Atour Lifestyle Holdings Limited (ATAT) Earnings

Management highlights

- Market Environment & Strategic Direction - The hotel industry is shifting from scale-driven expansion to high-quality growth, with competition now centered on product innovation, service capability, and operational efficiency rather than just supply growth. - In retail, consumers increasingly prioritize alignment between products and personal lifestyles alongside product quality, with growing demand for personalized offerings. Only brands that consistently invest in quality and build differentiated experiences can earn long-term consumer recognition. - The company is advancing its new three-year "China Experience, Brand-Led Excellence" strategy across its two core hotel and retail businesses to drive long-term sustainable growth. - Hotel Business Operations - Adheres to a quality-first principle with strict project selection and opening standards, opening 101 new hotels in Q2 2026. Focuses on core higher-tier city business districts, with supplementary expansion into strong third-tier cities, areas around 5A scenic spots, and urban renewal projects. - Continued product upgrades across the multi-brand portfolio covering different price segments: the latest Ator 3.6 upper-midscale product balances experience quality and investment returns; Ator Origin has more than 60 operating hotels and 90 in the pipeline, offering differentiated nature-focused experiences; Ator Lite 3.3 midscale product has optimized its cost model, focusing investment on core experience areas (sleep, breakfast); SaHe, the upscale lifestyle brand, has redefined high-end lifestyle standards with strong pricing power. - Introduced the "Six Peace of Mind Commitments" to clarify service standards across key guest touchpoints, aiming to embed reliable, consistent service into the Ator brand and set an industry benchmark for service quality. Also runs public welfare initiatives to support frontline service staff, believing that respected staff deliver better guest experiences. - Retail Business Operations - Built strong systematic competitive capabilities across brand building, product R&D, supply chain management, and content creation that form a long-term moat. Shifting from a single blockbuster product model to a comprehensive portfolio of sleep-related products. - Launched upgraded core products (Deep Sleep Memory Foam Pillow Pro 4.0, Deep Sleep Thermal Regulating Comforter Pro 3.0 All Season) built on the Atura Planet Deep Sleep Standard, which translates user sleep experience into scientific, verifiable product standards that address common sleep pain points. - Long-term goal is to consolidate Atura Planet's position as the leading, most trusted sleep product brand for consumers. - Membership Ecosystem - As of end-Q2 2026, total registered individual members reached 120 million. The membership ecosystem acts as a foundational growth driver for both hotel and retail businesses, and the company is building refined segmented engagement systems to deliver customized benefits, deepen user connections, and enhance long-term user lifetime value.

Guidance

- Full-year 2026 total net revenue is expected to grow 30% YoY compared to 2025 (maintained from prior guidance). - Full-year hotel opening guidance is maintained unchanged, and full-year hotel closure guidance is also unchanged at approximately 80 closures. - Based on strong first-half performance and solid new product sales momentum, full-year retail revenue growth guidance has been raised to 40% YoY (up from prior lower guidance). - Full-year group net profit margin is still expected to see a modest YoY decline (maintained from initial full-year guidance). G&A and R&D expense ratios are now expected to stay relatively stable (an improvement from the beginning-of-year expectation of rising ratios), but a shift in revenue mix toward faster-growing lower-margin business segments and a higher expected effective tax rate will still drive a modest margin decline.

