Atour Lifestyle Holdings Limited

2024 earnings conference call. At this time, all participants are 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 Mr. Luke Hu from Senior IR Manager. Please go ahead, sir.

Thank you, operator. Good morning and good evening, everyone. Welcome to our fourth quarter and full year 2024 earnings conference call. Today, you will hear from our founder, chairman, and CEO, Mr. Wang Haijun, and our EVP co-CFO, Mr. Wu Jianfeng. Before we continue, please be aware that this discussion will include forward-looking statements and federal securities laws. These statements are subject to various risks and uncertainties. and the 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 a clear understanding of these measures and a reconciliation of GAAP to non-GAAP financial results, please refer to the earliest release issued earlier today. Furthermore, a webcast replay of this conference call will be accessible on our website at ir.yaduo.com, where a copy of the results presentation is also available. Now, I will turn the call over to Mr. Wang, our CEO.

Thank you, Kuchen. Hello, everyone. Thank you for participating in the 4th quarter and the full-year business phone conference of Yaduo Group in 2024.

Thank you, Luke. Hello, everyone. And thank you for joining Atour's fourth quarter and fourth year 2024 earnings call today.

请大家翻到我们PPC的第三页。 2024年是亚洲三年战略规划中创新与突破的一年。 在中国体验2000好店的战略引领下,我们持续扩大品牌影响力,实现了业务规模与经营质量的双重提升。 In the struggle to upgrade the experience, we continue to deepen the Chinese experience value connotation through the business model of accommodation and retail double-wheel drive. In terms of scale expansion, we successfully built a diversified brand formation and continued to run the medium and high-end market. In 2024, we accumulated a new opening of 47 billion hotels and a new contract of 670. Not only did we exceed the goal set in the beginning of the year,

Please turn to slide 3 of our fourth quarter and financial year 24 results presentation. The year 2024 marked a chapter of innovation and breakthroughs in Ator's three-year strategic roadmap. Guided by our vision of Chinese experience, 2,000 premier hotels, we continued to expand our brand influence. driving sustained growth in both business scale and operational excellence. As we elevated our experiential offerings, we further deepened the essence of the Chinese experience through a dual engine business model that seamlessly integrates hotel and retail. In terms of network development, we have successfully curated a diversified hotel brand portfolio reinforcing our leadership in the upper mid-scale hotel market. In 2024, we opened 471 new hotels and assigned 670 new projects, not only exceeding our initial targets, but also solidifying the foundation for achieving our 2,000 premier hotels target.

Next, I will introduce the specific situation of the 4th quarter and all kinds of business in 2024.

Now, I would like to provide more details on our performance for the fourth quarter and the full year of 2024.

首先是住宿业务,请大家翻到我们PPT的第五页。 次季度集团大盘Ralpha达到337元,为二三年同期的94.1%,其中OCC为二三年同期的98.2%。 Let's begin with our hotel business.

Please turn to slide five. Our RevPar reached RMB 337 during the fourth quarter, representing 94.1% of 2023's level for the quarter. Specifically, OCC stood at 98.2% of its level for the same period in 2023. ADR endured ongoing pressure due to the high-comparison base effect, reaching 96% of its level for the same period in 2023.

Please turn to page 6. Our Zaiying, a mature hotel that has been operating for more than 18 months, still shows a better performance than DaPan. Please turn to slide 6.

Our mature hotels in operation for more than 18 months continued to outperform the group's hotels' overall performance during the fourth quarter. same hotel RevPar for the fourth quarter reached the 96% of 2023's level for the same period. Notably, OCCs steadily recovered to 99% of 2023's level for the fourth quarter, while ADR reached a 97.4% of its level for the same period of 2023.

Please turn to page 7. In 2024, the Group Brands continued to improve. The organizational efficiency of our development team is fully reflected. The number of newly opened and signed hotels this year has broken the record high. The hotel network is expanding rapidly. In the fourth quarter, we have opened 111 hotels. We have opened 471 hotels this year. The total growth rate is 63%. By the end of the fourth quarter, Please turn to slide 7.

In 2024, as the group's brand awareness continued to strengthen, the efficiency of our development team became increasingly evident. For the full year, both new hotel openings and the signings reached the record highs, accelerating the rapid expansion of our hotel network. In the fourth quarter alone, we opened 111 new hotels, bringing the total number of openings for the year to 471, representing a 63% year-over-year increase. By the end of the fourth quarter, the number of hotels in operation had risen to 1,619, representing a 33.8% year-over-year growth. Meanwhile, the number of hotels under development expanded by 20% year-over-year, reaching 741 as of the end of the quarter. further solidifying the foundation toward achieving our goal of 2,000 premier hotels in operation by 2025.

