Meituan
HKEX:3690
Earnings Call Analysis
Q3-2023 Analysis
Meituan
The company reported a robust quarter, with significant growth in Gross Transaction Value (GTV) and room night bookings compared to both Q3 of 2022 and the pre-pandemic period in 2019. This growth underscores an evolutionary shift in consumer trends to which the company responded by diversifying its product offerings, including an expansion of discounted deals and live streaming events, which helped to attract and retain customers.
Financial resilience is demonstrated through a notable rise in total revenue, up by 22.1% year-over-year to RMB 76.5 billion, which can be attributed to the company's strategic focus on integrating retail with technology. This 'Retail + Technology' strategy is designed to enrich consumer lives by improving access to quality food and lifestyle choices.
During the traditionally investment-heavy third quarter, Meituan Select made strategic expenditures, particularly in the grocery category, to navigate challenges such as high temperatures, which required additional subsidies and promoted seasonal products. The company was able to reduce quarterly operating loss ratio sequentially, reflecting improved operating efficiency across its business segments.
The company's food delivery service experienced a 23% year-over-year growth in order volume, demonstrating a strong upward trajectory. Expectations are set for similar growth rates in Q4 based on the current year's performance, indicating stable and sustained momentum which contributes to the company's long-term growth targets.
There are indications of a potential for significant online penetration, as both quarterly active merchants and transacting users reached record highs. The dynamic consumer trends and innovative service offerings are positioned to capture this opportunity for growth, ensuring the company stays aligned with the market demand.
Certain business segments are forecast to sustain high growth rates and to further accelerate online penetration over the next few years. Impressively, segments like the restaurant SaaS business and the electric moped sharing service have seen improvements contributing to the company's positive cash flow and profitability outlook.
Despite acknowledging short term challenges in the revenue growth of certain segments like Meituan Select, which is facing growth deceleration due to macroeconomic headwinds and changes in offline consumption, the management retains confidence in the long-term profitability and growth of its core businesses and new initiatives. Strategic adjustments in operations and strategy are underway to foster efficiency and quality growth.
The company's board showing confidence in the intrinsic value of the company and long-term growth prospects, has authorized a share buyback program of up to USD 1 billion. This move is a testament to the company's financial strength, solid prospects, and commitment to delivering shareholder value.
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Thank you for standing by, and welcome to the Meituan Third Quarter 2023 Earnings Conference Call. [Operator Instructions]I would now like to hand the conference over to Scarlett Xu, VP and Head of Capital Markets. Please go ahead.
Thank you, operator. Good evening, and good morning, everyone. Welcome to our third quarter 2023 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 third 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 disclosure documents in the IR section of our website.Now I will turn the call over to Xing. Please go ahead.
Thank you, and good evening, everyone. In the first quarter, our total revenue increased by 22.1% year-over-year to RMB 65.5 billion (sic) [ RMB 76.5 billion ], and our adjusted net profit increased to RMB 5.7 billion and representing 62.4% year-over-year growth. Meanwhile, our annual transaction users and annual active merchants both experienced accelerated growth and achieved a record highs.Furthermore, purchase frequency also reached a new break peak. We continued to innovate by introducing the Everything Now lifestyle to consumers and further facilitated industrial digital transformation. We have expanded the service scope that consumers can enjoy on our platform and further diversified our product formats. Through years of business operations, we have reached a point where we are helping over 10 million merchants generate more income while also creating job opportunities for millions of couriers. Going forward, we will continue to implement our Retail + Technology strategy and provided more diverse local services to Chinese consumers, fulfilling our mission that we help people eat better and live better.During the quarter, our food delivery business maintained its robust growth momentum, especially in peak daily order volume reached a new record high to 78 million [indiscernible] doubled the level of 3 years ago. To capture more opportunities from the consumption recovery and further unlock consumption potential, we further enhanced our understanding of consumer needs across different income levels and different consumption scenarios are empowering merchants to digitize their operations.The scale of our medium and high-frequency user base, along with their purchase frequency continued to grow rapidly and user stickiness also improved. We iterated our membership program offering coupon packages of different sizes, which effectively boosted user transaction frequency. In addition, we continue to enhance consumer mindshare for a high-growth consumption scenario. For instance, during this year's milk tea marketing campaign, [Foreign Language] on the first day of autumn, over 21 million milk tea orders were made in a single day, showing a large potential of the afternoon tea category.Order growth for late-night snacks were also particularly shown in the summer, thanks to our effective marketing and subsidy strategy. During the National Day holiday, we also witnessed strong growth from travel scenarios at hotels, airports, and train stations. In