Atour Lifestyle Q4 2024 Earnings Report

Atour Lifestyle EPS Results

• Actual EPS: $0.33
• Consensus EPS: $0.30
• Beat/Miss: Beat by +$0.03
• One Year Ago EPS: N/A

Atour Lifestyle Revenue Results

• Actual Revenue: $285.58 million
• Expected Revenue: $275.49 million
• Beat/Miss: Beat by +$10.09 million
• YoY Revenue Growth: N/A

Atour Lifestyle Announcement Details

• Quarter: Q4 2024
• Date: 3/25/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, March 25, 2025
• Conference Call Time: 7:00AM ET

Atour Lifestyle (NASDAQ:ATAT), through its subsidiaries, develops lifestyle brands around hotel offerings in the People's Republic of China. The company provides hotel management services, including day-to-day management services of the hotels for the franchisees; and sells hotel supplies and other products. It also offers retail management service; investment management service; financial information service management; property management services; and software and technology services, as well as operates travel agency. Atour Lifestyle Holdings Limited was incorporated in 2012 and is headquartered in Shanghai, China.

Atour Lifestyle Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Thank

[Operator]

you for standing by, and welcome to Artor Lifestyle Holdings Fourth Quarter and Full Year twenty twenty four Earnings Conference Call. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a question and answer session. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr.

[Operator]

Luke Hu from Senior IR Manager. Please go ahead, sir.

[Luke Hu, Senior Manager Investor Relations at Atour Lifestyle Holdings]

Thank you, operator. Good morning and good evening, everyone. Welcome to our fourth quarter and full year twenty twenty four earnings conference call. Today, you will hear from our Founder, Chairman and CEO, Mr. Wang Haijun and our EVP, Co CFO, Mr.

[Luke Hu, Senior Manager Investor Relations at Atour Lifestyle Holdings]

Wu Jianfeng. Before we continue, please be aware that this 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 what is 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 purposes.

[Luke Hu, Senior Manager Investor Relations at Atour Lifestyle Holdings]

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.

[Moderator]

Thank you, Luke. Hello, everyone, and thank you for joining Atour's fourth quarter and full year twenty twenty four earnings call today. Please turn to Slide three of our fourth quarter and financial year twenty twenty four results presentation. The year 2024 marked a chapter of innovation and breakthroughs in Ator's three year strategic roadmap. Guided by our vision of Chinese Experience 2,000 premier hotels, we continued to expand our brand influence, driving sustained growth in both business scale and operational excellence.

[Moderator]

As we elevated our experiential offerings, we further deepened the essence of the Chinese experience through a dual engine business model that seamlessly integrates hotel and retail. In terms of network development, we have successfully curated a diversified hotel brand portfolio, reinforcing our leadership in the upper mid scale hotel market. In 2024, we opened four seventy one new hotels and assigned six seventy new projects, not only exceeding our initial targets, but also solidifying the foundation for achieving our 2,000 premier hotels target. Now I would like to provide more details on our performance for the fourth quarter and the full year of 2024. Let's begin with our hotel business.

[Moderator]

Please turn to Slide five. Our RevPAR reached RMB $3.37 during the fourth quarter, representing 94.1% of twenty twenty three's level for the quarter. Specifically, OCC stood at 98.2% of its level for the same period in 2023. ADR endured ongoing pressure due to the high comparison base effect reaching 96% of its level for the same period in 2023. Please turn to Slide six.

[Moderator]

Our mature hotels in operation for more than eighteen months continued to outperform the group's hotels overall performance during the fourth quarter. Same hotel RevPAR for the fourth quarter reached 96% of twenty twenty three's level for the same period. Notably, OCCs steadily recovered to 99% of twenty twenty three's level for the fourth quarter, while ADR reached 97.4% of its level for the same period of 2023. Please turn to Slide seven. In 2024, as the group's brand awareness continued to strengthen, the efficiency of our development team became increasingly evident.