Next, I would like to share the latest developments for Ator's hotel brand. Since its launch, it has been one of the leading brands and products in the mid- and high-end market. As of now, Yaduo 4.0 has opened 16 hotels, 67 projects in the pipeline, and opened hotels in the core districts of multiple high-end cities. It has achieved a double-edged sword in business and experience. Once again, it has verified the leading position of Yaduo in the mid- and high-end hotel brand. Please turn to slide 8.

As our comprehensively upgraded hotel product, Ator 4.0 has consistently reinforced our leadership in the upper mid-scale segment since its launch, enhancing both our brand strength and product offerings. There are 16 ATOR 4.0 hotels in operation and 67 projects in the pipeline. These hotels in operation have swiftly emerged as top performers in both operating performance and customer experience across key business districts in several higher tier cities nationwide, further highlighting ATOR's dominance in the upper mid-scale segments. As more of the Attour 4.0 hotels commence operations, we will be well-positioned to deliver an exceptional accommodation experience to an even broader customer base.

Please turn to page 9. We are very happy to announce that this quarter, QingJu 3.0 has successfully reached a stage-level milestone of 100 new hotels. These hotels are mainly located in the core areas of the upper-line and above-line cities. Please turn to slide 9.

We are delighted to share that during the fourth quarter, Adorlight 3.0 achieved the significant milestone of 100 hotels in operation. These hotels are strategically located in key business districts across second-tier cities and above. As our next brand poised for expansion to 1,000 hotels, Atour Lite continues to gain robust market traction, driven by its distinct product positioning and substantial growth potential.

Since the release of the 3.0 product, we have been paying close attention to the needs of users and carefully created a unique focus. We have launched joint activities many times, both to show the unique creativity of Qingju as a young residential brand, and to redefine the individualized residential experience during the process of building a young social scene. We have always been deeply committed to strengthening strong brand awareness for Atour Light.

Since the debut of Atour Light 3.0, we have closely focused on customer needs thoughtfully crafted unique touch points and successfully launched a series of brand collaborations that have not only showcased a tour life's unique identity as an innovative youth-centric hotel brand, but also redefined the personalized accommodation experience through a range of immersive social interactions. With well-defined market positioning and a targeted communication strategy tailored to the younger generation, we have significantly enhanced Atour Lite brand recognition and market penetration. These efforts have laid a solid foundation for Atour Group's expansion in the mid-upscale hotel market.

Next is our retail business. Please turn to page 10. In 2024, the retail business of Adore continued a strong growth trend. GMV reached 25.9 billion yuan this year. Moving now to our retail business, please turn to slide 10.

In 2024, Ator's retail business maintained its strong growth momentum with four-year GMB reaching RMB 2.59 billion. representing an impressive 127.7% year-over-year increase. Online channels remained the primary driver, consistently contributing to over 90% of total GMB, fueled by strong sales performance across multiple e-commerce platforms.

Thanks to Minrui's market volatility, we are closely monitoring the consumption hot spot. During the Double 11, the Aduo retail GMV broke 4.2 billion yuan. In the same year, Double 11 increased by more than 80% in 2023. In the same year, Double 11 increased by more than 36% in June 2018. With our astute market insights, we remain highly attuned to evolving consumer

For the 2024 Double 11 Shopping Festival, our retail GMB exceeded RMB 420 million, reflecting an 80% year-over-year increase and a 36% growth compared to the 2024 June 18th Shopping Festival. During the recent Spring Festival, we once again delivered outstanding results by seizing key marketing opportunities. creatively fostering emotional connections with customers by seamlessly integrating the festive atmosphere with our fresh brand messaging. The ongoing success of Atorplanet's Deep Sleep series further validates our brand market appeal and the strong growth momentum we continue to generate.

The retail business as an asset is an important part of the innovation and extension of China's experience. Next, we will talk about our thoughts and practice in the deep sleep field.

Serving as an innovative interpretation and a tangible extension of Ator's signature Chinese experience, our retail business plays a vital role in supporting our strategy. Let me elaborate on our perspectives and key initiatives within the deep sleep sector.

Let me elaborate on our perspectives and key initiatives within the deep sleep sector. Please turn to slide 11.

