Q1 2023 Atour Lifestyle Holdings Limited Earnings Call
Speaker 2: are in listen-only mode. After the speaker's presentation there will be a Q&A session. Today's conference is being recorded. At this time I would like to turn the conference over to Ms Queenie Chin, Senior Manager of Investor Relations. Please go ahead ma'am.
Speaker 3: Thank you, operator. Good morning and good evening, everyone. Welcome to our first quarter 2023 earnings call. Joining us today are founder, chairman and CEO , Mr. Wang Haijun, and our co-CFOs, Ms. Zhao Rui and Mr. Wang Shodong.
Speaker 3: The discussion today will include forward-looking statements made under federal security laws that are subject to numerous risks and uncertainties.
Speaker 3: Actual results may differ materially from those stated or implied by our comments today. The company does not undertake any obligations to update any forward-looking statements, except as required by applicable laws. On today's call, please return to your seats.
Speaker 3: Management will also discuss certain long GAAP financial measures for comparison purposes only. For a definition of long GAAP financial measures and the reconciliation of gap to long GAAP financial results, please see the earnings release issued earlier today.
Speaker 3: In addition, a webcast replay of this conference call will be available on our website at ir.yaduo.com. Now, I will turn the call over to Mr. Wang, our CEO .
Speaker 4: Ach chal tanjanghu kanciia goh anda ya go cheelaan har in hon and T G doa G him Hui.
Speaker 5: Thank you, Queenie. Hello everyone and thank you for joining a tour's first of quarter 2023 earnings call today.
Speaker 4: Thank you for your attention.
Speaker 4: Thank you for your attention.
Speaker 4: If you have any questions, please let us know in the comments section. Thank you for watching.
Speaker 4: Thank you for your attention.
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Speaker 4: Please subscribe to our channel and share this video with your friends.
Speaker 5: I'm pleased to share with you that Atul commenced the year 2023 on a strong note, achieving solid results in both our hotel and aerial based retail businesses.
Speaker 5: Our core value proposition to serve people with exceptional experience continues to guide our steps as we refine and polish our hotel services and lifestyle products to deliver atour experiences to every customer.
Speaker 5: These uncompromising efforts, combined with our dedication to excellence, drove a robust recovery in both the hotel and retail businesses during the first quarter.
Speaker 5: We continue to execute our three-year development plan to open 2,000 premier hotels while establishing the Chinese experience as the industry benchmark.
Speaker 5: which we believe will solidify our leading position in the upper mid-scale hotel industry post-pandemic.
Speaker 4: Thank you for your attention.
Speaker 4: our business lines.
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Speaker 5: As we enter into the post-apandemic era, we are seeing a rapid market recovery driven by surge in travel and accommodation demand.
Speaker 5: Embodian our three pruned mantra, high quality, high value, and high efficiency. A tour responded quickly to the first of quarters rising market opportunities and achieved the parallel growth in ADR and OCC.
Speaker 5: Our ref power for the first quarter rebounded significantly to 118% of 2019's level for the same period while both ADR and occupancy rates exceeded 2019's level.
Speaker 5: demonstrating our exceptional recovery capability.
Speaker 5: Looking at the first quarter in greater detail, our REFpar recovery rate was 102%, 136%, and 119% of 2019's level for January , February , and March, respectively.
Speaker 5: Furthermore, same hotel ref part for mature hotels in operation for more than 18 months recovered to 118% of 2019's level in the first quarter showcasing a vigorous rebound of our business at the operational level.
Speaker 4: Thank you for your attention.
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Speaker 4: For the five-day labor day holiday, explosive demand for travel and hotels.
Speaker 5: stimulated further improvement in Ralf-Par to 133% of 2019's level
Speaker 5: Notably, Red Parts Recovery rate soared to over 160% of 2019's level in various provinces, such as Shandong, Fujian, and Hu Be among others.
Speaker 4: Thank you for your attention.
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Speaker 4: 0 I hope you enjoyed this video. I hope you enjoyed this video.
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Speaker 5: The pandemic during the second half of 2022, combined with the Chinese New Year holiday in the beginning of 2023, slightly impeded our overall progress with respect to new openings in the first quarter.
Speaker 5: However, alongside the market recovery, franchisees' engagement trends have continued to improve.
Speaker 5: The number of new hotels we signed in the first quarter reached the 94, representing a new record high for single quarter signings.
