Atour Lifestyle Holdings Limited

ladies and gentlemen thank you for standing by and welcome to the at all lifestyle holdings fourth quarter and full year 2023 earnings conference call at this time all participants are in a listen only mode after the speaker's presentation there will be a question and answer session today's conference is being recorded At this time, I would like to turn the conference over to Ms. Alison Zhang, Director 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 2023 earnings call. Today, you will hear from our founder, chairman, and CEO, Mr. Wang Haijun, and our co-chief financial officers, Mr. Wang Shoudong and Mr. Wu Jianfeng. Before we continue, please be aware that today's discussion will include forward-looking statements under federal securities laws. These statements are subject to various risks and uncertainties, and actual results may differ significantly from what is stated or implied in our comments today. The company is not obligated to update any forward-looking statements except as required by applicable laws. Additionally, during this call, our management will discuss certain non-GAAP financial measures solely for comparison purposes. For clear understanding of these measures and a reconciliation of GAAP to non-GAAP financial results, please refer to the earnings release issued earlier today. Furthermore, 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.

Thank you, Allison. Hello, everyone, and thank you for joining

a tourist fourth quarter and a full year 2023 earnings call today. 2023 is the beginning of Yaduo's three-year strategy.

This is the first time we have proposed the vision and goal of experiencing 2,000 good stores in China. Throughout the year, Yaduo has advanced the experience strategy from digitalization, organizational culture, management and operation in three directions, and has formed the long-term ability to experience and drive business. to support China's experience. Now, China's experience is getting deeper and deeper, and it has triggered a profound collective resonance. Our 2,000 good stores' large-scale strategy has also achieved significant stage results. In 2023, we will have a total of 289 new stores and about 576 new ones. The goal of completing the initial design of the year is to reach the foundation of 2,000 good stores.

2023 was an exceptional year for Ator, wherein we unveiled our strategic vision for expanding our portfolio to 2,000 premier hotels nationwide by 2025 and establishing the Chinese experience as the industry benchmark. Throughout the year, we worked diligently to enhance digitalization, organization, and corporate culture as well as our management and operations capabilities, which have become the pillars of our sustainable growth as an experience-driven business. Today, our signature Chinese experience is resonating deeply with people, evoking a profound collective response. Moreover, we have achieved significant milestones in our hotel network expansion, In 2023, we opened a total of 289 new hotels and assigned additional 576 projects, surpassing the targets we set at the beginning of the year and laying a solid foundation for our goal of 2,000 premier hotels by 2025. 2024 will be a year of innovation and breakthrough.

On the experience strategy, we will firmly strive to provide users with diversified services and excellent experiences that are not only for accommodation. First, we will continue to strengthen the value perception of people, warmth, and fun, and establish a user-to-user experience resonance. Next, we will focus on the connection between accommodation and retail members to realize user interaction in both scenarios, and continue to create a unique and deep experience for the customer. In the end, we will continue to promote digitization work, energy-saving experience upgrade, and raise China's experience to a new height. On a scale strategy, we will continue to consolidate Asia's strong leadership position in the mid- and high-end hotel market, and continue to expand the brand influence of the mid-end market, and establish a continuous development of partner ecotourism that cooperates and cooperates, and help the group scale to grow steadily.

2024 is poised to be a year of innovation and breakthroughs as we build on this success. To advance our Chinese experience strategy, we will remain dedicated to providing our customers with multifaceted services and exceptional experiences that go beyond accommodation. First, we will promote greater awareness of our cultural, inviting, and interesting experiences, cultivating lasting bonds with our discerning customers. Second, we aim to establish a virtual cycle fostering seamless customer crossover between retail and accommodation to bring our unique deep sleep experience to all of our members. Finally, we will continue to advance digitalization empowering experiential upgrades, and elevating the Chinese experience to new heights. In terms of our network expansion strategy, we will continue to solidify Ator's leading position in the upper mid-scale market, while expanding Ator's brand awareness in the mid-scale market, and establish a sustainable, mutually beneficial franchisee ecosystem to help drive our hotel network's steady growth.

下面我將展開介紹2023年第四季度及全年各項業務的具體情況。 Now, I would like to provide more details on our performance for the fourth quarter and the full year of 2023. 首先是住宿業務。 四季度,我們的RollerPod相比於2019年同期,恢復度達到了109%, and ADR and OCC have been at the same level for more than 19 years in four consecutive seasons. From October, November and December, the recovery rate of RollerPod reached 109%, 107% and 110% respectively, fully demonstrating our demand for business travel. Over 18-month-old mature hotels are still stable, Let's begin with our hotel business. In the fourth quarter, our RevPar recovered to 109% of 2019's level, with both ADR and OCC exceeding 2019's level for the fourth consecutive quarter.

Specifically, RevPAR's recovery rate for October, November, and December was 109%, 107%, and 110%, respectively, compared with the same period in 2019. These results underscore the resilience of our hotel business, which is primarily fueled by business travel demand. Additionally, Our mature hotels in operation for more than 18 months performed well during the quarter. Their same hotel Revpar recovery rate reached 110% of 2019's level in the fourth quarter, aligning with the overall performance of our hotel business. 此外,我们打造了一支非常有战斗力的开发队伍,

Formed a high-tech organizational structure and a unified business circle strategy. Lead our hotel network to quickly expand. Four seasons of new business reached 100. Created a new high in the history of the season. A new business of 289 in the whole year. By the end of 2023, the number of companies in the hotel industry reached 1,210. This season's contract maintains rapid growth. The pipeline project continues to expand.

Meanwhile, we have assembled a highly competitive development team with an efficient organizational structure and a unified development strategy in core business districts to empower the rapid expansion of our hotel network. In the fourth quarter we opened another 100 hotels, a record high on a quarterly basis, resulting in a total of 289 new openings for the full year. As of the end of 2023, we had a total of 1,210 hotels in operation. Furthermore, our new signings remained robust in the fourth quarter, with our pipeline continuing to expand. As of December 31st, the number of hotels under development reached 617, representing a 70% year-over-year increase.

A tour like 3.0, our mid-scale offering,

continued to garner market recognition as evidenced by 27 new signings during the fourth quarter, accounting for over 15% of our total new signings for the period. As of the end of 2023, we had a total of 25 Ator Light 3.0 hotels in operation, which progressed swiftly through the ramp-up phase and began demonstrating robust operational performance upon entering the mature stage. Particularly in the core business districts of higher tier cities, these hotels have emerged as leaders in both operating performance and customer experiences, highlighting Attour Lite 3.0's strength across products, services, and brand influence in the mid-scale market.

At the same time, we have officially established the QingJu Brand Department in the fourth region. The focus is to create a brand image of accommodation for young customers. We have launched the QingJu Special Service on behalf of Blue Friends. Users can learn more about local tourism, humanities, and food specialties in QingJu. We hope to create a simple, pure, and easy-to-use accommodation experience for every QingJu user. In addition, in order to better approach the number of young users, we have innovatively launched the exclusive luggage service product of QingJu. QingJu 3.0 is based on the idea of free youth, which satisfies the needs of young business guests for fashionable individualization and high-quality accommodation experience, and has gained the recognition of more and more consumers. As the next flagship brand that we focus on, we believe that The growth of QingJu 3.0 will be huge and will lead to a comprehensive upgrade of Chinese mid-range hotels.

Furthermore, we officially established an independent branding department for Attour Light in the fourth quarter, with a primary focus on crafting a differentiated accommodation brand image preferred by young customers. we introduced a series of distinctive services represented by blueprints, allowing customers to deeply explore local tourism, cultural and culinary specialties. These initiatives and efforts are dedicated to providing each of our Atour Light customers with a simple, pure and relaxing accommodation experience. In addition, To better cater to young business travelers' preferences, we introduced our innovative, exclusive Attourlite privilege services. Embracing the concept of life at ease, Attourlite 3.0 fulfills young business travelers' demand for a stylish, personalized, and high-quality accommodation experience and is earning increasing recognition among customers. As the next flagship brand we are propelling toward the 1,000-hotel mark, we are confident in Atorlite 3.0's tremendous potential and firmly believe that it will lead the comprehensive upgrade of China's mid-scale hotel market.