In recent years, the market potential of the sleep economy has gradually been unlocked. However, the industry faces challenges such as limited brand differentiation, widespread category homogenization and stagnating product innovation. Against this backdrop, AtorPlanet has leveraged a deep understanding of consumer needs to continually elevate to refine its natural deep sleep brand concept and enhance product competitiveness. These efforts have positioned AtorPlanet as a pioneer at the forefront of emerging trends within the sleep economy.

In terms of product research and development, we accurately analyze the consumer's diverse sleep needs and pain points, and create high-quality deep sleep products based on the technology, craftsmanship, and materials. Based on user feedback, we continue to innovate. In the development process of the brand, Ado Planet is gradually creating unique products. For example, our Deep Sleep Memory Pro series of products To fuel our product development,

we rigorously analyze customers' diverse sleep needs and pain points. These insights, coupled with our innovation in technology, craftsmanship, and materials, have led to the creation of an extensive range of premium deep sleep products. We continuously refine and iterate these products based on customer feedback. Throughout the brand's development, Atul Planet has cultivated a distinctive product philosophy that drives market success. A prime example of this is the Deep Sleep Memory Foam Pillow Pro series, which has achieved outstanding performance. Through exceptional product quality and a well-executed marketing strategy, we have established a blockbuster product model that aligns perfectly with consumers' pursuit of superior sleep. as evidenced by the DeepSleep Memory Foam Pillow Pro series annual sales exceeding 3.8 million units. In the pillow segment, AtorPlanet has consistently maintained its industry-leading position, further cementing our reputation as the go-to choice for the deep sleep in consumers' minds.

In addition, with the rapid growth of the sleeping market and the continuous breakthrough of new products, we have formed a mature R&D system from paid products to product systems. Shenshui's product line has also expanded further. In 2024, as an important result of our expansion of the product line, Shenshui Xia Liangbei and Shenshui Kongwenbei Pro series have won the high trust of consumers, with a total sales of more than 770,000 a year. Furthermore, through our dedicated efforts in the sleep market and continuous breakthroughs in product innovation,

We have developed a sophisticated product development mechanism that has evolved from creating individual blockbusters to offering a comprehensive product category series. Further expanding our deep sleep product portfolio, take our comforter product series, which represents a significant milestone in our category expansion as an example. In 2024, the DeepSleep Lightweight Comforter and the DeepSleep Thermal Regulating Comforter Pro series garnered exceptional market recognition, with annual sales surpassing 770,000 units. As the Comforter product line continued to perform strongly, It contributed to over 20% of total retail GMV for 2024, reflecting year-over-year growth of more than 300%. Its success not only serves as an emergent driver of AttorPlanet's ongoing growth, but also stands as a testament to our ability to replicate our blockbuster product model across different product categories.

In 2025, we will continue to focus on deep-sleeping ecology and actively promote brand construction and product development. At the same time, we will also pay more attention to improving the basic skills of retail business, bringing more and better sleeping products to users, as well as higher-quality experiences, and long-term development of the Asia Star brand. We believe that in the context of the rapid development of the sleeping economy and the acceleration of industry integration, we will continue to explore the scientific sleeping

In 2025, we will remain focused on the deep sleep ecosystem, efficiently driving progress in both brand development and product innovation. At the same time, we will further strengthen the fundamentals of our retail business, offering customers a broader array of superior sleep products and enriched experiences to propel the long-term growth of the Attour Planet brand. We are confident that as the sleep economy continues to expand rapidly and the industry undergoes accelerating consolidation, our ongoing exploration of scientific sleep solutions will catalyze continuous advancement in industry craftsmanship and quality standards with a tour planet leading and shaping the evolution of the customer sleep experience.

Please turn to slide 12.

Last but not least, I would like to share our progress across channel development and our membership business.

In terms of channel development,

Our CRS channel accounted for 63.5% of total room nights sold for the fourth quarter and 63% for the full year, respectively. Notably, the contribution of room nights sold to our corporate members rose to 21.1% in the fourth quarter, driven by the ongoing growth of our corporate members.

The stable growth of the CS channel is due to the continuous improvement of the Azure membership system and the continuous abundance of membership rights. By the end of 2024, the number of Azure registered members has exceeded 89 million, with a growth of more than 40%. In 2024, we have newly upgraded the Azure A-card membership system, completed the integration of hotel members and retail members' identities and rights, and further deepened the integration of accommodation and retail scenarios.

