Hello, ladies and gentlemen. Thank you for standing by, and welcome to the Atour Lifestyle Holdings First Quarter 2025 Earnings Conference Call. Today's conference is being recorded. I would now like to turn the call over to Mr. Luke Hu, Senior IR Manager. Please go ahead, sir.

Thank you, operator. Good morning, and good evening, everyone. Welcome to our first quarter 2025 earnings conference call. Today, you will hear from our Founder, Chairman and CEO, Mr. Wang Haijun and our EVP, Co-CFO, Mr. 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 purposes. 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.

Thank you, Luke. Hello, everyone, and thank you for joining Atour's First Quarter 2025 Earnings Call today. In the first quarter of 2025, China's domestic travel market experienced fluctuations amid a complex and volatile macro environment with numerous uncertainties presenting both challenges and opportunities. As a leading lifestyle group, we have always adhered to our business philosophy of serving people and are confidently navigating these evolving market dynamics. We continue to respond proactively to shifting consumer preferences for superior quality, personalized service and experience-driven consumption. Meanwhile, we remain firmly committed to advancing the strategic initiative of Chinese Experience 2,000 Premier hotels, which not only strengthens our brand awareness and product offerings, but also drives the transformation and elevation of the industry's value chain. Next, I would like to provide more details on our business performance for the first quarter of 2025. Let's begin with our hotel business. Our RevPAR reached RMB 304.4 in the first quarter of 2025, representing 92.8% of its level in the same period of 2024. Specifically, OCC reached 95.8% and ADR stood at 97.2%, both compared to the same period in 2024. RevPAR for our mature hotels in operation for more than 18 months in the first quarter of 2025 was 92.8% of the level for the same period in 2024, in line with the group's overall performance, while OCC and ADR for these mature hotels reached 95.6% and 97.4% of 2024's levels for the same period, respectively. Benefiting from our strengthening brand influence and robust organizational efficiency, our hotel network continued to expand, demonstrating the resilience of our business. In the first quarter, we opened 121 new hotels, representing a 24.7% year-over-year increase. By the end of the first quarter, we had a total of 1,727 hotels in operation, representing a 32.6% year-over-year increase. This quarter, franchisees remain positive about our brand development. This has led to a continuous expansion of our pipeline projects. By the end of the first quarter, the number of hotels under development reached 755, while pursuing scale expansion, we always adhere to the quality standards. We carefully screen and evaluate both new hotel signings and openings to ensure sustainable high-quality growth. In the first quarter, guided by our long-term growth philosophy and deep insight into current business travel trends, we implemented upgrades to our mid-scale and upper mid-scale hotel products. In the upper mid-scale segment, we launched Atour 3.6 in the first quarter. This product embodies an in-harmony with nature design philosophy, seamlessly integrating business functionality and a relaxed ambience. Furthermore, Atour 3.6 prioritizes enhanced convenience and comfort through optimized space utilization and upgraded functional design. This innovation enables us to deliver a comprehensive full scenario ultimate business travel experience, setting a new benchmark for premium business travel in the upper mid-scale market. Since its launch, Atour 3.6 has received widespread market recognition and positive feedback from franchisees through its strong product vitality, holistically upgraded our customer experience features, and efficient investment returns. We believe this product will further solidify our core competitiveness in the upper mid-scale segment. Looking ahead, the Atour Series 3 and Series 4 product lines will jointly shape our next-generation upper mid-scale hotel portfolio, operating in parallel to complement each other. Atour Series 3 strengthens our leading brand position in core business travel scenarios. Meanwhile, Atour Series 4 offers an extended life cycle and shapes the future of the upper mid-scale market. Together, Series 3 and Series 4 product lines address diverse customer aesthetic preferences and accommodation needs while also providing franchisees with a broader range of investment options. In addition, for existing hotels with renovation needs, we have introduced the Atour 3.5 SE renovation program to help them maintain market competitiveness. In the mid-scale segment, we remain committed to product innovation and experiential upgrades that cater to the diverse needs of younger consumers. In 2023, we introduced Atour Lite 3.0, which effectively addressed the critical market challenges such as outdated aesthetics and inadequate service experiences by incorporating youthful, fashionable design and innovative service touch points. This product has received widespread acclaim from both franchisees and consumers. Meanwhile, during the operation, we have gained valuable insights into the preferences of younger consumers. Building on this foundation, we launched Atour Light 3.3 in the first quarter. Inspired by the Blue Knights of Genoa, Atour Light 3.3 provides customers with a relaxing and restorative resting experience through immersive atmospheric design. Atour Light 3.3 features comprehensive upgrades in visual design, spatial perception and facilities while offering tailored functionality for business meetings and work-related needs. These enhancements further elevate the overall customer experience. With its improved quality, expanded versatility and adherence to our Atour signature experience