[Moderator]

For the full year, both new hotel openings and signings reached record highs, accelerating the rapid expansion of our hotel network. In the fourth quarter alone, we opened 111 new hotels, bringing the total number of openings for the year to four seventy one, representing a 63% year over year increase. By the end of the fourth quarter, the number of hotels in operation had risen to sixteen nineteen, representing a 33.8% year over year growth. Meanwhile, the number of hotels under development expanded by 20% year over year, reaching seven forty one as of the end of the quarter, further solidifying the foundation toward achieving our goal of 2,000 premier hotels in operation by 2025. Next, I would like to share the latest developments for Atorx hotel brands.

[Moderator]

Please turn to Slide eight. As our comprehensively upgraded hotel product, Atua four point zero has consistently reinforced our leadership in the upper midscale segment benefits launch, enhancing both our brand strength and product offerings. Currently, there are 16 Atua four point zero hotels in operation and 67 projects in the pipeline. These hotels in operation have swiftly emerged as top performance in both operating performance and customer experience across key business districts in several higher tier cities nationwide, further highlighting Atour's dominance in the upper mid scale segment. As more of the Atour four point zero hotels commence operations, we will be well positioned to deliver an exceptional accommodation experience to an even broader customer base.

[Moderator]

Please turn to Slide nine. We are delighted to share that during the fourth quarter, Atour Life '3 point zero achieved the significant milestone of 100 hotels in operation. These hotels are strategically located in key business districts across second tier cities and above. As our next brand poised for expansion to 1,000 hotels, A Tour Light continues to gain robust market traction, driven by its distinct product positioning and substantial growth potential. We have always been deeply committed to strengthening strong brand awareness for AtoorLite.

[Moderator]

Since the debut of AtoorLite three point zero, we have closely focused on customer needs, thoughtfully crafted unique touch points and successfully launched a series of brand collaborations that have not only showcased Atour Life's unique identity as an innovative youth centric hotel brand, but also redefined the personalized accommodation experience through a range of immersive social interactions. With well defined market positioning and a targeted communication strategy tailored to the younger generation, we have significantly enhanced Atulite brand recognition and market penetration. These efforts have laid a solid foundation for Atul Group's expansion in the mid upscale hotel market. Moving now to our retail business, please turn to Slide 10. In 2024, Ator's retail business maintained its strong growth momentum with full year GMV reaching RMB2.59 billion, representing an impressive 127.7% year over year increase.

[Moderator]

Online channels remained the primary driver, consistently contributing to over 90% of total GMV, fueled by strong sales performance across multiple e commerce platforms. With our astute market insights, we remain highly attuned to evolving consumer trends. For the twenty twenty four eleven Shopping Festival, our retail GMV exceeded RMB420 million, reflecting an 80% year over year increase and 36% growth compared to the twenty twenty four June eighteen shopping festival. During the recent spring festival, we once again delivered outstanding results by seizing key marketing opportunities, creatively fostering emotional connections with customers by seamlessly integrating the festive atmosphere with our fresh brand messaging. The ongoing success of Aetor Planet's Deep Sleep series further validates our brand's market appeal and the strong growth momentum we continue to generate.

[Moderator]

Serving as an innovative interpretation and a tangible extension of Ator's signature Chinese experience, our retail business plays a vital role in supporting our strategy. Let me elaborate on our perspectives and key initiatives within the deep sleep sector. Please turn to Slide 11. In recent years, the market potential of the sleep economy has gradually been unlocked. However, the industry faces challenges such as limited brand differentiation, widespread category homogenization and stagnating product innovation.

[Moderator]

Against this backdrop, Atoor Planet has leveraged a deep understanding of consumer needs to continually elevate to refine its natural deep sleep brand concept and enhance product competitiveness. These efforts have positioned Atoor Planet as a pioneer at the forefront of emerging trends within the sleep economy. To fuel our product development, we rigorously analyze customers' diverse sleep needs and pain points. These insights coupled with our innovation in technology, craftsmanship and materials have led to the creation of an extensive range of premium deep sleep products. We continuously refine and iterate these products based on customer feedback.

