Atour Lifestyle Holdings Limited (ATAT) Q4 2025 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to Atour Lifestyle Holdings Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. I would now like to turn the conference over to Mr. Luke Hu, Senior IR Manager. Please go ahead, sir.

Thank you, operator. Good morning and good evening, everyone. Welcome to our fourth quarter and full year 2025 earnings conference call. Today, you will hear from our Founder, Chairman and CEO, Mr. Wang Haijun; and our EVP Co-CFO, Mr. Wu Jianfeng. Before we continue, please be aware that today's discussion will include forward-looking statements under federal securities laws. These statements are subject to various risks and uncertainties, and actual results may differ significantly from stated or implied in our comments today. The company is not obligated to update any forward-looking statements, except as required by applicable laws. Additionally, during this call, our management will discuss certain non-GAAP financial measures solely for comparison purpose. For a clear understanding of these measures and a reconciliation of GAAP to non-GAAP financial results, please refer to the earnings release issued earlier today. Furthermore, a webcast replay of this conference call will be accessible on our website at ir.yaduo.com, where a copy of the results presentation is also available. Now I will turn the call over to Mr. Wang, our CEO.

[Interpreted] Thank you, Luke. Hello, everyone. Thank you for joining Atour's Fourth Quarter and Full Year 2025 Earnings Call today. Please turn to our results presentation. Looking back at 2025, sustained global competition, structural shifts in consumption and accelerating technological transformation collectively shaped the overarching theme of the year. Amid a volatile recovery, China's travel and consumer markets have become increasingly mature, rational and resilient. In this environment, we are more convinced than ever that only by staying true to our user-first philosophy, relentlessly enhancing user experience and building enduring brand value can we navigate industry cycles in an increasingly competitive maturing market. 2025 marked the successful completion of our Chinese Experience 2000 Premier hotels strategic initiative. In terms of the hotel business, we achieved our scale target of 2,000 premier hotels and further strengthened our brand through differentiated product positioning and customer experiences that resonate. Meanwhile, our retail business sustained strong growth momentum, accounting for nearly 40% of the group's total revenue. Atour Planet further reinforced its leading position in China's sleep market, establishing itself as the preferred choice for consumers. We continue to see growing synergy between our hotel and retail businesses with each strengthening the other to further enrich the value proposition of our Chinese experience. As we enter 2026, we continue to see considerable market uncertainty. However, our strategic direction has never been clearer. We will [Technical Difficulty]

Ladies and gentlemen, please remain on the line. Your conference will resume shortly.