standards, we believe Atour Light 3.3 will serve as a key driver in achieving our goal of 1,000 Atour Light hotels and will establish itself as a flagship product in the mid-scale segment. In an increasingly competitive market, we remain focused on creating products with extended life cycles. By continuously enhancing our product competitiveness with reinforced experience differentiations, we effectively meet the diverse needs of broader demographics, further solidifying our leadership across market segments. Now moving to our retail business. The growth of our retail business is a natural extension of our positioning as a lifestyle group and our business philosophy of serving people. In the first quarter, our retail business maintained strong growth momentum with GMV reaching RMB 845 million, up 70.9% year-over-year, driven by rising brand strength and growing customer loyalty. Online channels continued to contribute over 90% of total GMV. Since its inception, Atour Planet has remained committed to studying and integrating customers' sleep needs across both hotel and home environments. This anchors the deep sleep experience firmly in the minds of customers. Across different scenarios, Atour Planet's products not only fulfill customers' functional needs, but also deeply resonate with their emotional needs. In the pillow category, our deep sleep memory foam Pillow Pro series maintained robust sales performance in the first quarter, consistently ranking as the top seller in its category on major third-party e-commerce platforms. Since its launch, the accumulated sales of the deep sleep memory foam Pillow Pro series have exceeded 6 million units, further solidifying Atour Planet's leading position in the pillow category. Based on our capture and exploration of user needs as well as the refinement and analysis of user feedback, Atour Planet has developed a standardized user-driven product iteration model. In March, in line with seasonal changes, we launched the Deep Sleep Thermal Regulating Comforter Pro 2.0 summer season, serving as the upgraded version of the Deep Sleep Lightweight Comforter introduced last year. This new product further optimizes the breathable cooling system, aiming to provide customers with a natural and cozy coolness instead of an ultimate coat touch. Upon launch, the product received widespread consumer praise, ranking first in sales in its category on Tmall and Douyin in its first month. Within just 48 days, the product exceeded RMB 100 million GMV, making it another blockbuster product in the deep sleep series. Amidst an increasingly competitive market environment, we have been steadily reinforcing Atour Planet's core strength. On one hand, we continue to drive innovation in product materials and manufacturing technologies. On the other hand, by establishing a comprehensive set of production standards, we have achieved end-to-end quality control and ensured consistent and reliable product quality. Moreover, Atour Planet remains focused on refining product details based on customer needs, aiming to enhance the overall usage experience. With the continuous improvement of both product performance and quality, Atour Planet is well positioned to meet consumers' growing expectations for high-quality living, redefining new standards for both product quality and customer experience. Moving to our membership business and the channel development progress. Thanks to the continued enhancement of our membership ecosystem and an expanding range of membership benefits, our registered individual members surpassed 96 million by the end of the first quarter, representing a 35.4% year-over-year increase. Our core CRS channel continued to maintain stable performance, accounting for 65.1% of total room nights sold during the first quarter. The contribution of room nights sold to corporate members was 19.8% during the first quarter. We continue to enhance our A-Card membership ecosystem by gaining deeper insights into user behavior and preferences across different business formats. This enables us to further integrate hotel and retail businesses, thereby driving cross-consumption between them. In the first quarter, alongside the launch of new retail products, we introduced cross-promotional campaigns that allow retail customers to access our hotel membership benefits. These initiatives have attracted more retail customers to our hotels, driving further conversions across our business segments. In terms of member engagement, we actively leverage emerging trends in leisure and business travel to continuously deliver experiences and benefits that highly resonate with customers. For example, during the spring festival, we launched our countertrend travel blind hotel booking campaign, catering to the younger travelers' growing preference for exploring niche crowd-free destinations. We also introduced the destination ambassadors to share local travel inspiration. Additionally, we partnered with a vertical travel platform to establish integrated memberships, further embedding our value proposition throughout customers' journeys and enhancing member loyalty. Finally, I am pleased to announce the recent release of our 2024 ESG report. Throughout 2024, we continued to strengthen our ESG governance by embedding sustainability principles across both hotel and retail businesses. At the same time, we are actively fulfilling our social responsibilities through industrial support and social assistance programs in Yaduo Village. And by leveraging our brand influence, we also built bridges for biodiversity conservation. Looking ahead, we remain committed to upholding our product philosophy of being humane, warm and inspiring, scaling the expansion and driving quality enhancements to both our hotel and retail businesses. Guided by our long-term growth principle, we remain committed to making tangible contributions to sustainable development and the betterment of society.

