Atour Lifestyle Holdings Limited (ATAT) Q3 2026 Earnings Call Transcript

Operator: Ladies and gentlemen, thank you for standing by, and welcome to Atour Lifestyle Holdings Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. I'd now like to turn the conference over to Mr. Luke Hu, IR Director. Please go ahead, sir.

Luke Hu: Thank you, operator. Good morning and good evening, everyone. Welcome to our third quarter 2026 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 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 purpose. For a clear understanding of these measures and the 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.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] Thank you, Luke. Hello, everyone, and thank you for joining Atour's third quarter 2026 earnings call today.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] So far this year, we have continued to see structural diverging trends in China's consumer market. It's not just about how consumers allocate their budgets. It reflects a change in how they judge value. With more options than ever, consumers are making decisions more carefully. They rely more on real experiences and brand reputation. They also increasingly seek an emotional connection, choices that reflect who they are, and a sense of being understood and valued. With both reason and emotion shaping consumer choices, experiential value and brand trust are becoming the industry's key differentiators. Even as the external environment and competitive landscape evolve, we remain guided by our strategy of Chinese experience, brand-led excellence. We continue to strengthen our experience advantage and connect with users through our brands. Even in a divergent market, we continue to win users' choice and trust.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] Now, I would like to provide more details on our business performance for the third quarter of 2026.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] Let's begin with our hotel business. The third quarter coincided with the peak summer travel season. Despite temporary weather disruptions in some regions, leisure travel demand remained resilient overall, with travel activity concentrated in the peak season. As demand patterns shifted across regions and customer segments, we continued to draw on our differentiated products and experiences to support steady growth in our hotel business. In the third quarter, our RevPAR was 100.45% of the level in the same period of 2025, reflecting steady operating performance. ADR was particularly resilient, further demonstrating the brand value we have built over the years.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] As for our hotel network, we continued to take a quality-first approach to expansion and grow at a steady pace. When choosing sites, we carefully consider their long-term growth potential and the location advantages as we continue to open high-quality hotels. This targeted approach has allowed us to meet a wider range of accommodation needs. In the third quarter, we opened 128 new hotels, bringing our total to 2,288 hotels in operation as of the end of the third quarter. We also maintain a healthy pipeline of 778 hotels at the same quarter end, providing a solid foundation for the continued growth of our hotel network.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] Turning to our booking channels. In the third quarter, our CRS channel continued to perform steadily, accounting for 61.5% of total room nights sold. Bookings under corporate agreements also made a stable contribution, accounting for 20.7% of total room nights sold. We will continue to improve member engagement and our services for corporate clients to make our own channels more competitive and provide our hotels with a more stable, diverse customer base.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] Now let me walk you through the latest developments across our hotel brands.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] Atour 3.6, the latest generation of Atour Hotel, now has more than 200 hotels in operation. Just over a year after the first one opened, its product model has gradually been validated by the market, helping Atour 3.6 build a solid reputation and enter a phase of steady expansion. With construction and operating costs that remain competitive over the long term, Atour 3.6 offers franchisees an investment option in the upper midscale hotel segment that balances returns and quality. These advantages also enable more high-quality projects to generate sustainable commercial value. At the same time, its design combines practicality with contemporary aesthetics, helping it stand the test of time and giving the product a longer lifespan. In the third quarter, Atour 3.6 continued to deliver outstanding performance, with RevPAR of hotels in operation exceeding RMB 410, demonstrating its strong competitive position.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] Atour Origin has shown remarkable growth potential since it began operating as an independent brand. In the third quarter, RevPAR of Atour Origin hotels in operation exceeded RMB 520. We continue to refine Atour Origin's signature experience touchpoints. We also recently partnered with an outdoor lifestyle brand to extend the natural tranquility of Atour Origin from hotel spaces into urban outdoor experiences. This allows guests to slow down and unwind, whether at the hotel or out exploring the city. Atour Origin's distinctive brand identity has attracted new customer groups. Its strong pricing power is also supporting steady expansion, opening up greater opportunities for us in the upper midscale segment.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] The upper midscale segment has long been Atour's core focus. It is also where we capture demand for quality accommodation. With distinct positioning and product offerings, Atour Hotel and Atour Origin have rounded out our upper midscale brand portfolio. Together, they strengthen our core business and create new opportunities for growth. They also allow us to serve more diverse accommodation needs and offer franchisees more flexible investment options. We will continue to refine each brand's distinct operating approach, further strengthening our dominant position in the upper midscale market.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] In the midscale market, hotel investors are placing greater emphasis on predictability. Atour Light 3.3, the latest version of Atour Light, balances investment efficiency with quality, and through its experiential advantages, opens up greater potential for a price premium. Its adaptability to different projects also provides more options for upgrading existing urban properties. For customers, Atour Light 3.3 remains focused on its Stay Chill brand proposition and the aspects of their stay that matter most. With its unique positioning and relaxed atmosphere, Atour Light 3.3 has gradually built its distinct customer base, continuously bringing new customers to the group. In the third quarter, Atour Light 3.3 continued to make breakthroughs in operating performance, with RevPAR of hotels in operation exceeding RMB 360.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] In the third quarter, Atour Light Series 3 also reached a milestone of 200 hotels in operation. As the network expands, an increasing number of guests are coming to appreciate Atour Light's distinctive positioning and product touchpoints through firsthand stays. Its brand strength has also grown steadily. The rollout of more benchmark projects has further validated Atour Light's operating model, which delivers stable returns and can be replicated at scale. This highlights the brand's long-term potential in the midscale market. As Atour Light enters its next stage of development, we will remain committed to the premier hotels principle, keep strengthening our products and experiences, expand steadily in prime locations, and firmly advance toward the goal of becoming a 1,000-hotel brand.