At Atorlite 3.0, we launched Atorlite 4.0 last November. After the release of the product, we gained a wide range of attention and love from the market. In the upper mid-scale market, we launched a tool 4.0 in November last year

capturing widespread attention and acclaim from the market upon its release. Guided by even more stringent criteria, we have successfully identified a batch of projects within carefully chosen properties across target cities. The very first tour 4.0 hotel is progressing smoothly and is scheduled to open soon. We are confident that as we gradually unveil a tour 4.0 hotels, they will take our entire upper mid-scale portfolio to the next level.

In addition, the key digitalization work of the Group this year is to fully integrate retail scenarios into the interests of Asian members, realize the interaction of two major scenario member growth systems, and build a unified 1RD Asian member. In the future, we will increase the interests of all scenarios, the integration of enterprises and individual member ecosystems, and more abundant brand cross-border cooperation, to continue exploring and building a unique Asian membership.

Moving now to our prime memberships. Bolstered by Ator's escalating brand recognition, our membership base grew substantially in the fourth quarter of 2023. As of December 31st, our registered members surged by 78% year-over-year, exceeding 63 million. Furthermore, A key digitalization initiative this year is to seamlessly integrate retail scenarios into our membership benefits and establish a unified 1ID tour membership, which will ultimately encourage mutual access and growth between these two major business segments. Moving forward, we will augment premium benefits across all scenarios unlock value through smooth integration of our corporate and individual membership ecosystems, and foster deeper brand collaborations across diverse industries.

Although the demand for holiday travel has declined in the fourth quarter, business travel is still stable. As the first resort brand to choose for business travel, our CRS channel sales and business ratio has risen by 65.1% this quarter, Despite the softening of leisure travel demand during the fourth quarter, business travel activity remained solid.

Ator, as the preferred brand for business travelers, experienced an increase in room nights sold through our CRS to 65.1% for the fourth quarter and 63.4% for the full year. Coupled with the rapid expansion of our corporate membership, the contribution of room nights sold to corporate members rose to 20.8% in the fourth quarter.

The last is our retail business. In 2023, Asia's retail has achieved an explosive growth. The GMV of retail this year reached 1.1 billion yuan, which is about 300% of the same growth. The ratio of GMV to online channels is more than 80%. Among them, the content e-commerce has made a major breakthrough. The GMV of Douyin's channels reached 400 million yuan, which is up to 16 times the same growth.

Last but not least, our retail business experienced a dramatic surge in 2023, with full-year GMV reaching RMB 1.14 billion, approximately three times higher than last year. Online sales accounted for over 80% of the total GMV, with significant breakthroughs on content e-commerce platforms. For instance, GMV contributed by Douyin soared to RMB 400 million in 2023, a remarkable 16-fold increase compared with the previous year.

The productivity of Ado Planet continues to consolidate. In 2023, we have launched a number of new products of the Shensui series. Shensui Gen Pro has sold more than 1.2 million products throughout the year. In the period of Tianmao, Douyin, and Jingdong Double 11, it ranked first in the sales of pillow products and ranked top 1 in the sales of Shensui's small red book pillow products. In addition, Shensui Kouwenbei Meanwhile, our Deep Sleep products emerged as a market powerhouse in 2023. Throughout the year,

our retail business concentrated on sleep scenarios to gain a deep understanding of customers' sleep-related needs and address their sleep difficulties. With the goal of offering customers a relaxing and comfortable sleep experience, Attour Planet's product capabilities continued to strengthen in 2023, with several blockbuster launches in our Deep Sleep series. Among them, Our Deep Sleep Pillow Pro sold over 1.2 million units across the year, topping sales charts in pillow segments on Tmall, Douyin, and JD.com during the Double 11 Shopping Festival. We also maintain our top position as the most mentioned pillow product on Xiaohongshu. Also, our Deep Sleep Temperature Control Quilt a key addition to AttorPlanet's ever-expanding product portfolio, surpassed 100,000 units in sales in 2023. Fueled by our relentless pursuit of innovation and product development, AttorPlanet's deep-sleep portfolio is poised for further expansion.

In the past year, AttorPlanet has focused on deep sleep and deep growth experience. In 2023, the annual user experience of Yaduo retail in Tianmao, Douyin and Jindong platforms will be excellent. In addition, through the link between retail and accommodation, we have accumulated more than 400,000 services for users to provide deep sleepers and Yaduo bags.

We made significant strides in our retail business over the past year as we focused on deep sleep scenarios and curated exceptional experiences. Following our Chinese experience strategy, we achieved an industry-leading shopping experience across leading third-party platforms. Moreover, by merging retail and accommodation scenarios, we offered our customers the opportunity to experience and enjoy the comfort provided by the Attour Deep Sleep Pillow Pro through our A-plus services during their stay with us, which has attracted a vast pool of customers and recorded more than 400,000 orders to date.

In 2023, Attour Deep Sleep Pillow Pro will continue to launch products that meet the needs of the time. to achieve the rapid development of the business. At the same time, we pay great attention to the upgrade of brand construction and product development. Based on the huge member's real sleep data, we continue to innovate the deep sleep formula, and continue to improve our brand and product power. In 2024, we will focus on brand growth, and establish a complete brand value recognition階梯. Through efficient new product development mechanisms, Leveraging our invaluable deep sleep insights, we maintain our product growth trajectory in 2023

consistently launching premier products, finally attuned to the evolving demands of this era. This strategic approach contributed substantially to the rapid expansion of our retail business. At the same time, we boosted our efforts across brand building and upgrades, as well as product development. Drawing upon extensive feedback from our members' real sleep experiences, We continually optimize our deep sleep offerings, thereby amplifying our brand and product strength. As we move into 2024, our focus will remain on brand-driven growth and establishing a comprehensive brand value continuum. We will continue to enhance our product's competitive edge and expand product categories utilizing our efficient product development mechanism, providing our customers with diverse and superior suite products. Furthermore, we intend to propel synergetic development between our retail and hotel businesses, leveraging our hotels to create a closed-loop experiential ecosystem that will allow our customers to engage in a truly immersive sleep experience during their stay.

Over the past year, we have witnessed a gradual recovery in domestic business travel demand, coupled with explosive growth in leisure travel.

Looking into 2024, we expect a sustained upward momentum in business travel and the popularity of experience-driven leisure tourism to persist. As a leading upper mid-scale hotel chain in China, Atour's unique neighborhood-style services and innovative deep sleep experience will continue to provide customers with unparalleled accommodation experiences. further enriching a tour's brand value and expanding the mind share of the Chinese experience. Now, I'll turn the call over to our co-CFO, Mr. Wu Jianfeng, to discuss our financial results.