[Moderator]

Throughout the brand's development, Atul Planet has cultivated a distinctive product philosophy that drives market success. A prime example of this is the Deep Sleep Memory Foam Pillow Pro series, which has achieved outstanding performance. Through exceptional product quality and a well executed marketing strategy, we have established a blockbuster product model that aligns perfectly with consumers' pursuit of superior sleep, as evidenced by the Deep Sleep Memory Foam Pillow Pro Series annual sales exceeding 3,800,000 units. In the Pillow segment, Aetur Planet has consistently maintained its industry leading position, further cementing our reputation as the go to choice for the deep sleep in consumers' minds. Furthermore, through our dedicated efforts in the sleep market and continuous breakthroughs in product innovation, we have developed a sophisticated product development mechanism that has evolved from creating individual blockbusters to offering a comprehensive product category series, further expanding our deep sleep product portfolio.

[Moderator]

Take our Comforter product series, which represents a significant milestone in our category expansion as an example. In 2024, the Deep Sleep Lightweight Comforter and the Deep Sleep Thermal Regulating Comforter Pro Series garnered exceptional market recognition with annual sales surpassing 770,000 units. As the comforter product line continued to perform strongly, it contributed to over 20% of total retail GMV for 2024, reflecting year over year growth of more than 300%. Its success not only serves as an emergent driver of Vitor Planet's ongoing growth, but also stands as a testament to our ability to replicate our blockbuster product model across different product categories. In 2025, we will remain focused on the deep sleep ecosystem efficiently driving progress in both brand development and product innovation.

[Moderator]

At the same time, we will further strengthen the fundamentals of our retail business, offering customers a broader array of superior sleep products and enriched experiences to propel the long term growth of the Atour Planet brand. We are confident that as the sleep economy continues to expand rapidly and the industry undergoes accelerating consolidation, our ongoing exploration of scientific sleep solutions will catalyze continuous advancements in industry craftsmanship and quality standards with Atua Planet leading and shaping the evolution of the customer's sleep experience. Please turn to Slide 12. Last but not least, I would like to share our progress across channel development and our membership business. In terms of channel development, our CRS channel accounted for 63.5% of total room nights sold for the fourth quarter and 63% for the full year, respectively.

[Moderator]

Notably, the contribution of room nights sold to our corporate members rose to 21.1% in the fourth quarter, driven by the ongoing growth of our corporate members. The steady growth of our CRS channel can be attributed to our continuous enhancement of the tour's membership ecosystem and the ongoing expansion of member benefits. By the end of twenty twenty four, our registered individual members surpassed 89,000,000 representing year over year growth of more than 40%. In 2024, we also completed a comprehensive upgrade of the A Card membership ecosystem seamlessly integrating membership identities and benefits across our two primary service areas. This upgrade reinforced the synergy between accommodation and the retail experiences.

[Moderator]

Additionally, we expanded our service categories to better cater to the evolving demand for the solutions, consistently delivering unique and tailored accommodation experiences to our customers. Please turn to Slide 13. In 2025, we will continue refining and strengthening the a card membership ecosystem by expanding value added benefits across all touch points, ensuring that our hotel and retail customers enjoy seamless high quality services across various scenarios. Meanwhile, we will consistently upgrade and iterate the tiered benefit system for both corporate and individual members. Additionally, we will strengthen our closed loop service experience, unlocking the cross consumption potential between accommodation and retail.

[Moderator]

Looking ahead, we will continue to widen our membership experience mode and roll out more diverse scenario based promotional activities, further deepening and expanding the Ator's signature Chinese experience to enrich its meaning and broaden its scope. Please turn to Slide 14. As the final year of our three year strategic roadmap, 2025 represents a pivotal moment in laying the foundation for our next phase of growth. As the market landscape becomes increasingly fragmented, Atuo will remain focused on strengthening its core competencies. Our priorities will remain on amplifying brand momentum, boosting organizational vitality and advancing digital capabilities By strategically seizing on development opportunities, we will drive continuous breakthroughs in both scale expansion and quality enhancement across the hotel and retail businesses.

[Moderator]

Moving forward, with steadfast dedication to achieving our expansion goals, we will continue to establish the benchmark for customer experience, strategically driving sustained high quality growth for the long term. Now, I'll turn the call over to our co CFO, Mr. Wu Jianfeng to discuss our financial results.

