Recently, Atour Group released its latest financial report for the quarter. In the third quarter of 2024, revenue increased by 46.7% year-on-year to 1.899 billion yuan; adjusted net profit increased by 41.2% year-on-year to 384 million yuan; adjusted EBITDA increased by 40.0% year-on-year to 532 million yuan.

Atour has maintained high growth on a high base, and many institutions such as Shanghai Pudong Development Bank International, Guojin Securities, and Huatai Securities have given Atour a buy rating, with Huatai Securities raising its target price for Atour to $38.62.

▲Multiple institutions give Atour a "Buy" rating

Looking at the financial reports recently released by hotel groups, the hotel industry shows a clear trend of differentiation. On the one hand, the era of traditional full-service international hotels "winning without effort" is gradually fading, and brand premiums are declining to varying degrees. On the other hand, Chinese domestic chain hotel brands are making further breakthroughs in the mid-to-high-end market, with a more favorable overall growth situation.

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With the "base" of the mid-to-high-end market, Atour has opened an upward cycle, exploring its own distinctive path in hotel network expansion, multi-brand matrix, and the creation of new business format scenarios.

Policy and market dual drive, hotel network expansion accelerates

A report from the China Reform and Development Research Institute points out that this year, China's service consumption has shown a trend of stopping the decline and rebounding, releasing huge growth potential. Since last year, relevant departments have continued to exert efforts at the policy level to promote the transformation and upgrading of China's tourism market. At the same time, the proportion of time occupied by hotel accommodation in the entire journey is continuously increasing, and consumer demand is strong.

Under the dual drive of policy benefits and market demand, the expansion of Atour's hotel network further accelerated this quarter. The number of new hotels opened in Q3 reached 140, a year-on-year increase of 72.8%, once again setting a new record for the number of openings in a single quarter. As of the end of September, the number of operating hotels has reached 1,533, with 732 projects under development in the pipeline, and the willingness of franchisees to sign contracts continues to strengthen.

Industry insiders believe that compared with the hotel chain rate of over 70% in the United States, China's hotel chain rate is only 40.95%, and there is still a lot of room for penetration. The expansion speed of mid-to-high-end chain hotels is relatively fast, and Atour is a backbone force in the mid-to-high-end brands, with ample long-term growth potential.

Brand matrix increasingly perfected, investment returns enter a virtuous cycle

This quarter, Atour further perfected its hotel brand matrix, and in October, it newly launched the high-end brand Sah Hotel. Faced with the current structural dilemma of traditional full-service high-end hotels, Sah Hotel uses "selected services" to solve the problem of efficiency per square meter, standardizing the personalized services with the highest user demand, bringing about an increase in premium and operational efficiency, and is expected to create a more virtuous high-end hotel UE (unit economic model) in terms of profitability.

The strong expansion of Atour 4.0 has also further consolidated Atour's leadership in the mid-to-high-end field. Currently, there are 6 hotels open, with a rapid increase in occupancy rates, and more than 60 projects in the pipeline, with ample high-quality project reserves.

Atour's layout in the mid-range market has also further released competitive advantages. In the third quarter, Light Live 3.0 performed strongly, signing 38 new projects, with the signing ratio continuing to exceed 20%. As of the end of September, the number of Light Live 3.0 hotels open has reached 76. The opportunities brought by the upgrade of core business district properties will further enhance the market space for Light Live 3.0.

With the launch of the new brand Sah Hotel, as well as the accelerated replication of Atour 4.0 and Light Live 3.0, Atour's multi-brand formation is becoming increasingly clear, meeting the needs of different consumer groups through a combination of luxury, high-end, mid-to-high-end, and mid-range. Looking at the investment return cycle of products from each brand under its umbrella, it has a leading advantage among brands of the same grade.

Building a deep sleep experience barrier, enhancing growth certainty

Affected by the high base of strong travel demand during the summer vacation last year in China, and the impact of severe weather in the third quarter of this year, the operational indicators of the hotel industry are facing significant pressure in the third quarter of this year. Under performance pressure, Atour still shows strong operational resilience.

The financial report shows that in the third quarter, Atour Group's RevPAR (average revenue per available room) was 380 yuan, ADR (average daily rate) was 456 yuan, and OCC (occupancy rate) reached 80.3%, with a steady occupancy rate performance.

During the reporting period, Atour's retail business GMV increased by 107.7% year-on-year to 566 million yuan, and the membership systems and points benefits of Atour Hotels and Atour Planet across multiple platforms were also recently interconnected. The deep sleep brand mind shaping brought by retail blockbusters will promote the increase in hotel repeat occupancy rates; at the same time, the sticky traffic brought by membership interconnection also provides stable support for the long-term growth of the hotel business.

Atour has created a deep sleep scene ecosystem through the "hotel + retail" layout. Whether it is the setting of hotel deep sleep rooms and floors; or the hot sale of Atour Planet's deep sleep series pillows and quilts, it has formed a consistent and coherent sleep experience of "at home" and "on the way", building a differentiated experience barrier.

Conclusion:

In summary, the rise of domestic Chinese chain brands is an inevitable trend, and focusing on user experience while balancing operational efficiency is the key to success, which is also an important reason why Atour can stand out.

Looking at the performance report, Atour's operational value and resilience are commendable, and its own competitive barriers have basically been built. Since Atour proposed the "Chinese Experience" strategy, the "Chinese Experience" has been continuously enriched, extended, and explored in the hotel and retail sectors.

Atour has also actively implemented a dividend policy this year, conveying firm confidence to the outside world and bringing considerable returns to investors. For investors, Atour's intrinsic value is expected to continue to grow in the future, which is undoubtedly a signal worth looking forward to.

Choose a "good track", make a "good layout", and draw a "good blueprint". In the changing market supply and demand environment, it can also open an "upward cycle".