The most promising Atour continues to 'advance' with store opening efficiency + retail business

On May 23, $Atour(ATAT.US), as the leading listed chain hotel company, released its Q1 2024 financial report as the "grand finale."

(ATAT Q1 2024 Financial Report)

ATAT's Q1 2024 net revenue increased by 89.7% YoY to RMB 1.468 billion. Under non-GAAP accounting standards, the company's adjusted net profit was approximately RMB 261 million, up 63.4% YoY.

(Maidian Research Institute)

Compared to other listed chain hotel companies that have already released their Q1 reports, ATAT's revenue and net profit growth rates are slightly better.

(Maidian Research Institute)

In Q1, ATAT's ROE of 11.68% was also higher than that of its peers.

(ATAT Q1 2024 Financial Report)

The reasons behind this: In Q1 this year, ATAT's average daily rate (ADR) was RMB 430, slightly lower than RMB 443 in the same period last year; occupancy rate (OCC) was 73.3%, 0.8 percentage points higher than 72.5% last year; RevPAR was RMB 328, slightly lower than RMB 337 last year.

Among companies that have already released quarterly reports, RevPAR change rates ranged from -10% to 10%. ATAT's RevPAR was close to last year's, placing it in the middle of the industry. Hotel operational efficiency is not the reason for ATAT's leading performance—rather, it's the faster store expansion and better-than-expected retail business.

By the end of Q1, ATAT had 1,302 operating hotels with 148,149 rooms, up 34.5% and 31.6% YoY, respectively. Compared to peers with tens of thousands of hotels, ATAT, with just over a thousand hotels, sees a greater performance contribution from opening the same number of similarly-tiered hotels.

Moreover, ATAT has the highest proportion of franchised hotels among domestic peers. In Q1, ATAT generated net operating cash flow of RMB 143 million. By the end of the quarter, ATAT's total cash/cash equivalents/restricted cash amounted to RMB 3.049 billion. Meanwhile, ATAT's debt-to-asset ratio has dropped to the "comfort zone" of 60%+. Ample cash reserves and a healthy financial position give ATAT a first-mover advantage in "stockpiling" pipeline hotels. Currently, ATAT has 674 pipeline hotels, 57 more than in Q4 last year. ATAT's pipeline hotel growth rate is also faster than the industry average.

In 2024, ATAT continues to shift from selling "room nights" to selling services, solidifying and deepening its mid-to-high-end brands. ATAT Light Hotel 3.0 offers multiple services for business travelers, starting with "free zero-pressure suit rentals," and its membership numbers continue to grow steadily.

ATAT's retail brand "ATAT Planet" has long been favored by consumers for its deep-sleep series, including neck pillows and summer quilts. This year, ATAT has launched several new products, paired with official flash sales and limited-time discounts, achieving strong sales. In Q1, ATAT's retail GMV reached approximately RMB 416 million, up 277.4% YoY. Given that ATAT's retail business grew rapidly last year, maintaining over 2x growth this year far exceeded my expectations.

Recently, the stock prices of domestic listed chain hotel companies have declined, which I attribute to two reasons:

First, the post-"May Day" holiday period has seen a cooling of speculative capital;

Second, most listed hotel companies reported slowing growth in their Q1 reports from April to May, leading institutions to lower their growth expectations for chain hotels this year.

(Comparison of ATAT's Analyst Forecasts vs. Actual Performance, Futu)

ATAT's Q1 report slightly exceeded analyst expectations.

As of the close on May 23, ATAT's PE (TTM) was less than 18x, almost lower than all comparable peers listed in A-shares, Hong Kong, and U.S. stocks, placing it in the lowest tier of the industry. ATAT has no basis for a deep correction in the medium term.

After the "revenge travel" surge in 2023, residents' willingness to travel remains strong in 2024. According to estimates by the Ministry of Culture and Tourism Data Center, during the recent "May Day" Golden Week, domestic tourist trips totaled 295 million, with total spending of RMB 166.89 billion, up 7.6% and 12.7% YoY, respectively. Compared to 2019, these figures represent increases of 28.2% and 13.5%. Among domestic and international chain hotel companies, many have seen long-term bullish stock trends. ATAT, with its asset-light model, first-mover retail business, and high expected hotel opening growth rate, is likely to maintain leading medium-term growth in the domestic chain hotel sector. Investors should be patient with the temporary stock price pressure due to slowing industry growth and adhere to long-termism!