[Jianfeng Wu, Co-CFO, Executive VP & Director at Atour Lifestyle Holdings]

Thank you, Haijun. Now I would like to present the company's financial performance for the first quarter of the full year 2024. Please turn to Slide 16 for the results presentation. Our net revenues for the fourth quarter of twenty twenty four grew by 38.5% year over year and 9.8% quarter over quarter to RMB2084 million. Net revenues for full year 2024 increased by 55.3% year over year to RMB7248 million.

[Jianfeng Wu, Co-CFO, Executive VP & Director at Atour Lifestyle Holdings]

The increases were driven by growth in the monetized hotels and retail businesses. Revenues from our monetized hotels for the fourth quarter of twenty twenty four were RMB1106 million, up by 30% year over year and down by 6.2% quarter over quarter. For full year 2024, revenues from our monetized hotels increased by 53.3% year over year to RMB4149 million. The year over year increases were primarily fueled by our ongoing hotel network expansion and the growth of our supply chain business. The quarter over quarter decrease was mainly due to a decrease in RevPAR.

[Jianfeng Wu, Co-CFO, Executive VP & Director at Atour Lifestyle Holdings]

Revenues contributed by our leased hotels for the first quarter of twenty twenty four were RMB164 million, reflecting 15.9% year over year and 13.4% quarter over quarter decline. For the full year 2024, revenues from our leased hotels decreased by 16.4% year over year to RMB703 million. The declines were primarily due to a decrease in the number of these hotels as a result of our product mix optimization. Revenues from our retail business for the first quarter of twenty twenty four were RMB765 million, representing 85.6 year over year and 59.5% quarter over quarter increases. For full year 2024, revenues from our retail business increased by 126.2% year over year to RMB2198 million.

[Jianfeng Wu, Co-CFO, Executive VP & Director at Atour Lifestyle Holdings]

The increases were driven by widespread recognition of our retail brands and effective product innovation and development after we successfully broadened our range of product offerings. Now let's move to costs and expenses. Please turn to Slide 17. Hotel operating costs for the fourth quarter of twenty twenty four increased by 8.3% year over year and decreased by 9.4% quarter over quarter to RMB792 million. Hotel operating costs for the full year 2024 increased by 38.7% year over year to RMB3108 million.

[Jianfeng Wu, Co-CFO, Executive VP & Director at Atour Lifestyle Holdings]

The year over year increases were primarily due to the increases in variable costs such as supply chain costs associated with our ongoing hotel network pension. The quarter over quarter decrease was due to a decrease in our number of leased hotels as a result of our product mix optimization. Gross margin of our hotel businesses was 37.535.9% for the first quarter and full year 2024, compared with 29.936.8% for the same period of 2023. Retail costs for the first quarter of twenty twenty four rose by 66.2 year over year and 69.8% quarter over quarter to RMB386 million. For full year 2024, retail costs increased by 111.1% year over year to RMB1084 million.

[Jianfeng Wu, Co-CFO, Executive VP & Director at Atour Lifestyle Holdings]

The increases were associated with the rapid growth of our retail business. The gross margin of our retail business was 49.650.7% for the first quarter of for the first quarter and the full year of 2024, compared with 43.747.2% for the same period of 2023. The increases were attributable to the increasing contribution from higher margin products. Now please turn to Slide 18. Selling and marketing expenses accounted for 1713.4% of net revenues for the first quarter and the full year of 2024, compared with 13.710.1% for the same period of 2023, respectively.

[Jianfeng Wu, Co-CFO, Executive VP & Director at Atour Lifestyle Holdings]

The increases were mainly due to our enhanced investment in brand recognition and the effective development of online channels, in line with the growth of our retail business. General and administrative expenses, including share based compensation expenses, accounted for 4.84.5% of net revenue for the first quarter and full year of 2024, compared with 6.86.2% for the same period of 2023, respectively. The decreases were primarily due to improved management efficiency and economies of scale. Technology and development expenses accounted for 2.21.8% of net revenue for the first quarter and full year of 2024, compared with 1.51.7% for the same period of 2023, respectively. The increases were mainly due to increased investments in technology systems and infrastructure to support outstanding hotel network and retail business and improved customer experience.