addition, the value of Pin Hao Fan has become increasingly evident as more and more high-quality selections at affordable prices emerge. Pin Hao Fan allowed us to effectively add to the full delivery lease at a low price spend. Moreover, campaigns and events that promotes mega-hit products such as Shen Qiang Shou, help cultivated consumer behavior in viewing large streaming and shopping on Meituan and further enhance their transaction frequency.At the same time, they also help merchant accumulate customers, improve operational efficiencies, and enhance brand image. In September, Shen Qiang Shou launched a special live streaming session for Time-honored Brands at [Foreign Language] to celebrate Mid-Autumn Festival in Beijing, Shanghai, Shenzhen and Xi An. The session was intended to both facilitate digital transformation for Time-honored Brands and find a new growth opportunities in food delivery for them.We also offered merchants new tools for customer management, which will help them grow their customer base and revenue. Through these efforts, we further expanded the diversity and improved the quality of our platform supply. Meituan Instashopping, once again grew strongly in the third quarter with order volume, merchant base and user base all increasing notably. We further promoted the integration of online and offline retail and facilitated the rapid growth of on-demand retail. To better adapt to the evolving consumption trends, the retail industry is actively embracing the new on-demand model, which meets the needs of [indiscernible], [ BusinessNow and ServiceNow ] [Foreign Language].In fact, the Everything Now shopping style had emerged as a new norm among younger generations. Even against the backdrop of last year's high base as our Instashopping's order volume continued to achieve strong growth, reaching a peak of over 13 million daily orders on [ Chinese ] Valentine's Day in August. We further expanded our user base across [ all ] tiers. The consumers from lower tier cities growing at a faster rate than average. Meituan's transaction frequency has further accelerated, particularly among users aged 18 to 25. Young people have emerged as the primary consumer force of Meituan Instashopping.Moreover, people have started to use Meituan Instashopping in a wide variety of timeframes and consumption scenarios. For example, order mix from late-night snacks has further increased notably. During the third quarter, our annual active merchants grew by 30% year-over-year. We have not only empowered the digital transformation of a small retail model retailers. I have also established partnerships with nearly 400 brands. In addition, a number of our Meituan InstaMart [Foreign Language] now exceeded 5,000 complementing traditional offline supply. Evolving consumer demands are also driving changes on the supply side. We see retailers and brands constantly diversifying the SKU offerings align with the on-demand retail channel.During the third quarter, non-food categories such as electronics, home appliances and beauty products remained as key growth drivers. Categories such as freshly cut fruit [Foreign Language] have also emerged entering to consumers' diverse demands for quality products. We believe that on-demand retail will continue to drive consumption expansion and transform the offline retail in the future. And we are very confident that Meituan Instashopping will remain its robust growth as a leading on-demand retail platform. And our in-store hotel and travel business maintained its strong growth momentum since the beginning of this year with the GTV increasing by over 90% year-over-year in the third quarter.Quarterly active merchants grew by over 50% compared to the same period of last year and quarterly transacted users also increased substantially throughout this period. We further solidified our competitive advantages in a shop-based model and leverage short-form videos and live streaming to promote mega-hit products.Our [indiscernible] effectively revitalized the growth for our merchants, facilitated transactions for our platform and provided consumers with a better quality, more cost-effective products and services. Our in-store business grew robustly during the summer achieving a new record in monthly GTV in August. Throughout the third quarter, we continued to iterate and refine our live streaming and Special Deals [Foreign Language]. Then we introduced the Must-Eat Festival [Foreign Language] for the first time, offering consumers cost-effective products and engaging content and leveraging our in-depth understanding of consumer behavior and LBS features, coupled with an improvement in our product capabilities, our live streaming session can effectively bring in nearby consumers with specific consumption needs.We also see the opportunities during the Mid-Autumn Festival and National Day holiday [Foreign Language], optimizing our Meituan Platform, live streaming [Foreign Language], we showcased [Foreign Language] and wedding expert [Foreign Language]. With Meituan Platform live streaming now covering more than 200 cities, the number of live streaming sessions have increased 10x sequentially and their GTV contribution has grown substantially. We also enhanced our service offerings and boosted our AI capabilities to reduce entry barrier for merchants to engage in live streaming on Meituan.Furthermore, we refined our operations and optimize the user traffic allocation for Special Deals [Foreign Language] reinforcing consumer mindshare as the go-to platform for value for money purchases. These initiatives also motivated more merchants to offer high-quality part effective products value increased transaction volumes on our platform.During the summer holidays and the National Day on the week, we proactively launched a number of marketing events and in-based promotions to drive growth. For example, we jointly launched the first Online Beauty Expo, [Foreign Language] in collaboration with over 30 brands. We introduced over 150 mega-hit products covering a broader range