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Thank you for standing by, and welcome to the Meituan First Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions]
I would now like to hand the conference over to Scarlett Xu, VP and Head of Capital Markets.
Thank you, Operator. Good evening, and good morning, everyone. Welcome to our first quarter 2023 earnings 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 2023 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 that 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 Web site.
Now I will turn the call over to Mr. Xing Wang. Please go ahead, Xing.
Thank you, Scarlett, and good evening to everyone. Since the beginning of 2023, China had experienced gradual consumption recovery. We are glad to see that the recovery of local servicing has been outpacing many other sectors, particularly, [indiscernible] retail technology platform that's deeply rooted in the on-demand retail and local services. Meituan has captured consumer's diverse demand for goods and services during the consumption recovery, with the various businesses posting healthy growth.
For the first quarter of 2023, our total revenues increased by 26.7% year-over-year to RMB58.6 billion, and adjusted EBITDA is RMB6.3 billion, and adjusted net profit RMB5.5 billion, and especially on-demand delivery has become increasingly popular among consumers, covering not only restaurant foods, also broader retail categories.
We have continued to expand our categories and selections to deliver almost everything to the consumer's doorsteps. Moreover, we have explored and developed diversified operating solutions and marketing tools that allow millions of merchants in local services to see the post-pandemic recovery opportunities, increase their revenue, and improve their operating efficiency. We are firmly committed to creating more value for all the participants in our ecosystem, and we will continue to fulfill our mission to help people eat better, live better.
Now, let me walk you through each of our business in more details. The food delivery business has continued to recover since the beginning of this year. During the first quarter, we committed to helping new merchants start their businesses and empowering all merchants to improve online operations. We then devised all the growth by better understanding the diverse consumer demand, dynamically iterating our operational strategies, and providing consumers with better products and services. We believe that food delivery is not simply moving in-store dining supply online and providing procurement services, further restructuring of restaurants and product supplies to match and create consumer demand. In the first quarter, the number of active merchants and transacting users for our platform continued to grow steadily for our food delivery business.
On the supply side, we further expanded our high-quality merchant base to enlarge high-quality supply of our platform. During the quarter, the number of newly on-boarded key accounts and city key account merchants increased year-over-year. We supported chain restaurant in their new store openings and existing store upgrades.
Meanwhile, at the end of March, we piloted a brand new promotional event called Shen Qiang Shou for merchants in Shenzhen, and later extended to Beijing in May. Shen Qiang Shou is a promotional event that integrates live streaming, short-form videos, and other formats to sell discounted high-quality products. In April, we also upgraded our monthly marketing campaign, Shen Quan Jie. In these events, merchants could offer big discounted deals through flash sale, live streaming, or short-form video to promote the low-price high-quality dishes. These events help merchants market their mega-hit products, and enhance their growth potential in combination with our existing shelf-based model.
On the demand side, as the food delivery industry experienced rapid recovery, we [swiftly] (ph) adjusted our marketing strategy and user incentive schemes, in line with the regional recovery pace and holiday demands. This resulted in notable order volume growth in travel scenarios, and mid to high [AOV] (ph) orders in the first quarter. Moreover, we continue to explore traffic growth and stimulate non-instant demand, incentivize consumers to stockpile attractive coupons in our live streaming events.
Meituan Instashopping maintained its high growth momentum during the first quarter. We reinforced the consumer mindshare of Meituan being able to deliver almost everything to their doorstep. Driven by growth in both use case and transaction frequency, Meituan Instashopping order volume increased by about 35% year-over-year in the first quarter. Leveraging various marketing events, we further expanded the quality and diversity of supply on our platform.
Annual active merchants of Meituan Instashopping increased by over 30% year-over-year. With no good specialty stores, equal average, and flowers maintaining high growth, we also further expanded the coverage of Meituan InstaMart, [foreign language], and total mix from Meituan Instamart continued to grow. We are delighted to see the consumption categories and scenarios continue to rise. During our Chinese New Year shopping festival, Nian Huo, more and more consumers chose on-demand delivery for purchasing holiday gifts for friends and families. Categories such as liquor and beverage, juice, seafood, dairy products and small appliances were quite popular among consumers.
