But with ADR increase, I think we have more room and a better potential and to move the quality of the products into a higher and higher level. So for the next 2 years, we expect that similar levels of growth for both L&O hotels and the F&M hotels. So that’s one thing. Another thing is the L&O hotels, because we have gone through renovations with the lower base, so the percentage of L&O hotels have gone through the renovation is higher than F&M hotels. That’s also drive up ADR increase a little bit higher. So I hope that I answered the question for the — for your first. For the second question regarding the synergy and also the restaurant business, we have experimental moving the restaurant with the hotels, combining the breakfast delivery to be a 3 meals full-day restaurant.
And we have seen some good result such as in our Jingan hotels in Shanghai. That increased the revenue substantially. But doing — moving the larger staff in the restaurant into the hotels and — requires a new system and new operating standard. So we are doing the second experiment in the second-tier city. So the first-tier city we have done, and there is many elements that we need to take into consideration, for instance, the competition landscape of F&B in the buildings. Some of the buildings that we lease hotels already have other restaurant services; and then also the space constraints; and thirdly, the staff constraints. And so that — so we’re taking those 3 factors. We have taken more experiment this year. And we have another — a couple of them opened, scheduled to be in the summer.
So we’ll report to you the result of the synergy in that area. And right now, I think the experiment and forming the standard and system and building better fundamentals and making sure we are not also introducing some of the uncertainty and higher competition in the restaurant business into the stable hotel business, so those are the elements that we are considering. So third question…
Rene Vanguestaine: Simon, could you please repeat the third question, which we think had to do with L&O hotels versus F&M going forward?
Simon Cheung: No, my third question is actually more related to, broadly speaking, the number of hotels now you’re running at slightly over 4,000 and restaurant over 200 now. I did hear that you have a hotel target additions, 500 for this year but more like in the medium term. Do you have any target in your mind in terms of the outcome for both respective segments?
Alex Xu: Okay. The — Simon, that — our ambition and plan and — is always that let’s build the fundamentals. Then, we’ll build a growth plan that’s compatible with our current resources with the — so that we can continue to improve our brand standard and brand identity. And so we plan, internally, the next 3 to 5 years and continue to grow our hotels by the numbers, by 10% to 15% per year. And slowly, hopefully, after we build a stronger fundamental, build a stronger base, we can even further accelerate it to growth. But right now, because we have a number of issues experienced and lessons we have learned through the past M&A, which also resulted in some of the legacy problems that also consumes our internal resources to restructuring those kind of businesses and also to restructuring the restaurant and making sure the restaurant has a robust logistics system support to grow the franchised and managed models.
And we — the hotels landscaping is very clear, and the restaurants, we’re still getting a — trying to learn the lessons and patterns of our strengths in which area, such as community store, the street-front stores and also the high-traffic areas such as train stations, subway stations. And so once we have firmly built a profitable, robust business model, then we will grow more quickly. So that’s our — the next midterm plan.
Simon Cheung: Sorry, I haven’t looked at the numbers yet, but then the restaurant, are you done with all the closure? Do you feel that your hotel — your restaurant count is pretty much bottom and likely going to steady at least in the coming quarters?
Alex Xu: Sorry, Simon?
Rene Vanguestaine: Number of restaurants [indiscernible].
Alex Xu: That is correct. The — right now, with a substantial completion, I think the restaurant reorganization is substantially completed. And so now, we can focus on instead of closing or transitioning working — restructuring of the unprofitable stores, that now we can focus on growing the franchised, the more profitable stores. The legacy issues of the restaurant side, Simon, has primarily resulted in, I think, some of the locations are — had a higher rent and continue reducing the traffic, reduce the traffic. And so it’s more challenging and — to stay profitable even after our staff put in more efforts. And so those restaurants, we have already closed, substantially closed. So we do — we will expect the — a number of restaurants and we’re also growing but albeit initially, I think, slowly because, as we stated, the pattern and the system are still emerging.
And the restaurants — the competition in the restaurant is stronger than we originally estimated and expected. And so we do not know the trend will continue, but we still think that the restaurant business, I think, will be more — has more characteristics and challenging than the hotel business.
Simon Cheung: If I may just get a very final follow-up question, just you mentioned number of hotels that you’re planning for some upgrades. So out of your 4,000 aged hotels, how many of them are going to offer upgrade? And your receptive — receptions of — by the franchisee, how are they willing to take — indeed do the upgrades when you compare to your assessment of the entire portfolio?
Alex Xu: Right now, about half. I think that my last numbers came in about half of them are in the renovations. And I think another half, we expect them to be completed in the next 2 years, next two to three years.
