Atour Lifestyle Holdings Limited Q4 2022 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the tour lifestyle Holdings fourth quarter and full year 2022 earnings conference call.
At this time all participants are in listen only mode. After the speaker's presentation. There will be question and answer session. Today's conference is being recorded.
At this time I'll like to turn the conference over to MS. Queenie Chin.
The manager of Investor Relations. Please go ahead ma'am.
Thank you operator, good morning, and good evening, everyone welcome to our fourth quarter and full year two years and did you earnings call.
Joining us today are our founder chairman and CEO , Mr. Walt hygiene and your policy at Kohls, Michelle right and Mr won't show, though.
Before we start please note. The discussion today will include forward looking statements made under federal Securities laws that are subject to numerous risks and uncertainties.
Actual results may differ materially from those stated or implied by our comments today. The company does not undertake any obligation to update any forward looking statements, except as required by applicable law.
During today's call management will also discuss certain non-GAAP financial macro for conservation purposes only.
For a definition of non-GAAP financial measures and reconciliation of GAAP to non-GAAP financial results. Please see the earnings release issued earlier today.
In addition, a webcast replay of this conference call will be available on our website at IR <unk> com.
Now I will turn the call over to Mr. Wang our CEO .
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Thank you Tony Hello, everyone and thank you for joining my towards fourth quarter and full year 2022 earnings call today.
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This is our first earnings call. Following our successful listing on NASDAQ, becoming a public company is not just important milestone for us. It also encourage us to continuously improve our products and customer experiences while building a stronger lifestyle brand.
Since its establishment in 2013, a choice has always been positioned as the largest country lifestyle brand.
We haven't done that to navigate a fashionable approach to meet those refined expectations of those with the amount of high quality lifestyle beyond accommodation.
Great people centered and hospital experiences photo of joy for our customers by providing instrument M. B a.
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222 was a challenging year in which we experienced various degrees of pandemic outbreaks across the country. We were glad to see that new post pandemic phase emerged at year end, the three year, Panama imposed great challenges on the hospitality industry as a whole.
As a leading upper Midscale hotel chain in China until I proactively responded to these challenges and housing staffers to cater to customers needs during such times with memorable and personalized experiences in a safe and comfortable environment.
By refining our lifestyle products and improving customer experiences across various scenarios, we weathered the challenge with fortitude and resilience.
Even better positioned to pursue sustainable growth as the market rebounds.
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Today, we are delighted to announce a solid full year performance as well as fourth consecutive year of profitability with total revenue for 'twenty to 'twenty two maintaining its growth momentum.
To take this opportunity to express our deep gratitude to our customers and franchisees are choosing and trusting a tau ASO to employees on the front lines, who work tirelessly to ensure a safe and comfortable accommodation experience for our customers. We sincerely. Thank you feel perseverance and dedication.
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Our strong balance sheet.
To inaugurate 'twenty to 'twenty, three we released a new three year development plan that targets to expand our footprint as a total of 2000 premier hotels by the end of 2025, each offering a host of a standardized yet pleasant and personalized experiences.
Aligned with our dual engine development plan encompasses experience and scale, we're committed to becoming a neutral benchmark for the Chinese experience.
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First our hotel business development during the fourth quarter of 2022, our Revpar achieved approximately 80% of 2019 level for the same period following the lifting of pandemic restrictions in China in November 20th 22.
A portion of our population contracted Covid, which also disrupted our business operations.
Since the beginning of 2023 pent up demand for travel and accommodation that started to rebound rapidly in response to evolving market conditions. We took the initiative to reduce our number of requisition hotels, which is a forward thinking move that proved very effective accordingly, the percentage of breakfast and requested the hotels in our hotel.
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As we have progressed through the first quarter of 'twenty three our revpar is increasing rapidly.
I've seen a joined the seven days Spring Festival holiday when the Revpar turned 105% of its level for the comparable period in 2019 exceeding the overall industry level.
