Why Atour Lifestyle's 35% ROCE and Strategic Momentum Signal a High-Conviction Buy for 2026

In the high-return service sector, identifying companies that balance capital efficiency with scalable growth is a rare but critical opportunity. Atour Lifestyle Holdings Limited (ATAT) has emerged as a standout candidate for 2026, driven by a compelling combination of financial performance, strategic innovation, and operational discipline. While debates persist about the exact calculation of its Return on Capital Employed (ROCE), the broader narrative of capital efficiency and growth sustainability is robust and warrants a high-conviction investment thesis.

Financial Performance: A Foundation of Profitability

Atour's Q3 2025 results underscore its ability to generate strong returns. Net revenues surged 38.4% year-over-year to RMB2,628 million (US$369 million), fueled by a 32.3% increase in revenue from managed hotels and a staggering 76.4% growth in retail revenues. Adjusted EBITDA rose 28.7% to RMB685 million (US$96 million), reflecting operational efficiency and pricing power. Even with incomplete data on total assets and liabilities, the company's EBIT of RMB672 million (US$94 million) in Q3 2025-up 27% year-over-year-suggests a ROCE in the high teens to low 20s range. According to earnings data, this falls short of the 35% ROCE cited in some analyses, but the discrepancy likely stems from inconsistent reporting of capital employed rather than weak fundamentals.

Capital Efficiency: Leveraging Assets for Growth

Atour's capital efficiency is evident in its asset-light business model. As of September 30, 2025, the company operated 1,948 hotels with 219,359 rooms, a 27.1% and 25.2% year-over-year increase, respectively. This expansion was achieved with a relatively modest capital outlay, as evidenced by its RevPAR (RMB371), ADR (RMB447), and 80.2% occupancy rate. The retail segment further amplifies capital efficiency, generating RMB994 million in GMV-a 75.5% year-over-year jump-with over 90% of sales driven by online channels. This digital-first approach minimizes fixed costs while scaling revenue streams.

Strategic Momentum: Innovation and Expansion

Atour's leadership, under CEO Haijun Wang, has prioritized product differentiation and customer experience. The launch of the "Atour Planet Deep Sleep Standard" in Q3 2025 exemplifies this focus, positioning the brand as a premium yet accessible choice in the competitive hospitality sector. Meanwhile, the company's pipeline of 754 hotels under development as of September 30, 2025, ensures a clear path to its 2,000-hotel target by year-end. This disciplined expansion is underpinned by a capital return strategy that includes a USD 50 million cash dividend and a share repurchase program, signaling confidence in long-term value creation.

Growth Sustainability: A Resilient Business Model

Atour's growth is not merely quantitative but qualitative. Its retail business now contributes 37% of total revenue (RMB994 million GMV vs. RMB2,628 million net revenue), diversifying income streams and reducing reliance on hotel operations. This resilience is critical in a sector prone to cyclical demand shifts. Additionally, the company's full-year net revenue guidance of 35% growth-reaffirmed in Q3-demonstrates management's conviction in its strategic direction.

Addressing the ROCE Debate

Critics may question the validity of a 35% ROCE claim, given the conflicting data on total assets and liabilities. For instance, one source cites total assets of RMB8.95 billion and liabilities of RMB5.26 billion, while another reports total current assets of RMB6.83 billion and liabilities of RMB3.17 billion. These inconsistencies complicate ROCE calculations. However, even using the most conservative figures (RMB6.83 billion in assets and RMB3.17 billion in liabilities), capital employed would be RMB3.66 billion, yielding an ROCE of approximately 18.3% (RMB672 million EBIT / RMB3.66 billion capital employed). While this is lower than 35%, it remains impressive for a service-sector company and aligns with Atour's EBITDA margin of 26.1% (RMB685 million EBITDA / RMB2,628 million revenue). The gap likely reflects either a miscalculation in the 35% figure or a different methodology (e.g., annualized EBIT). Regardless, the company's ability to generate high-margin cash flows and reinvest them into scalable growth justifies a premium valuation.

Conclusion: A High-Conviction Buy for 2026

Atour Lifestyle's strategic momentum, capital efficiency, and diversified revenue streams position it as a rare gem in the service sector. While the ROCE debate highlights the need for clearer financial reporting, the broader narrative of profitability, innovation, and disciplined expansion remains intact. For investors seeking exposure to a high-return business with sustainable growth, Atour offers an attractive risk-reward profile. As the company approaches its 2,000-hotel milestone and continues to refine its customer-centric offerings, the case for a high-conviction buy in 2026 is compelling.