Atour Lifestyle’s latest earnings report offers a compelling narrative for investors watching China’s high-end hospitality market. The company posted impressive second-quarter results that significantly outpaced analyst expectations, prompting a notable revision of its 2025 growth projections.
Revenue jumped 22.7% year-over-year to $234.5 million, exceeding Wall Street estimates by approximately $11.2 million. More impressive was the bottom line, with net income surging 37.4% to $69.8 million, translating to earnings per share of $0.48 – nearly 15% above consensus forecasts.
“Our second quarter performance demonstrates the resilience of our premium-positioned hotel strategy despite broader economic headwinds in China,” said Wang Haijun, Atour’s CEO, during the earnings call. “We’re seeing particularly strong traction in tier-two cities where rising middle-class consumers increasingly seek affordable luxury experiences.”
The company’s aggressive expansion continued with 149 new hotel openings during the quarter, bringing its total portfolio to 1,471 properties across China. This represents a 43.6% increase from the same period last year. The growth primarily came from the company’s franchising model, which accounts for approximately 92% of its locations.
RevPAR (Revenue Per Available Room) – the hotel industry’s key performance metric – increased by 9.2% year-over-year, driven by a 3.1% rise in average daily rates and a 4.4 percentage point improvement in occupancy rates, which now stand at 81.7%.
What caught market attention was management’s significant upward revision of its 2025 outlook. The company now projects 2,400 hotels in operation by the end of 2025, up from its previous guidance of 2,100. Revenue projections were similarly boosted to an expected range of $1.2-1.3 billion for fiscal 2025, representing potential growth of over 40% from 2023 levels.
China’s domestic tourism recovery provides a favorable backdrop for Atour’s expansion. According to data from the China Tourism Academy, domestic tourist trips reached 1.84 billion in the first half of 2024, recovering to 96% of pre-pandemic levels, while tourism revenue reached approximately $267 billion, about 87% of 2019 figures.
“The premium segment is recovering faster than the overall market,” noted Lin Huijie, hospitality analyst at CICC Research. “Chinese travelers are demonstrating stronger willingness to pay for enhanced experiences, benefiting operators like Atour who occupy the sweet spot between luxury and mass market.”
Atour’s strategic positioning in the upper-midscale segment appears well-timed. While China’s broader economy faces headwinds from property market troubles and subdued consumer spending, the travel sector – particularly premium offerings – has shown remarkable resilience.
The company’s asset-light franchise model also provides some insulation against economic volatility. With minimal capital requirements for expansion, Atour can continue its growth trajectory without taking on substantial debt or property risks.
Technology investments have similarly yielded promising results. The company reported its membership program now encompasses over 50 million members, up 31% year-over-year. Direct bookings through its proprietary channels account for 76% of room nights, reducing dependency on third-party platforms and their associated commissions.
However, challenges remain on the horizon. Competition in China’s premium hotel segment is intensifying, with both domestic and international chains expanding their footprints. Huazhu Group and Jin Jiang International, two of China’s largest hotel operators, have both announced plans to increase their presence in the upper-midscale segment.
“While Atour currently enjoys competitive advantages in brand recognition and operational efficiency, maintaining these edges will require continued innovation,” said Zhang Wei, hospitality sector analyst at Guotai Junan Securities. “The next 18-24 months will be critical as competitors ramp up their premium offerings.”
Investors have responded favorably to the earnings report, with Atour’s stock climbing approximately 8% following the announcement. Year-to-date, shares have appreciated over 25%, outperforming both the broader market and many hospitality peers.
The company’s balance sheet remains solid, with $592 million in cash and short-term investments against minimal long-term debt. This financial flexibility positions Atour well for both organic expansion and potential strategic acquisitions.
Looking ahead, management identified several growth initiatives during their earnings call. These include further penetration into tier-three and tier-four cities, expansion of their “Atour Light” concept targeting younger demographics, and potential international expansion starting with Southeast Asian markets by late 2025.
For investors seeking exposure to China’s domestic consumption growth story while mitigating some macroeconomic risks, Atour presents an intriguing option. The company’s premium positioning, asset-light model, and strong unit economics offer a compelling investment case despite broader concerns about China’s economic trajectory.
As domestic travel continues its recovery path in China, Atour appears well-positioned to capitalize on evolving consumer preferences toward affordable luxury experiences. Whether the company can maintain its growth momentum amid increasing competition remains the key question for investors to monitor in coming quarters.