Sequentially, we forecast that the rest half of the first quarter of 2023 and will achieve 115% of its level for the same period in 2019.
As this growth momentum builds we are confident that the company will continue to pick up in the coming quarters.
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As a leading upper Midscale hotel chain in China. That's all has earned broad recognition and studying brand reputation by virtue of its premium experiences and and holistic comprehension of customers' preferences and desires, our strategic decision to develop our hotel network, mainly in core business districts in first or second tier cities.
This not only highlights our extensive experience and deep market insight, but also empowered our rapid growth and development over the past decade. Today, we have established an effective hotel network with a distinct portfolio of six brands centered on a tour and tour X are two upper Misko hotel brands.
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In 2022 we opened 191, new hotels, well, while experiencing only four hotels closed out or closures from our existing portfolio under the challenging conditions as of December 31st 2022, I don't know tell them that well encompasses 932 hotels with a total of 108000.
Rooms, representing a rapid increase of 25% year over year in both hotels and rooms.
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Furthermore, we manage a rich and ever evolving pipeline of hotels under development positioning the company to seamlessly capture and maximize future growth opportunities.
As of year end 2022 we had 363 hotels under development on a related note. We are currently seeing high demand for industry integration as many independent hotels suffered I survive.
During the pandemic offering great opportunities to augment our development pipeline as we identify and acquire suitable properties will actively expand our coverage even further and solidify our leadership in the upper Midscale segment well.
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Finally, we completed our product R&D based in Shanghai in 2022, a dedicated facility specializing in the research and development of our tower products. Following several months of a persistent effort. We officially launched the a tour like three O to O version on February 22022nd of 2023.
This revolutionary product upgrade delivers a high quality more relaxed experience for a tour like customers, while offering franchisees a less capital intensive investment opportunity.
As a misko hotel brand in our portfolio toward light is important is for Qi just happen that primarily centered or cases, two young urban travelers seeking a premier experiences through continuous improvement and iterations based on our keen understanding of shifting market demand. We believe we can grow in a tall life family into our neck.
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Next let me share more details on the development of our loyalty program and our central reservation system or Crs are driven by the quality of services and enjoyable customer experiences. Our membership base has grown rapidly by the end of 2022, we had over 35 million members and our members a repurchase rate for 20th century further.
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Our stickiness continues to improve.
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To reward our members for their trust, we have constantly enriched our loyalty program. Our goal is to develop a scenario based membership ecosystem offering rich lifestyle privileges covering culture consumption and social interactions.
In June of 2022, we launched our <unk> loyalty program, a new lifestyle membership our brand providing unique pups and personalized experiences extending beyond hotel services.
We were also amplify our efforts to attract and engage new members through extensive promotion channels, including club memberships with third parties.
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With regards to Crs, the increasing coverage of both individual memberships and corporate customers has accelerated the growth of our Crs contribution to the overall sales in 'twenty to 'twenty two the percentage of our nights sold through our direct sales channels and Crs was more than 80% of them close to six.
Percent respectively.
Driven by our continuously updated lifestyle products and customer experiences, we expect Crs contribution to sales to maintain its growth momentum in the coming quarters.
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Moving to our retail businesses. In addition to offering superb accommodations and pleasant and personalized customer experiences. We have designed our hotels to display it and highlight lifestyle products, establishing an innovative scenario based retail business that guy's customers from discovery to purchase creating a close loop from London to.
In retail we also integrate our offline scenarios with online channels, including our mobile App and wasting mini program as well as other third party platforms.
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As our second growth driver, our retail business performed well in 2022, despite frequent COVID-19 outbreaks.
Full year, <unk> reached 324 million renminbi, representing a 42% year over year growth.
Online third party platforms achieved breakthrough growth with an impressive 71% year over year increase in <unk>.
During the double 11 shopping festival our tour planet flagship store was included in a top eight best selling Hello brands aren't renowned e-commerce platforms.