Speaker 5: Furthermore, among our newly signed hotels, the repurchased rate from our existing franchisees was more than 40%.
highlighting our product competitiveness and brand premium. It's also worth mentioning that our tour light 3.0 version has quickly gained market acceptance, achieving a remarkable performance with a total of 16 new projects signed by the end of Q1.
since its release on February 22nd of this year.
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Thank you for your attention.
Our hotel network continues to grow rapidly. As the end of first quarter this year, we had extended its coverage to 968 hotels representing a year-over-year increase of 23%. The end of the first quarter of the year, we had extended its coverage to 968 hotels representing a year-over-year increase of 23%.
Meanwhile, our pipeline remained healthy and continued to expand.
Excitingly, we commenced the operation of our portfolio's 1000th premier hotel today in Lanzhou. Officially marking the inception of our 1000th hotel era.
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As the end of the first quarter, we had 413 hotels under development. We will continue to peruse and analyze the ever-evolving market prospects alongside opportunities to consolidate the hotel market.
as we map our course for opening a total of 280 hotels by the end of this year.
I hope you enjoyed this video. If you have any questions, please leave them in the comments. Please subscribe to our channel.
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Our loyalty program and central reservation system, or CRS, also maintained their steady growth momentum in the first quarter, benefiting from our high quality services and premier customer experiences.
As of the end of Q1, our membership base surpassed a 38 million with an increase of over 2.8 million new members since the end of the previous quarter.
Our members are young and engaged, representing the most energetic and promising consumer group in China.
Among those members who stayed with us in the first quarter, about 46% of them were aged 30 to 40, and 25% were younger than 30.
Meanwhile, the percentage of our nights sold through our CRS exceeded 60% in the first quarter of 2023 sustaining its healthy growth trend.
The last is our long-term business.
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Now moving to our scenario based retail business.
as a leading lodging centric lifestyle brand.
The retail business is a natural extension of our expertise in hospitality.
reaching beyond accommodation to harmoniously complement our value proposition to serve people who have diverse lifestyles.
In the past few years, we have successfully developed the three product lines, namely a tour planet, V2Go and Sahra.
focusing on sleep, travel, and aroma aesthetics respectively.
Through these premium offerings, we deliver a tour's signature experience of comfort, ease, and relaxation to our customers when they are at home as well as on the go.
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These high quality lifestyle products, along with our diversified online and offline distribution channels, and our continuously improving brand awareness, underpinned the robust growth of our innovative scenario-based retail business during the first quarter.
further solidifying its role as our second growth driver.
GMB increased by almost 200% year-over-year to RMB 142 million in the first quarter of 2023, propelled by rapid growth in both our online and offline distribution channels.
Revenues from our scenario-based retail business for the quarter reached the RMB 100 million milestone. Reflecting its powerful growth momentum.
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We are purposefully focused on our sleep category.
with Ator Planet products as our cornerstone in the first quarter. Ator Planet contributed nearly 80% of our retail business's total GMV. In March, we launched the upgraded 2.0 version of our Ator Planet R90 Deep Sleep pillow.
Following a comprehensive user feedback study.
We creatively refined the pillows, design, and construction to strike the optimal balance between comfort and functionality.
Thanks to these luxurious features, the A2WR Planet R90 2.0 version pillow to gain a popular product quickly after its release and has garnered enormous user recognition with its sales performance significantly exceeding the level of the 1.0 version for the comparable period.
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We hope you will enjoy this video. Please subscribe to our channel. We hope you will enjoy this video. Please subscribe to our channel. Thank you for watching. We hope you will enjoy this video. Thank you for watching.
Our retail business is deeply rooted in our lodging centric lifestyle brand philosophy.
adhering to our original goal of bringing the at-war hotel experience into our customers homes we remain committed to exploring deep sleep from every angle as we strive to deliver a comfortable and relaxing sleep experience
We are very optimistic about the massive potential and development opportunities in China's sleep market.
Moving forward, we will continue to strengthen our insight into users evolving needs and push the boundaries of product development, providing our users with premier sleep experiences through a diverse and growing suite of sleep related products.
We believe that our ongoing holistic improvements across our product development capabilities, operational efficiency, and brand awareness will establish a tour as an important player in China's sleep products market.
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Since our establishment in 2013, we have consistently endeavored to provide our customers with cultural, inviting, and interesting experiences throughout every step of their journeys, creating an intimate ambience where people can warmly connect.
Meanwhile, we continuously explore new possibilities and expand our consumption scenarios, catering to the refined expectations of those who demand a high-quality lifestyle.
Our value proposition originated with the goal to provide an exceptional experience to customers during their stay with us, which we further elevated to serve people who have diverse lifestyles.
has not only elevated our strum performance across both our hotel and retail businesses.
