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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
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Good day, and thank you for standing by. Welcome to Meituan's First Quarter 2022 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.
And now I'd like to hand the conference over to Ms. Scarlett Xu, Vice President and Head of Capital Markets. Thank you. Please go ahead, ma'am.
Thank you, operator. Good evening, and good morning, everyone. Welcome to our first quarter earnings conference call. Joining us today are Mr. Xing Wang, Chairman and CEO; and Mr. Shaohui Chen, Senior Vice President and CFO of Meituan. For today's call, management will first provide a review of our first quarter results and then conduct a Q&A session.
Before we start, we would like to remind you that our presentation contains forward-looking statements, which include a number of risks and uncertainties and may differ from actual results in the future. This presentation also contains unaudited non-IFRS financial measures and should be considered in addition to and not as a substitute for measures of the company's financial performance prepared in accordance with IFRS.
For a detailed discussion of risk factors and non-IFRS measures, please refer to the disclosure documents in the IR section of our website. Now I will turn the call over to Mr. Xing Wang.
Please go ahead, Xing.
Thank you, Scarlett. Hello, everyone, and welcome to Meituan's first quarter 2022 earnings call. We achieved a healthy growth across different businesses in Q1, despite the spread of omicron to more regions in China since March. For the first quarter of 2022, our total revenue increased by 25% year-over-year to RMB 46.3 billion. Annual transacting users on our platform increased to 693 million, while the number of annual active merchants increased to about 9 million.
The average number of transactions -- transacting user increased to 37.2 on the trailing 12 months of Q1 2022 compared to 30.5 for the trailing 12 months of Q1 2021. Adhering to our upgraded company strategy, Retail+Technology. We never cease to provide consumers with diverse high-quality services and daily necessity supplies during the recent COVID resurgence. We proactively responded to government's guidance around COVID resurgence since March, building our social responsibilities and creating more value for the society at large. Specifically, our on-demand delivery network played a meaningful role in providing consumers in the affected areas with daily necessities and daily services, including news, groceries, medicines and running errands. I am proud of how our teams work seamlessly together across the company to find a safe and creative solutions for consumers emergence during challenging times.
In Shanghai, to better meet the demand of people with special needs, we launched quite a few new services. including the community group meals, community group grocery repurchases and emergency helpers. We also spent -- we also sent our autonomous delivery vehicles from Beijing to Shanghai, delivering goods in multiple residential communities, hospitals and universities.
Meanwhile to ensure sufficient delivery capacity and safe working environment for our couriers, we offered them free nucleic acid test alongside local governments and free accommodation or rest station for those living in locked-down communities. We will continue to build on the mutual trust forged strongly amongst consumer, merchants, couriers and all other industry participants during this challenging period and along the way.
Let's start with our first segment, food delivery. And its revenue and order volume grew by 17.4% and 15.8% year-over-year in Q1. Both quarterly and transacting users and transaction frequency also increased steadily year-over-year in Q1 with medium or high frequency users positioned more frequently versus average. In January and February, food delivery performance was very resilient. During Chinese New Year, as more people stayed put and celebrated holidays in their working cities, consumer mindshare and preferences for food delivery also strengthened.
We have accumulated a broad consumer base with high consumption power over the years. Who usually opt for convenience and variety that comes with ordering food delivery for family gatherings compared to the spring festival period last year, the number of merchants selling New Year meals on our platform also doubled. High AOV orders attributed to a higher percentage of total orders, with the new categories such as beverages and desserts increasing meaningfully year-over-year during the holidays.
Since March, omicron spread to many regions, including Shanghai, Shenzhen and Jilin, controlled measures were stricter with many merchants suspending operations and couriers getting quarantined meaningfully limiting our merchant supplies and delivery capacities in these cities and hence, impacting business growth. However, we leveraged our strong organizational and execution capabilities accumulated over the years to help people meet their daily needs during lockdowns in Shanghai and others.
For example, we quickly pioneered and launched the community group meal services, residents in the same community can order meals in bulk together, which are prepared in central kitchens, and delivered by us through vehicles to ensure steady routine meal supply.
The services covered over 9,000 communities and 10 million residents this is the initial launch, which also helped us bring a lot of new users to our platform. Besides, we also launched emergency helpers services. In Chinese, it's called [Foreign Language] establish -- to especially -- to actually address the needs of the elderly, pregnant women and people with disabilities, including delivery meals, supermarket grocery and emergency medicines.
We have received over 210,000 of these urgent requests since launch, over 90% of which are from elderly people and mothers with babies. In addition, our delivery services are critical for merchants to generate revenues during special periods like this. We launched multiple measures to help merchants in difficulties, such as commission rebates to hundreds of thousands of small to medium merchants in over 30 cities. We continue to provide food delivery manager [Foreign Language] and free smart operational equipment to tens of thousands of merchants.