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] In the upscale segment, SAVHE continued to deliver outstanding performance, taking our brand portfolio further into higher value markets and opening up more opportunities for upscale expansion. For a long time, China's upscale hotel market was dominated by international brands. However, their globally standardized operating models made it difficult for them to localize operations and respond promptly to personalized customer needs. Today, Chinese consumers are at the forefront of global demand trends, with increasingly high standards for product aesthetics, cultural expression, and distinctive experiences. We believe local brands still have significant room to grow in China's upscale hotel market. Our experience in this market over the past few years has enabled us to more accurately capture and assess what customers in this segment need. I am also pleased to share that we will soon unveil a new upscale hotel brand to complement our existing portfolio. With distinctive brand positioning, product designs, and experience features, we aim to serve a wider range of consumer scenarios and price points, helping bring Chinese upscale hotel brands to the world stage.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] Moving on to our retail business.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] In the third quarter, Atour Planet sustained its strong growth momentum with retail revenue reaching RMB 1.36 billion, up 61% year-over-year. This performance reinforces our belief that brands with quality products and experiences can continue to win consumers over. They can also create new consumer demand and market opportunities and find their own path to growth.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] Reinforcing our strength in core categories and making continued breakthroughs in strategic categories reflect more than an expanded product portfolio. These advances reflect our ongoing focus on creating value for users supported by the systematic capabilities we have built across product development, supply chain management, content creation, and brand building. These capabilities support one another and work together. First, in product development, we start with how people actually sleep. We identify the problem before looking for a technical solution. Our systematic approach to improving our blockbuster products has proven effective in the market. We also have a clearer sense of how to take each product category forward. Second, in supply chain management, we continue to expand our network of capable, high-quality suppliers who can work with us over the long term. We rely on industry-leading manufacturing standards to ensure a high-quality product experience. Alongside new product feature upgrades and continued quality improvements, we have also made significant progress this year in addressing the stock-out issues we faced in the past. Third, in content creation, we don't overwhelm users with technical specifications or rely on gimmicks. Instead, we explain what our products do and how they work in simple, everyday terms that people can relate to. This helps us build emotional connections with users and reinforces their impression that Atour Planet truly understands them. Fourth, in brand building, Atour Planet increasingly comes to mind when consumers think of natural deep sleep. Our consistent pricing discipline and product experience have also helped us gradually build one of our strongest assets, the trust of our users.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] In the third quarter, we focused on the finer details of users' sleep experience and the problems they encounter. Drawing on those insights, we rolled out a range of upgraded products in the sleep pad category, all of which showed strong sales momentum. In our core categories, to date, cumulative sales of the Deep Sleep Memory Foam Pillow Pro series have exceeded 13 million units. Our latest generation Deep Sleep Memory Foam Pillow Pro 4.0 surpassed RMB 100 million in sales just 17 days after launch, demonstrating how well the product resonated with users. Our comforter category also performed strongly, with revenue up more than 70% year-over-year in the third quarter. The product lineup within the Deep Sleep Thermo-Regulating Comforter Pro 3.0 series has further validated the category's growth momentum. In our strategic categories, Deep Sleep Loungewear 2.0 and Deep Sleep Fitted Sheet 2.0 also posted standout sales, giving Atour Planet's growth a further boost.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] We have always believed that the sleep market deserves our sustained focus. It offers stable long-term demand and significant market potential. Trust built on real experiences with a product is more likely to develop over time into lasting brand preference and customer loyalty. This builds greater brand value and helps the brand endure. That is why we remain confident in the long-term prospects of the sleep market. We also hope that Atour Planet will become a sleep brand that more and more consumers trust and will help drive China's sleep consumption market toward higher quality development.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] Turning to membership, we had more than 124 million registered individual members at the end of the third quarter. Members have long expected more than just a growing list of benefits. Distinctive benefits with tangible value are becoming increasingly important to the member experience. in the third quarter, we partnered with a retail ecosystem for the first time to launch a joint membership program, extending our member experience into more aspects of everyday life, including local shopping. We hope to bring the sense of comfort and peace of mind that users find on their travels into more of their daily lives.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] Going forward, we will continue to put users' real needs first. We will uphold our best price, best benefits, and best room availability guarantees while offering differentiated benefits and services. By delivering an experience members can trust, we aim to strengthen member loyalty and attract more high-value new customers. Guided by users' desire for quality living, we will keep exploring more partnership opportunities across different aspects of everyday life. At the same time, with deep sleep at the center, we will also continue to deepen the synergies between our hotel and retail businesses.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] Taking a long-term view ultimately brings us back to our people. For our users, as our brand and product portfolio continues to expand, more and more users are choosing Atour. Meeting their ever-changing needs and responding to their aspirations for a better life are always our most important long-term responsibility, and the starting point and standard for all of our products and services. We will put our founding purpose into practice through sincere service and carefully crafted products so that users continue to feel at ease and cared for. For our employees, we are also taking steps to energize the organization, help them feel a sense of belonging, and give them more opportunities to grow. As the world around us changes, we will also seize opportunities and embrace change to help our organization evolve. We will fundamentally rethink traditional approaches to organization and reshape how we manage the business, laying a solid foundation for the group's long-term competitiveness.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] I will now turn the call over to our Co-CFO, Mr. Wu Jianfeng, who will discuss our financial results.