Tomorrow, Our tour planet, our 19th Deep sleep pillow has quickly become a blockbuster on DAU in since its launch on October 5th of 2022 with peak daily <unk> exceeding 1 million renminbi going forward, we will continue to explore our customers diverse demands and sleeping scenarios with exclusive offers.
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In conclusion, as we look into 2020 three we will continue to expand our hotel network and improve our operating efficiency and ensuring that we constantly deliver towards distinctive line of high quality accommodations and pleasant personalized lifestyle experiences to each and every customer.
As we reinforce our leading position in China's upper Midscale Hotel market. We are also becoming ambassadors for the Chinese experience setting a new benchmark for ambiance comfort and style worldwide for our retail business. We will continue to invest in brand awareness and sales channel development following the rationale of.
Haas profitability, we will also seek new opportunities with promising prospects of our comprehensive growth and development, we remain deeply committed to creating incremental value for our customers franchisees employees as well as our shareholders for the long term.
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And now I would like to talk a ton of call over to our co CFO , Mr. Juan show Don to discuss our financial results.
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Thank you Mr want now I would like to present to you the company's financial performance for the fourth quarter and full year 2022.
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Our net revenues for the fourth quarter of 2022 grew by five 8% year over year to 626 million Reminbi net revenues for the full year 2022 increased by five 4% year over year to 2000 263 million Reminbi. These increases were mainly driven by the.
<unk> revenue contribution from both men of China's hotels, and our retail and other businesses.
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Revenues from our managed hotels for Q4 were 365 million renminbi up five 4% year over year.
For full year 2022 revenues from our men and choice hotels increased by 11, 5% from last year to 1000 361 million Renminbi. These increases were primarily driven by the rapid expansion of about town network. The total number of our <unk> hotels increased from seven.
112 as of December 31st half 2021 to 819 nine as of December 31st 2022.
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Revenues contributed by our leased hotels for Q4 were 139 million RMB down 10, 1% year over year for full year 2022 revenues from our leased hotels decreased by 12, 3% to 553 million renminbi Euro, but yeah both.
Decreases were primarily due to the diminished customer traffic and weakened consumption demand amid the reach of such a resurgence of COVID-19 across China in 2022.
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Our revenues from retail and others for the fourth quarter increased by 34% year over year to 122 million room, maybe full year revenues from our retail and others were at 349 million Reminbi, an increase of 17, 6% year over year. These increases were attributable to the rapid growth of our scenario.
<unk> retail business, driven by our hotel network expansion as well as growing recognition of our retail brand and our increasing capabilities a private label product offerings.
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Now, let's move to costs and expenses.
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Our hotel operating costs for the fourth quarter decreased nine 8% to 356 million or I mean be it year over year hotel operating costs for the full year were 1390 1 million renminbi and decrease of one 9% year over year. These decreases were mainly attributable to our effective control.
Of both expenses and labor costs amidst the pandemic resurgence along with pandemic related lease concessions, we received from landlords joined up period.
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Other operating costs for Q4 were 68 million or it can be an increase of 32% year over year. Other operating costs for the full year were 187 million renminbi up 14, 3% year over year. These increases were mainly driven by increased costs alongside the rapid growth of our scenario base.
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Selling and marketing expenses for Q4 increased by 37% to 54 million renminbi, selling and marketing expenses for the full year 2022 were 140 million Reminbi, an increase of 12, 7% year over year.
These increases were mainly driven by the increased investment in brand promotion and channel development for our scenario based retail business.
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General and administrative expenses for the fourth quarter were 217 million RMB four years general administrative expenses were 350 million reminbi, excluding share based compensation expenses of 160 million renminbi adjusted general and administrative expenses decreased by <unk>.
Nine 5% year over year to 57 million Reminbi for the fourth quarter and decreased by three 8% year over year to 119 million RMB for the full year.
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Our technology and development expenses for Q4 were $16 million or it may be down eight 4% year over year technology and development expenses for the full year 2022 were 66 million or RMB, an increase of 27% year over year. The year over year increase was mainly attributable to our increasing investments in <unk>.
