Atour Lifestyle Holdings Ltd. Q3 FY2024 earnings call

• Hotel network expansion: Accelerated with 140 new hotel openings in Q3, up 72.8% y-o-y, total hotels in operation at end of Q3: 1,533 (37.9% y-o-y growth). New openings guidance raised to 450 from 400 for full year.
• New brands: Launched SAVHE Hotel, an upscale lifestyle brand inspired by Eastern aesthetics. Atour 4.0 has over 60 projects in pipeline with 6 hotels in operation. Atour Light 3.0 signed 38 new projects in Q3, with 76 hotels in operation by end of September.
• Retail business: GMV grew 107.7% y-o-y to RMB566 million in Q3, topped pillow and comforter sales during Double 11. Launched new deep sleep products like Atour Planet Deep Sleep Memory Foam Pillow Pro 2.0 and Deep Sleep Thermal-Regulating Comforter Pro.
• Membership ecosystem: Registered individual members exceeded 83 million by end of Q3, up 53.7% y-o-y. Unified membership systems and revamped Atour Mini Program for seamless experience.
• ESG initiatives: Bambook Library evolved into cultural interaction space, with over 1,500 libraries in 200 cities, and launched One City, One Library Initiative in Xi'an.

Hotel Business

• Net revenues from manachised hotels in Q3 2024 were RMB1,179 million, up 51.0% year-over-year. RevPAR of manachised hotels was RMB376. Leased hotels revenues were RMB190 million, down 20.4% year-over-year. RevPAR of leased hotels was RMB527.

Retail Business

• Revenues in Q3 2024 were RMB408 million, up 104% year-over-year. GMV grew 107.7% year-over-year to RMB566 million, with online sales accounting for over 90% of total GMV.

Others

• Revenues in Q3 2024 were RMB50 million, up 26.4% year-over-year.

• Full-year net revenue expected to increase 48% to 52% compared with 2023.
• RevPAR forecast: Mid-to-high single-digit year-on-year decline due to high base effect and various factors.
• New openings: Full-year new openings guidance raised from 400 to 450.

• Market fluctuations: Impact on RevPAR due to high base effect, typhoons, and holiday schedule changes.
• Competition: Pressure from other brands in hotel and retail segments affecting market share.

Q: Could you provide more color on the third quarter Q4 and also October RevPAR performances? Also, could you advise on the RevPAR guidance for 2024? Would there be any change to the full-year revenue growth guidance as well?

A: September RevPAR under pressure due to high base, typhoons, new hotels opening, and holiday rearrangement. October RevPAR showed narrowing decline in RevPAR due to leisure travel. Full-year RevPAR expected to decline mid-to-high single-digit y-o-y. Full-year revenue growth guidance of 48% to 52% maintained.

Q: Since this year we have achieved rapid hotel opening, will we maintain the 400 hotel opening guidance or adjust again? And the new signings are also strong, but considering the RevPAR decline led by high base and supply growth, will there be any changes in new signing momentum going forward?

A: Full-year new openings guidance raised to 450 from 400. New signings momentum remains strong with franchisees' confidence high, repurchase rate over 50% in Q3, but will strengthen control over new signing quality.

Q: Can you share more details on the unit economics of SAVHE, such as its target RevPAR, CapEx or typical payback?

A: Expected mature SAVHE Hotel RevPAR target between RMB550-RMB650. Cost per room around RMB200,000. Return on investment period including renovation period expected to be 4.1 years.

Q: Could you share the latest signing momentum and opening plan for Atour 4.0 and Atour Light 3.0? And evaluate the pressure on your blended RevPAR next year?

A: Atour 4.0 has over 60 projects in pipeline, 6 hotels in operation, expected to exceed 10 by year-end. Atour Light 3.0 signed 38 new projects in Q3, 76 hotels in operation by end of September. Blended RevPAR affected by structural factors but will continue to upgrade products to drive healthy growth.

Q: Would you mind sharing your next year closure plan? And the reason for the decrease in leased hotels?

A: Full-year closures expected around 50, based on property quality and operational performance evaluations. Leased hotels decreased due to converting one hotel to franchise and negotiating with owners on contract expiration.

Q: How does the management perceive growth potential and category planning of the retail business? What are the revenue projections for next year?

A: Retail business has great growth potential in sleep economy market. Focus on expanding sleep and pan sleep categories. Full-year retail revenue guidance of doubling year-on-year maintained. Next year's growth forecast is part of annual budget in progress, but retail business expected to continue faster growth than hotel business.