Thank you, Haijun. Now I would like to present the company's financial performance for the first quarter of 2025. Our net revenues for the first quarter of 2025 grew by 29.8% year-over-year and fell by 8.6% quarter-over-quarter to RMB 1,906 million. Revenues from our hotel business for the first quarter of 2025 were RMB 1,032 million, up by 23.5% year-over-year and down 6.7% quarter-over-quarter. The year-over-year increase was primarily fueled by our ongoing hotel network expansion. Revenues contributed by our leased hotels for the first quarter of 2025 were RMB 129 million, a decrease of 23.5% year-over-year and 21.6% quarter-over-quarter. The declines were primarily due to a decrease in the number of leased hotels as a result of our product mix optimization. Revenues from our retail business for the first quarter of 2025 were RMB 694 million, up by 66.5% year-over-year and down 9.3% quarter-over-quarter. The year-over-year increase was driven by growing recognition of our retail brands and effective product innovation and development as we successfully broadened our range of product offerings. Now let's move to costs and expenses. Hotel operating costs for the first quarter of 2025 increased by 11.2% year-over-year and decreased by 7.3% quarter-over-quarter to RMB 736 million. The year-over-year increase was primarily due to the increases in variable costs such as hotel manager costs associated with our ongoing hotel network expansion. Gross margin of our hotel business expanded to 36.6% in the first quarter of 2025 from 34.1% during the same period of 2024. Retail costs for the first quarter of 2025 rose by 53.7% year-over-year and decreased by 12.5% quarter-over-quarter to RMB 337 million. The year-over-year increase was associated with the rapid growth of our retail business. Gross margin of our retail business expanded to 51.4% in the first quarter of 2025 from 50.5% during the same period of 2024, primarily attributable to the increasing contribution from higher-margin products. Selling and marketing expenses accounted for 14.8% of net revenues for the first quarter of 2025 compared with 11.9% for the same period of 2024. The increase was mainly due to investment in brand recognition and effective development of online channels in line with the growth of our retail business. General and administrative expenses, excluding share-based compensation expenses, accounted for 4.1% of net revenue for the first quarter of 2025 compared with 5.0% for the same period of 2024. The decrease was primarily due to improved management efficiency and economies of scale. Technology and development expenses accounted for 2.1% of net revenues for the first quarter of 2025 compared with 1.6% for the same period of 2024. The increase was mainly due to increased investment in technology systems and infrastructure to support our expanding hotel network and retail business and improve the customer experience. Adjusted net income for the first quarter of 2025 was RMB 345 million, representing a 32.3% increase year-over-year. Adjusted EBITDA for the first quarter of 2025 was RMB 474 million, up by 33.8% year-over-year. Adjusted net profit margin for the first quarter of 2025 was 18.1%, representing an increase of 0.3 percentage points year-over-year. Adjusted EBITDA margin for the first quarter of 2025 was 24.9%, an increase of 0.8 percentage points year-over-year. We also maintained a healthy cash position. As of March 31, 2025, our cash and cash equivalents totaled RMB 3,146 million with net cash of RMB 3,074 million. As part of our commitment to enhancing shareholder value in accordance with the annual dividend policy adopted in August 2024, today, we declared our first cash dividend in 2025 of USD 0.14 per ordinary share or USD 0.42 per ADS, for an aggregate amount of approximately USD 58 million. Concurrently, we announced a 3-year share repurchase program under which we may repurchase an aggregate value of up to USD 400 million. Through a comprehensive shareholder return initiative encompassing dividends and share repurchase, we are taking concrete actions to reward shareholders' trust and support, enabling all shareholders to share in the company's growth achievement. For full year 2025, we currently expect total net revenue to increase by 25% to 30% compared with full year 2024.