of services, including facial treatment, hair salons, manicures, [ dental care ] [indiscernible]. And these initiatives sparked significant interest in terms of consumption.During the quarter, we collaborated with 20,000 merchants and launched the first-ever Must-Eat Festival. During the festival, we encouraged the merchant to offer consumers Must-Eat Set Meals, [Foreign Language] at affordable prices. In addition, we introduced a Must-Eat Festival markets [Foreign Language], an offline event that allows consumers to sample dishes from various restaurants issued on our Must-Eat list. This initiative helped boost in-store dining consumption and nearby shopping centers.Our hotels and travel business continued its strong growth trajectory in the third quarter, with both GTV and room nights growing robustly compared to both the third quarter of 2022 and 2019. We successfully captured the summer big season closely track the evolving consumption trends and further diversified our products offering.For example, we introduced a greater number of discounted deals [Foreign Language] and increased the frequency of live streaming sessions on our platform. We also expanded quality supply and optimized the price competitiveness to meet the increasingly diverse needs from consumers. After launching the Stay For More brands [Foreign Language] last quarter, we further enriched our Hotel + X packaged deals and enhanced our consumer mindshare through promotions, marketing campaigns and live streaming events.In August, we unveiled the last Must-Stay List for 2023 or [Foreign Language], featuring a selection of over 900 hotels. We expanded our promotional efforts through live streaming and joint marketing collaborations with the high-star hotel. For small and medium-sized hotel merchants. We made our best effort to understand their different operational needs and pain points. We helped them improve traffic acquisition, provide room renovation solutions and broadened promotional channel all aimed at boosting their earnings. Room nights or alternative accommodation also continued to grow rapidly during the third quarter. We enhanced our platform's self-service capabilities of consumers make more efficient and better informed choices and enhance the whole operational efficiency.And now turning to our new initiative segment. First, Meituan Select maintained its market position in the third quarter with enhanced operating efficiency. We reinforced our product and pricing capabilities to provide more value for money selections. We also continually refined our logistic network and increased the density of high-quality pickup station, elevating the overall fulfillment experience for consumers. We continue to expand Meituan Select user base and have accumulated 490 million transacting user at the end of September.Meanwhile, we have been helping farmers increase income, facilitating the circulation of agricultural products and boosting the earnings for small business owners. Meituan Grocery, that's [indiscernible] delivered the further strong growth, the GTV growing rapidly in the third quarter. And we are pleased to see that Meituan Grocery has increasingly become the preferred choice for consumers with its user base, purchase frequency and average order value, all increasing steadily.During the quarter, we solidified our pricing advantage, optimized our logistic network and improved the operational efficiency across the entire supply chain. In addition, we enhanced the breadth and depth of our product offerings and leverage the holiday promotions to satisfy consumers' diverse needs and strengthen consumer mindshare. For example, sales of mooncakes and seafood experienced high growth during the holiday season.Moreover, our continuous improvement of private label products ensure that our consumers can access a wider range of high-quality items with a guaranteed supply. Since the beginning of the year, the number of macro policies aimed to promote economic growth and consumption have been unveiled, and we believe consumer demand will gradually recover next year and we will adapt to the evolving consumption trends and iterate our products and operational strategies and provide consumers with a more cost-effective products and services.We intend to play an active role in enhancing the industry ecosystem and create more job opportunities and help stimulate consumption. And looking ahead, we will continue to focus on our Retail + Technology strategy to help people eat better, live better.So 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 third quarter financial results. During this quarter, our businesses delivered resilient growth with our total revenue increasing by 22.1% year-over-year to RMB 76.5 billion. Cost of revenue ratio decreased 5.7 percentage points year-over-year to 64.7%, primarily due to the improved gross margin of our food delivery Meituan Instashopping and goods retail businesses as well as the increased contribution of online marketing service revenue.Selling and marketing expenses ratio increased 4.7 percentage points year-over-year to 22.1%, mainly due to our increased promotion, advertising, user incentives and the employee benefit to stimulate consumption and solidify our competitive advantage. And the expenses ratio and G&A expense ratio both decreased year-over-year to 7% and 3.3%, respectively, probably benefiting from improved operating leverage.Our focus on stimulating high-quality growth and improving operating efficiency drove substantial year-over-year growth in total segment operating profit and operating margin. Total segment operating profit increased from RMB 2.5 billion to RMB 5 billion, and the operating margin increased from 4.1% to 6.5%. On a consolidated basis, our adjusted net profit increased significantly year-over-year, reaching RMB 5.7 billion this quarter.Turning to our cash position. As of September 30, 2023, we maintain our strong net cash position with our cash and cash equivalents and short-term treasury investments totaling RMB 133.6 billion. In