Atour Lifestyle Holdings: A Hotel-Retail Hybrid in China’s Evolving Landscape

Atour Lifestyle Holdings Limited (NASDAQ: ATAT) has filed its 2024 annual report on Form 20-F with the U.S. Securities and Exchange Commission, offering a glimpse into its rapid expansion and strategic pivot to integrate hospitality with retail. The report underscores the company’s ambition to redefine China’s mid-tier hotel market while leveraging its scenario-based retail ecosystem to drive growth.

The Dual-Engine Growth Strategy

Atour’s 2024 performance is defined by its dual focus on hotel expansion and retail innovation. The company added 471 new hotels in 2024, a 63% increase over 2023, expanding its operational footprint to 1,619 hotels. This growth aligns with its goal of reaching 2,000 hotels by 2025, positioning it as the largest upper-midscale hotel chain in China by room count.

However, the true standout is its retail segment, which now contributes 30% of total revenue. Retail gross merchandise volume (GMV) surged 127% year-over-year to RMB 2.59 billion, fueled by hit products like the Deep Sleep Memory Foam Pillow Pro Series (3.8 million units sold) and its Deep Sleep Comforter (770,000 units). The company’s A Card loyalty program, with 89 million members, has become a key driver of cross-consumption between hotels and retail, accounting for 21% of hotel room nights sold via corporate memberships.

Financial Performance: Growth vs. Margin Pressures

Despite strong top-line growth—55% year-over-year revenue growth to RMB 7.25 billion—Atour faces margin challenges. Its adjusted net profit margin dipped to 18% in 2024, down 1.4 percentage points from 2023, due to:
- Declining RevPAR: Hotel RevPAR in Q4 2024 was RMB 337, or 94% of 2023 levels, with occupancy rates also lagging. Management attributes this to high base effects and macroeconomic uncertainty.
- Higher marketing costs: Selling and marketing expenses rose to 17.1% of revenue to fuel retail expansion.

The company’s cash position remains robust, with RMB 3.5 billion in liquidity, but investors will monitor whether margins stabilize as retail scale advantages materialize.

Growth Risks and Market Dynamics

1. Market Saturation: Atour’s aggressive hotel expansion risks oversupply in China’s fragmented mid-tier hotel market. Competitors like Hilton and Marriott are also targeting this segment, intensifying price wars.
2. Consumer Spending: The retail segment’s reliance on discretionary purchases makes it vulnerable to economic downturns. Atour’s deep sleep products, while innovative, face imitation from rivals.
3. Execution Risks: Scaling 500 new hotels in 2025 (as planned) requires flawless execution to maintain brand standards and guest satisfaction.

Investor Takeaways

• Buy Signal: The stock’s 60% return over the past year reflects investor confidence in its dual-engine model, particularly retail’s high growth.
• Hold Caution: Near-term risks—RevPAR volatility and margin pressure—could test patience. The stock’s 3.1% pre-earnings dip to $29.30 highlights this tension.

Conclusion

Atour Lifestyle’s 2024 results validate its innovative business model, blending hospitality with lifestyle retail to capture China’s evolving consumer preferences. With RMB 2.6 billion in retail GMV and 89 million members, the company is well-positioned to capitalize on the “sleep economy” and experiential travel trends.

Yet, the path forward is not without hurdles. Margin pressures and hotel market competition demand disciplined execution. For investors, Atour’s RMB 3.5 billion cash reserves and 25% revenue growth target for 2025 (driven by 500 new hotels and 35% retail growth) suggest a high-risk, high-reward opportunity.

While the stock trades near its 52-week high of $33.32, its “GREAT” financial health score (3.66/5) from InvestingPro signals a solid foundation. Those willing to endure short-term volatility may find long-term value in Atour’s unique hybrid strategy—provided it can sustain retail momentum and stabilize margins.

Final Verdict: A Hold for cautious investors, but a Buy for those betting on China’s rising middle class and the company’s retail innovation edge.