Ahead of Valentine's Day, Women's Day this year, demand for categories such as flowers, beauty and personal care products, electronics and home appliances [indiscernible]. In addition, we strengthen the consumer measure for consulting doctor and buying medicines of Meituan. During the Chinese New Year, we offered incentives and traffic support for pharmacies that stay open for business while providing free online consultation service for people in certain regions. We also promoted our online consultation services for seasonal epidemic diseases driving high growth in order volume and consumer base in our medicine category this quarter. As demand restored, offline consumption and tribal activities have gradually recovered since the beginning of the year.
With a particularly low-cost growth during the Chinese New Year, merchants witnessed hold online promotion recovered very rapidly, so as consumers demand to find the local stores at discount, we proactively captured the offline consumption demand recovery, collaborating with the local government merchants to stimulate demand for local services and satisfy consumer's diverse needs.
In the first quarter, GTV of the in-store hotel and travel business increased by more than 52% year-over-year. With the year-over-year GTV growth in March exceeding 100%, merchant's willingness to open new stores had gradually picked up, and the number of annual active merchants reached a new high.
For the in-store business, both GTV and revenue growth accelerated month by month. We captured the consumption demand for group gathering and family meals during the Chinese New Year holiday and launched precept in-store manuals, packaged and more. We have millions of merchants across services categories, including catering, [indiscernible] for Chinese New Year [foreign language] and promoted keyword searches such as go to place for Chinese New Year [foreign language]. As we continue to expand our merchant supply, we also enriched our marketing and content format, iterated our product operating strategy and optimized the service capability of our business development team. We improved our merchant service quality and enhanced synergies across different business lines and providing merchants with the more promotional channels.
For example, leveraging holiday promotion such as Labor Day, we launched a comprehensive Meituan platform live streaming program to incentivize participants participation from any high-quality merchant provide consumer deep discounted, high-quality products to cope with the evolving consumption trends, we supported small and medium-sized merchants with a featured characteristic that mix creative ideas with traditional programs, such as flower arrangements, new houses, magic crafts to operate online and incentivize their services.
On the consumer side, we continued to strengthen our content capability and iterated short-form video contents. We piloted programs such as Special Deals [foreign language]. We provided the merchants with new marketing tools to promote mega-hit products [indiscernible] by offering the consumer high quality services at deeper discount and strengthen the consumption of consumer mindshare for finding the best deals on Meituan.
In the future, leveraging our competitive advantage in organizational capabilities, consumer mindshare, and merchant service, we will progress to iterate our operations, diversify our products and services offerings for both merchants and consumers, and ultimately help online penetration of the in-store industry.
[Indiscernible] during the first quarter. There was significant growth in both hotel room nights and GTV. During Chinese New Year holiday, year-over-year room night growth versus 2022 and 2021 both exceeded 40%. As the weather became warmer during the Chinese New Year, local accommodations and short-distance travel scenarios continued to recover and peaked for several consecutive weekends.
With the borrowed consumption trends enriched our product mix and leverage holiday promotions to enhance brand awareness. We speak about post-pandemic industry recovery capability and adopted various new marketing tactics including an optimized subsidy strategy and increase in live streaming frequency.
In the high-star hotel brand, we expanded supply, optimized our pricing mechanism, improved the merchant information available on our platform, explored in-depth collaboration with high-star chain hotels. We also optimized our packaged deal products and enhanced distribution channels. In addition, we further diversified our Hotel+X product offerings and build high-star hotel restaurants for our food delivery platforms. As a result, room night contribution from high-star hotel reached 90% in the first quarter to a record high.
In addition, we launched [outside] (ph) hotel and travel sales event and worked with Hong Kong authorities to distribute travel consumption coupons to mainland visitors. On the low-star brand, we continued to optimize our room renovation program and further develop our CRM tools and marketing solutions. These tools have helped the merchant enhance their pricing mechanism to better match market demand, allowing them to capture the industry recovery opportunity and satisfy diverse consumer needs.
On the alternative accommodation side, we continued to focus on user experience, operating efficiency, and growth in supply. Our strong performance in the first quarter demonstrated our ability to capture the industry recovery and meet the diverse accommodation needs of consumers while continuing to optimize our operating efficiency.
Now moving on to our new initiatives, we maintained an industry-leading position and continually improve operation efficiency. We continue to optimize our pricing and product management capability while maintaining high quality standard. We provided consumers with a wider more diverse selection money for value products with our nationwide next-day logistic and self-pickup network that covers cities, counties, and vast rural areas.