We also started to host feedback panels with merchants across multiple cities, to better understand their operating pain points. Both our service model and merchant support measures continue to iterate, which demonstrated the agility of our organization and yet again proved our strong execution. Despite the short-term impact on the food delivery industry, we are confident that our long-term competitive advantage remains unchanged. And consumer mindshare, we continue to strengthen through this challenging period.
Couriers are essential to our food delivery business. During the Spring Festival, we distribute total subsidy of over RMB 550 million to couriers working through the holidays, while also providing them free Chinese New Year eve meals or gift boxes along. In both Shenzhen and Shanghai, we opened more than 800 courtesy hotels, provided accommodation for around 3,000 couriers on top of the free food and hygienic equipment. Besides safety is always of outmost importance. The smart safety helmets for couriers are more widely used in more cities, the new second-generation smart helmet launched in February, it's light-weighted with user-friendly user experience.
Our occupational injury insurance, we will cooperate with and follow government guidance in executing the policy to ensure a pilot program launch timely, covering all couriers expenses in the process. Overall, couriers welfare and security in every part of our business operation, decision-making as we ensure a safer working environment for couriers with better cash and benefits.
Now let's move on to our second segment, in-store, hotel & travel. Segment revenue increased by 15.8% year-over-year in Q1, mostly driven by strong performance in January and February. In-store services GTV increased by over 30% year-over-year. Around New Year and spring festival holiday seasons, we launched the various promotional campaigns to further stimulate demand for local services.
Quarterly active merchants increased by over 30% year-over-year, as we expand the categories on our platform. More gathering categories such as hot springs, winter sports, hotel dining and entertainment packages all recorded a stellar growth, boosted by the Winter Olympics celebration this year. We continue to iterate and diversify our online marketing and transaction-based products and services, allowing merchants to acquire consumers efficiently, the increased table turnover rates and consumer stickiness.
Annual transacting users increased by close to 20% year-over-year in Q1. Meituan as the go-to destination for local services in consumer mindshare further strengthened. For in-store dining, we continue to focus on the light-meal and fast food categories, accelerating the digitization while enriching our supply to better fulfill the surging demand from younger generations and young families. For other in-store services, consumption trends are quickly evolving.
Now we are even faster to identify them and innovate our products accordingly. The new consumption demand from younger generation helps us to bring more diverse and trendy services to our nearly 200 service categories. However since March, higher tier cities were affected by the omicron, with stricter control measures and drastically reduced off-line traffic, resulting in a significant negative impact on our in-store hotel & travel businesses.
Although we are facing short-term fluctuations, we will cooperate with the local governments to stimulate local consumption along side recovery in different regions. For example, in April, Shenzhen government issued RMB 500 million of consumption vouchers, which we participated and assisted to boost consumption, it's about stimulated consumer demand for local shopping, food and travel during the main holiday.
Our hotel and travel business was significantly impacted by the COVID resurgence in March. The domestic hotel room nights decreasing by single digit year-over-year in Q1. As a result of stricter controls on intercity travels, demand for audience within or around the city with domestic room nights for these scenarios increasing by high single-digit percentage year-over-year in Q1. We enhanced our service offerings and service quality to better save -- to better serve the increasing demand of local travel.
Also room night contribution from high-star hotels reached 17%, a record high for us. This is a result of our continuous effort in improving offerings, services and fulfillment quality in addition to better marketing capabilities for short trips and Hotel+X products. For our low and medium star hotel segment, we provided improved products and services to help accelerate the merchant's digital transformation process. Allowing hotels to benefit from lower cost and higher conversion rates.
Now moving on to third segment, new initiatives. Segment revenue increased by 47% year-over-year this quarter. As we continue to focus on goods retail business, in conjunction with our upgraded company strategy. Our various good -- food retail business model helped to address different consumption needs and provide consumers with groceries and other necessary daily necessities, reliably during the COVID resurgence across different markets despite stricter COVID controls.
On Meituan Instashopping [Foreign Language] improved its high-growth trajectory in Q1, with order volume growing by nearly 70% year-over-year. User base and transaction frequency both increased in Q1. With its annual transacting users as the main growth driver for overall order volume growth and that is increasing rapidly year-over-year. We also drove consumption through various marketing and promotional campaigns during holidays, but further enhancing consumer mindshare as Meituan delivers everything to their doorsteps.
During Chinese New Year, we collaborated with around 600 supermarkets, chain stores and convenience stores and nearly 100 established consumer goods and electronics brands on promotions for over a month, allowing consumers who stayed put in their working cities for spring festival to enjoy more adverse range of goods significantly more consumers on their own Meituan Instashopping to send the holiday gifts to their distant families during spring festival this year.
During Valentine's Day, flower orders nearly tripled versus last year, with the ordering other standard type gifts also becoming more popular. Sales of electronics and cosmetics increased by 6x and doubled, respectively versus last year. GTV and order volumes both grew significantly year-over-year during this aforementioned shopping festivals. Besides both our quarterly active merchants and newly onboarded merchants increased significantly year-over-year in Q1.
