Dan Xu: Just one last quick question for me. With the disposal of Urban and also the deconsolidation of Argyle, do we expect any disposal gain or loss or any impairment that might occur later in the future after the first half impairment already being impacted?
Alex Xu: I will elaborate a little bit, then Selina will add. The disposal of the interest in Urban, that is completely , and there will be no more impairment on that end, but with Argyle because we’re still the majority of the shareholders, so we have the numbers in the book. But because of the performance in 2022, we expected lower. So we had, I believe significant impairment in the second half of 2022 because of the Argyle portion and — but I will leave that balance to Selina.
Selina Yang: I think you’re — yes, Alex, this is correct. For Urban, because Urban has purchased the interest back totally, so there is no further impairment in the future for Urban. For Argyle, actually, we recorded in the long-term investment both in PL and balance sheet. So they’re very, very little mature in the future.
Alex Xu: From my understanding is the amount of the residual value in those long-term investments is insignificant. And with that, I think we have — we’ll be able to completely really focused on our core and again growth. That give us resources and instead of focusing on some of the problem-solving products so give our team time and energy. I’m just talking about new core organic growth plan.
Operator: The next question comes from .
Unidentified Analyst: I have one more question. What are the company’s future plan for food and the beverage acquisitions?
Alex Xu: Let me elaborate on that. As you just heard the numbers, our 2 distinguished brands in the restaurant side, many, many people sometimes think that legacy brand over 20-something years. But the history of the food and the restaurant services indicated that there are not too many brands in China that can survive and grow in the 20-year period. So this really demonstrated both brands’ sustainability and their management capabilities. So we have the locations in the past of those 2 restaurants in high-speed train stations and in supermarket centers and in shopping malls. Those are primary locations of these restaurants. You disclosed the numbers, so the traffic to those areas gets reduced dramatically because of the pandemic.
Also some of them because of the online shifting consumption trend. So, in the future, with the resumption of the travels, so both the traffic to the high-speed train stations to the local supermarket centers and the shopping malls, we resume, especially the high-speed train stations, we think those hubs will recover the quickest and the fullest. Supermarket centers and the local shopping malls still are under a lot of pressure because the more — new — many new malls opening and therefore, are cutting back on the traffic to the existing malls. And the supermarket centers, many demands are moving to online and the many alternative formats in the supermarket deliveries. So we — as a result of that, I believe we still are managing to have a good and healthy operations for the past 3 years.
And again, just showing to our people that the capabilities we have over there. So in light of that, so the new trend that our new focus of the growth plan is going to be focusing on opening more restaurants in the community centers, servicing the local communities and the retirement communities in a more efficient way. And also on the product side, we want to develop called affordable luxury and great products and great service at affordable cost, and we also will enhance our delivery capabilities and to increase presented the delivery revenues. And fourthly, we will also leveraging our hotel, facilities and hotel resources. One of the reasons, , we have a healthy hotel operating margin is because we are able to managing all aspects of the hotel segments, service segment well, including breakfast restaurant services, room revenues.
And as a result, and the companies of these and we have a healthier margin than most of our competitors or than the industry average. And so we’ll continue to leveraging that and to increase the food quality and services for both on the breakfast and in certain hotels, we started providing full day dining, we’re talking about the mid-to-scale hotels, not mid- to high-end due to upscale. Upscale, most of the hotels, we have our plan to have the full dining service component because that’s very much needed by the guests. So we believe we see that initiatives, and also we will continue to focus on franchised restaurants. And we have seen demand for our 2 brands by other restaurant operators and by our own hotel franchisees. So with the recovery of the economy and the lift of the pandemic measures and the increased traffic to those regions, we do expect our food and restaurant business will be benefited greatly from those as well as our growth plan.
Thanks.
Operator: The next question comes from Peter Yang of Goldman Sachs.
Peter Yang: So I have two questions. The first is on the EBITDA margin. Could you give us the guidance of what kind of EBITDA margin you were expecting in this year and maybe next year after the topline is fully normalized? And the second question is regarding the company’s strategy — strategic focus. So maybe the strategy the company is looking at in terms of expanding in mid-scale or in the upscale segments or after acquiring the restaurants. So what are the priorities for the company’s strategies? And how are you going to focus or make progress on those areas?
Alex Xu: Thanks, Peter. I will take the second question, just talk about the strategy, our focus and then Selina will talk to you about our projected 2023 or the margin discussion, okay, EBITDA margin, 2023 and 2024. So as we mentioned earlier, Peter, running the gaming experience in the past 3 years made our team, I think, stronger in operating in the tough environment. We do believe the 2023, 2024 recovery period, there are still going to be a lot of challenges meanwhile, with a lot of opportunities and with the rapid recovery. And we are still not back to the 2019 levels in terms of the entire tourism industry. So with that, and we are clearly focusing our core and organic growth on the hotel side. Each business unit has its existing management team, so our group’s management focuses are going to be on the hotel core organic growth.
So the organic growth consists of probably 3 parts. First is the existing hotel portfolios renovation and upgrade. That’s our key area of focus because we have been behind for the last 3 years, and that we need to completely upgrade and renovate many, many hotel products, some of them being used as quarantine facilities, and the wear and tears are more than the other types of usage. So then the second focus is to develop and opening more new hotels with especially the mid-scale to upscale levels. And by showcasing these new hotels and we will further influence our lower . And the third focus is to improve, continue to improve our overall operating efficiencies and part of the overall efficiencies and are many, again, subarea we focus on, for instance, community outreach and local sales and marketing program and enhance our service to our guests and deliver — deploy robotic technology to lower our labor cost.
Because of the labor shortage, the labor costs are a challenge for the next many years, I think, to come. And to improve our information technology and mining the data and to increase our system efficiencies. And due to further also deploy some of the AI newly used, for instance, what even our teams are starting to experiment some of the AI tools for customer service, for sales and marketing and for new media. And so those are the folks to improve the overall hotels operating margin and efficiencies. So those are our core focus. And then on the other side, if there are local strong focused hotel management company’s operators that we have a common — share common value, common goal and financially disciplined. And then we may continue to explore this M&A.
And then lastly, the food and restaurants. And for that, I just mentioned to you our management team in the food and services defined affordable luxury. In light of the new economy, and we want to use a lot more. If they want to use a lot more on local ingredients, create customer-preferred meals at affordable price and servicing the local communities and by diversifying from the supermarket centers and also shopping malls into the — directly into local communities. And become part of the habitual and hardcore demand for the local communities, we believe that sector will grow very healthily and generating a healthy cash flow and return to our investors. So with overall focused approach and with the recovery of the economy, we think 2023, we really plan to generate margin and close to that of pre-pandemic level.
So with that, I’m passing the rest of the questions to Selina.
