GreenTree Hospitality Group Ltd. Annual Report: A Simple Breakdown

I’m putting together this guide to help you understand GreenTree Hospitality Group’s latest annual report. Think of this as a plain-English breakdown of how the company is doing, where they’re headed, and what you should watch as an investor.

1. What does the company do and how did they perform?

GreenTree is a major player in the Chinese hospitality market, running hotels and restaurants. They use two main business models:

• Leased-and-Operated: The company leases properties, manages staff, and pays all rent and labor costs.
• Franchised-and-Managed: The company licenses its brand to third-party owners. This is their main growth engine, making up most of their 4,580 hotels. It allows them to grow quickly without spending as much of their own capital.

Growth Update: Expansion is slowing as the company faces a more cautious economy and difficulty securing prime locations in saturated major cities. While they have 1,260 hotels in the pipeline, the pace of new openings has moderated.

2. Financial performance: The struggle to balance price and occupancy

The company is currently facing pressure on its pricing power. For their franchised hotels, the average price a guest pays per night dropped from 178 RMB in 2023 to 163 RMB in 2025. Simultaneously, the occupancy rate fell from 75.8% to 69.4%.

As a result, the revenue generated per room for franchised hotels dropped from 135 RMB to 113 RMB. Because fixed costs remain high, this decline in per-room revenue puts direct pressure on profit margins.

3. Operational strengths and risks

The "franchise-first" strategy allows for rapid scaling, but it creates operational challenges. Because the company does not own the buildings, they have limited control over daily quality and safety, which poses a risk to brand reputation. On the positive side, they maintain a strong loyalty program with over 111 million members. Approximately 72% of their bookings come directly through their own channels, which helps them avoid the high commission fees charged by third-party travel websites.

4. Financial health and risks

The company’s financial health is increasingly tied to the success of its franchisees. GreenTree has begun lending money to partners to help them open new locations; however, these loans carry inherent risks, as there is no guarantee these partners will remain profitable or be able to repay the debt.

Key Investor Risks:

• Tax Risk: The company anticipates it may be classified as a "Passive Foreign Investment Company" (PFIC) for 2025. This can lead to complex tax reporting requirements and potentially higher tax bills for U.S. investors.
• Concentrated Control: Founder Alex S. Xu and his partners control approximately 94.4% of the voting power. This leaves minority shareholders with very little influence over board decisions or corporate strategy.
• Legal Jurisdiction: Because the company is based in the Cayman Islands and operates primarily in China, it is difficult for U.S. investors to pursue legal action or enforce U.S. court judgments against the company.

5. Future outlook

GreenTree is shifting its focus toward smaller, less competitive cities where real estate costs are lower. They are also attempting to enter the luxury market to attract higher-spending travelers. These moves represent a strategic pivot into new territory where the company has yet to establish a proven track record.

Investor Takeaway: GreenTree is navigating a difficult transition period characterized by lower occupancy and pricing pressure. When considering an investment in GHG, weigh the strength of their direct-booking loyalty program against the significant risks associated with their corporate governance, potential PFIC tax status, and the challenges of entering the premium hospitality market.

Note: This report covers the year ending December 31, 2025. The company’s shares trade on the NYSE under GHG.