Thank you, Haijun. Now, I would like to present the company's financial performance for the fourth quarter and the full year of 2023. Our net revenues for the first quarter of 2023 grew by 140.4% year-over-year and 16.3% quarter-over-quarter to RMB 1,505 million. Net revenues for the full year 2023 increased by 106.2% year-over-year to RMB 4,666 million. The strong increases were driven by the robust growth in both hotel and retail business. Revenues from our monetized hotels for the fourth quarter were RMB $861 million, up by 133.3% year-over-year and 9.0% quarter-over-quarter. For full year 2023, Revenue from our monetized hotels increased by 98.8% year-over-year to around the $2,706 million. The increases were primarily due to the ongoing expansion of our hotel network and the increase in repop. The total number of monetized hotels increased to 1,178 as of December 31, 2023, up by 31.0% year-over-year and 9.1% quarter-over-quarter, while retail recovered to RMB 353 and RMB 371 for the first quarter and the full year of 2023, respectively. Revenues contributed by our leased hotel for the first quarter were RMB 195 million, representing an increase of 40.4% year-over-year and a decrease of 18.1% quarter-over-quarter. For full year 2023, revenues from our leased hotel increased by 51.9% year-over-year to RMB $880 million. The increases were primarily due to the increase in rent power, which recovered to RMB $495 and RMB $517 for the first quarter and the full year of 2023. The quarter-over-quarter decrease was mainly due to the seasonality and the closure of one hotel in September. Revenue from the retail business for the first quarter increased by 315.6% year-over-year and 75.3% quarter-over-quarter to RMB $412 million. For full year 2023, revenues from our retail business increased by 283.2% year-over-year to RMB 972 million. These increases were attributable to widespread recognition of our retail brands and compelling product offerings, as well as improved product development and distribution capabilities. Now let's move to costs and expenses. Our hotel operating costs for the fourth quarter increased by 106.0% year-over-year and 18.9% quarter-over-quarter to RMB 733 million. The year-over-year increase was mainly due to the increase in variable costs, such as supply chain costs associated with the ongoing expansion of our hotel network. The quarter-over-quarter increase was mainly due to an impairment of RMB 47 million from our leased hotel booked in the fourth quarter of 2023, compared with RMB 13 million booked in the previous quarter. Hotel operating costs for full year 2023 were RMB 2,241 million, an increase of 60.8% year-over-year. Growth margin for our hotel businesses was 29.9% and 36.8% for the first quarter and the full year of 2023 respectively, compared with 29.3% and 27.2% for the same period of 2022. Retail costs for the first quarter increased by 295.4% year-over-year to RMB 232 million. For full year 2023, retail cost increased by 238.1% year-over-year to RMB 513 million. The increase was associated with the rapid growth of our retail business. Growth margin of our retail business was 43.7% and 47.2% for the first quarter and the full year of 2023, respectively. compared with 40.8% and 40.1% for the same period of 2022. The increases were attributable to increasing contribution from high-margin online sales. Setting and marketing expenses for the first quarter of 2023 increased by 283.2% year-over-year to RMB 207 million. Selling and marketing expenses for full year 2023 increased by 235.6% year-over-year to RMB 470 million. The increases were mainly due to our increased investment in brand awareness and online channel development associated with our retail business. General and administrative expenses for the first quarter of 2023 were RMB 105 million including RMB 2 million share-based compensation expenses, compelled with RMB 217 million, including RMB 160 million share-based compensation expenses for the same period of 2022. For full year 2023, general and administrative expenses were RMB 451 million, including RMB 162 million share-based compensation expenses compared with RMB $350 million, including RMB $160 million share-based compensation expenses for full year 2022. The increases, excluding the impact from share-based compensation, were primarily due to the increased cost related to management personnel and professional services expenses. Technology and development expenses for the first quarter of 2023 increased by 39.7% year-over-year to RMB 22 million. Technology and development expenses for full year 2023 increased by 16.8% year-over-year to RMB 77 million. Adjusted EBITDA for the first quarter of 2023 was RMB 251 million up by 116.1% year-over-year. Adjusted net income for first quarter increased by 175.8% year-over-year to RMB 222 million. Adjusted net profit margin for full year 2023 was 19.4%, up by 8 percentage points year-over-year. The significant increase in gross profit margin in both our hotel and retail businesses along with our optimizing operating leverage led to an improvement in the group's overall net profit margin. Normally, we have maintained a healthy cash position with stable growth momentum. As of December 31, 2023, our cash and cash equivalent totaled RMB 2.8 billion. Among the net cash was approximately RMB 2.8 billion. That concludes our financial highlights for the first quarter and the full year 2023. With that, that's open for Q&A.

Thank you. If you wish to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 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 limit your questions to one at a time. If you wish to have follow-up questions, please rejoin the queue.

We will take our first question.

Your first question comes from the line of Lydia Ling, Farm City. Please go ahead, your line is open.

Hello, everyone. I'm Lydia from Huachi. Thank you for the opportunity to ask me a question. First of all, congratulations on the performance of the company's fourth quarter. What I'm most concerned about is our 2024 exhibition. It may be divided into several small parts. One is about the opening of the year. Because I saw that the pipeline of our fourth quarter is also improving further. So can you share with us a plan for this year's year-round opening? For example, how much will our Qingzhu open? How much will our Yaduo open? This is the first small part of the question. The second one is also a repa trend that everyone is more concerned about. Last year, our repa also had a good improvement. May I ask, for this year's latest repa guidance and our revenue guidance, Because the first quarter is coming to an end, it would be helpful if we could share some of the latest operations of the first quarter. Hi, management. This is Lydia from Citi. So congratulations on the results. And so my question is mainly focused on the growth outlook for 2024. And so basically first is on the like the hotel opening plan. And we saw actually like the further growth in the pipeline in first quarter. So what would be your sport opening plan for this year? And the second party is on the repat trend, which actually rebounded well last year. So what's your latest expectation for repat trend for this year and also your revenue guidance? And if any color on the first quarter trend, that will be very helpful. And as the Chimney and the Labor Day holiday is approaching, so what will be your expectation on the repat performance for these two holidays? And so lastly, it's on the margin trend. And so what will be your latest guidance and looking into the 2024? And we see some actually increase in the light expense ratio in the first quarter. So what will be your expectations for the light 2024? Thank you. Okay, thank you, Lillian.

Let me answer the opening question first. In 2023, there will be 289 new stores. At the end of the year, the number of new stores will be about 1,210, which is a 30% increase. In 2024, we expect to maintain a 30% increase in the number of new stores. There will be 360 new stores this year. There will be 200 to 220 new stores in Yaduo Hotel. There will be 60 to 80 new stores in Qingzhu. This goal will also help us to reach our three-year strategic goal of 2,000 good stores by 2025. Thanks, Lydia. Let me answer your question on the new openings. In 2023, we opened 289 new hotels, and the total number of hotels in operation by the end of the year was 1,210.

And that was a 30% increase. And we aim to keep that growth rate as well in this year. So this year, our target for new openings would reach 360. And among those 360, about 200 to 220 will be a tour hotels, while 60 to 80 will be a tour light hotels. And all of this would help us to march towards the 2,000 premier hotels by the year of 2025, and that is our goal.

Let me answer your second and third questions. First of all, it's about the trend of Rappaport. In fact, in 2023, we achieved a relatively good recovery of Rappaport. Looking at the current Rappaport structure, because we maintained about 30% of the opening rate this year, the new products are still relatively high. Okay, now Lydia, let me try to answer your second and the third question.

First, regarding the development trend of RAVPAR, well, from the perspective of RAVPAR's structure, this year we will maintain a 30% growth rate of new hotel openings, as those new hotels will account for a relatively higher proportion than those of our peers. Meanwhile, the expansion momentum of our mid-scale offering, Atour Light, was strong, and that means with more Atour Light hotels to open, they may have a certain impact on our overall RAF PAR. And considering what we already have from Q1's data and taking some uncertainties in the external environment into account, overall we hold a cautiously optimistic attitude for this year's RAF PAR growth. We aim to match last year's RAF PAR levels.

And as for the Qingming and May the first holidays, looking from the reservation data we have, we've seen some very active traffics, and obviously they're going to turn out to be pretty nice results for those two holidays. And also, let me try to update our revenue guidance a little bit as well.

As in revenue with the rapid development of both our accommodation and retail business, we expect the 2024's full-year revenue to grow by around 30%.

In terms of the profit and loss ratio, we are confident that we can gradually improve with the optimization of the cost structure and the improvement of our operating efficiency. One more note on revenue, that 30% growth will be a leading growth across industry. And as for profit, we have the confidence to improve it in each of our business segments along with our cost of structural

optimizations and the increase of management and operation efficiency. However, our overall profit margin may be subjected to changes in the contribution of each revenue stream. We do expect our profit margin to continue with the trend of a relatively stable and moderate growth. Thank you.

Thank you, Lydia. Let's have next question.

Thank you. Please stand by. Your next question comes from the line of CJ Lin from CICC.

Please go ahead. Your line is open. .

I'll translate my question to English. Thank you, management. We have talked about the new opening. I have a follow-up question on the new signing. So what's the target of the new signing this year, and what's the progress in Q1? And do we see objects changing the franchisee's confidence and interest since this year? Thank you.

Okay, thank you, Sujie. Thank you, Sujie. In terms of signing, we signed 576 companies in 2023, which is quite outstanding. Now that we are entering the first quarter of 2024, our overall signing continues to maintain a good trend. The demand for the entire joint market is still relatively active. In 2024, we also believe that with the continuous increase in brand influence in Asia and the competitiveness of our new products, we will definitely let more joint companies enter the Asian system.