the third quarter, cash generated from operating activities improved significantly year-over-year to RMB 11.2 billion.Now let's look at our segment results. Starting with core local commerce. Our core local commerce segment's revenue increased by 24.5% year-over-year to RMB 57.7 billion. Operating profit increased year-over-year to RMB 10.1 billion. Operating margin was 17.5% this quarter.During the third quarter, our on-demand delivery delivered resilient growth with order volume growing 23% year-over-year. For food delivery, we saw a steady growth in both monthly transacting users and their average purchase frequency. Order volume, 2-year CAGR slightly increased as compared to the second quarter despite the external challenges and the negative impact of extreme weather.On the unit economics side, average order value declined year-over-year against last year's high base. The decline was also a natural result of the recovery of small and medium-sized restaurants. At the same time, our strengthened marketing efforts to stimulate consumer demand and acquired users led to a year-over-year increase in subsidy spending. However, we continue to benefit from the abundant supply of couriers, order volume growth also drove economies of scale on the cost side, while the increase in marketing demand from merchants drove the strong growth in online marketing service revenue this quarter. These favorable factors helped to offset the increase in subsidy and lower AOV.Notably, operating profit order continue to increase on a year-over-year basis. In Meituan Instashopping, order volume grew robustly with steady average order volume reaching 7.6 million this quarter. Importantly, the year-over-year growth rate of order volume continued to accelerate from the second quarter, even again last year's high base. We further invested in user mindshare to drive growth and ramp up marketing expenditure for holiday promotions and medicine category. These investments yield positive results with both the scale of transaction users and their purchase frequency grow rapidly.At the same time, we saw that offline retailers and brands were increasingly willing to allocate marketing budget to our platform. As a result, online marketing services revenue achieved a remarkable year-over-year growth of about 120% again, while Meituan Instashopping revenue growth to outpace order volume growth this quarter. Unit economics improved compared to the same period of last year, driven by heightened advertising monetization, abundant courier supply and enhanced economy scale.Now let's turn to our in-store hotel and travel business. The third quarter was peak season for local services. we strategically increased investments to support merchants and incentivize consumers. At the same time, we allocated sufficient resources to marketing and promotional events to successfully drive growth. GTV for in-store hotel and travel achieved very robust growth and revenue grew at a slower pace than GTV.Notably, the [transaction]-based service revenue growth for our in-store and travel business was very strong year-over-year. We have seen an accelerated utilization of [indiscernible] local service industry. The consumer demand for services like GTV achieved along with other [ live and on-demand services ] was particularly high. Our hotel and travel business maintained its robust growth in both the room night scale and ADR this quarter. Online marketing services revenue growth was slower compared to commission revenue as subscription-based revenue remained flat compared to the same period last year due to the adjustment on annual fees in certain categories in lower-tier cities.However, we are pleased to see that merchants' willingness to [indiscernible] online gradually recovered. This trend is reflecting in the fast growth in both the number of merchants and their spending on placing performance-based ads, which has led to rapid recovery and performance-based advertising revenue.Operating profit remained relatively stable compared to the second quarter. The sequential decline in operating profit margin was mainly due to our increased marketing efforts to capture peak season opportunities and strengthen our competitive advantages. Nevertheless, we remain confident in the long-term profitability potential of the in-store hotel and travel business.Turning to our new initiatives. During this quarter, revenue in this segment increased by 15.3% year-over-year to RMB 18.8 billion, mainly due to the development of our goods retail business and partially offset by the contraction of our self-operated ride-sharing business model. The segment's operating loss ratio further narrowed to 27.2% from 31% in the second quarter of this year.For Meituan Select, the third quarter is traditionally the investment season for grocery. In fact, we increase the subsidy for seasonal summer products and roll out more seasonal promotions. We also maintained significant expenditure on co-chain and logistics to handle the challenges posed by highest temperatures.Despite these factors, our improved business operating efficiency led to a narrowing of the quarterly operating loss ratio on a sequential basis. Meanwhile, many of our other new initiatives continue to make good progress enhancing their operating efficiency.In summary, despite external challenges, our core business once again grew resilient, setting new record cross-market performance metrics. We are actively exploring more effective measures to navigate changes in the external environment. Our confidence in the long-term potential for our core business remains intact. This business has proven their resilience and strong durability over the past decade. We believe our experience and the strong execution capability will equip us to confront challenges, strengthen our competitive mode and capitalize on new opportunities in the future. Meanwhile, we will continue to pursue high growth strategy for our new initiatives and continue to improve operating efficiency.With that, [indiscernible] Q&A.