[Interpreted] Yes. Thank you. As we enter 2026, we continue to see considerable market uncertainty. However, our strategic direction has never been clearer. We will embrace change while maintaining a long-term focus. We consistently create value-added experiences with a personal touch through high-quality products and services. Building on this foundation, we have officially launched a new 3-year strategic plan, Chinese experience brand-led excellence. Experience remains the cornerstone of our development and a core driver of growth. We will further reinforce our differentiated experience mode, amplify our strength, pioneer new frontiers and strengthening our leadership within the industry. Brand serves as the anchor of our long-term development and the guiding force behind our strategy. We will firmly follow the course of a lifestyle group, actively exploring and expanding growth path. By using scenarios as a bridge, we will deepen the synergy between our hotel and retail businesses, leveraging our brand to connect across scenarios and deepening our emotional connection and resonance with users. Now I would like to provide more details on our hotel and retail performance for the fourth quarter and full year of 2025. Let's begin with our hotel business. In the fourth quarter, our RevPAR was RMB 335.7, representing 99.6% of the level in the same period of 2024, with the recovery showing sequential improvement trend. Specifically, OCC reached 98.8% and ADR stood at 101.5% of their levels in the same period of 2024. In the fourth quarter, RevPAR for our mature hotels and operation for more than 18 months was 96% of the level in the same period of 2024, while OCC and ADR stood at 97% and 99.6% of 2024 levels for the same period, respectively. In 2025, we opened 488 new hotels. By the end of the fourth quarter, the number of hotels in operation reached 2,015, representing a 24.5% year-over-year increase. As of the same date, our pipeline of hotels under development stood at 779, providing a solid foundation for the continued expansion of our hotel network. On the hotel channel front, our core CRS channel remained stable, accounting for 62.9% of total room nights sold in the fourth quarter. The contribution of room nights sold to corporate members was 20.8% during the quarter. Next, I would like to share the latest developments across our hotel brands. The upper mid-scale segment has long been our core focus where we have built a deep presence. For a longer-term view, at the beginning of this year, we officially upgraded Atour 4.0 to an independent brand, Atour Origin. While retaining efficient business travel functionality, Atour Origin introduces an immersive vacation ambience, creating a sene urban retreat where customers can find peace of body and mind. Its differentiated brand positioning has been validated by the market. For full year 2025, RevPAR for Atour Origin hotels in operation exceeded RMB 430. To date, 55 Atour Origin hotels are in operation with over 50 projects in the pipeline. Together, Atour Hotel and Atour Origin form a more competitive brand portfolio in the upper mid-scale market. Atour Hotels style is tailored to mainstream business travel, offering customers dependable options that balance functionality with emotional appeal. The latest product, Atour 3.6, continues to gain market recognition for its meticulous hardware configuration and outstanding service details. In the fourth quarter, the RevPAR of Atour 3.6 hotels in operation surpassed RMB 380. Atour Origin expands customers' experience and enriches their sense of well-being through its unique atmosphere. The synergistic development of the 2 brands has created more flexible investment opportunities for our franchisees while better addressing the diverse needs of our customers across various travel scenarios. The advantages have further strengthened our competitive edge through innovative scenario designs and enhanced customer experiences, helping us maintain our absolute leading position in the upper mid-scale market. SAVHE Hotel marks a substantial breakthrough in advancing our brand portfolio in the upscale market, leveraging an efficient investment model, innovative experience design and a profound cultural expression, SAVHE Hotel has forged a distinct path within the existing market framework and become a game changer in the upscale segment. Currently, SAVHE has established its presence with 3 hotels in Shanghai, Shenzhen and Guangzhou. With its unique aesthetic system, carefully crafted ambience and exceptional experiences, SAVHE is gradually becoming a cultural gateway in each city it enters, redefining the value of upscale hotels. In the fourth quarter, SAVHE delivered exceptional operating results with RevPAR exceeding RMB 950. In 2026, we will further develop our Eastern wellness experience and build a holistic so healing experience system. Through more refined operations and a more comprehensive framework, we will drive further brand upgrades and breakthroughs. Based on a longer-term vision, SAVHE partnered with EHL Hospitality Business School in the fourth quarter to jointly develop an upscale accommodation service system that combines global expression with Eastern values, supporting the brand's long-term development. We aim to establish SAVHE as a showcase of global vision and Eastern stories, translate its core experiential philosophy into new value benchmark for the global upscale hotel industry and bring Chinese experiences to the world stage. The mid-scale hotel market has significant potential, yet product and service homogenization has long been a major pain point for the industry. We believe the key to breaking through is to develop an operating model that balances experience and efficiency while also incorporate sustainability, thereby creating a unique and differentiated competitive advantage. By the end of 2025, over 160 Atour Light Series 3 hotels were in operation. We have focused on higher-tier cities, continuously refined our products, deepened brand building and improved operational efficiency, thereby steadily elevating brand asset quality. Atour Light has also demonstrated strong operational resilience. In the fourth quarter, the RevPAR of the Atour Light Series 3 hotels in operation recovered by more than 110% year-over-year and full year RevPAR recovered by over 100% year-on-year. In 2026, we will fully roll out Atour Light's refined cost model, deepen its distinctive operations and management and systematically improve operational efficiency and product competitiveness. At the same time, we will continue to focus on core customer needs, enhance brand recognition and influence and build unique Atour Light mind share. At the organizational level, we are working to establish Atour Light's distinctive talent development system to comprehensively enhance the team's overall capabilities. Atour Light's goal has always been clear. Driven by product and brand strength, we will reshape the mid-scale market landscape and establish a new benchmark among mid-scale hotel brands. Moving on to our retail business. Over the past few years, the traditional consumer market has been mired in homogeneous competition and sluggish growth. Only brands that truly define new demand and create new value have a chance to break through the industry's structural constraints and chart a differentiated growth path. This is precisely the path a Atour Planet has taken. Rather than engaging in evolution with brands taking a traditional path, we have proactively chosen and firmly committed to an entirely new trajectory. Guided by user needs, we have forged this path of differentiated growth through deep insights into users' sleep pain points and continuous product innovation. This has not only reshaped the market landscape, but also helped drive progress and upgrade across the industry. In 2025, our retail business sustained strong growth momentum with full year revenue reaching RMB 3.67 billion, representing 67% year-over-year growth. Atour Planet has also consistently ranked among the top brands in the bedding category on major third-party platforms. Throughout the year, we continued to drive product innovation and expand categories and our Deep Sleep ecosystem grew increasingly mature. The release of the Atour Planet Deep Sleep standard set a benchmark for the high quality and consistency of our products. Building on our solid product performance, Atour Planet's brand influence continued to strength, laying a solid foundation for the long-term development of our retail business. In 2025, our pillow category further strengthened its leadership, consistently topping category rankings on major third-party platforms and gaining product mind share among users. Cumulative sales volume of the Deep Sleep Memory Foam Pillow Pro Series has exceeded 10 million units since launch, marking a significant sales milestone. Our comforter category also delivered robust growth momentum with full year GMV increasing by over 90% year-over-year and market share continuing to rise. Our new categories, fitted sheets and loungewear received positive market feedback in 2025, collectively driving the continuous evolution of our Deep Sleep ecosystem. Looking ahead, the industry is entering a new cycle driven by innovation with competition increasingly centered on product value and user experience. In 2026, we will systematically enhance our core capabilities on product excellence, we will further expand our differentiated experience advantage, making a Atour Planet's Deep Sleep experience a competitive moat that is difficult to replicate. On the supply chain front, we will deepen rigorous management at every stage to ensure product consistency and reliable delivery. At the brand level, we remain committed to creating long-term value, building deeper emotional connections with our users. Built on deep user insights and product innovation, we are positioned to consolidate and strengthen our competitive lead. We will open a new chapter for our development while collaborating with industry partners to elevate quality and innovation across the sector. We have always upheld our core value of serving people, continuously deepening our experiential value. This is also clearly reflected in our membership operations. Unlike the membership systems prevalent in the industry, which offer from homogenized benefits and a low brand recognition, we continue to explore new scenarios to deliver truly tangible differentiated experiences for our users. In early 2026, we partnered with Starbucks China to launch a joint membership program. Beyond linking membership systems and offering reciprocal benefits, this collaboration aims to build a multi-scenario lifestyle ecosystem, spanning travel, dining and leisure, creating a bridge to extend value across different scenarios. By the end of 2025, our registered individual members reached 112 million, representing a year-over-year growth of over 25%. Moving forward, we will continue to deepen our membership operations with a brand-building mindset, focusing on the full user life cycle to create a membership ecosystem that stays closely connected with the users. Building on our hotel and retail business, we will continue to introduce new benefits tailored to the Deep Sleep scenario. At the same time, we will actively explore more diverse scenarios and expand our reach to a wider audience, further deepening emotional connections with users. In addition, we will further enhance our digital capabilities and build a more granular operational framework for user segmentation, providing strong support for the long-term development of our membership business. Last but not least, as we embark on our new 3-year strategy, we are more resolute than ever. Guided by the belief that everyone deserves kindness, we will remain user-centric and ensure that every user feels our sincerity and care. Guided by our long-term vision of a timeless Atour warmth along every journey, we will uphold our quality standards while striving to break through the ceiling of the experience. At the same time, we will further strengthen our organizational capabilities and refine our digital framework, laying a solid foundation to support the group's long-term development. We are committed to accompanying our users on this long-term journey, moving forward together every step of the way. dedicated to providing lasting companionship, we aim to curate experiences where body and mind return to inner peace through every genuine connection, fulfilling our warm and steadfast commitment to every user. I will now turn the call over to our Co-CFO, Mr. Wu Jianfeng, who will discuss our financial results.