Segment performance

For Q2 2026, Ator Lifestyle Holdings reported total net revenues of 3.419 billion yuan, growing 41.4% year-over-year (YoY). 1. Hotel business: - Monetized hotels revenue: 1.725 billion yuan, up 32.8% YoY, accounting for 50.45% of total net revenue. Growth was driven by hotel network expansion and supply chain business development. - Leased hotels revenue: 132 million yuan, down 11.8% YoY, accounting for 3.86% of total net revenue. The decline resulted from a reduction in the number of leased hotels (from 24 to 19 YoY). - Total hotel gross profit: 659 million yuan, up 18.7% YoY. Gross margin declined due to faster growth of lower-margin hotel supply chain business, which now makes up a larger share of hotel revenue. - Overall operational metrics: Group-wide RevPAR was 345.4 yuan, 100.7% of 2025 Q2 level; ADR was 101.2% of 2025 Q2 level, occupancy (OCC) was 99.7% of 2025 Q2 level. CRS channel accounted for 61.5% of total room nights sold, with corporate members contributing 20.4% of room nights. As of end-Q2 2026, total operating hotels reached 2,175, with 811 hotels in the development pipeline. Key sub-brands had RevPAR exceeding: Ator 3.6 > 370 yuan, Ator Origin > 450 yuan, Atour Lite 3.3 > 340 yuan, SaHe > 1,000 yuan. 2. Retail business (Atura Planet): - Retail revenue: 1.575 billion yuan, up 63.2% YoY, accounting for 46.07% of total net revenue. Growth was driven by rising brand recognition, successful product innovation, and expanded product offerings. - Gross profit: 809 million yuan, up 57.4% YoY. Gross margin declined due to a shift in product mix. Core category performance: Pillow category remains the leading segment, with cumulative sales of the Deep Sleep Memory Foam Pillow Pro series exceeding 12 million units; comforter category GMV grew more than 80% YoY; new strategic categories (fitted sheets, loungewear) maintained strong sales momentum and grew their revenue contribution.

Risks & headwinds

No explicit discussion of material operational failures or new unanticipated risks was included in the prepared remarks or Q&A section of the call. Management noted that industry supply growth is experiencing cyclical deceleration as the industry matures, but framed this adjustment as an opportunity for leading brands with strong competitive advantages to gain market share, rather than a material downside risk to the company. Forward-looking statements were noted to be inherently uncertain, with actual results potentially differing from projected performance per standard regulatory disclosure.

Analyst Q&A

• Q: Industry-wide hotel supply growth has decelerated this year. Will this affect Ator's signing activity, and are there any changes to full-year hotel opening and closing guidance?

  A: Cyclical supply fluctuations are a normal part of industry maturation. Ator prioritizes high-quality supply that meets consumer quality demands over overall volume, and franchisees increasingly favor leading brands with strong performance during market cycles, creating opportunities for Ator to gain market share. First-half signing and pipeline growth have been steady, so full-year opening guidance is maintained unchanged, and full-year closure guidance of ~80 hotels is also kept unchanged.

• Q: RevPAR has been volatile so far in Q2. What is management's outlook for RevPAR performance in the second half of 2026?

  A: Long-term demand for quality accommodation remains solid for both business and leisure travel, and this core trend has not changed. Early July saw temporary travel disruption from adverse weather, but demand has stabilized and picked up since late July as the summer peak season progressed. Management encourages investors to focus on the industry's long-term shift toward higher quality development and leading brands' cycle resilience rather than short-term data volatility.

• Q: What is driving the retail business's strong 60%+ growth in Q2, and what is the updated full-year retail growth guidance?

  A: The strong growth is the result of long-term accumulation of systematic capabilities across brand, product, supply chain and content creation, rather than chasing short-term trends. Ator focuses on product innovation around real consumer sleep needs, and has expanded from a core leading pillow category to fast-growing comforters and new categories like fitted sheets and loungewear. Given strong first-half performance, management raised full-year retail revenue growth guidance to 40% YoY.

• Q: Has the full-year net profit margin guidance changed from the beginning of the year, and is there any update to the shareholder return policy?

  A: Management still expects a modest full-year net profit margin decline YoY, maintained from initial guidance. While revenue growth exceeded expectations, keeping G&A and R&D expense ratios stable, the revenue mix is shifting to faster-growing lower-margin businesses, and the effective tax rate will rise, leading to the modest margin decline. The shareholder return program is proceeding as planned: cumulative share repurchases have exceeded $150 million by end-Q2, and the existing steady dividend policy remains in place.