Thank you, Sijie, for your question. As for new signings, we signed 576 projects in the full year of 2023, which was an outstanding performance. And now entering Q1 2024, we have maintained that strong momentum on signings overall. And as we see it, the franchise market is still active. In 2024, we are confident that by leveraging Ator's growing brand influence and with our newly launched products' competitiveness, more franchisees are to be attracted into Ator's system for certain.

Thank you, Sijie. Let's have next question.

Thank you. We will take our next question. Your next question comes from the line of Dan Chi from Morgan Stanley. Please go ahead. Your line is open.

Thank you. Thank you for giving me the opportunity to ask this question. I'm Dan, a hotel analyst at Damo. My question is mainly about the long-term sales. Just now, Mr. Wang shared a lot. The performance of the long-term sales last year was very outstanding. I would like to ask Mr. Guan to talk about the entire product planning in 2024. As Mr. Wang mentioned, it may be in terms of deep sleep and experience, as well as in terms of the product, there are a lot of different perspectives. Another one is about the long-term sales. What is our expected income goal for this year? Mr. Wu just mentioned that our total revenue this year is 30%. I would like to see how much the contribution of the long-term sales is. Let me translate it. My question is about scenario-based retail business. It recorded a very exceptional performance last year. I would like to ask about the management's 2024 strategic plan on this segment, especially on your product plans and also any rough revenue guidance contribute to the total revenue 30% year-over-year growth revenue guidance. Thank you.

Thank you, Dennis. Well, thank you Dan for your question.

Retail business as our second growth driver has achieved an outstanding results in 2023 with a full year revenue of RMB 970 million, accounting for 20.8% of our total revenue. In 2024, we will continue to drive the healthy growth of retail business and to keep on strengthening the building of our basic capacity to further focus on the brand and our products.

In terms of the brand, we will focus on the Asian planet, focusing on our deep sleep products. We will continue to improve our retail product development capabilities, and continue to expand our deep sleep products. In 2023, we will have three over 100 million pillow products. On top of that, we have successfully launched deep sleep bed sheets and deep sleep beds, which has received the love and good sales from users. And in terms of branding, we do have the plan to focus on Attour Planet and our Deep Sleep products. We will consistently improve our R&D capability for retail products.

to further tap into the deep sleep categories. In 2023, we availed of the momentum from three pillow products with 100 million cells each. Successfully launched our deep sleep temperature control quote, which had won the consumer's favor and very decent sales. In this year's March 21st, I mean 2024's March 21st, On the World Sleep Day, we launched yet another new product, the Attour Planet Deep Sleep Summer Cool Pilt, as a continuous expansion of our product portfolio. 另外一方面,我們也會不斷強化我們的零售跟住宿場景的結合。

At the same time, we will also continue to strengthen the combination of retail business and our accommodation scenarios to place more deep sleep products into our tour hotels this year,

to create an immersive deep sleep experience scenario for our consumers and to keep on strengthening the mind share of a tour deep sleep experience.

As you may have noticed, starting from this financial report, we will disclose our retail business as a separate business unit. We will also strengthen the standards of retail basic capabilities, including organizational capabilities, research capabilities, data infrastructure capabilities, channel capabilities, and so on. This can set a solid foundation for the long-term growth of retail business. And you probably have noticed that beginning with this latest financial report, we started to disclose information of the retail business as an independent business unit.

We also plan to enhance the fundamental capabilities in retail, including capabilities in organization, R&D, data infrastructure, channels, etc. We try to build a solid foundation for our longer-term steady growth. Since the beginning of 2024, our retail business continued its positive momentum, and we do expect 2024's full-year retail revenue to grow more than 50%, reaching RMB 1.45 billion. Thank you.

Thank you, Dan. Let's have next question.

Thank you. We will take our next question. Your next question comes from the line of from UBS. Please go ahead. Your line is open.

Hello, everyone. Thank you for giving me a chance to ask a question.

I'm Chen Xin from UBS. I have two questions for Manager Chen. The first question is, I saw a significant drop in the annual tax rate in the fourth quarter. I'd like to ask what the main reason is. The second question is, I've seen that we've had plenty of cash in our accounts. I'd like to ask if there will be future funds in the future, such as dividends, rebates, arrangements, and so on, in the use of funds. I'd like to ask Manager Chen to share with us. I have two questions. The first is that I have noticed that the executive tax rate has decreased significantly in the fourth quarter. May I know the main reason? The second question is that about the company's plan on the use of cash. Is the company considering about raising dividend payout or share buyback to increase the shareholder returns? Thanks.

Thank you, Mr. Chen. As for the taxation question, we do have an entity which enjoyed preferential tax policies in 2023, and there was a one-off tax exemption in the fourth quarter. As for your second question on cash utilization, well, thanks to our robust business growth and our asset light mode, the group's cash flow maintained healthy growth.

On December 31st last year, our group's net cash and short-term investment at banks reached a total of RMB 3.5 billion. 那麼我們在今年也會充分地考慮各種有利於提升股東回報的方案,包括剛才你提到了分紅、回購這些措施,以不斷提升我們的現金的使用效率。 And in this year, we will thoroughly consider various means and different ways of rewarding the shareholders, such as dividends payout, share buybacks, et cetera, to continuously enhance the efficiency of our cash utilization. This is it. Thank you.

Thank you. And we can take one more question.

Thank you. We will take our final question. Your final question comes from the line of Candice Tsang from Bank of America. Please go ahead. Your line is open.

Candice Tsang from Bank of America

Thanks a lot for the opportunity to raise my questions. This is Candice Zhang from Bank of America. My questions are specifically on Atorize 3.0. Management has just shared hotel opening target for 2024. Would you have any goals for new signings of a tour life 3.0 in this year and how's the performance and current operation status of those open hotels lastly can management share your views on the competitive landscape of the mid-scale hotel segment overall thank you um um

Well, thank you, Candice.

A Tour Life 3.0 is our mid-scale offering targeting young business travelers, and it has been quite popular with the franchisees since its launch in February last year, evidenced by more than 90 new signings in 2023.

For the 3.0 project, we will focus on the core business circle of the core city above the second level, creating a standard quality of a mid-end hotel. Currently, we have opened stores in 21 cities, including Beijing, Shanghai and Shenzhen. The performance of the business is also good. For example, our standard store, the exhibition of Guangzhou Pazhou, the exhibition of Guangzhou Tower, and the exhibition of Qingju Hotel. Since the opening in November last year, Repa has had an average of more than 600 yuan, which is far more than the performance of the surrounding products.

A Tour of Life 3.0 focuses on core business districts and higher tier cities, aiming to set a benchmark for quality in the mid-scale hotel segment. And by now, we had A Tour of Life 3.0 hotels opened in 21 cities, including Shanghai, Guangzhou, Shenzhen, all with quite decent operational performance. For instance, the average ref power for our exemplary hotel, the Attour Life Hotel at Guangzhou Pazhou Exhibition Canton Tower Subway Station, since its opening in November last year, it has exceeded 600 RMB in its ref power, far exceeding the performance of the surrounding competitors.

The second question is about the competition between the two companies. And regarding your second question on the competition in the mid-scale market, we believe that the scale of this market has been verified already.

Because with Touralight 3.0's design catering to the aesthetic view of the young people and the consistent service experience we offer, it can well match the young business travelers' need for high-quality accommodation experience, and it has been successfully recognized by the consumers.

We just mentioned that the business performance of Qingju 3.0 is extremely competitive in the same business circle. The advantage of the return cycle of investment is very obvious. And as I previously said, the operation performance of a tour like 3.0 hotels are very competitive in their business districts. And the advantage in the cycle of return on investment is quite obvious.

We believe that with its powerful competitiveness and the extensive market recognition, Atul Light is poised to become our second brand within Atul Group to hit the scale of 1,000 hotels. Thank you.

And that concludes the question and answer session. I would like to turn the conference back over to Alison Zhang for any additional or closing comments.

Thank you for joining us today. If you have any further questions, please feel free to contact our IR team. We look forward to reconnecting with you next quarter. Thank you and goodbye.