We brought more diverse mergers onto our platform in order to better fulfill evolving consumer demand. Since the beginning of this year, growth from categories, such as convenience stores, flower shops and other new merchant categories, meaningfully accelerated. In March, we were the first to launch a rapid antigen testing kits delivery with a number of pharmacies by ensuring sufficient and diverse medicine supplies. During COVID resurgence in various cities, together with offline super markets and stores, Meituan Instashopping played an important role to ensure steady daily necessity and grocery supplies for consumers. For example, the early lockdowns in Shanghai, we help deliver essential goods to consumers, especially for those with special needs.
In Beijing, Meituan Instashopping worked closely with over 20,000 supermarkets, convenience stores and grocery stores and more to maximize the supplies to consumers.
Taking into account the high demand at night from people who worked during the day, operational and delivery time for supermarkets and grocery was extended to ensure that incentives such as fresh produce and other necessities could be purchased and delivered during the night time as well. We also increased the help to supplement bigger capacity at supermarkets to meet the surge in online orders at supermarket. The consumer mindshare that we deliver everything from -- we deliver everything home also strengthened as a result. In future, we will further improve operations for large specialty store and supermarket accounts and build more regional teams to further increase our consumer mindshare.
And Meituan Select, [Foreign Language], is our community e-commerce business. In the first quarter, we focused on high-quality growth. improving operating efficiency by growing scale and maintaining our market leadership. We further build out our core capabilities around the digital operation and procurement. On the supply side, we deepened our collaboration with merchants to provide more quality SKUs and diverse product selections to consumers.
The percentage of products coming from agricultural produce, direct sourcing or centralized nationwide procurement, increased.
We also further optimized infrastructure and operating system for cold-chain logistics, expanding network coverage while ensuring strict quality control across the entire supply chain. We proactively explored and applied smart warehousing system and continuous iterating fulfillment methods to improve efficiency.
Corporate social responsibility continues to be our top priority. We actively support farmers not only by promoting their products but also providing job opportunities through our new vocational training program in lower-tier cities. In Q1, agricultural produce sales accounted for almost 50% Meituan Select sales, with offline stores working with us in rural areas now around 1 million.
We actively participated in COVID prevention and control measures with the government guidance, to ensure properly price and supplies to consumers through setting up a suite response mechanism for the entire supply chain and logistics assistance, which further improved our strong execution and efficient procurement capabilities.
Next, let's talk about our staff-operated Meituan Grocery, [Foreign Language]. It provides the consumer grocery with on-demand delivery and services within 30 minutes. We further expanded product metrics to meet the rising demand during the Chinese New Year holidays, and continuously improving product selection and marketing strategy. We not only stimulated holiday consumption demand but also helped consumer stock up food and supplies at short notice. Both number of items per order and average order value increased as a result.
During the lockdown in Shanghai, we proactively iterated our operations to ensure the stable supply of daily necessities. We went all out to make sure our supply chain was stable and functional properly. We rolled out a plan on services for residents in lockdowns during launching a community group purchase feature. We increased the inventory significantly at our front distribution centers, extended our services time and increased headcount for sorting and delivery.
In situations where warehouse staff and couriers could not access to their lockdown leading communities, we provided them with accommodation nearby their work areas. Autonomous delivery vehicles sent to Shanghai also sale to areas with contactless delivery requirements, improving delivery efficiency substantially. During recent COVID resurgence in Beijing, we focus on ensuring necessary supplies for consumers. Our autonomous delivery vehicles continued to operate in around 10 communities in Shunyi District. We also immediately increased supplies and inventories of important products to ensure steady time and broad pricing for consumers.
Besides we increased our critical staffing capacity to ensure smooth operations. For example, people capacity was up by 70% and couriers capacity by 50%. To ensure goods were given to consumers' timely. In future, Meituan Grocery will continue to improve operating efficiency across supply and procurement chain by using technology to empower industrial digital transformation. And looking ahead to the second quarter and the full year, we will continue to face the impact and challenges from Omicron.
As our mission continues to counter COVID resurgence and to achieve the dynamic zero COVID goal, we will align our strategy with the policies and improve our operations and services using advanced technologies in order to meet people's basic needs as well as to boost consumption recovery. Meanwhile, we will continue to assist small and medium-sized merchants, and we'll try our best to understand their pain points to help them through the difficult time. Because our corporate social responsibility is at the heart of everything we do.
Last but not least, we will further assist the digital transformation of the retail industry, by fulfilling our mission, we help people eat better, live better. We are confident to carry on delivering greater value through continuous technology innovation to our consumers, merchants and society as a whole.
With that, I will turn the call over to Shaohui for an update on our latest financial results.
Thank you, Xing. Hello, everyone. I will now go through our first quarter financial results. During the first quarter, our total revenue reached RMB 46.3 billion, increasing by 25% year-over-year in the midst of the resurgence of COVID cases in the challenged macro environment. The increase was mainly driven by the steady revenue growth of our food delivery and in-store, hotel & travel business, and the strong revenue growth of our new initiatives, especially in the goods retail businesses.