At the end of March, the accumulated number of transacting users had reached 450 million with the consumer service further habituated. In addition, we actively promoted the circulation of agricultural products and helped the farmers increase their income. During the first quarter, agricultural products accounted for more than 40% of total sales [indiscernible].
We established partnership with many local governments and suppliers in the product's place of origin and extended our efforts in the direct procurement of high quality agricultural products. The centralized procurement of fresh fruits and vegetables accounted for than 20% of total sales with some categories even exceeding 50%. Our initiatives have helped us bring high quality product directly from farms to consumer's dining tables.
Our engagement in rural areas also allow us to offer more employments opportunities locally with number of pick-up station in lower density markets now exceeding 1.3 million. Another business [indiscernible] grocery recorded over 50% year-on-year GTV growth in the first quarter and continued to lead the growth of the industry.
During the quarter, we continued to focus on controlling cost and improving efficiency and achieved multiple year-over-year enhancements in operational efficiency. Thanks to our digitized system, cold chain logistics, and on-demand delivery capability, we accelerated our product circulation efficiency and elevated the consumer experience, which will [foreign language].
In addition, the increase in SKU offerings and improved delivery experience also strengthened our consumer mindshare. AOV and order frequency also increased compared to the same quarter last year. We continued to deepen our partnership with the government authorities and farmers in the product's place of origin offering more seasonal locally sourced selected products. [Foreign Language] This effectively diversified our platform's supply and helped farmer increase their income. We also established in-depth collaboration with brands and launched joint branding program in selected categories to match our differentiated and customized marketing campaigns helping brands increase sales.
As the macro-economy recovered further through the rest of the 2023, we continued to incentivize consumption recovery and increased demand by optimizing our products offerings, and procurement network. We will continue to enrich our marketing tools to better meet merchant's diverse needs and increase their revenue and profit.
We will actively support merchants in expanding their service coverage, facilitating new store openings, enabling the large number of small and medium-sized merchant benefited from online operations, especially as a company that needs retail and technology. We firmly believe that technology will bring new advancements and growth opportunities for retail middlemen. We will increase our investment in technology and effectively explore the implementation of cutting-edge solutions whether this will be AI, autonomous delivery or something else, we will seek to capture tech-enabled industry growth. In the meantime, we remain committed to our mission to help people eat better, live better.
With that, I will turn the call over to Shaohui for an update on financial results.
Thank you, Xing. Hello, everyone. I will now go through our fourth quarter financial results. During this quarter, total revenue increased by 26.7% year-over-year to RMB58.6 billion boosted by strong local consumption recovery post reopening and our effective marketing measures.
Cost of revenue ratio increased on both year-over-year and quarter-over-quarter basis to 66.2% primarily due to the increased gross margin of our food delivery, Meituan Instashopping, and the goods retail business. Selling and marketing expenses ratio, R&D expenses ratio, and the G&A expenses ratio all remained flat sequentially decreased on a year-over-year basis to 17.8%, 8.6%, and 3.4% respectively, primarily benefiting from improved operating leverage driven by our focus on high-quality growth and improving operating efficiency.
Total segment operating profit and operating margin increased remarkably to RMB4.4 billion and 7.5%, respectively, compared to operating loss and operating margin of RMB 3.7 billion and a negative 8.1% in 2022. On a consolidated basis, our debt to EBITDA and adjusted net profit were RMB6.3 billion and RMB5.5 million for the quarter, turning from loss to profit on a year-over-year basis, and further increasing on a sequential basis.
Turning to our cash position, as of March 31, 2023, we continued to maintain a strong net cash position, with our cash and cash equivalents and short-term treasury investments totaling RMB111.4 billion. Cash from operating activities in the first quarter improved significantly to RMB8.1 billion, compared to cash outflow of RMB11.3 billion in the same period of 2022.
Now, let's look at our segments results, starting with core local commerce. Our core local commerce segment, the revenue increased by 25.5% year-over-year to RMB 42.9 billion, operating profit increased by 100.7% on a year-over-year basis to RMB9.4 billion. Operating margin for the segment increased by over eight percentage points, year-over-year it's 22%. On-demand delivery achieved 14.9% year-over-year order volume growth this quarter for food delivery. The overall performance of order volume growth in the first two months of the year was negatively impacted by the effect of Chinese New Year.