The steady growth of our CRS channel can be attributed to our continuous enhancement of the TOR's membership ecosystem and the ongoing expansion of member benefits. By the end of 2024, our registered individual members surpassed 89 million, representing year-over-year growth of more than 40%. In 2024, we also completed a comprehensive upgrade of the ACARD membership ecosystem, seamlessly integrating membership identities and benefits across our two primary service areas, This upgrade reinforced the synergy between accommodation and the retail experiences. Additionally, we expanded our service categories to better cater to the evolving demand for our solutions, consistently delivering unique and tailored accommodation experiences to our customers.

In 2025, we will start from the whole scenario and continue to improve the construction of the A-Card member ecosystem, so that accommodation and retail users can enjoy a consistent and high-quality experience and service in a diversified scenario, and at the same time promote the improvement and reception of enterprises and individual members and other full-fledged systems. In addition, we will continue to build a service experience loophole to stimulate the cross-consumption potential of accommodation and retail businesses, Please turn to slide 13.

In 2025, we will continue refining and strengthening the ACARD membership ecosystem by expanding value-added benefits across all touchpoints. ensuring that our hotel and retail customers enjoy seamless high-quality services across various scenarios. Meanwhile, we will consistently upgrade and iterate the tiered benefit system for both corporate and individual members. Additionally, we will strengthen our closed-loop service experience, unlocking the cross-consumption potential between accommodation and retail. Looking ahead, We will continue to widen our membership experience moat and roll out more diverse scenario-based promotional activities, further deepening and expanding the ATOR's signature Chinese experience to enrich its meaning and broaden its scope.

Please turn to page 14. 2025 is the end of our three-year strategy, and it is also the key point from the beginning. In the increasingly diversified market environment, we will continue to hone our basic skills, focusing on brand market capability, organizing vitality improvement, and digitalized ability construction. In the process of accurately grasping the opportunity to develop, we will promote the expansion and quality improvement of accommodation and retail businesses. Please turn to slide 14.

As the final year of our three-year strategic roadmap, 2025 represents a pivotal moment in laying the foundation for our next phase of growth. As the market landscape becomes increasingly fragmented, Atuo will remain focused on strengthening its core competencies. Our priorities will remain on amplifying brand momentum, boosting organizational vitality, and advancing digital capabilities. By strategically seizing on development opportunities, we will drive continuous breakthroughs in both scale expansion and quality enhancement across the hotel and retail businesses. Moving forward, With steadfast dedication to achieving our expansion goals, we will continue to establish the benchmark for customer experience, strategically driving sustained high-quality growth for the long term. Now, I'll turn the call over to our co-CFO, Mr. Wu Jianfeng, to discuss our financial results.