Thank you, Haijun. Now I would like to present the company's financial performance for the first quarter and full year of 2025. Revenues from our managed hotels for the first quarter and full year of 2025 grew by 28.1% and 28.0% year-over-year to RMB 1.4 billion and RMB 5.3 billion, respectively. The increases were primarily fueled by the ongoing expansion of our hotel network. Revenues contributed by our leased hotels for the first quarter and full year of 2025 decreased by 9.8% and 15.9% year-over-year to RMB 148 million and RMB 590 million, respectively. The declines were primarily due to a decrease in the number of leased hotels as a result of our product mix optimization. Revenues from our retail businesses for the fourth quarter and full year of 2025 increased by 52.4% and 67.0% year-over-year to RMB 1.2 billion and RMB 3.7 billion, respectively. The increases were driven by growing brand recognition, successful product innovation and a broadened range of product offerings. The gross margin of our hotel business was 35.8% for the fourth quarter and 37.0% for the full year of 2025. The gross margin of our retail business improved year-over-year to 52.6% for both the fourth quarter and the full year of 2025, reflecting the growing contribution from higher-margin products. Selling and marketing expenses accounted for 16.5% and 15.2% of revenues for the fourth quarter and full year of 2025, respectively. The year-over-year increase for the full year was mainly due to investment in brand recognition and the effective development of online channels in line with the growth of our retail business. General and administrative expenses, excluding share-based compensation expenses, accounted for 5.5% and 4.2% of net revenues for the fourth quarter and full year of 2025, respectively. The year-over-year decrease for the full year was primarily driven by improved management efficiency and economies of scale. Adjusted net profit margin for the fourth quarter and full year of 2025 was 17.7% and 17.9%, representing an increase of 1.7 percentage points and a decrease of 0.1 percentage points year-over-year. Adjusted EBITDA margin for the fourth quarter and the full year of 2025 was 25.5% and 25.3%, respectively, up 4.3 and 0.9 percentage points year-over-year. We maintained a healthy cash position. As of December 31, 2025, cash and cash equivalents totaled RMB 3.3 billion with net cash of RMB 3.1 billion. In line with our commitment to enhancing shareholders' value, we declared aggregate cash dividends of approximately USD 108 million for the full year of 2025. And as of December 31, 2025, we have made on market repurchase of USD 46 million since the implementation began in the third quarter. Through the comprehensive shareholder return initiatives, we are taking concrete actions to reverse shareholders' trust and support, ensuring that all shareholders benefit from the company's growth. For the full year of 2026, we currently expect total net revenues to increase by 20% to 24% compared with the full year of 2025. That concludes our financial highlights for the fourth quarter and full year of 2025. Now let's open the floor for Q&A.