During the first two months of 2022, consumer demand for food delivery and merchant willingness to operate during the holiday season was quite high due to legislative policy as a result of pandemic control. In contrast, this year, many people, including delivery riders returned to their hometowns earlier following December to the opening. In addition, many merchants that were not open for business during the holiday season this year; however we have seen rapid recovery in order volumes coming in early February, which further accelerated to over 20% on a year-over-year basis, in March.
With regard to food delivery revenue, its year-over-year growth far outpaced order volume growth, mid-to-high end supply recovered faster than low-end supply during the quarter. In addition, dealers were more willing to pay for premium, large-ticket size and longer-distance orders during the Chinese New Year. The favorable order mix drove the year-over-year increase in commission and delivery service revenue, operating profit and operating margin for our food delivery business both increased meaningfully on a year-over-year basis primarily thanks to the business scale recovery, favorable order mix change, and abundant courier supply.
Turning to Meituan Instashopping, order volume growth in January was also affected by the home-returning effect. However, as work resumed after the Chinese New Year, consumer demand also recovered due to order volumes increasing rapidly starting in early February, and returning to its high-growth trajectory in March. So, the average order volume for Meituan Instashopping covered for around 11.1% of our total on-demand delivery orders during the first quarter. Average order value continued increase year-over-year because of heightened consumption demand for COVID and the fuel-related medicine, as well as increasing demand of [indiscernible] non-essential products, such as [indiscernible] electronics.
The business unit economics improved significantly year-over-year thanks to an increased order volume contribution from higher margin equipments such as flowers, improved economic scale and higher AOV. The improving AOV also driven our rapid growth of online marketing revenue primarily contribute by the expansion of online marketing merchant space and merchants' increased ARPU.
Let's now turn to our in-store, hotel, and travel business, which achieved strong revenue growth on both year-over-year and quarter-over-quarter basis. On one hand, the benefit from strong demand recovery for local seller's consumption and travel as GTV growth for in-store, travel, and hotel drove robust year-over-year and quarter-over-quarter growth in our transaction revenue this quarter. The revenue growth rate for hotel and travel were particularly significant, benefiting from a total discount in the sale of room nights and a decrease in [indiscernible].
On the other hand, we see also the willingness of merchants to hold [indiscernible] promotion is gradually recovering. However, revenue growth was slower than GTV growth, which was mainly caused by the following factors. First, that we strategically lowered the threshold of our subscription-based services for flagship service category and lower-tier cities to encourage more merchants to own our platform. Second, the retrofitting of hotel booking has boost GTV growth while contributing to a smaller portion of tax revenue. Third, merchants' volume needs more time to recovery. Operating profit and operating profit margin for our in-house, hotel, and travel business increased on both a year-over-year and on a quarter-over-quarter basis thanks to the increase operating leverage due to business scale recovery. This was partially offset by a higher revenue contribution from lower-margin hotel booking and travel business and the increases in our traffic additional expenses and merchant rebate.
Let's now turn to our new initiatives segment. During the quarter, revenue in this segment increased by 30.1% year-over-year to RMB15.7 billion, mainly due to the development of our good retail business. The segment operating loss further narrowed down to RMB5 billion from RMB6.4 billion in the fourth quarter of last year. From a [indiscernible], the continued operating efficiency improvements led to the decrease in operating loss and operating loss margin on a sequential basis. More specifically, fulfillment costs reduced thanks to more smart warehousing efforts and [indiscernible] efficiency improved attributable to better stock management [indiscernible] expenses as a percentage of [indiscernible] also went down.
From a [indiscernible], operating loss continued to narrow on a sequential basis thanks to better operating efficiency. Meanwhile, we also continued to improve operating efficiency and [to cut losses] (ph) for other new initiatives. In summary, we are pleased to see that our core local commerce segment recovered fast, and delivered strong growth, riding on the recovery of local consumption. Both our adjusted EBITDA and adjusted net income achieved a remarkable growth, and both operating cash flow and free cash flow increased significantly. We expect that recovery of China's economy could drive strong growth in our core business in the next few quarters.
Our business matrix covers a wide range of categories and price band, helping us meet different consumer needs across different stages of consumption recovery. The frequency of our users have increased over the past year, and still have huge potential to grow. Overall, we will remain confident in the non-growth potential for our core local commerce segment. Meanwhile, we will continue to narrow the operating loss of our new initiatives, and the improved operating efficiency.