[Jianfeng Wu, Co-CFO, Executive VP & Director at Atour Lifestyle Holdings]

Please turn to Slide 19. Adjusted net income for the first quarter of twenty twenty four was RMB333 million, representing a 49.9% increase year over year. Adjusted EBITDA for the first quarter of twenty twenty four was RMB443 million, up by 76.5% year over year. Adjusted net profit margin for the full year 2024 was 18%, representing a decrease of 1.4 percentage points year over year. Adjusted EBITDA margin for the full year 2024 was 24.4%, a decrease of 1.5 percentage points year over year.

[Jianfeng Wu, Co-CFO, Executive VP & Director at Atour Lifestyle Holdings]

The decreases in both margins were primarily due to a decline in RevPAR along with organic growth in selling and marketing expenses amid our retail business expansion. Please turn to Slide 20. We also maintained a healthy cash position with stable growth momentum. As of 12/31/2024, our cash and cash equivalents totaled RMB3518 million with net cash of RMB3556 million. Please turn to Slide 21.

[Jianfeng Wu, Co-CFO, Executive VP & Director at Atour Lifestyle Holdings]

For full year 2025, the company currently expects total net revenues to increase by 25% compared with full year 2024. That concludes our financial highlights for the fourth quarter and the full year 2024. Now let's open for Q and A.

[Operator]

Thank you. Our first question comes from Dan Chee from Morgan Stanley. Your line is now open.

[Dan Chee, Vice President, Equity Research at Morgan Stanley]

This is Dan from Morgan Stanley. First of all, congratulations on the new hotel opening and signings record highs in 2024. My question is about the hotel business. Can you share some colors about the hotel's performance on RevPAR in first quarter twenty twenty five? We also noticed about the full year revenue guidance of 25%.

[Dan Chee, Vice President, Equity Research at Morgan Stanley]

We're wondering what is the contribution from the hotel business and the company's RevPAR assumption for the full year 2025? Thank you.

[Moderator]

Thank you, Dan. Let me answer your question. Due to our high base effect, our full year RevPAR for 2024 decreased by 6.8% compared to 2023, and that was in line with the guidance we provided previously. And in this year quarter one, especially the March, due to some seasonal factors and the weather conditions, our overall RevPAR performance was relatively volatile and we expect a year on year decline in Q1 RevPAR of mid to high single digits. As of now, we believe 2025 still presents some uncertainties and challenges.

[Moderator]

The market is changing very rapidly, making it difficult for us to provide specific forecasts on the RevPAR. Nonetheless, against the backdrop of policy benefits and continued recovery in business travels, we will continue to implement our balanced and refined revenue management strategy, and we are confident to enhance the recovery of RevPAR performance, thereby boosting our long term revenue of our hotels and solidify our brand value. Although that the RevPAR still is going to remain not so sure unknown, but our continuously expanding hotel network and the high quality growth of the retail business, we expect the group's revenue to increase by 25% year on year in 2025. Thank you.

[Luke Hu, Senior Manager Investor Relations at Atour Lifestyle Holdings]

Thank you, Dan. Next question please.

[Operator]

Thank you. Just a moment for our next question please. Next, we have Simon Cheung from Goldman Sachs. Your line is now open.

[Simon Cheung, Managing Director at Goldman Sachs]

And then let me translate that into English. Last year, the company achieved record high in both the hotel opening as well as new signing. Perhaps can you share with us what is your guidance on both measures in 2025? Thank you.

[Moderator]

Thank you, Simon. Let me try to answer this question. In terms of new openings, we had opened four seventy one new hotels throughout 2024, bringing our total number of operating hotels to sixteen nineteen by the year end, a year on year increase of over 33.8%. And in 2025, this positive trend will continue. We expect to maintain a similar hotel opening growth rate with a full year target of 500 new hotels, so that we can steadily advance toward our strategic goal of achieving 2,000 premier hotels by 2025.

[Moderator]

Regarding new signings, we can see that the demand in the franchise market remains very active during Q1 of twenty twenty five. We observed that franchisees generally believe that the hotel industry still holds significant, also quite stable investment potential when compared with other investment opportunities. In their decision making processes, those mature franchisees pay particular attention to the long term value of brands and the competitive advantages of hotel products. We believe that based upon Atour's leading brand power and product strength, we expect our group's signings performance in 2025 to remain strong. Meanwhile, we believe that the high quality supply in the market still remains scarce.