Jianfeng Wu: Thank you, Haijun. Hello, everyone. I will walk through our financial performance for the third quarter of 2026. in the third quarter, our net revenues grew by 30.5% year-over-year to RMB 3.4 billion, supported by continued growth across our core businesses. Let me start with our hotel business. Revenues from our managed hotels grew by 20.4% year-over-year to RMB 1.9 billion, mainly driven by the ongoing expansion of our hotel network and development of our supply chain business. Revenues from leased hotels decreased by 18.6% year-over-year to RMB 134 million, primarily due to a reduction in the number of leased hotels as a result of our product mix optimization. We had 17 leased hotels at the end of this September, compared with 24 a year ago. Together, our hotel businesses recorded a gross margin of 37.9%, up 0.6 percentage points year-over-year, benefiting from a more favorable mix as leased hotels accounted for a smaller share of our hotel business. Turning to our retail business. Our retail business continued to grow, with revenues up 51% year-over-year to RMB 1.4 billion. This growth reflects the progress we have made in building our brand, expanding our product portfolio, and strengthening our supply chain capabilities. Retail gross margin was 52.1%, slightly down 0.6 percentage points year-over-year, but up 0.7 percentage points quarter-over-quarter. These fluctuations were primarily driven by differences in product mix across quarters. Overall, our retail gross margin has remained relatively stable. Turning to overall profitability. Adjusted net profit increased 26.2% year-over-year to RMB 615 million, while the adjusted net profit margin for the quarter was 17.9%, down by 0.7 percentage points year-over-year. This decline was primarily driven by a business mix shift, led by the rapid growth of our retail business, together with the continued investment in talent and organizational capability to support long-term growth. Adjusted EBITDA increased 28.8% year-over-year to RMB 883 million, with the adjusted EBITDA margin coming in at 25.7%, down 0.4 percentage points year-over-year. We maintained a healthy cash position. At the end of this quarter, cash and cash equivalents totaled RMB 2.7 billion, with net cash of RMB 2.5 billion. In line with our annual dividend policy, we declared a second cash dividend for 2026, amounting to about $59 million. This reflects our appreciation for shareholders' trust and support. For the full year, total dividend payments are expected to reach about $142 million. Finally, turning to our full-year outlook. For 2026, we currently expect total net revenues to increase by 33%-35% compared with the full year of 2025. That concludes my remarks. Now let's open for Q&A.