As a percentage of total revenue, cost of revenue was 76.8% this quarter, down from 80.5% in the prior year period, a slightly increased from 75.8% in the previous quarter. Year-over-year decline was mainly due to the improved gross margin of our food delivery business as well as the improved gross margin of goods retail business as we continue to optimize operating efficiency.
Selling and marketing expenses, as a percentage of total revenue, was 19.7% this quarter, relatively stable year-over-year, down from 22.7% in the previous quarter. The sequential decline was mainly attributable to the reduction in user incentives and the promotion of online marketing expenses. R&D expenses, as a percentage of total revenue, increased to 10.5% up from 9.4% in the prior year period and 9.3% in the previous quarter, while G&A expenses as a percentage of total revenue remained stable on both a year-over-year and quarter-over-quarter basis.
We are glad to see that our efforts and deliver high-quality growth and improve operating efficiency have achieved good progress this quarter. Total segment operating loss narrowed on both the year-over-year and quarter-over-quarter basis to RMB 4 billion this quarter as we improved operating margins across all business segments. Year-over-year and quarter-over-quarter increase in our total operating loss were mainly due to increase in fair value loss of financial investment. On consolidated basis both adjusted EBITDA and adjusted net loss improved on both a year-over-year and quarter-over-quarter basis to negative RMB 1.8 billion and RMB 3.6 billion, respectively, this quarter.
Turning to our segment results, starting with food delivery. Before moving to details, I would like to highlight that from this quarter, we are no longer disclosing GTV for this segment. As from a business management perspective, we will focus more on order volume. The segment's revenue increased by 17.4% year-over-year and decreased by 7.5% quarter-over-quarter to RMB 24.2 billion. Revenue per order increased on both a year-over-year and quarter-over-quarter basis to RMB 7.2 for the following reason.
First, AOV rose during in the quarter as more quality users and their higher willing is to pay for premium and large ticket size orders such as family orders, long distant orders and more selection selectively during the holiday. Second, the reduction in user incentives resulted in the decreased content revenue amount as we continue our focus on high-quality growth.
However, the increase in revenue per order was partially offset by the negative impact of commission revenue as we roll out a series of merchant supporting mergers in response to omicron spread in March.
During the quarter, both operating profit and operating margin improved on a year-over-year basis, a decline on a quarter-over-quarter basis to RMB 1.6 billion and 6.5%, respectively, thanks to [indiscernible] during the holiday period this year and our improved delivery efficiency. Delivery cost order reduced year-over-year. The lower delivery cost order together with the reduction in user incentives ratio contributed to a higher operating margin, a sequential decrease in operating margin was mainly due to the increase in delivery cost per order which was mainly due to higher seasonal couriers incentives partially offset by the lower user incentives.
Now turning to our second segment, in-store, hotel & travel. The segment's revenue grew by 15.8% year-over-year decreased by 12.6% quarter-over-quarter to RMB 7.6 billion this quarter. From January to February, our in-store business performed strongly with both order volume and GTV increasing at a much higher growth rate than in the fourth quarter last year. We constantly improved the variety and quality of our suppliers optimize of transition-based products and launch diverse marketing events to stimulate growth.
Meanwhile strong demand for local accommodation and short business travel during holiday periods also led to 15% year-over-year growth in domestic room nights for the first 2 months. However, since mid-March, omicron variant has spread across many regions, especially several Tier 1 cities, which significantly affected travel activities and offline local consumption, resulting in the growth rate of order volume for in-store business and domestic room nights turning negative in March.
Merchants well needs for online marketing also reduced significantly, in particular, this creates headwinds for CPC and display online marketing product sales, while marketing revenue was much less affected than commission revenue, which was mainly contributed by the year-over-year increase of active online marketing merchants, while subscription-based online marketing revenue maintained stable year-over-year growth in this quarter.
Operating profit for our in-store hotel and travel business segment increased to RMB 3.5 billion during this quarter, represent year-over-year growth of 26.4%, a quarter-over-quarter decline of 10.9%. Operating margin improved on both a year-over-year and a quarter-over-quarter basis to 45.6%, mainly attributable to the improved operating efficiency, smaller revenue contribution from hotel business, which has a relatively low OP margin and our tighter control over user incentive spending and promotion expenses.
Let's now turn to our new initiatives and others. During this period, revenue in this segment increased by 47% year-over-year to RMB 14.5 billion, mainly due to the expansion of goods retail business. Operating loss for this segment narrowed sequentially to negative RMB 9 billion during this quarter, while operating margin improved by 7.2 percentage points quarter-over-quarter to negative 62.3%, primarily attributable to the improved gross profit and operating efficiency in our goods retail business.
Our goods retail business remains our key area of investment with a focus on high-quality growth, our community e-commerce business delivered a healthy increase in both GTV and sales volume on a sequential basis while operating loss as a percentage of GTV continue to narrow compared to the fourth quarter. Operating loss for our community e-commerce business also narrowed sequentially. Our improved in product mix, for example, providing high-quality and cost-effective product offerings to meet consumption demand during Chinese New Year, has driven sequential increase in both our price item and the price markup. Furthermore, operating efficiency throughout the whole value chain also improved.