Thank you, Haijin. Now I would like to present the company's financial performance for the first quarter of the full year 2024. Please turn to slide 16 of the result presentation. Our net revenues for the first quarter of 2024 grew by 38.5% year-over-year and 9.8% quarter-over-quarter to RMB 2,084 million. Net revenues for full year 2024 increased by 55.3% year-over-year to RMB 7,248 million. The increases were driven by growth in the monetized hotels and retail businesses. Revenues from our monetized hotels for the first quarter of 2024 were RMB 1,106 million, up by 30% year-over-year and down by 6.2% quarter-over-quarter. For full year 2024, revenues from our monetized hotels increased by 53.3% year-over-year to RMB 4,149 million. The year-over-year increases were primarily due to our ongoing hotel network extension and the growth of our supply chain business. The quarter-over-quarter decrease was mainly due to a decrease in rep costs. Revenues contributed by our leased hotels for the first quarter of 2024 were RMB 164 million, reflecting 15.9% year-over-year and 13.4% quarter-over-quarter decline. For the full year 2024, revenues from our leased hotels decreased by 16.4% year-over-year to RMB 702 million. The declines were primarily due to a decrease in the number of these hotels as a result of our product optimization. Revenues from our retail business for the first quarter of 2024 were IMB 765 million, reflecting 85.6% year-over-year and 59.5% quarter-over-quarter increases. For full year 2024, revenues from our retail business increased by 126.2% year-over-year to RMB 2,198 million. The increases were driven by widespread rationalization of our retail brand and effective product innovation and development after we successfully boldened our range of product offerings. Now let's move to cost and expenses. Please turn to slide 17. Hotel operating costs for the fourth quarter of 2024 increased by 8.3% year-over-year and decreased by 9.4% quarter-over-quarter to RMB 794 million. Hotel operating costs for the full year 2024 increased by 38.7% year-over-year to RMB 3,108 million. The year-over-year increases were primarily due to the increases in variable costs such as supply chain costs associated with our ongoing hotel network expansion. The quarter-over-quarter decrease was due to a decrease in our number of leased hotels as a result of our product mix optimization. Growth margin of our hotel businesses was 37.5% and 35.9% for the first quarter and full year 2024, compared with 29.9% and 36.8% for the same period of 2023. Retail costs for the first quarter of 2024 rose by 66.2% year-over-year and 69.8% quarter-over-quarter to RMB 386 million. For full year 2024, retail costs increased by 111.1% year-over-year to RMB 1,084 million. The increases were associated with the rapid growth of our retail business. The gross margin of our retail business was 49.6% and 50.7% for the first quarter and the full year of 2024, compared with 43.7% and 47.2% for the same period of 2023. The increases were attributable to the increasing contribution from higher margin products. Now please turn to slide 18, Setting and marketing expenses accounted for 17% and 13.4% of net revenue for the first quarter and the full year of 2024, compared with 13.7% and 10.1% for the same period of 2023, respectively. The increases were mainly due to our enhanced investment in brand recognition and the effective development of online channels. in line with the growth of our retail business. General and administrative expenses, including share-based compensation expenses, accounted for 4.8% and 4.5% of net revenue for the first quarter and full year of 2024, compared with 6.8% and 6.2% for the same period of 2023, respectively. The decreases were primarily due to improved management efficiency and economic upscale. Technology and development expenses accounted for 2.2% and 1.8% of net revenue for the first quarter and full year of 2024, compared with 1.5% and 1.7% for the same period of 2023, respectively. The increases were mainly due to increased investment in technology systems and infrastructure to support our spending hotel network and retail business and improve customer experience. Please turn to slide 19. Adjusted net income for the first quarter of 2024 was RMB 333 million, representing a 49.9% increase year over year Adjusted EBITDA for the first quarter of 2024 was RMB 443 million, up by 76.5% year-over-year. Adjusted net profit margin for the full year 2024 was 18%, representing a decrease of 1.4 percentage points year-over-year. Adjusted EBITDA margin for the full year 2024 was 24.4%, a decrease of 1.5 percentage points year-over-year. The decreases in both margins were primarily due to a decline in red path, along with the organic growth in selling and marketing expenses amid our retail business expansion. Please turn to slide 20. We also maintained a healthy cash position with stable growth momentum. As of December 31, 2024, Our cash and cash equivalents totaled RMB 3,618 million, with net cash of RMB 3,556 million. Please turn to slide 21. For full year 2025, the company currently expects total net revenues to increase by 25% compared with full year 2024. That concludes our financial highlights for the first quarter and the full year 2024. Now let's open for Q&A.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. For the benefit of all participants on today's call, if you raise a question in Chinese, please immediately repeat your question in English. Please limit your question to one at a time. If you wish to have a follow-up question, please rejoin the queue. Stand by and compile while we compile the Q&A roster. Our first question comes from Dan Chee from Morgan Stanley. Your line is now open.

Good evening, everyone. Thank you for the opportunity to ask me a question. First of all, I would like to congratulate Mr. Guan on breaking the record in the number of new-opening and new-opening hotels this year. My question is about the hotel business. I would like to ask about the current performance of EZDOO's REVPAR. Can you give us a update? Another question is about the 25% growth of the company's annual income. I would like to ask the company about the growth of the hotel business. What is the forecast for the entire year of 2025? Please allow me to translate my question. This is Dan from Morgan Stanley. First of all, congratulations on the new hotel opening and signing record highs in 2024. My question is about the hotel business. Can you share some colors about the hotel's performance on REFPA in first quarter 2025? We also noticed about the full year revenue guidance of 25%. We are wondering what is the contribution from the hotel business and the company's REVPAR assumption for the full year 2025. Thank you. Thank you, Dan.

I will answer your question.

Thank you, Dan. Let me answer your question.

Under the influence of high-tech, the total REVPAR in 2024 is 6.8% lower than in 2023. With the previous market expectations, the guidance is basically the same. So in the first quarter of 2025, especially in March, some of the factors affected by the season and the weather, the overall RAPA performance is relatively fluctuating. We expect this year's QE RAPA to drop in the same way, from medium to high units.

Due to our high base effect, our full year REVPAR for 2024 decreased by 6.8% compared to 2023. And that was in line with the guidance we provided previously. And in this year, quarter one, especially the first half of March, due to some seasonal factors and the weather conditions, our overall REVPAR performance was relatively volatile. and we expect a year-on-year decline in Q1 REVPAR of mid to high single digits.