[Moderator]

Therefore, we will keep strip signing quality control, especially when represented by our new products such as Atour four point zero and AtourLite three point zero. From the perspective of long term brand development, we will set high standards and requirements for the site selection and property conditions of those initial projects to better showcase our long term brand value and market competitiveness. We know that we have the strategy of February premier hotels. So while we achieved the 2,000 hotels scale target this year, we will continue to solidify our foundation of premier hotels, supporting the group's long term high quality development. Thank you.

[Luke Hu, Senior Manager Investor Relations at Atour Lifestyle Holdings]

Thank you, Zalen. Next question please.

[Operator]

Thank you. Our next question comes from C. G. Lin from CICC. Your line is now open.

[Analyst]

So in 2024, our retail business continued very strong growth momentum. So what's our plan for the retail business in 2025? And are there any plans for new product or revenue targets? Thank you.

[Moderator]

Thank you, Sujian. Let me first bring up our overall retail business and product plans, then I'll ask Tianjin to add some financial details related to retail later. Well, as we have announced in our financial report, Atour Planet development is the natural outcome of Atour's long term commitment to our brand group positioning and serving people business model. Atuo Planet has indeed achieved impressive results in terms of its scale growth and brand momentum. However, we have to say that there's still substantial room for improvement across the whole industry.

[Moderator]

In 2025, we have set higher goals for ourselves and will strengthen the core competencies of Ator's retail across all dimensions. First, we will continue to enhance product R and D and innovation, consolidate our leading position in existing categories and build product barriers. We will also actively develop and expand new products in the sleep and pan sleep categories, enriching our deep sleep product matrix and continuously unleashing our ability to create blockbuster Secondly, we will remain user experience oriented and strive to create a tour planet retail product by referencing a higher standard from the apparel industry, so as to drive the home textile industry achieve overall improvement and innovation in its processes and the technology. Thereby, we have the target of establishing a leading industry standard in the deep sleep domain and promoting high quality and sustainable growth in our retail business. In terms of the revenue of retail business, it contributed 30% to our group's revenue in 2024, becoming a significant engine for the group's business growth.

[Moderator]

Looking into the full year 2025, with the continued scaling of dominant categories and the growth momentum from our new product matrix, we believe the retail business is expected to again outpace our hotel businesses in year on year revenue growth. We expect retail revenue to grow by no less than 35% year on year in 2025. Thank you.

[Luke Hu, Senior Manager Investor Relations at Atour Lifestyle Holdings]

Thank you, Tian. Next question, please.

[Operator]

Thank you. Our next question comes from Lydia Lin from Citi. Your line is now open.

[Lydia Ling, Director - Equity Research at Citi]

So I want to follow-up on the margin side. And so firstly, with the right of the retail business, so how do you describe the margin trend for 2025? And also effective for the retail business, what could be the margin trend for this year? Thank you.

[Moderator]

Okay. Thank you, Lydia. In 2024, we achieved an adjusted net profit margin of approximately 18% for the full year, a decrease of 1.4 percentage points compared to 2023. This was mainly due to the fluctuations in RevPAR throughout the year and the structural factors such as the increased proportion of our retail business. For 2025, although we know that the changes in company's revenue structure will continue, so we will also optimize our cost structure, improve our management efficiency to offset the impact on structural profit margins.

[Moderator]

We anticipate that the adjusted net profit margin will remain relatively stable. In 2024, the operating profit margin of our retail business increased to low double digits and moving forward as our retail scale continues to expand, we will maintain a certain level of marketing expenditure. We expect the operating profit margin of the retail business to remain at the similar level in 2025. In terms of the marketing strategy, we will continuously improve the efficiency of channel distribution to strengthen our brand building and more importantly, solidify our brand equity of Atul Planet. Thank you.

[Luke Hu, Senior Manager Investor Relations at Atour Lifestyle Holdings]

Thank you, Lydia. Next question please.

