Atour Lifestyle Q2: The Growth Outlook Accelerates

Atour Lifestyle Holdings (ATAT) reported strong Q2 results, with revenues up 37.4% year-on-year to RMB 2.47 billion ($345 million) and adjusted EPS of $0.42, both exceeding Wall Street consensus. Growth was driven by continued hotel expansion, now totaling 1,824 properties with 816 under development, and robust 79.8% year-on-year growth in its retail segment. While average daily room rates saw a slight decline, the pace of pressure is moderating, and the company raised its 2025 revenue growth guidance to 30%, reflecting an accelerating outlook supported by China's tourism recovery. The analyst maintains a Buy rating, noting the stock's continued undervaluation despite strong recent returns, with a fair value estimate of $51.1, 39% above its current price.

Analysis

Atour Lifestyle Holdings (ATAT) delivered a strong second quarter, with revenue growth accelerating to 37.4% year-over-year, reaching RMB 2.47 billion and surpassing consensus estimates by $19 million. The performance was driven by dual engines: the core manachised hotel segment saw revenues climb 26.5% on the back of a 29.2% expansion in its hotel footprint, which now totals 1,824 properties. Crucially, the growth pipeline remains robust, with 816 additional hotels under development, providing strong visibility into future expansion. Concurrently, the retail business reported an explosive 79.8% YoY revenue increase to RMB 965 million, fueled by a 74.9% surge in marketing expenses aimed at enhancing brand recognition. While key operational metrics faced headwinds—the average daily rate (ADR) declined 1.8% and occupancy fell 200 basis points due to competition—the pace of ADR pressure is moderating, a trend also observed by industry peer Trip.com. Profitability improved, with adjusted EBITDA growing 37.7% and gross margins expanding in both hotel (+260 bps) and retail (+270 bps) segments. In a significant signal of confidence, the company raised its 2025 revenue growth guidance to 30% from a 25-30% range, reinforcing the narrative of accelerating momentum.

Key Decisions for Investors

• Given the strong Q2 earnings beat, accelerated growth guidance, and a DCF valuation suggesting 39% upside, investors may consider the stock undervalued and view the current price as an attractive entry point for a long-term growth play.
• Investors should closely monitor the average daily rate (ADR) and occupancy metrics in subsequent quarters; a stabilization or improvement in these figures would validate the thesis that competitive pressures are manageable and could encourage further franchisee investment.
• The high retail segment growth justifies the 74.9% increase in marketing spend for now, but investors must track the return on this investment to ensure it continues to drive profitable topline growth rather than just eroding operating margins.