Magic construction in order to better support our expanding hotel network and improved customer experience.
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Adjusted net income for the fourth quarter increased by 199, 8% year over year to 81 million Renminbi adjusted net income for full year 2022.
It's 259 million renminbi, an increase of 85, 6% from the previous year.
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Adjusted EBITDA for Q4 was 116 million or even be up 82, 2% year over year adjusted EBITDA for the full year 2022 was 424 million Reminbi up 41, 9% year over year.
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James changing shifts again, you hear at Palm Beach Center by window shop. Meanwhile, we have maintained a healthy cash position as of December 31st 2022, our cash and cash equivalents totaled 1580 9 million renminbi with net cash of 1000 and 415 million renminbi.
An increase of 52% year over year.
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No material findings.
Thank you.
This concludes our financial highlights for the fourth quarter and full year of 2022 with that let's open for Q&A.
Thank you we will now begin the question and answer session to ask a question. Please press star one one on your telephone and like for your name to be announced to withdraw. Your question. Please press star one again for the benefit of all participants on today's call if you.
Raise your question in Chinese please immediately repeat your question in English please.
Please limit your questions to one at a time if you wish to have follow up questions. Please rejoin the queue again.
So once again Thats star one one for questions.
Our first question comes from the line of Sin Chen from UBS. Please ask your question Sir.
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Thanks very much for this question. So first of all I'd like to share with you. Some of my opinions related to our development space and potential first of all the upper Midscale segment is actually a mall the quickest growth segment in the Chinese the lodging industry and also in 2020. Two there were 6100 upper Midscale hotels and it is.
Estimated that this number by 2025 won't become 10000.
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And also second of all I like to say that I'm talking about the hospitality industry here in China from a standpoint of rooms, we're gonna see more and more chain hotels here in China and much.
So the percentage of the China Hotel in 2021 was 34, 4%. This number will be growing to approximately 45% in 2025 and this is gonna be a benefit beneficial trend for the whole industry.
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And third of all I'd like to talk about some of the competitive landscapes. So now you can see that.
The mid and upper mid scale hotel and also the brands are having a very high concentration level and also in China. There is also leading the rest of the world and I would like to talk to you about the this particular question in terms of three dimensions. The first one is about the brand and also scale and a second one is about the user recognition including satisfaction.
And repurchase rate and third of all the reward and return to franchisees. So according to these three standards of Tau always belonged to the top notch category in the upper Midscale segment here in China.
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At the current stage the upper Midscale hotel of the tour had the market share of 12% and it is estimated that this figure is going to be increased to 16% by 2025, which means that the by then we're going to have a 1600 hotels, so that is making it.
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Next question please.
Right. Thank you.
Next question comes from the line of laying down Jones film see ICC. Please ask your question Linda.
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All of a sudden yeah gilenya going through that you go cut them.
I would have asked me this question so again.
I'm being gone from CIBC.
Really appreciate this opportunity to ask questions first of all congratulations again for successfully completing the IPO last year and we can see the business has shown a strong recovery in the early 2023, Oh I have two short questions. Firstly, what is the recovery all the franchisees.
Timmons based on the current observation on the market a second would you. Please illustrate that pays off new Hope Hill hotel openings and the number of newly signed hotels into 2023.
Is there a guidance for the Targa hotel openings for the whole year. Thank you.
Okay.
Oh, I mentioned that if you want John Lewis.
For you for sure if 800 in Asia, you'll see what she she knew that comes with the gentlemen.
Another woman to easy to them that this is a tug of war maybe sheet machine Shouldnt assume we don't lend to the woman's household Yamana Fugard I don't know if I understood.
Thank you Ms. John for your question first.
First of all talking about the situation that we're having we have been observing a very obvious sentiment recovery of our franchisees and especially those are mature franchisees from our system of a tour.
So in Q1, we've been actually has seen a very good progress after contract signing which is exceeding our expectation. So we can see the demand those newly signed contracts.
