Ladies and gentlemen, thank you for standing by, and welcome to the Atour Lifestyle Holdings Third Quarter 2023 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Today's conference is being recorded. At this time, I'd 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 third quarter 2023 earnings call. Joining us today are 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 a 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.

[Foreign Language] Thank you, Alison. Hello, everyone, and thank you for joining Atour's third quarter 2023 earnings call today. We are delighted to report another robust quarter. Our unremitting pursuit of growing to 2,000 premier hotels nationwide by 2025, while establishing the Chinese experience as the industry benchmark, along with the continuous expansion of our brand influence, enabled us to capture the growth opportunities arising from both business travel and the peak leisure travel season. As such, we achieved tremendous breakthroughs across each of our business lines. [Foreign Language] Now, I would like to discuss our performance in detail. [Foreign Language] Let's begin with our hotel business. Travel and accommodation demand maintained solid growth momentum in the third quarter, highlighted by a notable uptick during the summer season. Accordingly, our third quarter's RevPAR increased to a record high of RMB424, and recovery rate rose to 118% of 2019's level, with July, August and September reaching 122%, 116%, and 115% respectively. Moreover, our ADR and OCC maintained their robust growth momentum during the Mid-Autumn Festival and the National Day Holiday period, increasing by 14.6% and 7.2%, respectively, compared with the same period in 2019. Together, they boosted our RevPAR's recovery rate for the period to 123% of 2019's level. [Foreign Language] Meanwhile, our mature hotels in operation for more than 18 months sustained their excellent performance. Their same-hotel RevPAR recovery rate reached 118% of 2019's level in the third quarter, in line with the overall performance of our hotel business, highlighting the markets recognition of Atour's brand as well as outstanding efficiency across our business management and operations. [Foreign Language] We continued to accelerate our hotel network expansion with 81 new openings in the third quarter, driving our hotel network to reach 1,112 hotels as of the end of September. Meanwhile,…

Thank you, Haijun. Now I would like to present the company's financial performance for the third quarter of 2023. Our net revenues for the third quarter of 2023 grew by 93.1% year-over-year and 18.4% quarter-over-quarter to RMB1,294 million. The strong increase in the third quarter was driven by the robust growth in both our hotel and scenario-based retail business. Revenues from our manachised hotels for the third quarter of 2023 were RMB781 million, up by 82.9% year-over-year and 24.7% quarter-over-quarter. These increases were primarily driven by the ongoing expansion of our hotel network and the increase in RevPAR. The total number of manachised hotels increased to 1,080 as of September 30, 2023 up by 27.5% year-over-year and 7.9% quarter-over-quarter, while RevPAR surpassed 2019's level and recovered to RMB418 for the third quarter of 2023, from RMB317 for the same period of 2022. Revenues contributed by our leased hotels for the third quarter of 2023 were RMB238 million, representing an increase of 49.3% year-over-year and 8.5% quarter-over-quarter. These increases were primarily due to the growth of RevPAR. RevPAR of our leased hotels surpassed 2019's level and recovered to RMB571 for the third quarter of 2023, from RMB384 for the same period of 2022. Revenues from retail and others for the third quarter of 2023 increased by 229.1% year-over-year and 11.4% quarter-over-quarter to RMB275 million, with scenario-based retail revenues growing by 291.7% year-over-year and 11.1% quarter-over-quarter to RMB235 million. These increases were attributable to our ongoing efforts to address evolving customer needs as well as our efficient product development mechanism, which enabled us to consistently launch sleep products that which are well-received by consumers. In addition, we continued to expand our customer base and enhance our brand recognition through a combination of various online and offline distribution channels. Now, let's move to…

Thank you, sir. [Operator Instructions]. Thank you. We are now going to proceed with our first question. First question is come from the line of Lydia Ling from Citi. Please ask your question.

Thank you. [Foreign Language]. Hi, management. I'm Lydia Ling from Citi. Thanks for taking my questions. First congratulations on very solid results for the third quarter including the hotel business and also the retail business. I also want to track with the management that this -- on the first quarter to-date trend, so do you have any changes in your full-year guidance in terms of the openings by RevPAR as well as for the top and bottom line guidance? And also as we are into the end of this year's also want to check with the company if you have any guidance for growth outlook for next year. Do you have any lighter initial expectations to share with us? Thank you.

[Foreign Language] Thank you, Lydia. Let me take your question. As of September 30th, we have opened 189 hotels cumulatively this year. The trend shows a quarterly increase, and we are pretty confident that the new hotel openings will accelerate further in the fourth quarter. And that's why we would like to maintain the target of 280 new hotel openings for the full-year. [Foreign Language] And secondly, in terms of the RevPAR, well, in our last earnings call, we had shared that our full-year RevPAR recovery rate was to be in the range of 113% to 117%. Well, now that's seen the overall progress till now is including the performance during the summer and the national day holidays all remained solid and was in line with our expectations. So we are maintaining the full-year guidance unchanged still within the range of 113% to 117%. [Foreign Language] And thirdly in terms of revenue. As we have achieved many breakthroughs in our retail business, the retail business revenue has continuously exceeded our expectations. Therefore, we will revise up our full-year revenue guidance to around RMB4.4 billion, with a year-on-year growth exceeding 90%. [Foreign Language] Regarding guidance for the next year, new hotel openings will progress steadily in line with the pace to achieve our goal of opening 2,000 premier hotels by 2025. And the RevPAR target for next year is to be with some moderate growth based upon this year's fundamental value. And as we are in the middle of internal budgeting for next year 2024, we would like to share more color on the next quarter earnings call. Thank you.