[Operator Instructions] We will now take up this question from the line of [indiscernible] from CICC.

[Foreign Language] So we've noticed that the overall industry supply growth has slowed slightly. Therefore, we'd like to ask about the recent sentiment among franchisees regarding new signings. And additionally, could you please also provide some guidance on new openings in 2026?

[Interpreted] Okay. Let me answer your question. Thank you, [indiscernible]. We have also observed fluctuations in the overall industry supply growth rate. However, if we look deeper, what's behind this is that after years of rapid expansion, the industry is now undergoing a profound structural upgrade and gradually moving towards a new stage of high-quality development. As for franchisees, we have also observed that they are now becoming more rational and discerning. However, I believe this shift towards rationality for them is actually positive for the long-term healthy development of our industry because when franchisees exercise greater caution in negotiating rents, choosing locations and selecting hotel brands, they are essentially facilitating a market screening process of survival of the fittest. The mutual selection between mature brands and quality franchisees will lead to a more solid foundation for cooperation. As regard to Atour's own strategic pace, high-quality supply in the market remains scarce. We have never advocated for purely scale-driven growth. However, high-quality distinctive growth is actually the direction of our long-term pursuit. We remain positive and optimistic about the signing momentum for 2026, and we will ensure that every newly signed project is more competitive in the market. In terms of new openings, well, thanks to the continued implementation of our premier hotel strategy, new hotels opened in 2025 have shown significant improvement in both of their location selection and property quality. In 2026, we will continue to uphold strict quality requirements, focusing on the core cities and the key commercial areas. On the basis of ensuring higher quality, we aim to achieve a similar scale of openings as last year.

Our next question comes from the line of Simon Cheung from Goldman Sachs.

[Foreign Language] Maybe can management share with us what do you think is going to be the outlook for the hotel industry in 2026? And also perhaps can comment about the first quarter RevPAR performance so far quarter-to-date as well as your view on the RevPAR trend for the rest of the year.

[Interpreted] Thank you, Simon, and let me take your question. In 2025, the hotel industry experienced a moderate recovery with a continued restoration of supply and demand dynamics. The 2025 full year RevPAR recovery showed a trend of sequential improvement throughout the whole year. In 2026, the overall industry supply growth may slow down furthermore, Leisure demand remains strong. For example, during the Spring Festival holiday this year, both the ADR and occupancy performed well, exceeding levels from the same period of last year. Based upon this, we expect the RevPAR in Q1 to continue the trend of improvement with a positive momentum. We will not provide specific guidance for RevPAR in 2026. But for the full year, the market environment is still changing relatively quickly. However, favorable policies and the continued recovery of business travel also provide positive factors. Our goal, however, still remains clear. That is to adhere to our strategic focus amidst market volatility. Therefore, we will persist with and deepen the differentiated experience advantages of Atour, maintaining our more balanced and refined revenue management strategy for both ADR and OCC to consolidate and enhance the performance of RevPAR recovery and solidify our long-term value of the brand.

We will now take our next question from Lydia Ling from Citi.