Operator: [Operator Instructions] Our first question comes from the line of Lydia Ling from Citi.

Lydia Ling: [Interpreted] Congratulations on the very strong results in the third quarter. My question is on the shareholder return. I wonder we saw that you actually announced the second dividend plan for this year. Could you share your overall long-term consideration regarding your shareholder return?

Jianfeng Wu: [Foreign Language]

Unknown Attendee: [Interpreted] Let me answer this question. Shareholder returns have always been a very important part of our long-term capital allocation. As I just mentioned, the two dividends announced this year total about $140 million. At the same time, we are advancing our share repurchase at a steady pace, and the cumulative repurchase amount so far this year has exceeded $120 million. As a result, taking the two together, cumulative shareholder returns this year have exceeded $260 million, reaching more than 110% of our 2025 net income.

Jianfeng Wu: [Foreign Language]

Unknown Attendee: [Interpreted] We remain confident in our long-term healthy development and our ability to continue generating cash flow. Going forward, we continue to target total shareholder returns of approximately 100% of prior year's net income through a combination of cash dividends and share repurchases, with execution adjusted dynamically based on market conditions.

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

Simon Cheung: [Interpreted] I just have one small question. It is in relation to the RevPAR performance for the fourth quarter as well as your outlook going into next year.

Jianfeng Wu: [Foreign Language]

Unknown Attendee: [Interpreted]. We maintained steady performance in Q3 despite diverging trends across the industry. Upon entering Q4, we continue to see diversified demand supporting the market. The combination of the National Day and Mid-Autumn Holidays drove the release of long-distance travel demand, and the leisure travel market performed well. Following the holidays, the resumption of business and MICE activities continues to support the business demand in the hotel market. Looking ahead, segmented travel scenarios such as autumn break travel, the inbound tourism, and ice and snow tourism will also bring some structural incremental demand in Q4.

Jianfeng Wu: [Foreign Language]

Unknown Attendee: [Interpreted] As for the 2027 trend, we will not provide specific RevPAR guidance at this moment. However, we believe the domestic hotel industry still has a solid foundation for steady development. On the one hand, the overall industry supply growth is slowing down, creating more favorable conditions for further improvement in supply-demand dynamics. Likewise, demand will continue to show relatively strong resilience, and we are fully confident in the fundamentals of domestic demand for quality accommodation.

Operator: Our next question comes from the line of Jiwei Liu from Citic.

Jiwei Liu: [Foreign Language] Management, I'm Jiwei Liu from Citic. The company's hotel opening pace has varied from quarter- to- quarter this year. Will you adjust the full-year hotel opening target? And how do you view hotel opening growth for 2027 and beyond?

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] In Q3, we opened 128 new hotels. In terms of the pace, it was a little bit faster than in the first half of the year. Based on the current progress of projects under construction in our pipeline, we are maintaining our full-year target of approximately 480 new hotel openings. At the same time, our target of approximately 80 hotel closures still stands.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] For 2027 and beyond, we are confident in the steady expansion of our hotel network. On one hand, we have ample pipeline reserves and that provided good visibility and support for our hotel openings over the coming period. On the other hand, the differentiated product portfolio, consistent experience advantages, and the enhanced ability to secure quality projects also provided more solid support for our hotel operations and long-term network expansion.