However, the failure in delivery and higher rate of damage fresh produce caused by the pandemic resurgence brought certain increase in compensation costs.
Operating loss for Meituan's Instashopping also narrowed compared to the fourth quarter of last year with operating margin optimizing and loss order decreasing. On one hand, AOV rose significantly as a result of consumers surge in demand to stock up food and necessities pre-lockdown and erosive demand for high ticket size gifts as well as flower purchase during holiday periods. On the other hand, we implemented tighter control over user incentive spending promotion and online marketing expenses due to seasonality. Operating loss and operating margin for Meituan Grocery both improved significantly on a sequential basis. This improvement was driven by two factors.
First, increased AOV and order density brought by the surge in demand for food and the suppliers piling during the pandemic. Second, improved operating efficiency generated by the optimization of subsidy strategy and the upgrade of our warehousing and fulfillment capabilities.
Now turning to our cash position. As of March 31, 2022, our cash and cash equivalents as well as short-term treasury investment total RMB 103.4 billion. Additionally, our operating cash outflow increased to RMB 11.3 billion from RMB 4.4 billion during the same period of 2022. The year-over-year increase in outflow was primarily due to, first, the outflow from net settlement of payables to merchants and the less cash inflows of advanced payments for online marketing services from merchants due to the outbreak of Omicron variant. Second, the increase in the payment of year-end owners.
To conclude, I would like to stress that our business, especially food delivery, in-store, and hotel booking will continue to face short-term headwinds on the back of resurgence COVID cases and a weaker macro environment. Nevertheless, we believe that the short-term impacts are temporary and all of our business will resume normalized growth post the strict pandemic front control period. We will continue to prioritize high-quality growth and operating efficiency improvements in the current environment.
Our company still has strong confidence in our long-term growth condition. We hope everyone can see through the short-term negative impact and value our company from a longer-term perspective. Additionally, we are glad to see that our dedication to our delivery network and retail technology services contribute to the wider society during the challenging time, we showcased our strong capability to execute efficiently and quickly accelerate our business operations.
We have further strengthened consumer mindshare on Meituan being the Retail+Technology company, while also deepening our trust relationship with users, merchants and couriers. We believe that such trust and recognition will eventually help drive our long-term growth. We will firmly employee our company strategy of Retail+Technology and continue to contribute to social responsibility in terms of supply side digitization, consumption expansion, innovation for industry upgrading and employment opportunity expansion. With that, we are now open for Q&A.
[Operator Instructions] The first question comes from the line of Ronald Keung from Goldman Sachs.
So for the food delivery segment, can you elaborate and share more details on the COVID impact for the second quarter? Will we focus more on promoting customer loyalty, and you also touched on subsidies. So are we adjusting any subsidy strategy on the current macro environment. And lastly, how should we think about the food delivery performance for the whole year of 2022?
Yes, our food delivery business was resilient if by calling resurgence in some places in January and February, although volume growth accelerate meaningfully around at spring new -- Chinese New Year However, since March omicron quickly spread in more cities, including several top-tier cities such as Shanghai, Shenzhen, Tianjin, et cetera, stricter COVID control policy were implemented citywide.
Many residential community had to -- had controlled measures in place to various extents and delivery products could not go up to consumer doorsteps, reducing the convenience and awareness to order food delivery. Nonresidential venues like offices, leisure hotels were also affected as consumer traffic has slowed. Order volume in these top-tier cities dropped significantly, resulting in a material impact on our order volume growth in March.
Provinces like Jilin, went to full lockdown around mid-March. It's order volume dropped by almost 90% compared to the pre-pandemic levels. Some lower-tier cities also adopted stricter COVID controlled measures and many cities operated by agency, suspended food delivery services. Since April, control measures were even stricter higher-tier cities that contribute to a higher percentage of our overall food delivery volume were all affected. Other volume in cities with high and mid risk areas dropped significantly in April.
For example, Shanghai started broader lockdown at the end of March. Although volume dropped by 90% versus pre-pandemic in April in Shanghai with restaurant opening for business only single-digit percentage and delivery capacity only mid-teens percentage versus pre-lockdown. They were split over into low risk and some no risk areas at late also adopted more cautious controlled measures, order volume growth in low risk and non-risk areas also materially slowed down.
Given the great COVID impact in Q2, I expect order volume growth in Q2 will materially accelerate versus Q1. However, as the pandemic was effectively brought under control in many places with more relaxing and short measures, order volume began to pick up steadily in the last 2 weeks of May. Since the end of May, restaurants in Shanghai and Beijing have been steadily resuming work. So we expect the order volume in June to show a better recovery trend than May.
Q3 and Q4 will depend on how COVID measures -- if more high-tier cities are affected, we will continue to see material impact on order volume growth. During this time, we will put more focus on high-quality growth, especially on increasing the transition frequency and thickness of medium high-frequency users. We will also optimize our operations and control subsidy, also operating profit and operating margin. For the first segment, I expect to achieve year-over-year improved in 2022.