Currently, we believe that in 2025, there will still be uncertainties and challenges throughout the year. The market is changing rapidly, and it is difficult to give a specific REVPAR expectation. But we also see the improvement of policies and the continued recovery of business. As of now, we believe 2025 still presents some uncertainties and challenges.

The market is changing very rapidly. making it difficult for us to provide specific forecasts on the REVPAR. Nonetheless, against the backdrop of policy benefits and continued recovery in business travels, we will continue to implement our balanced and refined revenue management strategy and we are confident to enhance the recovery of REVPAR performance, thereby boosting our long-term revenue of our hotels and solidify our brand value.

Although the RAVPAR's performance is uncertain, we are confident that the company's revenue will increase by 25% in 2025 due to our continuously expanding hotel network and high-quality hotel network.

Although that the RAVPAR still is going to remain not so sure, unknown, but our continuously expanding hotel network and the high-quality growth of the retail business We expect the group's revenue to increase by 25% year-on-year in 2025. Thank you. Thank you, Dan. Next question, please.

Thank you. Just a moment for our next question, please. Next, we have Simon Cheung from Goldman Sachs. Your line is now open.

Thank you for giving me the opportunity to ask questions, Mr. Wang, Mr. Hu, and Luke. 我想请教一个小小的问题,公司在上一年开店以及签约方面都创下历史新高,想请教一下你们对2025年建两方面有什么指引吧,谢谢。 And then let me translate that into English. Last year the company achieved record high in both the hotel opening as well as new signing. Perhaps can you share with us what is your guidance on both measures in 2025? Thank you.

Thank you for your question. Let's first look at the opening. In 2024, the company opened 471 hotels a year. At the end of the year, the number of hotels in the camp was 1,619. The total growth was more than 33.8. In 2025, the opening will continue to be a positive trend. We expect to continue to maintain similar opening increases. In 2025, the annual opening target is 500. Thank you, Simon.

Let me try to answer this question. In terms of new openings, we had opened 471 new hotels throughout 2024, bringing our total number of operating hotels to 1,619 by the year end, a year-on-year increase of over 33.8%. And in 2025, this positive trend will continue. We expect to maintain a similar hotel opening growth rate with a four-year target of 500 new hotels so that we can steadily advance toward our strategic goal of achieving 2,000 premier hotels by 2025.

In terms of contracts, in the first quarter of 2025, we will see that the demand for the joint market is still active. We also see that mature entrepreneurs generally think that compared to other investment opportunities, the hotel industry has a very high investment potential and is a stable area. In the process of investment decisions, these mature entrepreneurs are most concerned about the long-term value of the brand and the competitive advantage of hotel products. I think that based on the leading brand and our product power in Asia, We expect the group to maintain a good position in 2025.

Regarding new signings, we can see that the demand in the franchise market remains very active during Q1 of 2025. We observed that franchisees generally believe that the hotel industry still holds significant, also quite stable, investment potential when compared with other investment opportunities. In their decision-making processes, those mature franchisees pay particular attention to the long-term value of brands and the competitive advantages of hotel products. We believe that based upon Ator's leading brand power and product strength, we expect our group's signings performance in 2025 to remain strong.

At the same time, we believe that high-quality products in the market are always scarce. We will continue to strictly control the quality of contracts, especially with our new product lines such as Azure 4.0 and Stargate 3.0. From the perspective of long-term development of the brand, we will make a high standard and requirement for the selection of the first batch of projects. This can better show our long-term brand value and market competitiveness. As you all know, our three-year strategy for this year is to have 2,000 good stores. Meanwhile, we believe that the high-quality supply in the market still remains scarce.

Therefore, we will keep strict signing quality control, especially when represented by our new products such as Attour 4.0 and Attour Lite 3.0. From the perspective of long-term brand development, we will set high standards and requirements for the site selection and property conditions of those initial projects to better showcase our long-term brand value and market competitiveness. We know that we have the strategy of 2,000 premier hotels. So while we achieved the 2,000 hotels scale target this year, we will continue to solidify our foundation of premier hotels. supporting the group's long-term high-quality development. Thank you.

Thank you, Donald. Next question, please.

Thank you. Our next question comes from CG Lin from CICC. Your line is now open.

So in 2024, our retail business continues very strong growth momentum. So what's our plan for the retail business in 2025? And are there any plans for new product or revenue targets? Thank you.

Thank you, Sijian. I will first talk about the overall planning of retail business. Then I will add the financial situation. First of all, I would like to talk about the development of the entire Asia-Pacific planet. I think the development of the Asia-Pacific planet is the long-term commitment of Asia-Pacific to the positioning of the brand group and the natural result of operating the business model of the population.