It has also become the driving force behind a tourist core competitiveness and our key differentiator. As we move forward, this value proposition will further empower us to drive long-term sustainable growth and create greater value.
for our customers, franchisees, employees, and shareholders.
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Now, I'll turn the call over to our co-CFO, Mr. Wang Shodong to discuss our financial results.
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Thank you, Mr. Wong. Now I would like to present the company's financial performance for the first quarter of 2023.
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Our net revenues for the first quarter of 2023 grew by 71.2% year over year to R&B, 774 million. The strong increase in the first quarter was driven by growth in both the hotel business and the scenario-based retail business.
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Revenues from our Managers to Hotels for the first quarter of 2023, where RMB $447 million, up by 63.2% year over year.
This increase was primarily driven by the ongoing expansion of our hotel network and the recovery of Ravpar. As of the end of March this year, the total number of our managed hotels increased to 935 up by 24.3% year over year.
While the rest of our Manage-Rise hotels surpassed the pre-pandemic level in 2019, increasing to RMB 331 for the first quarter of 2023.
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Revenues contributed by our leased hotels for the first quarter of 2023 were RMB $187 million, representing an increase of 67.9% year-over-year.
The increase was primarily due to the recovery of RevPAR, driven by increased the customer traffic and stronger consumption sentiment since the beginning of 2023.
Rest part of our release the hotel surpassed the pre-pandemic level in 2019, increasing to RMB 464 for the first quarter of 2023.
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Revenues from retail and others for the first quarter of 2023 increased by 109.5% year-over-year to RMB 140 million. With scenario-based retail revenue growing by 174.3% year-over-year,
to RMB 113 million.
The increase was attributable to the growing recognition of our retail brand and enhanced the product capabilities.
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I'm injured. Chisi, Dan, Wu. Our hotel operating costs for the first quarter of 2023 increased by 18.1% to RMB 382 million year over year, mainly due to the increase in variable costs associated.
with the ongoing expansion of our hotel network and recovery of Ref-Par.
Hotel operating costs accounted for 49.3% of net revenues for the first quarter of 2023 compared to 71.5% of net revenues for the same period of last year.
In addition to the current costs, the main includes our long-term growth cost and other income costs. In 2020, the first quarter of the year, the other current costs, 7,000,000 yuan, the same cost, 124.5% The main reason is the cost of long-term growth and the current cost increase.
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Other operating costs primarily consist of costs for our scenario-based retail business and costs of other revenues. Other operating costs for the first quarter of this year was RMB 72 million, representing an increase of 124.7 million.
first quarter of 2023 compared to 7.1% of net revenues for the same period of 2022.
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In the first quarter of 2023, the total revenue of sales was 7.2%, and the total revenue of the same period in 2022 was 5.3%.
Dealing and marketing expenses for the first quarter of 2023 increased by 135.6% to RMB 6 million primarily driven by the increased investment in branding initiatives.
and the Distribution Channel Development associated with our growing scenario-based retail business. Selling and marketing expenses accounted for 7.2% of net revenues for the first quarter of 2023 compared to 5.3% of net revenues.
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General and administrative expenses for the first quarter of 2023 were RMB 193 million. Excluding share-based compensation expenses of RMB 141 million, adjusted general and administrative expenses increased by about 60,000 judgement by checkbox B of a district
by 13.8% year-over-year to RMB 52 million for the first quarter of 2023.
General and administrative expenses, excluding the impact from share-based compensation expenses accounted for 6.7% of net revenues for the first quarter of 2023, compared to 10.1% of net revenues.
for the same period of 2022. Arni Arthamian, D.D. Du, Yen Pha Phae Yong, E.C.C.C.B.A.Y.N. Y.Arni Arni and Tong Qi Chi Ping. Our technology and the development expenses for the first quarter of 2023.
were RMB 17 million, which were generally in line with the same period of 2022.
Adjusted net income for the first quarter increased by 2,114.3% year-over-year to RMB 160 million.
Adjusted EBITDA for the first quarter of 2023 was RMB 231 million, up by 584.8% year-over-year.
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Notably, we have maintained a healthy cash position, ended Q1 with RMB 2.0 billion in cash and cash equivalence.
Among them net cash was RMB a one point eight billion, representing an increase of 24% quarter over quarter. isan com on opamion D D to that houing one.
That concludes our financial highlights for the first quarter of 2023 with that. Now let's head it over to our Q&A session.