Looking ahead, I'm still very confident for food delivery's long-term growth and our capability to achieve it. During the challenge time, we roll out packing measures to meet consumers needs very quickly. We also design measures pay up merchants to sustain normal operation in Shanghai. We quickly acted on it to roll out the community group meal model to supplement the traditional food delivery model, delivering more than 400,000 miles to about 9,000 communities in total.
In Beijing, GTV dining out was banned from holidays, we increased our delivery queries by 30% and provide long-distance delivery services. We launched citywide delivery selections and demand for high AOV long distance orders surged. From 1st to 3rd of May, order volume increased by 30% year-over-year in Beijing with cross city long distance orders increased by 40%. We are confident to stimulate consumption post the pandemic control measure and food delivery order volume growth we all expect to normalize.
Next question comes from [indiscernible]
During recent COVID resurgence [indiscernible] that autonomous delivery vehicles to Shanghai to help with on-demand delivery efforts? And could you share more on the progress of autonomous delivery operations? And what about future developments in the trajectory? And at what point will this reach the scale that will help improve the EV.
Thank you, [Jae Yeong]. Well, I'm very proud to say that Meituan Autonomous delivery has delivered nearly 2.2 million orders in total since the start of 2020. And they were used many times in COVID affected areas, assisting local governments. This time, we immediately deliver -- deployed our vehicles in Shenzhen, Shanghai and Beijing. And from early April to May 24, they deliver more than 700,000 orders in total.
In Shanghai, we helped to deliver news, grocery and other necessary daily necessities for reaching hotel -- hospital, [indiscernible] and many mobile cabin hospitals in 15 lockdown communities. We also helped to deliver nucleic acid test samples, medical supplies within hospitals. In Beijing, our ADV, that means autonomous delivery vehicle, our ADV helped to continuously deliver grocery to more than 50 communities in Shunyi District.
We are working with local community to deliver daily necessities to many lockdown areas. In addition, they were also deployed in a number of lockdown colleges nationwide to deliver hundreds of thousands of essential supplies to teachers and students. And so it's a special scenario for ADV, given high competitive risk. We amplify the advantage of using such technology to empower deliveries. These vehicles can carry close to 150 kilograms achieved and relieving the delivery capacity -- delivery couriers for years. Also, it can reduce contention risk.
In the long run, I think autonomous delivery is sustainable and technology empowered the delivery method and it will supplement in our courier-based on-demand delivery network. It includes autonomous delivery vehicles and unmanned area of vehicles or you can call them delivery drones and other robotic methods, and they will integrate the air and ground last mile delivery systems.
These innovations will better meet on-demand delivery needs in places like residential communities, office, parks, universities, open roads and so on. In future, we hope that delivery drones and ADV can supplement the existing delivery network, so as to structurally improve our delivery efficiency and unit economics while improving user experience. And this will help us to automate ultimately to fulfill our mission to help people eat better, live better.
In the short term, we will apply this technology for a pilot trial in more consumption scenarios, including universities, residential communities and surrounding areas. We will also try improve our operating efficiency in different environments. And we will also work hard to make our technology more mature using either the internal R&D or external investment.
We want to make more contribution to this in the long term.
So in short, although the future is very bright and it's not going to be met anytime soon. So I believe this is going to be a very long-term effort. The R&D of our ADV started in late 2016. So it has been more than 5 years, 5 years and a half. And right now, we have hundreds of very bright people working on our internal R&D.
So that's -- I think that's part of our new initiative, our sale segment. So it's going to be great. It will take a long time. So don't -- no hurry.
Our next question comes from Eddie Leung from Bank of America Merrill Lynch.
Thank you for all the efforts you have done in the past few months. A question on the in-store and hotel segment. Just like Ronald, could you also provide some color of the COVID lockdown impact on this segment? What's the recent performance? And any thoughts on the full year profitability and growth profile of this business?
Thank you, Eddie. In Q1, our second segment was resilient in January and February, especially driven by holiday consumption around the spring festival. GTV of in-store service was up to 30%, hotel room nights was up to nearly 15% year-over-year. From mid-March, Omicron spread to more regions including Shanghai and surrounding provinces, more higher tier cities were impacted meaningfully, with spillover effect to other regions as well, reducing offline traffic and travel significantly the higher-tier cities consist of a significant part of our in-store revenue. So severely affecting the total segment's revenue.
Merchants well needs for online marketing also reduced so online marketing revenue declined year-over-year in March as well. The impact on hotel booking was even more severe than spot services. Since April, omicron spread through even more regions including Beijing, Guangzhou and Shenzhen with strict controlled measures. For example, Shanghai went full lockdown since the end of March. From May holiday onwards, in-store dining was not allowed in Beijing.
Nonessential locations such as entertainment venues, gyms and other indoor and outdoor venues all suspended operations across different street.