[Operator Instructions] The first question today comes from Gary Yu with Morgan Stanley.
In light of the current macro environment and consumer sentiment, I just want to see how would the demand and order growth for food delivery be affected? And also would the medium and long-term growth targets for food delivery still be intact. And also, have you seen any impact on Meituan Instashopping?
Firstly, as we mentioned, despite external challenges, our on-demand delivery business still posted high growth rate and other consumption-related factors. Its order volume grew by 23% year-over-year, order volume of food delivery kicked at 78 million during this summer about from 3 years ago. Meituan financial shopping also maintained rapid growth picking at 30 million orders on Chinese Valentine's Day, a new record.That said, consumers tend to be more cautious and prefer value for money selections. The demand growth for food delivery and work scenarios was affected, but we proactively vetted to these changes. For example, we expected supply in more low ticket size and high-quality selections. We also accelerated our strategy and efficiency in Pin Hao Fan, so that we can better meet consumers' evolving demand through a more efficient delivery format.In addition, for those who prefer high quality or group delivery meals, we also provide value for money, high-quality selection through Shen Qiang Shou. We partner with high-quality restaurants, leverage live streaming to stimulate consumers' now instant demand. We also optimized our membership program and cultivate consumer mindshare and looking for value for money deals at Meituan helping boost transaction frequency.Meanwhile, we are continuously exploring other effective ways to cope with the changing consumption trends. For Meituan Instashopping with order volume, 2-year CAGR was around 50% for the past 3 quarters. On-demand retail is a natural extension of food delivery and has large potential of online penetration across [ geography ], across category and across consumption scenarios. Innovative supply formats such as Meituan InstaMart, Meituan [Foreign Language] are specifically tailored to cope with the on-demand channel. It generates incremental growth for our business. Consumer mindshare and on-demand retail has increasingly deepened post-pandemic.Demand has increased across different scenarios in the third quarter, especially during nighttime and in travel scenarios. Data showed that Meituan Instashopping users or the food delivery much more frequently compared to non-Meituan Instashopping users. They represent our high-quality user base who have stronger purchasing power and loyalty to our platform. We expect huge upside in the transition frequency and approve for these core users as we continue to enhance supply.In the medium to long-term, we believe microeconomics in China will respectively recover. We have strong confidence in long-term growth potential for food delivery and for Meituan Instashopping. With our competitive mode and execution record, we believe we've impacted the growth opportunity. We remain confident on its business and the outlook of the long term growth target remains unchanged.
The next question comes from Thomas Chong with Jefferies.
Could management share about what you are seeing in food delivery and Meituan Instashopping? Basically how should we expect the order growth and financial for these two business as we head into Q4?
