According to the Zhitong Finance APP, on November 19, atour lifestyle holdings announced its latest quarterly financial report (ATAT.US). In the performance conference call, atour stated that the overall progress of store openings has maintained a good development momentum this year. The positive trend continued in the third quarter with 140 new hotels opened, once again breaking the third quarter's new opening record. So far this year, approximately 360 hotels have been opened, and the company is confident in increasing its annual opening target from 400 hotels to 450.

In addition, atour mentioned that atour 4.0 has currently opened 6 locations, with the number expected to exceed 10 for the year. As of now, there are over 60 atour 4.0 locations in the pipeline. Atour 4.0 is a forward-looking product that provides a relaxed experience for business travelers. Through experience upgrades and product innovations in the outlets, the operational performance is outstanding and meets the company's expectations, with its simple and natural style expected to have a long product lifecycle. Light Stay 3.0 signed 38 hotels in the third quarter, maintaining a signing ratio that consistently exceeded 20% of the overall signings. As of the end of September, 76 Light Stay 3.0 hotels have been opened. Based on differentiated product strength in the terminal market and deep insights into diversified users, it is expected that by the end of the year, the number of Light Stay 3.0 operational hotels will exceed 100.

Q&A

Q1: Regarding the performance of Lapa, can the company break down Lapa's performance in the third quarter, share Lapa's trends since October, explain whether there is guidance for Lapa for the entire year of 2024, and whether the annual revenue guidance will change?

A1: Regarding Lapa's performance in the third quarter, apart from being affected by last year's high price base during the summer vacation, September's performance was under pressure due to the typhoon weather, the concentrated opening of new stores at the end of the month, and changes in public holiday schedules, which dragged down the overall performance for the third quarter.

Since October, the high base effect has been easing, particularly during the National Day holiday period, driven by increased traffic led by leisure tourism, which has improved OTC compared to last year. Although there is still some pricing pressure, the decline in Lapa is showing signs of narrowing.

As for the forecast for Lapa for the entire year of 2024, due to multiple influencing factors, there is uncertainty regarding Lapa for the year. The company will prioritize stabilizing the OTC basic level while seizing core revenue opportunities, expecting a year-on-year decline in Lapa in the mid to high single digits.

In terms of financial expectations, although there are some fluctuations, thanks to the rapidly expanding hotel network and strong growth in retail business, the company still maintains its previous revenue growth expectation of 48% to 52%.

Q2: This year, the pace of hotel openings has accelerated quickly. Is the target of opening 400 stores for the whole year maintained or will it be adjusted again? Additionally, given the strong signing momentum, will the slowdown caused by market supply growth and a high base affect the subsequent signing rhythm?

A2: Regarding store openings, the overall opening progress this year maintains a good development momentum. The positive trend continues into the third quarter with 140 new hotels opened, once again breaking the record for new openings in the third quarter. So far this year, approximately 360 hotels have opened, and the company is confident that the annual opening target can be increased from 400 to 450 hotels.

In terms of signing new contracts, although there is volatility in the market, the demand in the franchise market remains active, and Atour franchisees show strong investment willingness. The repurchase rate of franchisees exceeds 50% in the third quarter, reflecting the confidence of franchisees and their recognition of the Atour brand. At the same time, the company will continuously strengthen the quality control of new signed projects, applying stricter standards to select the property conditions of signed projects. Nevertheless, the reserve of pipeline projects remains sufficient, which will steadily advance the strategic layout of 2,000 hotels for next year.

Q3: Can you share the single-store model and possible return information of the Dahe Hotel (should be referred to as 'Hanhe Hotel')? What are the management's thoughts and future plans regarding the high-end market?

A3: The Dahe Hotel (here should be 'Hanhe Hotel') is positioned as a high-end hotel with selected services, and its single-store model and return information are as follows: A mature Hanhe Hotel is expected to have target room rates of 550 to 650 yuan. With breakthroughs in design style and upgrades in soft and hard furnishings, the cost per room is controlled to around 0.2 million yuan. Through a high proportion of modular design and refined supply chain management, it can ensure the quality of project delivery while effectively controlling costs and construction time. Overall, the investment return period (including renovation period) for Hanhe Hotel is expected to be 4.1 years.

Regarding thoughts and plans for the high-end market: Currently, the traditional high-end hotel market in china faces various structural difficulties, such as aging hardware facilities and stagnant service experiences. Under operational pressure, investor confidence is insufficient, and hotels compromise on service quality to control costs, affecting consumer experiences. The significance of Atour creating high-end brands lies in its unique brand value and profound understanding of user experiences. Hanhe Hotel aims to benchmark against international standard five-star brands, injecting new vitality into the high-end hotel market in china with the essence of Chinese enterprises and the subtlety of Eastern brand tone.