After public venues required has resulted down within 48 hours, not only in places like China and Beijing, even at the lower risks regions affected, even people were cautious to tend to go out. Intercity consumptions scenario stopped and local offline consumption was subject to control measures, stop COVID dining, [indiscernible], training, duty, medical, athletics and more have to sustain operation on renew traffic.
Residents in lockdown communities also cannot visit this offline store. So business impact is even more severe for the quarter till date and the COVID impact on a second segment is materially more severe than on food delivery. The good sign is that the GTV began to pick up steadily in the last 2 weeks of May for our in-stock business, and residence in Shanghai and Beijing have been set to resuming work since the end of May.
However, given the material negative impact in April, May, I think the second segment will see quite meaningful revenue drop year-over-year in Q2. Given the uncertainty and different recovery pace in different cities, it's hard to predict for the full year performance. Business recovery is highly dependent on COVID situation, alongside our current future policy. I think our second segment, we are continuing to see negative impact in the second half of this year.
However, once the things start to normalize we will assist the government to stimulate demand for local service consumption, and we believe our in-store business will get back to healthy growth track. For example, during the May holiday, in Shenzhen, we assist the Shenzhen government in distributing consumption coupon vouchers on our platform, having -- driving GTV for in-store dining and other in-store services up by 50% and 30%, respectively, during the holiday year-over-year.
Overall, in-store GTV in Shenzhen was backed through healthy growth trend year-over-year
in May as well. However, some entering categories have not recovered fully or have traffic limited. The recovery for other in-store services is lower than in-store dining in Shenzhen at this moment. Despite short-term fluctuations, we are confident that the second segments TAM and growth in the long term. Our strategy remains unchanged.
For in-store, we will help to accelerate the digital transformation of local service industry with GTV, a key KPI.
We will also improve our product, content, supplies and traffic. For hotel bookings we will increase penetration in the low staff segment and focus on local travel. We will also continue to increase the high staff sale contribution to meet the various travel demand post-pandemic.
For small and medium and local service merchants [indiscernible] COVID, we will proactively roll out different measures to help merchants recover and get past the difficult time. We will also assist local government in stimulating consumption recovery going forward, like the work we did in Shenzhen.
Your next question comes from the line of Alicia Yap from Citi Group.
Congrats on the solid result despite a challenging environment. So we noticed the demand to stock up the food and also the necessity surge during the COVID period. So it looks like the impact on Meituan Instashopping might be different from those experienced on food delivery. So could you elaborate and share more details on the COVID impact made on Meituan Instashopping performance in the first quarter and also the second quarter. And also looking forward, how should we think about the performance for the full year 2022 and any potential future upside from this segment?
Thank you, Alicia, for your question on Meituan Instashopping. Yes, you are right. Although during lockdown, the operation, negatively impact for Meituan Instashopping. Overall, the impact was much less than that on food delivery. And the reason are follows: First, pre-lockdown made consumers rush to stock up grocery and daily necessaries.
For example, in Shanghai, we saw daily order volume and GTV surging by about 80% and 290%, respectively, during the week of March 21 versus the last week of February. . Second, traditional logistic networks also running behind schedule or had limited access in some cities, given time sensitivity and the new control measures, consumer prefer instant delivery and chose to order locally using on-demand delivery network. Third, in areas where in-store dining and delivery was restricted, supermarkets and convenience stores played a more critical role in meeting the daily needs, Meituan Instashopping merchant were in general, less effective than restaurants.
We are glad to see that Meituan Instashopping achieved strong growth across different metrics. This number of transaction and GTV growing by nearly 70% and over 80%, respectively, year-over-year in Q1. Average daily order volume also exceeded 3.9 million in Q1. Overall, Meituan Instashopping is the trusted partner to deliver everything home, and this brand awareness further strengthened during this period. More consumers embrace and enjoy ordering food and good, timely on-demand.
Meanwhile, we further increased user traffic conversion on our platform, our competitive advantage on merchant side also further strengthened with more diverse merchants onto our platform. Flowers, convenience stores and other new merchant category meaningfully accelerated. COVID has catalyzed many consumers to rely on on-demand delivery. So I expect Meituan Instashopping to benefit from the tailwind of everything now as we increase consumer mindshare and widen SKU selection.
Hence, I'm very confident in Meituan Instashopping growth potential in the long term. In 2022, we remain committed to Meituan Instashopping and is expected to increase the investment versus 2021, we will allocate more resources to capture consumer mindshare and drive the growth of our key categories.
However, I remain very confident of its profitability potential in the long run, given it's a natural extension from prepared food to more categories for the on-demand delivery. I would expect this long-term unit economics will be similar to food delivery. It also has the potential to achieve higher AOV and online marketing revenue upside.
Your next question comes from the line of Thomas Chong from Jefferies.
When we look at the numbers, the loss reductions for retail-related business were very minimal in Q1. Can you share with us more details on Meituan Select's recent performance? Also, given your core business profitability, we will likely see meaningful impact by COVID. Do you expect a greater cost reductions? What have you already done exactly to that means and what other strategies?
