreenTree’s FY2024 results reveal a company grappling with the aftermath of pandemic-era distortions and industry-wide headwinds. While revenue declines and impairment losses highlight short-term pain, the strategic moves—shrinking L&O exposure, prioritizing franchising, and targeting higher-margin segments—suggest a path to profitability.

The company’s RMB1.8 billion cash pile and adjusted net income growth offer hope that its restructuring is paying off. Yet investors must weigh this against its cautious revenue guidance and the slow pace of recovery in discretionary spending. For now, GreenTree appears to be a hold—a stock worth watching as its transformation unfolds, but one that demands patience given the lingering risks.

In the hotel sector, where scale and brand strength matter most, GreenTree’s pipeline and focus on quality could yet deliver dividends. But success will hinge on executing its strategy flawlessly in an environment where even small missteps could amplify existing challenges.