Okay. I will further take this question to explain our outlook for the Q4. We think 2-year CAGR of our order volume in Q4 to be similar expect of their first 9 months this year. There are several factors affecting the order volume growth. First, the impact from power macro environment or the volume growth, especially in what basic scenarios. Second this year's weather is pretty warm in October November, one weather doesn't help to deliver on the growth in the winter season. So more people return to offline consumption as compared to last year, so negatively impacted food deliveries, order volume growth.Here, we try our best to expand supply, optimize operations and improve efficiency. We think in Q4 these efforts will help drive consumption frequency among high-quality users and better satisfy demand in low ticket priced meals for more mass market consumers. For Meituan Instashopping despite having a high base in Q4 last year, the recent order volume is still growing healthily.We will continue to provide better supply for categories and enhance consumer mindshare. We expect the 2-year CAGR of order volume in Q4 to be around 45%, notably outpacing the growth in broader e-commerce space. Our financial outlook, we think in Q4, revenue year-over-year growth for food delivery will be slightly lower than the Q3 growth rate. Q4 revenue growth for Meituan Instashopping, we have the similar effect of the order volume.First, we think AOV will decline compared to the last Q4 of both business. For the food delivery business, large ticket size, [ family ] orders and long distance orders contribute much higher percentage in Q4 last year due to COVID. In the meantime, many SME merchants suspended operation in Q4 last year. These reasons lead to an extreme high base for AOV in last Q4. The full recovery of SME merchants and consumption behavior changes this year leads to the meaningful decline in both AOV in Q4 for food delivery.For Meituan Instashopping consumer demand to stockpile daily necessities and medicines were too high in Q4 last year. So AOV in Q4 last year was also in extremely high base. In addition, we spend less in marketing and subsidy last year due to the strong demand. In this Q4, we are stepping up our marketing efforts to stimulate demand under the current consumption environment. Higher subsidy will also counter revenue. On profit side, the cost savings from the sufficient courier supply and improved economies of scale will be offset by a decrease in AOV. At the same time, such that the order will increase quite meaningfully in Q4 on a year-over-year basis to stimulate demand.
The next question comes from Kenneth Fong with UBS.
For many categories in in-store hotel and travel sector usually benefits from the consumption upgrade given the recent macro headwind, how should we think about the impact to our in-store hotel and travel business? And how should we forecast this GTV growth in the next 1 to 2 years?
In the first 3 quarters, we noticed that the service retail grew by 18.9% year-over-year in China, much higher than the total retail sales of consumer goods. This shows that demand for service retail is still very strong. And thanks to our decade long experience in this sector and the rapid growth in online penetration, our in-store hotel and travel business maintained very high growth in Q3.In this environment, more and more consumers actually prefer value for money selections online. They are more price sensitive and usually compare prices among different channels before they make purchase decisions. On Meituan, we offer a range of coupons and packaged deals and more affordable prices and offline walk-in prices. Through our digital operation, we have gained strong consumer mindshare in finding stores and discounts. [Foreign Language] on Meituan Platform, we can help -- which can help us back to the changing consumption trend.In addition, we have a strong know-hows in the pricing of package deals and [ LBS ] so we can help merchants design popular packaged deals that match consumer demand. We also have merchants with traffic acquisition, so that the merchants can effectively attract consumers that encourage more consumers to complete transaction online. We are glad to see our quarterly active merchants and quarterly transacting users both reach record high, and there is still a large room for further online penetration.Now merchants and consumers pay more attention to the value that Meituan Platform offers. The consumption trends also start to emerge, for example, self-service tea house [Foreign Language], self-service [indiscernible] [Foreign Language] are becoming popular my young people. Co-branding and beverage, [Foreign Language] and [ post ] concept dining also grew increasing popularity. We keep up with the latest consumption trends and innovate our offerings and services to meet consumers' demand.We not only accelerate our existing share-based model also enhanced our special deals to [Foreign Language] section promote low price. In addition, we use live streaming to help merchants sell [Foreign Language] value for money packaged deals and incentivize consumers to stockpile coupons. GTV condition from live streaming rapidly increased in the past quarter. With all these measures, we are better positioned to meet the changing consumption trends and meet demand all in one place. Looking ahead, service retail will continue to be a key growth engine of China's economy. Online penetration of service retail is [indiscernible] of goods retail. So we believe there is still a large room to grow.Also consumer demand and service retailing is becoming more diverse. We are confident that our in-store hotel and travel business will continue to benefit from the strong progress. And considering the competitive landscape, we are going to roll out a series of measures to capital growing market and strengthen our market position, while these measures might impact short-term monetization rate and profit margin, we expect this business to maintain a high growth rate over the next few years even accelerate online penetration.
The next question comes from Ya Jiang with Citic Securities Company.
My question is also about the in-store hotel and travel business. Can you please provide some color on the performance during mid-autumn festival in the National Day holiday? And how should we envisage Q4 growth in the competition? And if the competition becomes more intense, will Q4 OPM be lower than Q3?