With that, we are now open for Q&A.
We will now begin the question-and-answer session. [Operator Instructions] Your first question today comes from Ronald Keung with Goldman Sachs. Please go ahead.
Thank you. Thank you, Xing Wang, Shaohui, and Scarlett. So, we recently noticed that Meituan's food delivery and in-store businesses launched some new marketing formats. These include live-streaming, short-form videos, and some special deal sessions. Could you share the progress of these attempts and initiatives and future plans? Thank you.
Thank you. So, the short answer is that we are anticipating [indiscernible]. And the longer answer is we started to pilot new marketing formats for both food delivery and in-store, hotel, and travel business since a few months ago. We launched live-streaming, short-form videos, and flash sales that [indiscernible] the traffic to the products that the merchants want to promote have been [indiscernible] product. And our [indiscernible] the model so that it provides the merchant with [direct marketing] (ph) and transaction fees. And our new [indiscernible] it's an important supplement to satisfy merchants' comprehensive marketing [lease] (ph).
In March, we launched a promotional event for the food delivery business for Shen Qiang Shou, in Shenzhen, and later extended it to Beijing, in May. Looking forward, we will introduce this event to more regions. Shen Qiang Shou is a promotion event that integrates a live streaming, short-form video and other formats with our discount high-quality products. On April 18, we fully upgrade our monthly marketing campaign Shen Quan Jie and new to the live streaming we have high-quality merchant-created market leading products. And on April 18, the event day, we recognized 50% year-over-year [including] (ph) order volume, and 75% year-over-year growth in daily active users, and then over 30% week-over-week growth in the GTV for our top tier account merchants, who participated in the events. Further growth from categories such as tea, coffee, [holiday meals] (ph) were quite [indiscernible]. For May, [indiscernible] merchant who participated in the event once again achieved a notable growth with the categories expanding to [indiscernible].
Looking forward, we will continue to provide the merchants with a larger traffic, and more visually appealing marketing tools through this [indiscernible]. Through also better serve the consumers' needs for both instant consumption and stockpiling, and consumer can stockpile coupons and bills in advance and then preferably place order in multiple times. This will encourage consumer to open our Meituan app more frequently, even during non-mealtime, and incentivize the food delivery demand and the non-instant scenarios. We have also noticed that when the consumer validates coupons online and they tend to add more product to their checkout, thereby driving sales growth for other share-based product, and the overall ARPU.
We will further focus on content creation in live streaming to stimulate consumer demand for both instant consumption and stockpiling. We believe the [indiscernible] products and share-based products from us reinforce each other and have great synergies with food delivery. This will open up more long-term goals and potential for food delivery. And also, we introduced the special deals [indiscernible] for in-store, hotel, and travel at the end of March that expanded across the country in April. We partnered with a national and regional chain merchants and [indiscernible] high-quality merchants across various categories to provide consumers with high-quality [indiscernible] more traffic to these mega-hit products we have the merchant further increase sales. We also have [transparent] (ph) consumer mindshare of finding the best deals on Meituan.
On April, [indiscernible] live streaming campaign. In this campaign, we offered deep discounted coupons for in-store dining categories, such as hotpot, tea, and café. We also worked with theme parks, hotels, travel agencies, and other in-store service merchants to provide the consumers with a wide range of high-quality selections. Our visually appealing documentation have reduced barriers in consumers' decision-making process and provide then with diverse choices. Specifically, there is a Labor Day live streaming event, sales of a single product [indiscernible] 1.5 million cups. In the future, we will continue to optimize special deals, pickup-and-go, and other marketing campaigns [indiscernible] live streaming, the merchant live streaming, and KOL live streaming. We will also use the content to empower mega-hit product promotions, improve our merchant and build recommendation capabilities to better satisfy consumer demands, meanwhile further enhance synergies with our food delivery business, offering more coupons that can be used for both in-store consumption and food delivery. And this will become a more convenient and user-friendly to our consumers. Thank you.
Thank you, Xing.
The next question comes from Thomas Chong with Jefferies. Please go ahead.
Hi, good evening. Thanks, management, for taking my questions. I have a question on the food delivery side. Can management [indiscernible] the recent performance of the business, including the order volume recovery and the growth? And how should we think about the order volume and the unit economics for the second quarter? Thank you.