This concludes today's conference call. Thank you for participating. You may now disconnect. you Bye. Thank you. Ladies and gentlemen, thank you for standing by and welcome to the At All Lifestyle Holdings fourth quarter and full year 2023 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there will be a question and answer session. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Alison Zhang, Director 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 2023 earnings call. Today, you will hear from our founder, chairman, and CEO, Mr. Wang Haijun, and our co-chief financial officers, Mr. Wang Shoudong and Mr. Wu Jianfeng. Before we continue, please be aware that today's discussion will include forward-looking statements under federal securities laws. These statements are subject to various risks and uncertainties, and actual results may differ significantly from what is stated or implied in our comments today. The company is not obligated to update any forward-looking statements except as required by applicable laws. Additionally, during this call, our management will discuss non-GAAP financial measures solely for comparison purposes. For clear understanding of these measures and a reconciliation of GAAP to non-GAAP financial results, please refer to the earnings release issued earlier today. Furthermore, 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.

Thank you, Allison. Hello, everyone, and thank you for joining

towards fourth quarter and the full year 2023 earnings call today. 2023 is the beginning of Yaduo's three-year strategy.

It is the first time that we have proposed the vision and goal of experiencing 2,000 good stores in China. Throughout the year, Yaduo has advanced the experience strategy from digitalization, organizational culture, management and operation in three directions, and has formed the long-term ability to experience and drive business. to support China's experience. Now, China's experience is getting deeper and deeper, and it has triggered a profound collective resonance. Our 2,000 good stores' large-scale strategy has also achieved significant stage results. In 2023, we will accumulate 289 new stores and sign about 576 new stores, exceeding the goal set at the beginning of the year to achieve the foundation of e-sports for 2,000 good stores.

2023 was an exceptional year for ATOR, wherein we unveiled our strategic vision for expanding our portfolio to 2,000 premier hotels nationwide by 2025 and establishing the Chinese experience as the industry benchmark. Throughout the year, we worked diligently to enhance digitalization, organization, and corporate culture as well as our management and operations capabilities, which have become the pillars of our sustainable growth as an experience-driven business. Today, our signature Chinese experience is resonating deeply with people, evoking a profound collective response. Moreover, we have achieved significant milestones in our hotel network expansion, In 2023, we opened a total of 289 new hotels and assigned additional 576 projects, surpassing the targets we set at the beginning of the year and laying a solid foundation for our goal of 2,000 premier hotels by 2025. 2024 will be a year of innovation and breakthrough.

On the experience strategy, we will firmly strive to provide users with diversified services and outstanding experiences that are not only for accommodation. First, we will continue to strengthen the interesting value perception of people, warmth, and interest, and establish a user-to-user experience resonance. Second, we will focus on the connection between accommodation and retail members to realize user interaction in both scenarios, and continue to create a unique and deep experience for the customer. In the end, we will continue to promote digitalization work, energy-saving experience upgrade, and bring the Chinese experience to a new height. On a scale strategy, we will continue to consolidate Asia's strong leadership position in the mid- and high-end hotel market, and continue to expand the brand influence of the mid-end market, establish a sustainable partnership and win-win partner ecosystem, and help the group scale steadily grow.

2024 is poised to be a year of innovation and breakthroughs as we build on this success. To advance our Chinese experience strategy, we will remain dedicated to providing our customers with multifaceted services and exceptional experiences that go beyond accommodation. First, we will promote greater awareness of our cultural, inviting, and interesting experiences, cultivating lasting bonds with our discerning customers. Second, we aim to establish a virtual cycle fostering seamless customer crossover between retail and accommodation to bring our unique deep sleep experience to all of our members. Finally, we will continue to advance digitalization empowering experiential upgrades, and elevating the Chinese experience to new heights. In terms of our network expansion strategy, we will continue to solidify Ator's leading position in the upper mid-scale market while expanding Ator's brand awareness in the mid-scale market, and establish a sustainable, mutually beneficial franchisee ecosystem to help drive our hotel network's steady growth.

下面我将展开介绍2023年第四季度及全年各项业务的具体情况。 Now, I would like to provide more details on our performance for the fourth quarter and the full year of 2023. 首先是住宿业务。 四季度,我们的RollerPod相比于2019年同期,恢复度达到了109%。 and ADR and OCC have been at the same level for more than 19 years in four consecutive seasons. From October, November and December, the recovery rate of RollerPod reached 109%, 107% and 110%. It fully demonstrates our demand for business travel. Over 18 months of mature hotel performance is still stable. Let's begin with our hotel business. In the fourth quarter, our RevPar recovered to 109% of 2019's level, with both ADR and OCC exceeding 2019's level for the fourth consecutive quarter.

Specifically, RAVPAR's recovery rate for October, November, and December was 109%, 107%, and 110%, respectively, compared with the same period in 2019. These results underscore the resilience of our hotel business, which is primarily fueled by business travel demand. Additionally, Our mature hotels in operation for more than 18 months performed well during the quarter. Their same hotel Revpar recovery rate reached 110% of 2019's level in the fourth quarter, aligning with the overall performance of our hotel business. 此外,我们打造了一支非常有战斗力的开发队伍,

Formed a high-tech organizational structure and a unified business circle strategy. Lead our hotel network to quickly expand. New business in the fourth quarter reached 100. Created a new high in the quarter. New business in the whole year, 289. By the end of 2023, the number of hotels in the group will reach 1,210. This quarter's contract maintains rapid growth. The pipeline project continues to expand.

Meanwhile, we have assembled a highly competitive development team with an efficient organizational structure and a unified development strategy in core business districts to empower the rapid expansion of our hotel network. In the fourth quarter We opened another 100 hotels, a record high on a quarterly basis, resulting in a total of 289 new openings for the full year. As of the end of 2023, we had a total of 1,210 hotels in operation. Furthermore, our new signings remained robust in the fourth quarter, with our pipeline continuing to expand. As of December 31st, the number of hotels under development reached 617, representing a 70% year-over-year increase.

Our mid-term product, QingGui 3.0, continues to gain market trust. In the fourth quarter, we added 27 new contracts. The contract ratio exceeded 15%. By the end of 2023, we have opened 25 hotels. A tour like 3.0, our mid-scale offering,

continued to garner market recognition as evidenced by 27 new signings during the fourth quarter, accounting for over 15% of our total new signings for the period. As of the end of 2023, we had a total of 25 Ator Light 3.0 hotels in operation, which progressed swiftly through the ramp-up phase and began demonstrating robust operational performance upon entering the mature stage. Particularly in the core business districts of higher tier cities, these hotels have emerged as leaders in both operating performance and customer experiences, highlighting Attour Lite 3.0's strength across products, services, and brand influence in the mid-scale market.

At the same time, we have officially established a brand department in the fourth region. The focus is to create a brand image of accommodation for young customers, and to launch a special service for blue friends. Users can also learn more about local tourism, humanities, and food specialties in Qingzhu. We hope to create a simple, pure, and easy-to-use accommodation experience for each resident. In addition, in order to better approach the preferences of young users, we have innovatively launched the exclusive luggage service product of QingJu. QingJu 3.0 is based on the concept of a free life, which satisfies the needs of young business guests for a fashionable, individualized and high-quality accommodation experience, and has gained the recognition of more and more consumers. As the next flagship brand that we focus on, we believe that The growth of QingJu 3.0 will be huge and will lead to a comprehensive upgrade of Chinese mid-range hotels.

Furthermore, we officially established an independent branding department for Attour Light in the fourth quarter, with a primary focus on crafting a differentiated accommodation brand image preferred by young customers. we introduced a series of distinctive services represented by blueprints, allowing customers to deeply explore local tourism, cultural, and culinary specialties. These initiatives and efforts are dedicated to providing each of our Atour Light customers with a simple, pure, and relaxing accommodation experience. In addition, To better cater to young business travelers' preferences, we introduced our innovative, exclusive Attourlite privilege services. Embracing the concept of life at ease, Attourlite 3.0 fulfills young business travelers' demand for a stylish, personalized, and high-quality accommodation experience and is earning increasing recognition among customers. As the next flagship brand we are propelling toward the 1,000-hotel mark, we are confident in Atorlite 3.0's tremendous potential and firmly believe that it will lead the comprehensive upgrade of China's mid-scale hotel market.