Yes, we have continued to enhance our live streaming capability in the last 2 quarters as a result of live streaming section successfully satisfied consumer demand during the holidays. The average number of live stream sections today during the September increased by 300% from June. GTV even surged by over 40x. We were in the National Day Golden Week. We also launched a variety of holiday themed promotions helping both daily transaction value of in-house and travel increased by over 150% versus 2019.For the hotel business, many tourist destinations experienced greater popularity and even had a hotel room shortage during the Golden Week and in some niche, but special tourist cities room nights increased versus 2019. This year, we further enhanced internal traffic allocation and cross-selling on our platform. We also trended external marketing channels. These measures help strengthen consumer mindshare in our space for more brands [Foreign Language]. In addition, we step up our marketing efforts to help merchants on our Must-Stay List, [Foreign Language] organize live streaming sections for these merchants. As a result, merchants on our Must-Stay List experienced 120% increase in number of bookings compared to the preholiday period.During the summer holiday and National Day Golden Week, we see a strong growth momentum in service retailing. We refine and diversify our marketing strategy, which generate positive results. We also strengthened consumer mindshare, enhance our content capability, and offer more marketing tools for merchants. In Q4, we just had a double 11 campaign. We will like more promotions and activities for the year end shopping festival. The market is still at a high-growth stage, particularly, there is a large potential for online penetration in lower-tier cities and a lot of new categories.We want to further enhance the existing users mindshare and to penetrate deeper into lower-tier markets. So in Q4, we will make more targeted investments and dynamically adjust our marketing strategy to drive growth. We estimate to further step up our marketing expenses on a sequential basis and significantly expand our local business development team in Q4 in a lower-tier cities, which will impact profitability. We are confident that our business scale should continue to grow rapidly during this investment.As for competition, we always view it from a positive perspective. There is still a large potential for online penetration in local service industry. We believe competition helps accelerate this process and benefit both consumers and merchants. It also pushes harder to make more innovations and positive changes. We need to make short-term investments to develop new markets or to optimize our products, and this may impact near-term profitability. These investments are necessary. It's not just about the current competitive environment, we also believe this will help us making long-term sustainable growth.Looking ahead, we will dynamically assess our investment ROI and allocate resources accordingly. We will strengthen our capability in content operations as well as consumer and merchant mindshare. We remain confident in the long-term growth and long-term profitability for in-store hotel travel business.
The next question comes from Alex Yao with JPMorgan.
Based on the recent 2 quarters' financials, there seems to be challenges to the loss reduction of the new initiatives segment. In addition, the segment growth is much slower than the core business, given the loss mainly came from Meituan Select, do you plan to make any strategic changes or adjustment to Meituan Select? How should we expect it's revenue growth and operating loss going forward? Do you have a sense of the breakeven point for Meituan Select? And lastly, any update for the other new initiatives? How should we think about your long-term financial returns.
I will take this question. So I totally understand shareholders may be quite concerned about the revenue growth of our new initiative segment. So first, allow me to clarify. Our new initiative segments consist of not one business, but a bunch of different businesses. And they have different accounting treatments and revenue recognition ways, which would impact revenue growth. So revenue growth of our new initiatives segment slowed down in Q2 and Q3, mainly due to revenue mix change. So first, for ride-sharing, we shut down the self-operating model in March. So Q3 revenue of ride-sharing is planned sharply because cash up year-over-year.And second, our B2B food service distribution business that's [indiscernible] reported a faster growth from its marketplace model, the 3P service. 3P service revenue on a net basis compared to the 1P service, which can be booked on a gross basis. So the 3P 1P mix change negatively impacted its revenue growth. Actually, the quality base is growing very nicely. It's just a different accounting treatment. So if you exclude these two factors, growth of this segment is actually quite similar as the growth of the core segment in Q3.In Q4, we will face more pressure from new industry's revenue growth. The impact from ride-sharing scaling back and [indiscernible] revenue mix change will still be there. It will persist. And in addition, both Meituan Maicai and Meituan Select had high -- very high base in Q4 last year and due to COVID surge at that time.And yes, as you probably know, a lot -- a very big chunk of the loss is from the Meituan Select. So I will address to him and for the recent macro headwinds and offline consumption recovery, the growth of Meituan Select slowed down a little bit. And we need more time to iterate our operations. But first, I need to elaborate how we look at the Meituan Select business. So this way, is part of our growth rate strategy.But remember that the mission of the company is to help people eat better, live better. We are very serious about our mission. So I believe in future, as has been proven in the past several years. In future, more and more people will use food delivery. They don't have to book for themselves. But there are still a big chunk of people who prefer for whatever region to book for themselves, and