Thank you, Sijie. Let me first bring up our overall retail business and product plans. Then I'll ask Tianjian to add some financial details related to retail later. Well, as we have announced in our financial reports, Ator Planet's development is the natural outcome of Ator's long-term commitment to our brand group positioning and serving people business model.

A2O Planet has indeed achieved impressive results in terms of its scale growth and brand momentum.

However, we have to say that there's still substantial room for improvement across the whole industry.

In the past five years, we have raised higher requirements for ourselves. We will also start from the basics of our Asian retail. First of all, we will continue to strengthen our product research and development innovation, consolidate the advantageous status of existing products, establish product barriers, and actively develop and expand new products around the types of sleeping and sleep-depriving products, enriching our deep-sleeping products, and continuously releasing the ability to create new products.

In 2025, we have set higher goals for ourselves and will strengthen the core competencies of Ator's retail across all dimensions. First, we will continue to enhance product R&D and innovation, consolidate our leading position in existing categories, and build product barriers. We will also actively develop and expand new products in the sleep and pan-sleep categories. enriching our deep sleep product matrix, and continuously unleashing our ability to create blockbuster products.

Next, we will use our experience as a guide, and follow the higher standards of the clothing industry to create products for the Asia-Pacific sales. In this way, we will drive the improvement and innovation of the entire craft technology industry,

Second, we will remain user experience oriented and strive to create a tour planet retail product by referencing a higher standard from the apparel industry so as to drive the home textile industry achieve overall improvement and innovation in its processes and technology. Thereby, we have the target of establishing a leading industry standard in the deep sleep domain and promoting high-quality and sustainable growth in our retail business.

In terms of retail revenue, in 2024, our retail revenue has reached 30% and has become an important engine for our group's business growth. In 2025, In terms of the revenue of retail business, it contributed 30% to our group's revenue in 2024.

becoming a significant engine for the group's business growth. Looking into the full year 2025, with the continued scaling of dominant categories and the growth momentum from our new product matrix, we believe the retail business is expected to again outpace our hotel businesses in year-on-year revenue growth. We expect retail revenue to grow by no less than 35% year-on-year in 2025. Thank you.

Thank you. Our next question comes from Lydia Lin from Citi. Your line is now open.

. . . . . . . So I want to follow up on the margin side. And so firstly, with the right of the retail business, so how do you look like the margin trend for 2025? And also, especially for the retail business, what could be the margin trend for this year? Thank you. Absolutely, Deb.

Okay, thank you, Lydia. Although the change in the revenue structure of our company will continue in 2025, we will continue to optimize our cost structure, improve our management efficiency, and focus on the impact of our structural profitability. We expect that in 2025, we will maintain the net profitability after adjustment to a relatively stable level.

In 2024, we achieved an adjusted net profit margin of approximately 18% for the full year, a decrease of 1.4 percentage points compared to 2023. This was mainly due to the fluctuations in REF PARC throughout the year and the structural factors, such as the increased proportion of our retail business. For 2025, although we know that the changes in companies' revenue structure will continue, so we will also optimize our cost structure, improve our management efficiency to offset the impact on structural profit margins, we anticipate that the adjusted net profit margin will remain relatively stable.

In terms of retail businesses, in 2024, the operating profit rate of retail businesses has increased to a low double-digit level. In the future, we will continue to invest in certain marketing expenses as the scale of retail business continues to grow. We expect that the operating profit rate of retail businesses in 2025 will remain on a similar level. In terms of marketing strategy, in addition to constantly improving the efficiency of our channel investment, we will also continue to strengthen the construction of our brand. More importantly, we want to cultivate the brand assets of our new brand in Asia.

In 2024, the operating profit margin of our retail business increased to low double digits. And moving forward, as our retail scale continues to expand, we will maintain a certain level of marketing expenditure. We expect the operating profit margin of the retail business to remain at the similar level in 2025. In terms of the marketing strategy, we will continuously improve the efficiency of channel distribution to strengthen our brand building and, more importantly, solidify our brand equity of Atul Planet. Thank you.

Thank you, Urija. Next question, please.

Thank you. Our next question comes from Sing Chun from UBS. Your line is now open.

Thank you, Mr. Ye and Mr. Jianfeng, for giving me the opportunity to ask this question. I am very happy to see that our 4.1% performance is consistent with that of the Bitcoin market. My question is about our hotel. Then we saw that Saha's first store has already opened. I would like to ask about the main development direction of management from this year's high-end brands. Let me translate it to English. This is Xin from UBS. And we noticed the first Saha store has already opened. Could the management share the main strategy for the high-end brand this year? Additionally, how is AtoLight 3.0 recent performance and does it meet management expectations? Thank you.