[Foreign Language] Lydia from Citi. And so my question is on the retail business, which actually had very strong growth last year. So could you share your plans for the retail business for this year? And also any new product plans and also new category launch? What will be your retail revenue target for 2026?

[Interpreted] Okay. Thank you, Lydia. Let me first share the overall direction and product plans for our retail business. Over the past few years, it is fair to say that Atour Planet has adhered to the development philosophy of innovation-driven and product-driven. We not only released the industry's first Deep Sleep standard, but also propelled the leapfrog growth in the retail business, truly leading the progress and upgrade of China's sleep industry. Moving forward, Atour Planet will enter a phase of deepening core capabilities, consolidating our competitive advantages from all dimensions. We aim to avoid homogenized competition with those emulators and followers and forge a unique development path for Atour Planet. In terms of category planning, Atour Planet will continue our focus on the Deep Sleep track. Firstly, we will continue to strengthen our core categories, and that will be the pillow category, to name one of them. Our goal for the pillow category is to maintain our absolute leading position, establishing a decisive advantage. While we expect the comfortable category to achieve an even faster growth than pillows, further increasing market share. Secondly, new categories such as fitted sheets and loungewear will accelerate breakthroughs, achieving scale growth through blockbuster product iterations and category matrix expansion. Besides, mattresses and other sleep accessories will also be as extended categories, collectively completing our Deep Sleep ecosystem layout of Atour Planet. Next, I would like to share our outlook for the retail revenue. In 2025, both scale and the brand reputation of our retail business reached new heights. Looking at 2026, we expect retail revenue to grow by 25% to 30% year-on-year. while maintaining the healthy scale growth, we are more focused on the continued consolidation of our core competitiveness. By continuously enhancing product strength and brand power, we aim to achieve a longer-term sustainable development for retail business.

Next question comes from Ronald Leung of Bank of America.

[Foreign Language] Let me ask my question in English. So I have a financial question. So we noticed that the company's actual net profit margin in 2025 was better than initially expected at the beginning of the year. Could you talk about your expected trend for the net profit margin in Q2 set?

[Interpreted] Thank you, Ronald. Well, indeed, for the full year of 2025, our group's adjusted net profit margin was approximately 17.9%. At the beginning of the year, we had estimated that there's going to be changes in revenue structure and a higher effective tax rate, and they would exert some drag on our profit margin. However, through refined operational management, our profit margins of all business units continued to improve. And coupled with the policy subsidies being embodied intensively during quarter 4, eventually, our 2025 net profit margin roughly leveled with that of 2024. Looking ahead to 2026, as our business continues to evolve, the revenue mix of our manachised business, supply chain business and retail business will continue to change. At the same time, based on the new 3-year strategy of Chinese experience brand-led excellence, we will allocate resources with a longer-term perspective. For instance, to strengthen key positions through workforce expansion and to enhance digital operational capabilities to support the group's long-term development. Therefore, we anticipate that both our G&A and R&D expense ratios will increase this year. Therefore, at this starting point of the year, we preliminarily expect the group's net profit margin for 2026 to decline slightly year-on-year.

We will now take our next question from Dan Chee of Morgan Stanley.

[Foreign Language] Please allow me to translate my question. My question is relating to the hotel closures. We saw that company closed 92 hotels in 2025 full year, including 7 leased and owned hotel -- leased and operated hotels. This was slightly higher than the initial estimate at the beginning of last year. Could you share the company's plan on hotel closure for the full year of 2026, providing that gross opening in 2026 is flat year-on-year?

[Interpreted] Thank you, Dan. Regarding closures, just like what we have been consistently communicating with the market, our core consideration for closure decisions is the consistency of experience. The goal is to continuously strengthen the operational quality and experience standards of our hotels in operation. In 2025, we rigorously maintained quality control over our operating hotels and thereby closing a total of 92 hotels. In 2026, to ensure the quality level of our overall hotel network, we will still maintain a certain proactive elimination rate, terminating cooperation with hotels that fail to meet a tours experiential standards in order to continuously consolidate our brand value in the long term. Nonetheless, based on the optimization and adjustments already made in 2025, now the foundation of our existing hotel portfolio is more solid. Therefore, we expect the number of closures in 2026 to decrease. Our current planned target is to close around 80 hotels within the year. Thank you.

Thank you. That concludes today's question-and-answer session. I would like to now turn the conference back to Mr. Luke Hu for any additional or closing comments.

Thank you for joining us today. If you have any further questions, please feel free to contact our IR team. We look forward to speaking with you again next quarter. Thank you, and goodbye.

This concludes today's conference call. Thank you for participating. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]