[Operator]

Thank you. Our next question comes from Xing Chen from UBS. Your line is now open.

[Xing Chen, Investment Banking Analyst at UBS Group]

Let me translate it to English. This is Xin from UBS and we noticed the first Saka store has already opened. Could the management share the main strategy for the high end brand this year? Additionally, how is H2Lite three point zero recent performance and does it meet management expectations? Thank you.

[Moderator]

Thanks, Chenxing. And let me first address your question regarding upper scale markets. Thanks, Quanxing. And currently, our two upscale hotel brands, A Tour S and Sake Hotel are developing in parallel. Among them, A Tour S has won the favor of high end business travelers by adapting to the contemporary needs, leveraging its precise market positioning and exceptional service quality.

[Moderator]

Of course, we will also promote the iterative upgrade of a Tour S, and we are actively preparing a new version to maintain its competitiveness and brand vitality in the market. As for Sakhe, we continued to adopt a long term mindset in our strategy, aiming to lead the development direction of China's upscale hotel market. We will meticulously craft each Sahe hotel establish a flagship for quality and experience. In February, our first Sahe hotel opened in Shanghai's Northbound. Since its trial operation, its advanced experiential services such as Sahe butlers and the room diffuser selection before checking in have received high praise from consumers and its pricing and positioning have also been well received by the market and customers.

[Moderator]

And then let me add something on AtoorLite three point zero. The development trajectory of AtoorLite consistently aligned with our expectations. As of the end of twenty twenty four, we have expanded to over 100 AtoorLite three point zero hotels in 46 cities across the country with strong operational performance that has significantly boosted the confidence of investments from the franchisees. As a new brand, Atoi Life three point zero requires accumulation and continuous refinement while rapidly expanding. We are now consistently incorporating feedback from consumers and franchisees, enhancing our brand strength through product iterations and refined operations.

[Moderator]

Currently, we have over 100 Atoor Light hotels in our pipeline, primarily located in core business districts of second tier and above cities. Thank you.

[Luke Hu, Senior Manager Investor Relations at Atour Lifestyle Holdings]

Thank you, QingJi. Next question is.

[Operator]

Thank you. Our last question comes from the line of Ronald Luun from Bank of America. Your line is now open.

[Analyst]

Let me translate my question into English. Could you share the plans for Hotel Closers plan 30225? Additionally, are there any new plans for shareholder return this year? Thank you very much.

[Moderator]

Thank you, Ronald, for your question. A key consideration in our decisions of hotel closures is the consistency of experiences. We aim at achieving the strategic goal of Chinese Experience 2,000 premier hotels by the end of twenty twenty five. Therefore, we will maintain a similar pace of closures in 2025, continuing to strengthen the centralized evaluation of the property quality and operational performance of our hotels in operation. For hotels that still fail to meet operational performance expectations after rectification in areas such as services and customer experiences, we will proactively terminate contracts with them in accordance with the agreements.

[Moderator]

Regarding shareholder returns, we have always placed great emphasis on and actively fulfilled our commitment to sustained returns for shareholders. In August of last year, we officially announced a three year annual dividend plan, clearly committing to distribute an annual dividend of no less than 50% of the previous financial year's net income over these three years. Last year, our dividend payout amount is around US62 million dollars In 2025, we will continue to comprehensively consider our company's overall operations, cash reserves and future business developments comprehensively to make integrated decisions on the timing and proportion of dividends, ensuring that our shareholders continue to share in the company's growth. Thank you. Thank you, Ronald.

[Operator]

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

[Luke Hu, Senior Manager Investor Relations at Atour Lifestyle Holdings]

Thank you for joining us today. If you

[Luke Hu, Senior Manager Investor Relations at Atour Lifestyle Holdings]

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.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.

Participants

Executives

• Luke Hu, Senior Manager Investor Relations
• Jianfeng Wu, Co-CFO, Executive VP & Director

Analysts

• Moderator
• Dan Chee, Vice President, Equity Research at Morgan Stanley
• Simon Cheung, Managing Director at Goldman Sachs
• Analyst
• Lydia Ling, Director - Equity Research at Citi
• Xing Chen, Investment Banking Analyst at UBS Group