At Atorlite 3.0, we launched Adore 4.0 last November. After the release of the product, we gained a wide market attention and love. In the upper mid-scale market, we launched a tool 4.0 in November last year

capturing widespread attention and acclaim from the market upon its release. Guided by even more stringent criteria, we have successfully identified a batch of projects within carefully chosen properties across target cities. The very first Attour 4.0 hotel is progressing smoothly and is scheduled to open soon. We are confident that as we gradually unveil Atour 4.0 hotels, they will take our entire upper mid-scale portfolio to the next level.

Next is our membership business. With the continuous improvement of the Ador brand awareness, our membership size has increased significantly in the fourth quarter. As of December 31, our registered membership has exceeded 63 million, which is 78% of the total growth. In addition, the company's key digitalization work this year is to fully integrate retail scenarios into the rights of Asian members, realize the interaction of two major scenario member growth systems, and build a unified 1RD Asian member. In the future, we will increase the rights of all scenarios, the integration of enterprises and individual member ecosystems, and more rich brand cross-border cooperation. continue to explore and build a unique Asian membership.

Moving now to our prime memberships. Bolstered by Ator's escalating brand recognition, our membership base grew substantially in the fourth quarter of 2023. As of December 31st, our registered members surged by 78% year-over-year, exceeding 63 million. Furthermore, A key digitalization initiative this year is to seamlessly integrate retail scenarios into our membership benefits and establish a unified OneID tour membership, which will ultimately encourage mutual access and growth between these two major business segments. Moving forward, we will augment premium benefits across all scenarios unlock value through smooth integration of our corporate and individual membership ecosystems, and foster deeper brand collaborations across diverse industries.

Although the demand for holiday travel has declined in the fourth quarter, business travel is still stable. As the first resort brand to choose for business travel, our CRS channel sales and business comparison has risen by 65.1% this quarter, Despite the softening of leisure travel demand during the fourth quarter, business travel activity remained solid.

Ator, as the preferred brand for business travelers, experienced an increase in room nights sold through our CRS to 65.1% for the fourth quarter and 63.4% for the full year. Coupled with the rapid expansion of our corporate membership, the contribution of room nights sold to corporate members rose to 20.8% in the fourth quarter.

The last is our retail business. In 2023, Aduo's retail has achieved an explosive growth. The GMV of retail this year reached 11.4 billion, which is about 300% of the same growth. The share of GMV on the online channel is more than 80%. Among them, the content e-commerce has made a major breakthrough. The GMV of Douyin's channel reached 400 million, which is up to 16 times the same growth.

Last but not least, our retail business experienced a dramatic surge in 2023, with full-year GMV reaching RMB 1.14 billion, approximately three times higher than last year. Online sales accounted for over 80% of the total GMV, with significant breakthroughs on content e-commerce platforms. For instance, GMV contributed by Douyin soared to RMB 400 million in 2023, a remarkable 16-fold increase compared with the previous year.

The productivity of Ador Planet continues to consolidate. In 2023, we have launched a number of new products of the Shensui series. Shensui Man Pro has sold more than 1.2 million products throughout the year. In the period of Tianmao, Douyin, and Jingdong Double 11, it ranked first in the sale of pillow products, and ranked top one in the number of pillow products of Shansui Xiaohongshu. In addition, the Shensui control unit Meanwhile, our Deep Sleep products emerged as a market powerhouse in 2023. Throughout the year,

our retail business concentrated on sleep scenarios to gain a deep understanding of customers' sleep-related needs and address their sleep difficulties. With a goal of offering customers a relaxing and comfortable sleep experience, Attour Planet's product capabilities continued to strengthen in 2023, with several blockbuster launches in our Deep Sleep series. Among them, Our Deep Sleep Pillow Pro sold over 1.2 million units across the year, topping sales charts in pillow segments on Tmall, Douyin, and JD.com during the Double 11 Shopping Festival. We also maintained our top position as the most mentioned pillow product on Xiaohongshu. Also, our Deep Sleep Temperature Control Quilt a key addition to Atorplanet's ever-expanding product portfolio, surpassed 100,000 units in sales in 2023. Fueled by our relentless pursuit of innovation in product development, Atorplanet's deep-sleep portfolio is poised for further expansion.

In the past year, Atorplanet has focused on deep-sleeping and deep-growing experience. In the year of 2023, the annual user experience of Yaduo retail in Tianmao, Douyin and Jindong platforms will be excellent. In addition, through the link between retail and accommodation, we have accumulated more than 400,000 services for users to provide Shenzhen Pro Yaduo compact products.

We made significant strides in our retail business over the past year as we focused on deep sleep scenarios and curated exceptional experiences. Following our Chinese experience strategy, we achieved an industry-leading shopping experience across leading third-party platforms. Moreover, by merging retail and accommodation scenarios, we offered our customers the opportunity to experience and enjoy the comfort provided by the Attour Deep Sleep Pillow Pro through our A-plus services during their stay with us, which has attracted a vast pool of customers and recorded more than 400,000 orders to date.

In 2023, Attour Deep Sleep Pillow Pro will continue to launch products that meet the needs of the time. to achieve the rapid development of the business. At the same time, we pay great attention to the upgrade of brand construction and product development. Based on a huge number of members' real sleep data, we continue to innovate the deep sleep formula and continue to improve our brand and product power. In 2024, we will focus on brand growth and establish a complete brand value recognition stage. Through efficient new product development mechanisms, Leveraging our invaluable deep sleep insights, we maintain our product growth trajectory in 2023

consistently launching premier products, finally attuned to the evolving demands of this era. This strategic approach contributed substantially to the rapid expansion of our retail business. At the same time, we boosted our efforts across brand building and upgrades, as well as product development. Drawing upon extensive feedback from our members' real sleep experiences, We continually optimize our deep sleep offerings, thereby amplifying our brand and product strength. As we move into 2024, our focus will remain on brand-driven growth and establishing a comprehensive brand value continuum. We will continue to enhance our product's competitive edge and expand product categories utilizing our efficient product development mechanism, providing our customers with diverse and superior SUMI products. Furthermore, we intend to propel synergetic development between our retail and hotel businesses, leveraging our hotels to create a closed-loop experiential ecosystem that will allow our customers to engage in a truly immersive sleep experience during their stay.

Over the past year, we have witnessed a gradual recovery in domestic business travel demand coupled with explosive growth in leisure travel.

Looking into 2024, we expect a sustained upward momentum in business travel and the popularity of experience-driven leisure tourism to persist. As a leading upper mid-scale hotel chain in China, Atour's unique neighborhood-style services and innovative deep sleep experience will continue to provide customers with unparalleled accommodation experiences. further enriching a tour's brand value and expanding the mind share of the Chinese experience. Now, I'll turn the call over to our co-CFO, Mr. Wu Jianfeng, to discuss our financial results.