Thank you, Thomas, for the question. We [indiscernible] growth on food delivery, since March. March order volume growth exceeded 20% year-over-year. And in April, we see the daily order volume growth continue to rise in the market [on a month basis] (ph). Thanks to the economy recovery and our continued support in merchants' online operations and new store opening, we actually saw 25% year-over-year growth in new store openings in April, [indiscernible] and high-quality merchants who were quicker to react to the consumption recovery, and then tap their supply. Small and medium-sized merchants also started to catch up in terms of new store opening.
Therefore, supply recovered strongly across all price bands. To further intensify demand, we also [indiscernible] in certain scenarios and time periods [indiscernible]. For example, we intensified late-night net orders and [indiscernible] orders especially in popular tourist cities during holidays. We further streamlined and function through live streaming and [pop-up format] (ph), which has brought up additional traffic and order volume growth. Since April, demand from lower [indiscernible], low-frequency users, and low AOV orders continue to recover as well. Overall, we believe that food delivery will achieve high order volume growth on a year-over-year basis in the second quarter. And we also continue to believe that food delivery will benefit from the overall economic recovery and we continue to believe 100 million transaction orders target remain our mid-to-long-term goal.
On the unit economic side, starting from second quarter, we have extended our marketing efforts to increase user [indiscernible] during some marketing events such as Shen Qiang Shou and the Shen Quan Jie to incentivize consumption and help merchants sell mega-hit products. In addition, as I mentioned, demand for low AOV orders continue [to rise] (ph). So, we are going to direct marketing [related] (ph) to these areas, although [cost per user] (ph) increase compared to the same period last year, order volume growth will bring economy of scale on a cost structure.
From a seasonality perspective, usually second quarter [indiscernible] unit economics thanks to favorable weather, and we expect the quarterly supply will continue to be favorable in Q2. [Indiscernible] I just mentioned we have offset the increase in subsidy overall. We will continue to invest to incentivize consumption demand while focusing on high-quality growth and operating efficiency. Thank you.
Thank you.
The next question comes from Gary Yu with Morgan Stanley. Please go ahead.
Hi, thank you management for the opportunity. I have one question related to in-store business. Could you please share some color on the latest recovery and growth trend for the in-store hotel and travel business? And a related question to that is, to confront competition, what measures has the management taken since the first quarter and what are the resultant performances so far? And based on the current strategy, how should we think about the growth and operating margin for the In-store segment in Q2? Thank you.
Thank you, Gary, for your question. Local consumption in China continues to recover. Our in-store hotel travel business also benefits from this strong demand and maintains robust growth on a year-over-year basis, especially during China and Labor Day holidays. April GTV of in-store hotel travel continues to grow rapidly on both year-by-year and month-over-month basis, reaching three times the scale of last April.
During the recent Labor Day holidays, GTV of our in-store hotel and travel business also increased by over 200% compared to the same period in 2022. Driven by the recent offline consumption recovery, we continue to take proactive measures to solidify our competitive advantages. For example, we optimize and enrich our product format and improve the service quality for both merchants and consumers. We customize our online marketing solutions based on key tiers and service categories. We lower the threshold of subscription-based services for certain sub categories in lower tier cities and simplify the merchant onboarding process. These mergers encourage more merchant to onboard our platform and to use our online marketing services and help us improve online penetration in lower tier cities.
In addition, we refined and stratified our operation-based on merchant tiers, launched a new merchant incentive scheme and leverage offline teams to provide better services and to deepen our partnership with the key merchants. As we mentioned earlier, reliance promotions such as Special deal and live streaming events in the second quarter, it's an opportunity for merchants to create and promote major products. It satisfies consumer demand to stockpile coupons and incentivize consumption through recommendations. It further solidifies our leading position, and we will continue to enhance video content, improve our user reviews in, and optimize our LBS-based recommendations. We also actively explore new traffic acquisition channels. For example, we work with third-party platforms and broaden our distribution channels such as [indiscernible] and short-form media platforms. We expand our efforts in offline marketing and join trend in promotions. Looking ahead to the second quarter, we will continue to ride on the consumption recovery trend, accelerate our operational and marketing strategies, and solidify our advantages, especially, we will further expand the supply of high-quality share-based products while strengthening our capability to promote key products through special deals to adapt and go, and live streaming.