Our first question comes from Sijie Lin from CICC.

Could you please share the performance of RevPAR since Q2 and provide outlook on RevPAR for the full year?

In Q1, the overall market experienced some volatility. There were multiple factors to be considered, including weather conditions, macroeconomic impacts, which are all affecting travel demand. Our RevPAR decreased by 7.2% year-over-year and also OCC and ADR were showing varying degrees of decline year-over-year as well. Entering Q2, we observed a continued divergence in market demand. While there was a recovery of business travel, it remains quite uncertain to some extent; however, leisure travel demand has demonstrated some notable resilience. During the Labor Day holiday, both pricing and occupancy performed quite strongly, exceeding prior year levels. So overall, we anticipate there might be some easing of RevPAR pressure in Q2 when compared to Q1. As for our view on the full year RevPAR performance, it still remains consistent with the beginning of the year. RevPAR still faces considerable uncertainty given the ongoing market volatility. However, in terms of our operations, we will not just blindly engage in price competition with the homogenized products in the market. What we will do is continue to adhere to Atour's differentiated experience advantages to seize core revenue opportunities, and we are going to adopt a more balanced and refined revenue management strategy in terms of both ADR and OCC so that we can continuously build the long-term brand value of Atour.

Next, we have Ronald Leung from Bank of America.

Could you please share your view on the new signings momentum and also new hotel openings for the full year of 2025?

Thank you, Ronald. In the first quarter, we maintained positive signing momentum amid industry-wide pressure from homogeneous supply. Atour solidified its unique market positioning through its differentiated brand strategy and distinctive experiential strength. This has continuously drawn the attention of high-quality franchisees. In addition, against the backdrop of persistent macroeconomic uncertainty, we have clearly observed along the way that compared to other investment channels, the hotel industry offers still relatively stable cash flow returns and a more robust business model. So despite some RevPAR volatility, premium property rental costs still remain in a relatively low range with improved availability, making the overall returns attractive in the long term. As a result of that, mature hotel franchisees are still confident and willing to seize opportunities to capture the long-term growth potential of premium brands in the future market. As for new openings, in the first quarter of this year, we opened 121 hotels, continuing that high-quality expansion trend since last year. Based upon that, we maintain our full year opening guidance of 500 new openings and have full confidence in achieving this goal, steadily advancing toward our strategic objective of reaching 2,000 premier hotels by year-end. Also based on our strategic goal of 2,000 premier hotels, we will impose stricter requirements on quality from multiple dimensions, including signings, openings, and operations to ensure that our hotel numbers grow with quality so that every hotel can provide users with a consistently high-quality experience. Thank you.

Next, we have Dan Chee from Morgan Stanley.

My question is related to the company's retail business. We saw retail business revenue growth in the first quarter was outstanding at 67% year-on-year. Previously, the company guided full year retail revenue of no less than 35% growth. I would like to ask the management about any update to the full year revenue guidance on this business and any strategic plan for retail in the coming period? Thank you.