Thank you, Haijun. Now, I would like to present the company's financial performance for the fourth quarter and the full year of 2023. Our net revenues for the first quarter of 2023 grew by 140.4% year-over-year and 16.3% quarter-over-quarter to RMB 1,505 million. Net revenues for the full year 2023 increased by 106.2% year-over-year to RMB 4,666 million. The strong increases were driven by the robust growth in both hotel and retail business. Revenues from our monetized hotels for the fourth quarter were RMB 861 million, up by 133.3% year-over-year and 9.0% quarter-over-quarter. For full year 2023, Revenue from our monetized hotels increased by 98.8% year-over-year to around the $2,706 million. The increases were primarily due to the ongoing expansion of our hotel networks and the increase in repops. The total number of monetized hotels increased to 1,178 as of December 31, 2023, up by 31.0% year-over-year and 9.1% quarter-over-quarter, while retail recovered to RMB 353 and RMB 371 for the first quarter and the full year of 2023, respectively. Revenues contributed by our leased hotel for the first quarter were RMB 195 million, representing an increase of 40.4% year-over-year and a decrease of 18.1% quarter-over-quarter. For full year 2023, revenues from our leased hotel increased by 51.9% year-over-year to RMB $880 million. The increases were primarily due to the increase in rent power, which recovered to RMB $495 and RMB $517 for the first quarter and the full year of 2023. The quarter-over-quarter decrease was mainly due to the seasonality and the closure of one hotel in September. Revenue from the retail business for the first quarter increased by 315.6% year-over-year and 75.3% quarter-over-quarter to RMB $412 million. For full year 2023, revenues from our retail business increased by 283.2% year-over-year to RMB 972 million. These increases were attributable to widespread recognition of our retail brands and compelling product offerings, as well as improved product development and distribution capabilities. Now let's move to costs and expenses. Our hotel operating costs for the fourth quarter increased by 106.0% year-over-year and 18.9% quarter-over-quarter to RMB $733 million. The year-over-year increase was mainly due to the increase in variable costs, such as supply chain costs associated with the ongoing expansion of our hotel network. The quarter-over-quarter increase was mainly due to an impairment of RMB 47 million from our least hotel booked in the first quarter of 2023, compared with RMB 13 million booked in the previous quarter. Hotel operating costs for full year 2023 were RMB 2,241 million, an increase of 60.8% year-over-year. Growth margin for our hotel businesses was 29.9% and 36.8% for the first quarter and the full year of 2023 respectively, compared with 29.3% and 27.2% for the same period of 2022. Retail costs for the first quarter increased by 295.4% year over year to RMB 232 million. For full year 2023, retail cost increased by 238.1% year-over-year to RMB 513 million. The increase was associated with the rapid growth of our retail business. Growth margin of our retail business was 43.7% and 47.2% for the first quarter and the full year of 2023, respectively. compared with 40.8% and 40.1% for the same period of 2022. The increases were attributable to increasing contribution from high-margin online sales. Setting and marketing expenses for the first quarter of 2023 increased by 283.2% year-over-year to RMB 207 million. Setting and marketing expenses for full year 2023 increased by 235.6% year-over-year to RMB 470 million. The increases were mainly due to our increased investment in brand awareness and online channel development associated with our retail business. General and administrative expenses for the first quarter of 2023 were RMB 105 million including RMB 2 million share-based compensation expenses, compared with RMB 217 million, including RMB 160 million share-based compensation expenses for the same period of 2022. For full year 2023, general and administrative expenses were RMB 451 million, including RMB 162 million share-based compensation expenses compared with RMB 350 million, including RMB 160 million share-based compensation expenses for full year 2022. The increases, excluding the impact from share-based compensation, were primarily due to the increased cost related to management personnel and professional services expenses. Technology and development expenses for the first quarter of 2023 increased by 39.7% year-over-year to RMB 22 million. Technology and development expenses for full year 2023 increased by 16.8% year-over-year to RMB 77 million. Adjusted EBITDA for the first quarter of 2023 was RMB 251 million, up by 116.1% year-over-year. Adjusted net income for first quarter increased by 175.8% year-over-year to RMB 222 million. Adjusted net profit margin for full year 2023 was 19.4%, up by 8 percentage points year-over-year. The significant increase in gross profit margin in both our hotel and retail businesses along with our optimizing operating leverage, led to an improvement in the group's overall net profit margin. Normally, we have maintained a healthy cash position with stable growth momentum. As of December 31, 2023, our cash and cash equivalent totaled RMB 2.8 billion. Among the net cash was approximately RMB 2.8 billion. That concludes our financial highlights for the first quarter and the full year 2023. With that, that's open for Q&A.

Thank you. If you wish to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 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 limit your questions to one at a time. If you wish to have follow-up questions, please rejoin the queue.

We will take our first question.

Your first question comes from the line of Lydia Ling from City. Please go ahead, your line is open.

Hello, I'm Lydia from Huachi. Thank you for the opportunity to ask me a question. First of all, congratulations on the performance of the company's fourth quarter. What I'm most concerned about is our 2024 exhibition. 那么可能分为几个小部分, 一个呢就是说关于全年的一个开店, 因为看到我们四季度的pepline也在进一步的提升, 所以呢分享一下我们对于今年全年开店的一个计划嘛, 然后比如说我们的金居会开多少, 我们的核心就是雅朵会开多少家, 这个是第一个小部分问题, 第二个呢也是大家比较关心的一个REPA trend, 然后去年呢我们REPA也有不错的一个改善, 那请问就是可能对于今年我们最新的一个REPA指引, 以及我们的收入的指引, Because the first quarter is coming to an end, it would be very helpful if we could share some of the latest operations of the first quarter. Hi, management. This is Lydia from Citi. So congratulations on the results. And so my question is mainly focused on the growth outlook for 2024. And so basically first is on the like the hotel opening plan. And we saw actually like the further growth in the pipeline in first quarter. So what would be your sport opening plan for this year? And the second party is on the repat trend, which actually rebounded well last year. So what's your latest expectation for repat trend for this year and also your revenue guidance? And if any color on the first quarter trend, that would be very helpful. And as the Chimney and the Labor Day holiday is approaching, so what will be your expectation on the repat performance for these two holidays? And so lastly, it's on the margin trend. And so what will be your latest guidance and looking into the 2024? And we see some actually increase in the light access ratio in the first quarter. So what will be your expectations for the light 2024? Thank you. Okay, thank you, Lina.

Let me answer the opening question first. In 2023, we will have 289 stores in total. At the end of the year, the number of stores will be about 1,210, which is a 30% increase. In 2024, we expect to continue to maintain a 30% increase in the number of stores. Our goal for the year is about 360 stores. There are about 200 to 220 hotels in Asia, and about 60 to 80 hotels in China. This goal will also help us to reach our three-year strategic goal of 2,000 good stores by 2025. Thanks, Lydia. Let me answer your question on the new openings. In 2023, we opened 289 new hotels, and the total number of hotels in operation by the end of the year was 1,210.

And that was a 30% increase. And we aim to keep that growth rate as well in this year. So this year, our target for new openings would reach 360. And among those 360, about 200 to 220 will be a tour hotels, while 60 to 80 will be a tour light hotels. And all of this would help us to march towards the 2,000 premier hotels by the year of 2025, and that is our goal.

Let me answer your second and third questions. First of all, it's about the trend of RepHab. In fact, in 2023, we achieved a relatively good recovery of RepHab. From the current RepHab structure, because we maintained a opening rate of about 30% this year, the price of new electricity is still relatively high. Okay, now Lydia, let me try to answer your second and third question.

First, regarding the development trend of RAVPAR, well, from the perspective of RAVPAR's structure, this year we will maintain a 30% growth rate of new hotel openings, as those new hotels will account for a relatively higher proportion than those of our peers. Meanwhile, the expansion momentum of our mid-scale offering, Atour Light, was strong, and that means with more Atour Light hotels to open, they may have a certain impact on our overall REVPAR. And considering what we already have from Q1's data and taking some uncertainties in the external environment into account, overall we hold a cautiously optimistic attitude for this year's REVPAR growth. We aim to match last year's REVPAR levels.

And as for the Qingming and May the first holidays, looking from the reservation data we have, we've seen some very active traffics, and obviously they're going to turn out to be pretty nice results for those two holidays. And also, let me try to update our revenue guidance a little bit as well.

As in revenue with the rapid development of both our accommodation and retail business, we expect the 2024's full-year revenue to grow by around 30%.

Regarding the interest rate, we are confident that we can gradually improve with the optimization of the cost structure and the improvement of our operating efficiency. One more note on revenue, that 30% growth will be a leading growth across industry. And as for profit, we have the confidence to improve it in each of our business segments along with our cost of structural

optimizations and the increase of management and operation efficiency. However, our overall profit margin may be subjected to changes in the contribution of each revenue stream. We do expect our profit margin to continue with the trend of a relatively stable and moderate growth. Thank you.

Thank you, Lydia. Let's have next question.

Thank you. Please stand by. Your next question comes from the line of CJ Lin from CICC. Please go ahead.

Your line is open.

Thank you, Manager Tang. We just talked about the opening. I would like to ask about the contract. What is the goal of the contract this year and how complete is the QE? Also, from what we have observed this year, is there a significant change in the confidence and emotions of the farmers? So I'll translate my question to English. Thank you, management. We have talked about the new opening. I have a follow-up question on the new signing. So what's the target of the new signing this year, and what's the progress in Q1? And do we see objects changing the franchisees' confidence and interest since this year? Thank you.