Uh huh.
So with Australia and India.
Oh, yes.
They're not very large outboard hernia shoulder and don't forget the Chengdu Guangzhou achieve for Qiagen.
I'll, let you do Asia.
And second point is that talking about the progress of our store opening or hotel opening in Q1, because of the pandemic and relaxation of the control policy and almost all the population got contracted the Covid and also when they've got recover in terms of their health. Many people just went back to their hometown to celebrate the holidays.
Day of Spring Festival as well. So this actually noted had a big impact on many different cycles for instance, the construction cycle or the new hotel opening cycle as well.
But we'll meet with Hulu being here we're.
<unk>, so know how to deal with.
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Junior our biopharm, Jackie how are you doing.
Yes.
Having that sad still we have a confident because of our sufficient and also increasing the number of hotels in the pipeline and also because of this particular opportunity that brought by this integration of existing markets and especially enjoy by those sino projects with them.
Very short term of construction. So this is pretty much supportive to our hotel opening target for the full year of.
This year, which is a 280, new which is also an year on year increase of 30%.
Okay.
Next question please.
Thank you. Our next question comes from the line of Ronald Leung from Bank of America. Please ask your question Bruno.
Hey, Glenn.
Blaine it's Howard.
Hum.
Ron the lab.
Well I think that he wanted to to your point.
Yeah, you got one to you that that's it what's out of Hong Kong. One is how do you see that Oh that's out there.
One system.
Yes, it's always a call Ralph Paul.
So rule, Ohio rerun that you've got that one done.
Oh My God.
I asked my question in English.
Hi, Good evening management, I would just like to ask about management outlook for trends or industry are.
What is management's outlook for Ralph par recovery revenue and also profit. Thank you very much.
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Yes, I think thats behind the QL I figured why not.
Yeah, So what I actually don't have it in ways that don't Goddammit I found Mayo with Google Apple to launch our homes to the railcar EEO policy based on accounting that Linda.
You don't write down I understand you made hydro <unk> that's totally fine.
And again, you might see a woman so for that bandwidth.
So I opened up with Hulu.
So thank you very much for this question first of all a tour is our position as the category of chain hotel and the settlement of the upper Midscale. So without the situation of our structure is the benefit and also dividend revpar of tourists still maintain a very strong.
So that's for Q1, we can't actually take a look at the recovery of the single market like a January or February independently, because you know the timing of celebrating the Chinese new year is just different in different years.
Now if you can kind of hold fast match anything.
Uh huh.
If you do the rough math on each one.
But if you could talk about fiber into your body issue.
So Tony on your R&D Center.
Sinter Iron Joseph at Citi.
Charlie with trees, yet no.
Our opinion trend.
Joe is young.
Okay.
Yes.
Golf Bank away from Xinjiang <unk>.
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Yeah on the trajectory.
So according to what we have now and according to our estimation in our forecast.
As a whole in Q1, I'll revpar recovery is going to be reaching a 115% and also in Q1.
Expected the revenue is going to have a year on year increase of 63% to 67% or so and in 2023 for the full year Revpar recovery. It is going to reach to the growth of high single digit and also the expected the revenue for the full year is going to experience and 50.
7% to 61% of the growth.
Hi, Brian <unk> from here.
We're more Italian debt because <unk> all costs. So if you go to Asia.
Your woman.
A telephone call. So I don't want you to them.
So the future.
And also on the profit front benefitted from the economy of scale, which is going to be showing up gradually and also due to the change in our structure.
Revenues.
As well as a very effective cost control methods to measures.
Our profitability is expected to have a continuous improvement.
Next question please.
Thank you I'll make this question comes from the line of you linked Jones from Haitong International. Please ask your question.
Hello, Ghansham groundnuts and tissue with a few hours.
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Lynching nurture Sequoia woman, just hang out with your dog.
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She talked about environment need to sell them is choosing to even mobile Ethiopia patching, Jay you can move yet.