We will focus on spending and maintaining our merchant base and allocate more resources to our merchant intrinsic program. We will stimulate consumer non-instant demand using more video content and more deep discount deals, and enhance consumer share of finding the best deals on Meituan. Starting from the second quarter, we will roll out these strategies to broader regions to accelerate GTV growth. The increase in merchant and consumer incentives will counter revenue. The revenue growth will be lower than GTV growth. And the more marketing expenses will further impact our operating margin we believe that these investments for the long-term growth of the business is necessary. This investment will not only help us improve in the product and content, but also accelerate online penetration and further solidify our leading position in the local service industry. We remain confident in the long-term growth and the long-term operating margin of our in-store hotel and travel business. Thank you.
Thank you. The next question comes from Yang Bai with CICC. Please go ahead.
Thank you, management, for taking my question. My question is about the hotel and travel. Can you please share more details on the performance of the hotel and travel business in Q1 and its recent recovery? I noticed some recent news that our hotel bookings increased notably during this year's Labor Day holiday versus 2019. How should we think about its growth in the second quarter, and what are the key targets and strategies for this business this year?
Thank you, Bai Yang for your attention on hotel business. Since the beginning of this year, we have actively captured the industry recovery opportunity and implemented various measures on both merchant and consumer types to drive the growth. We closely follow the recent recovery trade and continue to strengthen our product and service capability to meet the diverse needs from consumers.
We launch promotional campaigns and live streaming events, leverage holidays and special themes such as Chinese New Year, Valentines Day, and Spring outings to incentivize demand and stimulate consumer bookings. We further enhance the synergy between accommodation and other business through our Hotel+X program. We also strengthen our search and recommendation functions to help consumers make booking decisions more efficiently. We are happy to see that consumer my share and our brand awareness was further elevated in the high start domain. We continue to expand to try and optimize pricing strategy. We actually promoted joined marketing event and membership programs with major hotel brands.
We provided comprehensive marketing solutions for high stock hotel merchants and helped a few brands with spectrum store operations. Our marketing solutions cover broad operating aspects including branding, catering, membership program, holiday promotions and more. On March, we have signed Hotel+X partnership agreements with over 140 hotel brands and onboarded more package deals on our platform. We also work with Travel Agency to launch features packaged tours to capture marketing opportunities. In addition, we capture the growing up our travel market and launched special campaigns to drive the growth in this domain.
We also improved our operating capabilities in corporate travel. As a result, March hotel bookings from corporate clients increased over 150% year-over-year. In April, year-over-year growth of room nights and GTV exceeded 130% and 270% respectively and during the Labor Day holiday, average daily room nights increased by close to 180% versus same period of 2022 and increased by more than 60% against the pre-pandemic level in 2019. Daily room nights also broke record high.
Looking forward to Q2 and the second-half of 2023, growth will remain as our top priority. We expect the year-over-year growth of room night in Q2 to further accelerate from the Q1 level as the industry further recovers, we will continue optimize our existing share-based model and also enhance our capability to create mega-hit products through marketing campaigns and business acceleration. We will continue to penetrate high-quality merchants, high-quality consumers, and further optimize our product and pricing mechanism. Additional, we will continue to diversify our Hotel+X product offerings in the high stock domain to actually capture the growth potential in the corporate travel and about travel areas, explore new opportunity in this industry value chain and drive the digital transformation of the hotel and travel industry. Thank you.
Thank you.
The next question comes from Alex Yao with JPMorgan. Please go ahead.
Good evening, management team. Thank you for taking my question. It looks like the transaction users have picked out in late last year. Now that you guys have discontinued to disclose annual transacting user anymore, it will be great to hear management view on how we plan to further grow users and improve user retention? Thank you.
Thank you, Alex. I'm glad you raised a question on our user growth. In 2022, both demand and supply of the local service industry were negatively net impacted by the Pandemic, in response will drastically reduce our user extension budget. Some of our existing users did not make transactions on our platform during last year because of the pandemic control measures and the weak consumption demand. Due to those reasons, the HEV growth annual transaction user growth was negatively impacted but when the pandemic was over, we saw strong discount in consumer demand for local service, so we already improved our user incentives to further stimulate consumption recovery impact, EAU active users on both our Meituan and BMT apps reached a new highs in February for the first time, and they broke records for a second time in late April before the Labor Day holiday.