Okay, thank you, Sujie. In terms of signing, we signed 576 companies in 2023, which is quite outstanding. Now that we are entering the first quarter of 2024, our overall signing continues to maintain a good trend. The demand for the entire joint market is still relatively active. In 2024, we also believe that with the continuous increase in brand influence in Asia and the competitiveness of our new products, we will definitely let more joint companies enter the Asian system.

Thank you, Sijie, for your question. As for new signings, we signed 576 projects in the full year of 2023, which was an outstanding performance. And now entering Q1 2024, we have maintained that strong momentum on signings overall. And as we see it, the franchise market is still active. In 2024, we are confident that by leveraging Ator's growing brand influence and with our newly launched product's competitiveness, more franchisees are to be attracted into Ator's system for certain.

Thank you, Sijie. Let's have next question.

Thank you. We will take our next question. Your next question comes from the line of Dan Chee from Morgan Stanley. Please go ahead. Your line is open. Thank you.

Thank you for giving me the opportunity to ask this question. I'm Dan, a hotel analyst at Damo. My question is mainly about the long-term sales. Just now, Mr. Wang shared a lot. The performance of the long-term sales last year was very outstanding. I would like to ask Mr. Guan to talk about the entire product planning in 2024. Just now, Mr. Wang mentioned that it may be in terms of taxes and experience, as well as in terms of the products, there are many different perspectives. Another one is about the long-term sales. What is our expected income goal for this year? Mr. Wu just mentioned that this year, our total income is 30%. I would like to see how much the whole long-term sales contribution is. Let me translate it. My question is about a scenario-based retail business. It recorded a very exceptional performance last year. I would like to ask about the management's 2024 strategic plan on this segment, especially on your product plans and also any rough revenue guidance contribute to the total revenue 30% year-over-year growth revenue guidance. Thank you.

Thank you, Dennis. Well, thank you Dan for your question.

Retail business as our second growth driver has achieved an outstanding results in 2023 with a full year revenue of RMB 970 million, accounting for 20.8% of our total revenue. In 2024, we will continue to drive the healthy growth of retail business and to keep on strengthening the building of our basic capacity to further focus on the brand and our products.

In terms of the brand, we will focus on the Asian planet, focusing on our deep sleep products. We will continue to improve our product development capabilities and continue to expand our deep sleep products. In 2023, we will have three over 100 million pillow products. On top of that, we have successfully launched deep sleep bed sheets and deep sleep beds, which has received the love and good sales of the users. And in terms of branding, we do have the plan to focus on Attour Planet and our Deep Sleep products. We will consistently improve our R&D capability for retail products.

To further tap into the deep sleep categories, in 2023, we availed of the momentum from three pillow products with 100 million cells each. Successfully launched our deep sleep temperature control quilt, which had won the consumer's favor and very decent sales. In this year's March 21st, I mean 2024's March 21st, On the World Sleep Day, we launched yet another new product, the Attour Planet Deep Sleep Summer Cool Quilt, as a continuous expansion of our product portfolio.

On the other hand, we will continue to strengthen the combination of our retail and accommodation scenarios. At the same time, we will also continue to strengthen the combination of retail business and our accommodation scenarios to place more deep sleep products into our tour hotels this year,

to create an immersive deep sleep experience scenario for our consumers and to keep on strengthening the mind share of a tour deep sleep experience.

As you may have noticed, starting from this financial report, we will disclose our retail business as a separate business unit. We will also strengthen the standards of retail basic capabilities, including organizational capabilities, research capabilities, data infrastructure capabilities, channel capabilities, and so on. This can set a solid foundation for the long-term growth of retail business. And you probably have noticed that beginning with this latest financial report, we started to disclose information of the retail business as an independent business unit.

We also plan to enhance the fundamental capabilities in retail, including capabilities in organization, R&D, data infrastructure, channels, etc. We try to build a solid foundation for our longer-term steady growth. Since the beginning of 2024, our retail business continued its positive momentum and we do expect 2024's full-year retail revenue to grow more than 50%, reaching RMB 1.45 billion. Thank you.

Thank you, Dan. Let's have next question.

Thank you. We will take our next question. Your next question comes from the line of Xinxian from UBS. Please go ahead. Your line is open.

Hello, everyone. Thank you for giving me this opportunity.

I'm Chen Xin from UDS. I have two questions for the management team. The first question is that I saw a significant drop in the tax rate in the fourth quarter. I'd like to ask what the main reason is. The second is that we have enough cash in our account. I'd like to ask if there will be future funds in the future, such as dividends, rebates, arrangements, and so on. I'd like to ask the management team to share with us. This is from UBS. I have two questions. The first is that I have noticed that the executive tax rate has decreased significantly in the fourth quarter. May I know the reason? The second question is about the company's plan on the use of cash. Is the company considering about raising dividend payout or share buyback to increase the shareholder returns? Thanks.

Thank you, Mr. Chen. As for the taxation question, we do have an entity which enjoyed preferential tax policies in 2023, and there was a one-off tax exemption in the fourth quarter. As for your second question on cash utilization, well, thanks to our robust business growth and our asset light mode, the group's cash flow maintained healthy growth.

On December 31st last year, our group's net cash and short-term investment at banks reached a total of RMB 3.5 billion. And in this year, we will thoroughly consider various means and different ways of rewarding the shareholders, such as dividend payout, share buybacks, et cetera, to continuously enhance the efficiency of our cash utilization. That's it. Thank you.

Thank you. And we can take one more question.

Thank you. We will take our final question. Your final question comes from the line of Candice Tsang from Bank of America. Please go ahead. Your line is open.

Thank you for giving me the opportunity to ask questions.

I am Candice Tsang from Meiyin. I would like to ask about the Green Zone 3.0. The management has just shared the target of opening in 2024, which is 60 to 80. I would like to ask if we have a target of signing the Green Zone 3.0 this year. Thanks a lot for the opportunity to raise my questions. This is Candice Zhang from Bank of America. My questions are specifically on ATOR Live 3.0. Management has just shared hotel opening target for 2024. Would you have any goals for new signings of a tour life 3.0 in this year and how's the performance and current operations status of those open hotels lastly can management share your views on the competitive landscape of the mid-scale hotel segment overall thank you um um

Well, thank you, Candice.

A Tour of Life 3.0 is our mid-scale offering targeting young business travelers, and it has been quite popular with the franchisees since its launch in February last year, evidenced by more than 90 new signings in 2023.

For the 3.0 project, we will focus on the core business circle of the core city above the second level, creating a standard quality of a mid-end hotel. Currently, we have opened stores in 21 cities, including Beijing, Shanghai, and Shenzhen. The performance of the business is also good. For example, our standard store, Guangzhou Pazhou's exhibition, Guangzhou Tower subway station, occupies Qingju Hotel. Since the opening in November last year, the average price of Repa is more than 600 yuan, which is far more than the performance of the surrounding products.

A Tour of Life 3.0 focuses on core business districts in higher tier cities, aiming to set a benchmark for quality in the mid-scale hotel segment. And by now, we had A Tour of Life 3.0 hotels opened in 21 cities, including Shanghai, Guangzhou, Shenzhen, all with quite decent operational performance. For instance, the average rev bar for our exemplary hotel, the Attour Life Hotel at Guangzhou Pazhou Exhibition Canton Tower Subway Station, since its opening in November last year, it has exceeded 600 RMB in its rev bar, far exceeding the performance of the surrounding competitors.

The second question is about the competition between the two companies. And regarding your second question on the competition in the mid-scale market, we believe that the scale of this market has been verified already.

Because with Touralight 3.0's design catering to the aesthetic view of the young people and the consistent service experience we offer, it can well match the young business travelers' need for high-quality accommodation experience, and it has been successfully recognized by the consumers.

And as I previously said, the operation performance of a tour like 3.0 hotels are very competitive in their business districts. And the advantage in the cycle of return on investment is quite obvious.

We believe that with its powerful competitiveness and the extensive market recognition, Atul Light is poised to become our second brand within Atul Group to hit the scale of 1,000 hotels. Thank you.

And that concludes the question and answer session. I would like to turn the conference back over to Alison Zhang for any additional or closing comments.

Thank you for joining us today. If you have any further questions, please feel free to contact our IR team. We look forward to reconnecting with you next quarter. Thank you and goodbye.

This concludes today's conference call. Thank you for participating. You may now disconnect.