Thank you, Dan. In the first quarter, we seized the key marketing opportunities of the Spring Festival. We also gained advantage from the continuous popularity of the Deep Sleep series products. Our retail business achieved a year-on-year growth of over 70% in GMV. Meanwhile, we can see that the sales trend of the new products we launched in March, namely the Deep Sleep Thermal Regulating Comforter Pro 2.0 summer season, is also very strong. Looking at the full year, though market competition is still intense, our continuous enhancement of Atour Planet product offerings and brand awareness has led us to be quite confident in the performance of our upcoming product launches, and the major promotional campaigns we have in our plans. Based upon this outlook, we are now raising our full-year retail revenue growth forecast to 50% year-over-year. Meanwhile, despite some RevPAR uncertainties, the strong performance of our retail business has led us to increase our group's full-year revenue growth guidance to the range of 25% to 30% year-over-year. In the future, Atour Planet will continue to focus on the deep sleep domain, enhance product R&D, improve our product quality, and also consolidate our moat in the supply chain to achieve higher quality and sustainable development of both our products and our brand. Thank you.

Our next question comes from Wei Liu from Citics.

We noticed that you had just announced a dividend and share buyback program. Could you share some thoughts on the overall considerations behind these initiatives?

Thank you, Wei. Well, like we said before, we remain committed to creating long-term value and rewarding our shareholders' trust and support through concrete actions. So in addition to the dividend, we have also officially announced today a 3-year share repurchase program with a total amount not exceeding USD 400 million. Regarding the dividend, we will continue implementing the 3-year dividend plan established last year, under which the annual cumulative dividend payout will be no less than 50% of the net income in the previous fiscal year. That's why this year, as we announced, our first dividend distribution totals approximately USD 58 million, representing about one-third, 33% of the prior fiscal year's net income. Moving forward into the future, we will implement a comprehensive shareholder return program by combining dividend payout and share buyback together. While ensuring the company's stable and normal capital operations, we will actively consider various shareholder return methods in line with actual business conditions to enhance shareholder yield and enable all shareholders to share in the company's growth achievements.

Our next question comes from Lydia Ling from Citi.

Could you provide an update on the progression of your upscale brands? And also, we noticed the launch of some new products across both the upper scale and also mid-scale brands. So could you elaborate more on the strategies for them?

Thank you, Lydia. In terms of our upscale brands, I'd like to talk about our new brand flagship hotel. We consistently adhere to a quality-first principle. Our goal is to develop a batch of flagship projects. We are pleased to take this opportunity to announce that within this month, our flagship hotel at Binhu of Shenzhen will officially commence operations on the 28th of May. Since the trial operations of 2 Sahu Hotel, which started this year, their product positioning, design, aesthetics and service experiences have received widespread acclaim from the consumers. We are confident that our flagship hotel's core concept of Chinese experience and its brand ethos Oriental Serenity will establish new benchmarks in the upscale hotel market in China. In the upper mid-scale hotel segment, as I mentioned earlier, our Atour Series 3 and Atour Series 4 will coexist, and they will jointly shape our next-generation upper mid-scale hotel portfolio so that it not only reaches the choices of franchisees, but also meets the diverse accommodation needs of consumers, and also further expands the market coverage to consolidate Atour's leading position in the upper mid-scale market. As for the mid-scale hotel segment, we announced earlier that we are going to upgrade our Atour Light 3.0 to the Atour Light 3.3 version, which has undergone comprehensive upgrades in multiple dimensions, including experience, product texture and business functions. We are adopting more modular design applications in order to adapt to more diverse properties as well as enlarging the room areas. We are going to continue to be committed to creating a higher premium and cost-controllable investment model by offering lasting profitability and excellent returns so that we can provide franchisees with more investment options.

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 next quarter, and thank you, and goodbye.

And that concludes the question-and-answer session. And thank you very much for joining our call today. You may now disconnect.