The layout strategy of Hanhe Hotel will precisely target the core business circle locations in 11 major cities in china, adhering to the principle of quality first to create benchmark projects. The company will not prioritize the number of openings as the primary goal in the high-end hotel market, but will instead focus on brand and quality as the main objectives for developing the high-end market.

Q4: Can the signing and opening plans for Atour 4.0 and Qingju 3.0 currently be shared? Especially regarding Qingju 3.0, with the increase in the scale of terminal products, can its potential structural pressures on the group's RAP in the coming year be assessed?

A4: Currently, Atour 4.0 has opened 6 locations, and the number of openings is expected to exceed 10 within the year. As of now, there are over 60 4.0 projects in the pipeline. Atour 4.0 is a forward-looking product that provides a relaxed experience for business people. Through experience upgrades and product innovation in its stores, operational performance has been outstanding, overall performance meets company expectations, and its simple and natural style is expected to have a long product lifecycle.

Qingju 3.0 signed 38 contracts in the third quarter, maintaining a signing ratio exceeding 20% of the overall contracts. As of the end of September, 76 Qingju 3.0 hotels have opened. Based on differentiated product strength in the terminal market and profound insights into diverse users, it is expected that the number of operational Qingju 3.0 hotels will exceed 100 by the end of the year.

Regarding the potential structural pressure of Qingju 3.0 on the group's RAP next year, while the group level RAP will be affected by structural factors including accelerated opening speed, high proportion of new stores, and gradually increasing proportion of Qingju, the company will continue to enhance product competitiveness through product upgrades and renovating old stores to promote healthy growth of RAP. Taking Qingju 3.0 as an example, since its launch in February last year, the model has been continuously improved based on the operational performance of opened stores and user feedback, providing better experiences for users while offering franchisees stable returns, thus solidifying its product competitiveness in the terminal market. In the face of continuously changing consumer trends, it is essential to drive continuous product updates and iterations. The company will continue to focus on product innovation to meet users' lodging needs.

Q5: This year, the number of closed stores has increased. What are the reasons for the company's closures? What are the plans for closures next year? Noticing a decrease in direct-operated stores, what are the reasons for this? What are the plans for direct-operated stores next year?

A5: A total of 37 stores were closed in the first three quarters this year, and it is estimated that the total number of closures for the year will reach around 50. This decision was made based on a comprehensive assessment of the property quality and operational performance of the group’s operating hotels. The company is committed to providing consistent high-quality service across Atour, and hotels that fail to meet expectations after rectification will be terminated according to contract terms. This screening mechanism ensures continued improvement in the overall hotel quality of the group. Next year, a similar pace of closures will be maintained to support the achievement of the strategic goal of operating 2000 quality stores.

Regarding direct-operated stores, two direct-operated stores were reduced in the second and third quarters this year, one of which was amicably converted to a franchise store after the contract expired. The future expansion of the hotel network will primarily adopt a light asset franchise model, and there are currently no new openings planned for direct-operated stores. Before the direct-operated store contracts expire, the company will negotiate with the owners, considering factors such as brand display and core business district positioning to decide whether to renew or terminate the cooperation.

Q6: How do you view the growth prospects of the retail business (including category planning)? What are the revenue expectations for the retail business next year?

A6: From the perspective of growth potential, the urgent demand for healthy sleep supports a vast sleep economy market, which has broad growth space. Atour lifestyle holdings precisely meets the consumer's need for healthy and comfortable sleep through scientifically systematic deep sleep solutions, resulting in impressive performance in retail business this year. In addition to the popular deep sleep pillow, the quilt category also made remarkable breakthroughs, with the efficient launch of three new quilts enhancing the brand influence in the sleep economy.

In terms of category planning, the focus will continue to be on deeply cultivating the sleep sector, expanding categories in both sleep and semi-sleep fields, and thoroughly developing advantageous categories to cover a broader consumer population.

In terms of revenue expectations, the company still maintains the guidance of doubling this year's retail revenue year-on-year. Regarding next year's growth expectations, the overall budget work for the group is currently underway, and a clear guidance cannot yet be provided; however, it is generally believed that retail business will still contribute to a year-on-year growth rate that exceeds that of the lodging business, achieving normative healthy growth.