Thank you. You can ask a question. You need to press star one and one on your telephone and wait for your name to be announced. Until we draw your question, please press star one and one again. So star one and one to ask a question. For the benefit of all participants on today's call,
If you raise your question in Chinese please immediately repeat your question in English and please limit your questions to one at a time and if you wish to have follow-up questions please rejoin the queue. Thank you, we'll now take our first question.
Please stand by.
This is from the line of Siju Lin from CICC. Please go ahead.
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So I'll repeat my question in English. Thank you, management, and congrats on the strong results. So I have one question about RefPOC. Our Q1 RefPOC recovery reached 118%. So how's the RefPOC recovery in Q2? And for the full-year RefPOC recovery, will we adjust our guidance?
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Thank you very much, Sujie, for that question. In Q1, there were some partially due to the retaliatory rebound factors, and we were not sure whether that trend was going to be long-term, so we needed to observe. That's why on last quarterly earnings call, we gave a cautiously optimistic statement saying we here to give a chunk of theiah
guidance which is single digit positive growth for the whole year.
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118%, showcasing a vigorous rebound of our business at our operational level. And that was a high quality growth.
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As for Q2, now that we see in April and the Labor Day holidays in May, the Rev. Recovery Trend were both quite good. So we are confident to reach 110% recovery rate for the whole year. Thank you.
Operator, next question please. Thank you.
We'll now take our next question.
Please stand by. This is from the line of Ronald Leung from Bank of America. Please go ahead. Hello everyone. I'm Ronald Leung from Bank of America. Please go ahead.
So, let me ask the question in English. So, management, how do you think about the French I see? Sentiment now. So, management, how do you think about the French I see sentiment now?
Do you think there is a good improvement since 2023? And also, if the rough path can continue to improve and be better than expectations, do you think there is any chance that the 280 hotels opening... Do you think the overall openings can be better than the 280 hotels opening?
Thank you for watching.
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Thank you very much for that question, Ronald. In first quarter, in terms of signings, we made some rapid progress reaching 94 signings, which is the highest level of a single quarter signings in history.
Among those new signings, we found that over 40% of them are actually repurchases from our existing franchisees. And that really gave us a lot of encouragement.
We do believe that with the recovery of the market and together considering our pipeline reserves, we have already 413 in pipeline in first quarter.
And together with the chain hotel opportunities brought by the industry consolidation going on, we will be able to support the new hotel opening target of 280 this year.
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We at Tor always prioritize quality over quantity. We at Tor always prioritize quality over quantity.
We believe that quality is a prerequisite for long-term healthy development. Also just now you have heard that today marks the landing of our 1000 hotels in operation. That was in Lenzhou. That marks we officially have entered 1000 hotel era.
We will maintain this expansion speed while ensuring the quality of our products and those hotels and try to be robust and develop with more new hotels of that higher quality.
Next question, please.
Please.
Thank you. We'll now take our next question. Please stand by.
This is from the line of Lydia Ling from City, please go ahead.
from C.E. and I have a question regarding the competitive landscape in mid to upscale hotel. So as the hotel industry gradually recovers many hotel companies shift more focus and invest more in that mid to upscale segment and so with more hotel supply into the mid to upscale segment do you face more intense competition and how to versus
further enhance your competitiveness in this segment. Thank you.
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If you have any questions, please let us know. If you have any questions, please let us know. We will be happy to answer any questions you may have. Thank you for your attention.
The hotel industry has two paths, either cost-oriented or experience-driven.
We at tour, persist on experience since our establishment. Our strategy of focusing on exceptional experience has accumulated good reputation among our customers.
that had enhanced their satisfaction and repurchased. Our three mantra, three high mantras, namely high quality, high value, high efficiency, had helped us to ensure the long-term and stable returns for our franchisees. And that also has enabled us to gradually accumulate
recognition and market share among our franchisee partners. According to Sullivan's industry research, in terms of the number of rooms, we at tour had been maintaining the first position in the market share of the largest upper mid-scale hotel chains in China. And our leading is still expanding.
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See you soon. Sure, there are competitions.
While with the general trend of increasing hotel chain penetration, this industry, the hotel industry, does not develop as a zero-sum game.
For those players in this industry, whoever's got strong branding, operational capabilities, better customer experiences, as well as better model innovations, they can achieve high quality and sustainable development.
Only when every player in this industry, they do what they want to the extreme and also start to form differentiated product and experiences, that's the time when our industry will develop with more diversification.
and then a healthy competition pattern shall take place. Okay, operator, next question please.
Thank you. We'll now take our next question.