they need to buy grocery. So that means grocery is particularly important and particularly big category of retail.It's big, it's important, but it's particularly difficult. So in the past 20 years, either in the U.S. or in China, people have tried many ways to make online grocery work. So far, it hasn't been very successful, because grocery is such an important category of retail and also along the way, if you can make online grocery work, you must have cracked the problem of building a different type of registered network.And on top of that, that just better work, that's a huge potential for other general merchandise. So I think that's why online grocery in general or Meituan Select in particular is, I believe, may have big potential. But it's very difficult because it requires the platform to build a different type of fulfillment network. So that's why we have been trying -- we have been doing trial and error for the past 3 years that passed.So that's the first strategic value of Meituan Select because grocery itself is big. And second, our Meituan Select business is effectively helping -- help us bring new users and increase the user prudency and create cross-sell opportunities, so that is value. As I said, it's quite difficult because for all other regions -- so if you look at the numbers, it's growing, the growth has slowed down a little bit. And we are looking into the regions, and I think we have identified the regions and we have revised the strategy to improve the operation.So this way, we are very focused on building and improving the business, and we will make adjustments in strategy and operations, but not that kind of a strategic investment you are talking about. So I think we are going to improve the business. So for this past quarter and the coming quarters. I think the revenue will keep growing. The operating loss, it will -- or in the past quarter, the operating loss remained sort of flat on sequential base because the total size is bigger. So that means the loss margin is narrowing down sequentially. So I think that's a good sign.But of course, we are trying our best to improve faster. I think it will take some time. So going forward, we will keep focusing on high-quality growth and improve efficiency in all plans. And we expect the loss will narrow significantly in the next 3 years. In the long run, we still believe we can achieve along profitability and create a very big value. So that's my take on Meituan Select. And for other new initiatives, I think they have more good news, efficiency continued to improve and their path to profitability is clear.For example, our [ Kuailv ] and our restaurant SaaS business have both become the #1 player in China and efficiently improved continually during the past 2 years, and they help increase merchant stickiness with our platform. And also, our bike-sharing business has achieved a positive EBIT for 2 consecutive quarters. And also, our electric moped sharing business also improved and realized positive cash flow.And last year, our shared power bank business already become profitable. And this year, we further improved the operating efficiency. So overall, we remain quite confident to be able to achieve a stand-alone profitability for most of our new steps, not to mention the tremendous strategic value they may bring to us.On the other hand, I think that we are a rationale company. So if we realize we can do the realization that any of the new initiatives had very limited chance to make a stand-alone significant profit in the long run, we will address our strategy. And also, accordingly, we will adjust the resource allocation. I think that's the rationale.
The next question comes from Ronald Keung with Goldman Sachs.
So we've seen that the operating cash flow has significantly improved this year and has become more stable. So when the company has sufficient net cash and as the core business generates stable profits, just what is management's plan for capital allocation? And do we have a buyback plan as we see share price upside from a long-term perspective?
Yes, we have noticed -- a lot of companies are doing share buybacks straightly. We understand it's a good way to allocate capital for those companies, particularly those companies with mature and stable businesses and strong cash reserves. Especially if a price is significantly lower below company's so-called intrinsic values. So to benefit both the company itself and its shareholders for longer term. So for us, I think, first, we need to make sure given -- make sure we have enough cash. So given the current interest rate of the U.S. dollars, I think we need to make sure we have enough cash overseas, not just enough cash overseas, we pay our bonds in the coming future. So I think that's the bottom line.And on the business side, I think our new initiatives are still at investment stage. We are also exploring overseas opportunities. But we believe investing resources into our businesses and help us better capture market opportunities. Also, they will allow us to participate more in the industry transformation process and solidify our competitive mode.At the same time, from a longer-term perspective, of course, I believe our company is undervalued at the current share price. So we are confident about the long-term growth and the long-term value of our company. So we think that the current share price only reflects value of the one business as a food delivery, so we have had a very serious discussion about share buyback at our Board -- last Board meeting. And the Board has discussed and authorized us to do a share buyback up to USD 1 billion.So of course, we will take it into consideration, and you mentioned investment opportunities in our businesses and our cash flow and cash position with onshore and offshore and our stock price. I think that's the answer you want to hear.
There are no further questions at this time. I'll now hand the call back over to Scarlett Xu for closing remarks.
Okay. Thank you for joining our call. We look forward to speaking with everyone next quarter. Thank you.
That does conclude our conference for today. Thank you for participating. You may now disconnect.