Also, our company label MTU monthly transacting users achieved positive year-over-year growth by far with improving user engagement and user fitness. We also expect a healthy growth in ATU this year as the local service market in China further recovers. In addition, local service market holds great long-term potential, especially in lower tier cities, which will further flat the growth of our user base in the medium to long-term.
In the vast lower tier market, we have good opportunity to deepen user penetration as we continue to enrich supply and benefit from consumption upgrades. Going forward, transaction frequency will be the more important growth driver. We are encouraged to see that annual transition frequency per ATU has increased sequentially for the past 11 consecutive quarters. This is mainly due to our continuous improvement in platform supply, cross selling capability and brand awareness. In the past few years, we have established unique consumer mind share and delivering everything to consumer's doorstep and have become the go to platform for consumers to find stores and value for money, products and services.
Now, our goal is to further enhance the synergy and cross sale opportunity among various businesses to really build Meituan brand as a brand for everything now. We will further strengthen the consumer mind share in not only the ease and convenience also value for money. This will help improve user thickness and frequency. Our cohort data showed users who stay with us longer have higher transaction frequency and the longer they stay with us, the further increase their frequency becomes. Consumer will also cross purchase more category on our platform when they stay longer with us. For example, for users we acquired in 2015, annual frequency increased from six times in the first year to 60 times in the eighth year, 10 times growth. The average consumption category also increased from one to two in the first year to more than four categories in the eighth year, and we noticed that new users increase transaction frequency at a faster speed than earlier cohort users. Generally speaking, we are very confident in our ability to continue increase our transaction user scale and transaction frequency and users total lifetime value in the immediate long-term. Thank you.
The next question comes from [indiscernible] with CITIC Securities. Please go ahead.
Good evening, management. I'm [Ya Jiang] (ph) from CITIC. Could you please share some more information on the latest technology changes, such as AI, like, what's our progress to it or what impact it will bring to the whole industry? Does Meituan have any plans to participate in the AI area and how it's going to affect our business model? For example like were you considered to integrate any AI generated content, if there's any good model available? Thank you.
Thank you. I think by now, there should be no doubt that AI is real and coming. And in the past seven decades, since the first of the term artificial intelligence, there have been several waves of highs and lows, but this time, it's different. It appears larger language model has finally cracked the problem of mastery in human language, which is arguably the essence of human intelligence. And now, literally every week, or almost every day, there comes some exciting news about AI.
Here at Meituan, we are very excited about AI. We believe AI is going to change almost everything. It's definitely bigger than iPhone or Internet, and that's saying a lot. There are so many ways we can use AI. Or more specifically, generative AI, GenAI, and AI feature, it's just one of them. AI, this is going to change how people produce and generate content, and it will have an impact on our business. But in my opinion, what's even more important or more exciting the new interaction paradigm and the conversational AI. And this is the value with smartphone or iPads, multi-touch is now the most natural way to interact with other people. So, it's only natural for people to want to order food or book a hotel or [indiscernible] by just talking, I think that is the most natural way.
The demand has always been there. The challenge in the past is in the supply of the right technology. Now, with a larger language model, it's being to, yes, finally get there. And also, AI is going to have a huge impact on robotics. In the past four years, we have both in-house development and outside investment in robotics. And now, it seems robots are going to be much smarter. Actually, they may even get so smart that they become scary. So, AI is going to have such a huge impact in both the digital and the physical world. The regulators globally should get moving and get ready to do their job in working with science and business communities, the move to AI is a good thing, and for the whole society, and the human race.
And at Meituan, we are open to both external collaborations and [impactful] (ph) opportunities. And we have an internal team working on getting our own [transition] (ph) models and its applications. And at the moment we don't have anything to show. Honestly speaking, we are still playing catch-up. But I think the message should be clear enough, we are very committed to building our AI capabilities, and apply it to our use cases. Here we have the use cases; we have accumulated a massive amount of proprietary data. And we have the engineering and human resources, but we didn't have it. Of course, the more the better, so that's why we will be very actively investing in this, building our capability and use AI to the benefit of all people and in fulfilling our mission we have people eat better and live better. Thank you.
Thank you, Xing Wang.
There are no further questions at this time. I would now hand the conference back to Scarlett Xu for closing remarks.
Okay, thank you for joining the call. We look forward to speaking with you in the next quarter. Thank you for your support.
That does conclude our conference for today. Thank you for participating. You may now disconnect.