Thank you, Lydia. Operator, please invite next question.

Thank you. We are now going to take our next question. And the questions come from the line of Sijie Lin from CICC. Please ask your question. The line is opened.

[Foreign Language] So, my question is about Atour 4.0, which we launched recently. I feel that there is really a big improvement in overall style and quality compared with previous versions. So, how can we control the CapEx at 145,000 per room, while we're shipping this? And could you please share with us your expectations on its future RevPAR and the unit economics, including payback period? Thanks.

[Foreign Language] Well, thank you very much, Sijie, for your questions. Let me answer that. Atour 4.0 with nature distinguishes itself from our traditional business hotels or of others. It incorporates many natural native elements to create a sense of natural tranquility. And this provides a relaxation and leisurely ambience for our guests who are on the business trips or if they are constantly on the go. [Foreign Language] For a mature Atour 4.0 hotel, we would anticipate a RevPAR target of RMB400. At the same time, with breakthroughs in design styles and the upgrades in both facilities and amenities, the CapEx per room would be around RMB145,000 based upon a total number of 140 rooms. Atour 4.0 adopts a large scale modular design, which not only can help to better ensure the project quality. It also helps us to reduce the material and construction period. [Foreign Language] In general, the investment return period for Atour 4.0, while including the renovation period is estimated to be 3.5 years. That is shorter than our previous version, 3.5. We expect that Atour 4.0 will continue to enhance our competitiveness in the upper mid-scale hotel market and also lead our long-term growth. Thank you.

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

Thank you. We are now going to proceed with our next question. And the question is come from Ronald Leung from Bank of America. Please ask your question.

[Foreign Language] The performance of the retail business in the third quarter continues to exceed expectations. And there was also another breakthrough during 2011. Could you please provide insights into the company's future plans and growth expectations for the retail business? Thank you very much.

[Foreign Language] Well, thank you for your question. Our midterm strategy for the retail business revolves around two key approaches. The first is to do a subtraction. We aim to focus on concentrating and deepening our presence in the sleep market. And secondly, it is an addition. We are going to leverage our insights into customer behavior and the application of technology to continuously strengthen our product R&D as well as expanding our deep sleep product categories. [Foreign Language] Like we have previously introduced, our retail product capabilities are continually improving, ranging from the popular deep sleep pillow that gained widespread recognition to the deep sleep temperature control quote which achieved a monthly GMV exceeding tens of millions in September. Additionally, we have other products to be launched soon, demonstrating our effectiveness of our product R&Ds, especially the robust system for that. The new product in deep sleep series including the Deep Sleep Mattress, which will be officially launched soon. The deep sleep product line continues to expand, gradually extending from hotel users to a broader consumer base. This expansion has significantly increased Atour Planet's brand influence within the sleep economy. [Foreign Language] Our retail revenue was RMB235 million in the third quarter, increasing significantly by approximately 292% year-over-year. During the recently concluded 11.11 Shopping Festival, we topped the pillow sales chart across various third-party e-commerce platforms. The 11.11 GMV across all third-party e-commerce channels have exceeded RMB250 million, an increase of over 600% when compared with the same period last year and an increase of more than 140% from this year's June 18th Shopping Festival. With all that, we expect retail revenue for this year to reach RMB900 million, with a year-on-year growth exceeding 250%. Thank you.

Thank you. We can take our next question.

Thank you. We are now going to take our next question. And the question come from the line of [indiscernible] from Citi. Please ask your question. Your line is opened.

[Foreign Language] Thanks, management. I'm [indiscernible] is making rapid progress on sign and opening. So could you tell us more about the store's current business situation? Besides, we need to bring passion to the group's plan development with the increase in the production of Atour Light. Thanks.

[Foreign Language] Thank you for your question. Let me answer this one. As of the end of September, Atour Light 3.0 has accumulated 71 fine projects, consistently gaining recognition from our franchisees. 13 hotels have been opened, primarily focusing on core business districts in higher tier cities. These stores aim to set a benchmark for quality in a mid-scale hotel segment. [Foreign Language] Looking at those Atour Light 3.0 hotels that are currently opened, they had significantly shortened ramping up period as a new product. Both ADR and RevPAR are highly competitive when compared to the other mid-scale hotels in the same business districts. [Foreign Language] erall RevPAR next year, despite the structural changes and the pressures brought by the rapid expansion of new hotels and the increasing proportion of Atour Light, we plan to enhance product competitiveness through product upgrades and rejuvenation of existing hotels. Additionally, the support for new hotels ramp up will continue, aiming for a sustained and healthy growth in RevPAR. The goal is to achieve moderate growth compared to this year's RevPAR as a baseline. Thank you.

Thank you. [Operator Instructions]. We are now going to wait for a few minutes before taking the next question. [Operator Instructions]. That concludes the question-and-answer session. I would like to turn the conference back over to Alison Zhang for any additional or closing remarks. 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.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect your lines. Thank you.