Okay, Let me translate my question.
English Thanks management for taking my question. My question is regarding the opening target.
Hi, Tony.
<unk> thousand 75.
Thanks breakdown.
Hi, Brian and buy ratings.
I understand how do you make this plan.
Cheap the targets. Thank you.
Our continued out performance for each one of US a clear model <unk> <unk> at Jefferies.
You can leave you also look at the end of the answer.
Okay. Shortly on Tianjin Goshen virtual again, I'm trying to remember.
Number one the general.
Kim we will now.
But in reality.
So I'm not so sure each anyway.
So no one bedrooms are changing.
Sure.
Hi, Matt Young woman knockout on him.
Yes sure.
I noticed your downtime.
<unk> got some leasehold.
<unk> for your question. So let me provide the answer in this way. So this year well in the beginning of this year actually well, we propose that your engine development strategy of combining experience and scale.
At the same time, providing a pleasant and comfortable living environment and personalized living environment experience to our customers.
By 2025, we have also a strategic goal of opening 2000 high quality hotels. So let me give you the report about the total structure of that 2000.
The breakdown by the different level of our hotel brands. So I'm always the upper Midscale brands, including a tour and tour X. We're going to have 1500 to 1600 of these two brands in the upper mid scale by 2025 and also another 250 to three.
<unk> hundred hotels of the met our brand towards light and also the high end brands have taught us the number of which is going to become 150 to 200 also so this is pretty much the structure of the 2000 hotels.
I mean do you see it on the Sunshine woman CEO and turn it on to Richard what do you do that.
So the Asia under Judy.
Maybe hunter silicon into the Sunshine you'd want her if I forgot.
No.
Yes, Tien tsin.
Hi.
No one can get a mega Sanjay.
Yes.
No.
I'm sure John cannot survive Covid doing here no matter, how many of your contract would you Sanjay <unk>.
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Yes sure.
Hum.
So about 100.
None of the Ashish Sharma onto the central it but you can do without.
Yes.
So second of all I would like to say that I know the planning of the hotel opening of a tour is pretty much based on the market planning of Ctrip and also the business districts distribution on Ctrip as well so taking the first tier city as an example.
So there are now four tier one cities in China, and the total number of business districts amounted to around 150 of them. So according to our plan of opening 2000 hotels by 2025 and that means that on average in each of our business strict strict there there will be at least three hotels position.
That so that would be around in total of 450 hotels opened in tier one cities. So comparing with the planning of Ctrip rank since 208 hotels that is bookable.
For each business district, our penetration rate compared with that is only one 5% and also let alone in the new tier one and also the lower tier cities the penetration rate is even lower.
No 100, GB and I'll hop out.
So I went to visit with you.
I see.
Sure.
Oh I'm sorry.
Sure.
Okay.
Thank you Joshua.
That's the way that you're doing a whole lot.
Yes.
Sure.
And second of all I'm limited to you our detailed breakdowns around 450 hotels in the tier one cities and 650 hotels in new tier one cities and also imagine a tier one cities and 500 hotels in tier two cities and another 400 in the third.
Tier and lower cities. So that is to say that 80% of our hotels open will be in at least tier two cities and above.
So on the Air force cannot drill warm enough Jim how are you.
Google in Asia.
Okay, you won't go to Eagle products yet.
I wanted to ask you about agenda, we bought.
Now you guys description cultural geologic tuna.
So that is to say that as all as we have a very good branding differentiation strategy in place and also as long as we could provide the users and customers with excellent premium experience and also provide.
Franchisees with a very robust returns and rewards that are speaking each tier of the city of niche location, we're going to have a very good and potential development room.
Thank you.
Great. Thank you and that concludes the question and answer session I would like to turn the conference back to Queenie Chan for any additional or closing comments.
Alright. Thank you once again for joining US today, if you have any further questions. Please feel free to contact us have a great day.
This concludes today's conference call. Thank you for participating you may now disconnect.
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