Thank you. We'll now take our next question. Please stand by.
This is from the line of Andy Fu from Blue Lotus. Please go ahead. Hello everyone. I am Andy Fu from Blue Lotus. Please go ahead.
Thank you management for taking my question. Congrats on the good earnings performance at net income in the first quarter. Can management break down the reasons behind the outperforming earnings? Also consider the quick recovery trend of travel consumption. Do we have any update on the expectation on the earnings for the second quarter in the full year 2023? Thanks.4
Thank you for that question. I'll be taking this question.
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First of all, in terms of gross margin, our Q1 gross margin was 41%, which was 20% higher compared with Q1 of 2022. Mainly, there were two reasons. The first is that with our light asset mode, our Q1 gross margin was 41% higher compared
we benefited from the rapid recovery of Revpar and economy of scale effect brought by the expansion of our hotel network.
The second reason was due to the continuous development of our relatively higher gross margin retail business. The revenue contribution from our retail business have continued to increase.
And its gross margin by itself also has increased, and those two reasons also have drove our overall gross margin higher.
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Thank you for watching.
In terms of expenses, our three expenses accounted for 16% of revenue in the first quarter this year down by 3% year on year, in which marketing expenses accounted for 7% of revenue. That was up by 2% because
We increased the investment in branding initiatives and developing distribution channels for our scenario-based retail business. The rest 9% of revenue were administrative and R&D expenses, down by 5% than last year since we improved on our management efficiency.
The increasing of the management and R&D expenses were much smaller than the growth speed of our revenue.
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In the future, with our continuous expansion of our hotel network, along with the gradual kicking in of the economy of scale effects.
plus the continuous development of our retail business, we expect that our overall profitability will maintain a stable growth in the longer term.
Thank you. Next question please. Thank you. We'll now take our next question.
Thank you. Next question please. Thank you. We'll now take our next question. Please stand by.
And this is from the line of Xin Chen from UBS. Please go ahead. The United States is one of the planet's largest and largest
Q&A Let me ask you in English I'd like to use a question regarding the scenario between the two BNS How does one need to see the growth of potential of the scenario between BNS and the other BNS?
Thank you for watching.
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extension of our expertise in hospitality, reaching beyond accommodation to harmoniously complement our value proposition to serve people who have diverse lifestyles.
Our offline hotel scenes can provide a natural experience space, which also brings a lot of natural traffic to our retail businesses.
Retail, on the other hand, can also help to bring our at-home experience back to customers' homes.
help to improve their perception of Atwar and also bring them back to our hotels for more space in the future.
Retail business and hotel business as you see in this way can form a very nice loop with that kind of synergy.
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It is expected to do this as a result of seaside We will hope for many new experiences at further
Product-wise, we currently focus on a pen-sleep category, taking Atwar Planet as our core product. In first quarter, our Atwar Planet contributed nearly 80% to our overall GMV after retail sales. We have a full set of pillows, mattresses, quilts, and four-piece sets.
also very well. We are very optimistic about China's sleep products market with massive potential. And we believe there are quite a lot of different development opportunities. We also believe we at HUOR will also stand a place in China's sleep economy in the future. Thank you. line up on my foot water
from leveraging our expanding hotel network as both the consumption scenes and customer traffic sources, we also have been developing online third party channels. So that driven from both offline and online, these two channels have both been growing very fast.
Time for the demo and welcome. We're on Zoom 3.2. We'll begin by asking questions about the AMP Open oven M resource before the event.
In the future, we will continue to strengthen our investment on customer insight and product development to create more high-quality sleep products to offer first-class sleep experiences for our customers and so that we can make more people sleep better.
Thank you for watching.
Now, let me hand it over to Mr. Wang Shodong to talk about scenario-based retail financials.
Thank you for your attention.
Our scenario-based retail business in last year have already reached a revenue of 254 million and already achieved a positive bottom line.
Full year revenue will reach above 400 million with an increase of more than 80% year on year and profitability will also increase accordingly.
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Meanwhile, on the basis of stringent requirements on ROI and reasonable profit, we also will increase the investment in branding initiatives and distribution channel expansions to make sure that our scenario-based retails contribution to the group's overall profit will increase year by year.
OK, operator, the question maybe? Thank you. That does conclude the question and answer session. I would like to turn the conference back over to Queenie Chin for any additional or closing comments. Yes, thank you, operator. Thank you, everyone, once again, for joining us today. If you have any further questions, please feel free to contact us. Have a great day. Goodbye. Thank you. This does conclude the conference for today.