Thank you, Chen Xin. I will now share the situation of high-end brands.

Thanks, Chen Xin. Let me first address your question regarding upper-scale markets.

Currently, two high-end hotel brands, Yadoyce and SaHe, are developing in parallel. Yadoyce is currently in demand. Thanks, Chenxin. And currently, our two upscale hotel brands, Atour S and Sa He Hotel, are developing in parallel.

Among them, Ator S has won the favor of high-end business travelers by adapting to the contemporary needs, leveraging its precise market positioning and exceptional service quality. Of course, we will also promote the iterative upgrade of Ator S, and we are actively preparing a new version to maintain its competitiveness and brand vitality in the market.

For SaHe, we will continue to use a long-term mindset to develop this brand. We will also use this brand to lead the development direction of China's high-end hotel market. We will carefully build each SaHe Hotel to establish the standard of quality and experience. In February this year, our first SaHe Hotel was located in the north outskirts of Shanghai. Since the opening of the business, our SaHe managers have selected rooms for these advanced experience services.

As for Saha, we continued to adopt a long-term mindset in our strategy, aiming to lead the development direction of China's upscale hotel market. We will meticulously craft each Saha hotel, establish a flagship for quality and experience, In February this year, our first Sa He Hotel opened in Shanghai's Northbound. Since its trial operation, its advanced experiential services such as Sa He butlers and the room diffuser selection before checking in have received high praise from consumers, and its pricing and positioning have also been well received by the market and customers.

Let me add to the situation of Qingqu 3.0. The progress of Qingqu 3.0 has always been in line with our expectations. By the end of 2024, we have set up more than 100 Qingqu 3.0 hotels in 46 cities across the country. The business performance is also very good, and it has greatly enhanced the confidence of our investors. Let me add something on Attouralife 3.0.

The development trajectory of AtorLight consistently aligned with our expectations. As of the end of 2024, we have expanded to over 100 AtorLight 3.0 hotels in 46 cities across the country, with strong operational performance that has significantly boosted the confidence of investment from the franchisees. As a new brand, AtorLive 3.0 requires accumulation and continuous refinement while rapidly expanding. We are now consistently incorporating feedback from consumers and franchisees, enhancing our brand strength through product iterations and refined operations. Currently, we have over 100 tour-like hotels in our pipeline, primarily located in core business districts of second-tier and above cities. Thank you.

Thank you, Qinxin. Next question.

Thank you. Our last question comes from the line of Ronald Leung from Bank of America. Your line is now open.

Let me translate my question into English. Could you share the plans for hotel closures planned throughout 2025? Additionally, are there any new plans for shareholder return this year? Thank you very much.

Thank you, Ronald. Our key decision-making is the consistency of the experience. We have achieved the target of China's experience of 2,000 good batteries by 2025. Therefore, we will maintain Thank you, Ronald, for your question.

A key consideration in our decisions of hotel closures is the consistency of experiences. We aim at achieving the strategic goal of Chinese experience 2000 premier hotels by the end of 2025. Therefore, we will maintain a similar pace of closures in 2025, continuing to strengthen the centralized evaluation of the property quality and operational performance of our hotels in operation. For hotels that still fail to meet operational performance expectations after rectification, in areas such as services and customer experiences, we will proactively terminate contracts with them in accordance with the agreement.

In terms of shareholding returns, we also use high-level attention to implement the promise of sustainable returns to shareholders. In August last year, we officially announced that we will maintain a three-year shareholding plan. We clearly promised that within these three years, the amount of accumulated revenue per year will not be less than 50% of the previous year's net profit. Last year, our shareholding amount was about US$62 million. Regarding shareholder returns, we have always placed great emphasis on and actively fulfilled our commitment to sustained returns for shareholders.

In August the last year, we officially announced a three-year annual dividend plan, clearly committing to distribute an annual dividend of no less than 50% of the previous financial year's net income over these three years. Last year, our dividend payout amount is around 62 million US dollars. In 2025, we will continue to comprehensively consider our company's overall operations cash reserves, and future business development comprehensively to make integrated decisions on the timing and proportion of dividends, ensuring that our shareholders continue to share in the company's growth. Thank you.

Thank you, Ronald.

Thank you. That concludes today's question and answer session. I would now like to turn the conference back to Mr. Luke Hu, for any additional or closing comments. Thank you.

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

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