Operator: Our next question comes from Ronald Leung from Bank of America.

Ronald Leung: [Interpreted] Could you share the recent signing trends? How does the company continue to maintain your ability to secure premier hotels?

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] Let me continue answering this question of yours about signings. Against the backdrop of a more cautious industry trend, the franchisees now are considering project location, property conditions, partner brands, and investment returns in a more comprehensive and rigorous manner when making their investment decisions. However, for franchisees, at an equivalent investment scale, the hotel investment remains a quality business in the consumer sector with outstanding operational resilience and practically the strongest counter-cyclical attributes. We are also committed to making our brands and products stand the test of time and gain greater longevity, so that hotel investment projects can continue to generate stable operating value and commercial returns through their entire life cycle.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] Of course, in a market characterized by competition for existing market share, the good projects are certainly scarce. Leading products and an increasingly diverse brand portfolio gave us stronger competitiveness and greater initiative when securing quality projects. On the product side, it is not just about meeting functional needs through hardware facilities and aesthetics. The cultural depth and the differentiated experience embedded in the products themselves help the products achieve solid pricing power. On the brand side, over the past few years, we have already gradually built a richer, higher quality product matrix. New brands at different tiers, such as Atour Light, Atour Origin, and SAVHE, have gradually matured. The synergy across our brands strengthens our collective competitive position within commercial districts, and that enabled us to accommodate a wide range of property types.

Operator: Our next question comes from the line of Dan Chee from Morgan Stanley.

Dan Chee: [Interpreted] Please allow me to translate. My question is about the retail business. It continued to grow beyond our expectation. First and foremost, is there any update to full year 2026 retail revenue 40% growth target? From a longer term perspective, CEO Mr. Wang shared the strategic directions from product development to brand and content. What are your views on longer term growth trajectory or growth drivers?

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] All right. Let me first talk about the long-term growth driving factor behind our products. Since the beginning of this year, the retail business has maintained very strong growth momentum. In our view, the value of the retail business goes far beyond the rapid growth just in this phase. What we have always hoped for is to run the retail business with a long-term approach, to build up brand value and create a consumer brand that can consistently earn users' trust and has that long-term vitality.

Haijun Wang: [Foreign Language]

Unknown Attendee: [Interpreted] For the long-term development of Atour Planet, our direction is also very clear. First, we will continue to amplify our competitive advantages. This is how we define our competitive advantage. On one hand, we continuously solidify our product strength with continuous insight into users' real pain points, the presentation of products at Acme, and continuously evolving innovation capabilities. On the other hand, we insist on not engaging in price wars or relying on discounts and promotions, but instead, through content, we guide the users to gradually build a product selection mindset of sleep experience and accumulate long-term trust, also strengthen Atour Planet's mind share in the sleep category. That has been how we've been following the market of the trends, and also that's based upon our own thinkings. Of course, facing shortcomings in the long-term development head-on, we will also continue to build long-term capabilities and keep making breakthroughs. While launching new products, we are also thinking about our long-term product pipeline, continuously building long-term R&D capabilities and also accumulating technology. At the same time, we continue to bring in more high-quality suppliers, and we work with them to strengthen our respective capabilities. By building a stronger supply chain capability, we aim to provide better support for the continued innovation and upgrading of our product categories going forward.

Jianfeng Wu: [Foreign Language]

Unknown Attendee: Let me update the guidance for the retail business. Based on our overall operating performance, we are now raising our guidance for 2026 retail business revenue growth to 50%-55% year-over-year. Moreover, over the past few years, while the business scale has expanded, the operating profit margin of the retail business has also consistently maintained a trend of steady improvement. In the long term, we aim for Atour Planet to deliver steady revenue growth while continuing to improve profit quality and operating efficiency, building a business that compounds value over time and consistently creates long-term brand value.

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

Luke Hu: 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.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. [Statements in English on this transcript were spoken by an interpreter present on the live call.]