Thank you for a tough one, Thomas. In 2022, Meituan Select will focus more on high-quality growth. Over the last quarter, we worked on improving our supply chain capability and effective marketing. We were able to capture the consumption before surge before spring festival by providing high quality, value for money, festival goals, hence GTV before spring festival grew steadily. And during Chinese New Year, group leaders suspended operations to celebrate holidays with families.
So in February, our GTV declined. And as group leader returned to work after the holiday and our revenue growth quickly caught up to levels before the spring festival. While we keep improving our operating efficiency, our GTV also grew as we stay as the industry-leading player. And since March, omicron also impacted Meituan Select. Because in affected areas, some central and satellite warehouses suspended operations and some group leaders could not operate. Procurement was also affected in some areas.
Order volumes was negatively impacted in the second quarter so far, so was its operating efficiency. And we see gradual and improving trends in some regions. I expect, as fulfillment and logistics chain resumes and stabilizes, sales in these regions will also quickly recover.
Now overall, we maintained good growth momentum under the challenging time.
In the current environment, we have improved our ability to deal with emergency and urgent situations, and organization capability across the entire chain of operations is also improving.
And we will focus on ourselves and build up our foundations to ensure high product quality, and competitive pricing, more SKU variety, and timely delivery and good experiences for consumers. Overall, we are increasing operating efficiency and reducing cost by pursuing high-quality growth. We are also iterating operations SKUs and use management allocated to different regions.
On marketing expenses, we will reduce user acquisition costs with low conversion rates. On the back-end expenses, we also see room to go down. And I think the above measures will materialize in the next few quarters, but to grow our scale and cultivate user habits, we will also keep a fine balance between pace of cost reduction and business growth.
I think we have the cash flow and a strong balance sheet to develop new initiatives as Meituan Select. We are also confident of its long-term potential and additional landscape. In future, we will have ongoing assessment of COVID impact, core business profitability and community e-commerce developments, and we will adjust dynamically the development pace and resources allocation for Meituan Select and others.
Your final question comes from Gary Yu from Morgan Stanley.
I read that Meituan Grocery played an important role during COVID in Shanghai. So could you please share some of the details on its operation and new models, particularly on grocery group purchase? What was the unit economics like during COVID? And how do you expect your business model evolve and unit economics would be like post-COVID? And also, beyond COVID in 2022, what are your key strategies for this business?
In Shanghai, we proactively followed the government guidance and worked hard to procure our social responsibility by mainly doing 3 things right to make sure that there is a sufficient surprise.
First, we designed and rolled out an emergency plan. The priority for us was to make sure that we had enough inventory. So we immediately contacted all our suppliers, expanding supply pool, procuring and dealing directly from the producers to the front and distribution centers. We also preempted for upcoming needs and increased inventory at each front distribution center accordingly by iterating fulfillment model, increasing delivery vehicles and delivery frequency.
And second, we quickly roll out the grocery group purchase model and the government's -- government guidance. This effectively addressed the explosive demand and difficulty in buying grocery. So we prioritized the areas with high lockdown community density and close delivery capacity for this model. Residence or the grocery sourcing hub, which will be delivered together to the districts by drivers via vehicles rather than riders by [indiscernible], this is a one-stop solution for consumers various daily necessity needs and also an effective human method when delivery capacity was restrained. We delivered nearly 400,000 orders as of end of May.
And third, we quickly added the headcounts in Shanghai and reallocated staff such as the warehouse staff because -- and so on from Beijing, Guangzhou and et cetera, to Shanghai. We maximized our staffing capacity and also supplemented with autonomous delivery vehicles sent from Beijing to Shanghai. And our ADV addressed the situations where there were contactless requirements while increasing delivery efficiency so that the couriers were less exposed.
And after what we have all been through Guangzhou, Shenzhen and Shanghai, Beijing, et cetera. And we have already iterated our business to deal with the probably controlled situation in responses to government guidance. We will keep doing what we can to continue to provide stable and quality supplies. And given consumers' strong need to stock up in COVID affected regions, our AOV increased significantly as a result. And also COVID capitalized more consumers to using Meituan Grocery for 30 minutes grocery delivery.
Overall, order density as well as fulfillment efficiency also increased, have iterated new models such as grocery group purchases. In 2022, we will continue to operate the pattern at the front distribution centers with a focus on optimizing SKU management, user management and fulfillment.
Hopefully, it will lead to better user retentions and higher AOV and higher order density, and we will gradually improve our supply chain and product capabilities, increase SKUs and dynamically optimize procurement costs. Lastly, we will step up our efforts to increase efficiency, lower fulfillment costs and other expenses. So our unit economics will gradually improve over the long term.
Great. Thank you very much for all your questions. I'll now turn the call back to Ms. Scarlett Xu for her closing remarks.
Okay. Thank you for joining our call. We look forward to speaking with everyone next quarter. Thank you for your support.
Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.