Ladies and gentlemen, thank you for standing by, and welcome to the Atour Lifestyle Holdings First Quarter 2024 Earnings Conference Call. At this time, all participants are in a 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 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 first quarter 2024 earnings conference call. Today, we will hear from our Founder, Chairman and CEO, Mr. Wang Haijun, and our Co-CFO, 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 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.

[Foreign Language] [Interpreted] Thank you, Alison. Hello, everyone, and thank you for joining Atour's first quarter 2024 earnings call today. [Foreign Language] [Interpreted] During the first quarter of 2024, the travel market witnessed a contrasting demand patterns. While the recovery of business travel was relatively subdued due to macro uncertainties, experience-driven leisure tourism during holidays and weekends maintained its growth momentum from 2023. As a leading upper midscale hotel brand, Atour remains dedicated to advancing the comprehensive upgrade of its experience strategy amid the ever evolving external environment. By delivering exceptional accommodation experiences, we unleashed a greater value across our unique deep sleep scenarios. We also continued to enhance and upgrade our products and services, solidifying Atour's leading position in the industry. [Foreign Language] [Interpreted] Now, I would like to provide more details on our performance for the first quarter of 2024. [Foreign Language] [Interpreted] Let's begin with our hotel business. Please turn to Slide 4 of our first quarter '24 results presentation. Our RevPAR reached RMB328 in the first quarter, representing 97.4% of its level in the same period of 2023. Notably, we achieved a sustainable OCC growth, reaching 101.1% of 2023's level for the same period, demonstrating Atour's resilient demand and leading competitiveness. However, due to a high comparison base resulting from the explosive demand for both business and leisure travel in the same period of 2023, our ADR faced some pressure in the first quarter and decreased by 2.9% year-over-year. [Foreign Language] [Interpreted] Please turn to Slide 5. Excluding structural impacts, such as the ramp up of new hotels, our mature hotels in operation for more than 18 months performed well during the quarter. Their same-hotel RevPAR was 99.7% of 2023's level for the same period, while OCC reached 102%, and ADR stood at 98.4%, both compared…

Thank you, Haijun. Good morning and good evening, everyone. Now, I would like to present the company's financial performance for the first quarter of 2024. Please turn to Slide 16 of the results presentation. Our net revenues for the first quarter of 2024 grew by 89.7% year-over-year and decreased by 2.5% quarter-over-quarter to RMB1,468 million. The year-over-year increase was driven by robust growth in both the hotel and the retail businesses. The quarter-over-quarter decrease was caused by the decrease in RevPAR, which was RMB328 for the first quarter of 2024 compared with RMB358 for the previous quarter, and also was due to the renovation of one of our leased hotels. Revenue from our manachised hotels for the first quarter of 2024 were RMB836 million, up by 87.1% year-over-year while decreasing 1.8% quarter-over-quarter. The year-over-year increase was primarily fueled by the ongoing expansion of our hotel network and the rapid growth of the supply chain business. The total number of manachised hotels increased to 1,,271 as of March 31, 2024, up by 35.9% year-over-year. The quarter-over-quarter change was due to the decrease in RevPAR. RevPAR of our manachised hotels was RMB324 for the first quarter of 2024 compared with RMB353 for the previous quarter. Revenues contributed by our leased hotel for the first quarter of 2024 were RMB168 million, representing a decrease of 10.3% year-over-year and 13.8% quarter-over-quarter. This decline was mostly driven by the renovation of one of our leased hotels into our first Atour 4.0 hotel as well as the decrease in RevPAR. RevPAR of our leased hotels was RMB455 for the first quarter of 2024 compared with RMB464 for the same period of 2023 and RMB495 for the previous quarter. Revenues from our retail business for the first quarter of 2024 were RMB417 million, up by 268.9% year-over-year…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of CICC, Sijie Lin. Please go ahead, Sijie.

[Foreign Language] I will translate my question to English. So, thank you management. Congrats on the very fast hotel opening in Q1. The 97 new openings, almost achieved highest quarterly level last year, and the revenue growth is also big. So, will we adjust the full year opening revenue and profit guidance accordingly? Thank you.

[Foreign Language] [Interpreted] Thank you, Sijie. Let me try to answer your question. Although we saw some fluctuations in the RevPAR of the entire industry in the first quarter this year, but from the franchisees level, confidence in the hotel industry is still sufficient. And our signings in the first quarter also maintained rapid growth. And projects in our pipeline continued to expand, reaching 674. [Foreign Language] [Interpreted] In terms of new openings, in this first quarter, we opened 97 new hotels, continuing the trend in fourth quarter last year. This year, based on the strategic targets of having 2,000 premier hotels by 2025, we will put forward higher requirements for quality and consider quality as a prerequisite for quantity growth. Based on this, we would like to maintain our target of 360 new openings for the full year, and we stay fully confident about achieving that. [Foreign Language] [Interpreted] In terms of revenue, despite some fluctuations in RevPAR we saw, we still expect the group's 2024 revenue to maintain a high-quality growth. And based on the outstanding performance in the first quarter, especially in our retail business, we would like to raise this year's revenue guidance from what we announced last quarter, the original 30% year-on-year growth to a new growth of 40% year-on-year, maintaining a growth rate leading the industry. This is mainly due to the continued expansion of our hotel network and the contribution of our rapidly-growing retail business. At the profit level, the fluctuation of the overall RevPAR and the change of the company's revenue structure this year will bring certain pressure on our profit margin level. However, we will continue to optimize our cost structure, improve the efficiency of management and operations, and we expect to keep a relatively stable profit margin level. Okay. Thank you.

Thank you, Sijie.

Thank you.

Let's take next question.

Thank you. Our next question comes from the line of Dan Chee from Morgan Stanley. Please ask your question, Dan.

[Foreign Language] Please allow me to translate my questions. Can the management share the recent blended RevPAR trend in second quarter and in particularly occupancy and ADR's respective performance? And what's the company's most updated view on your blended RevPAR for full year 2024? Thank you.

[Foreign Language] [Interpreted] Thank you, Dan. Let me try to answer your questions. Our RevPAR in first quarter was RMB328, which was down by RMB9 compared to the same period last year. OCC was 73.3%, 0.8 percentage points higher than the same period last year. ADR was RMB430, down by RMB13 from the same period last year. [Foreign Language] [Interpreted] If we narrow down to our 843 mature hotels in operation for more than 18 months, the same hotel RevPAR performance in first quarter this year stood at 99.7%, which was basically unchanged from last year. [Foreign Language] [Interpreted] To separate OCC and ADR performances, last year's concentrated bursts of business and leisure travel to a certain extent drove the price base higher and imposed relatively more pressure on this year's price. Since April, including the Labor Day holiday, we have also seen such situation. According to QTD data, our Q2 RevPAR might have bigger pressure than in Q1. [Foreign Language] [Interpreted] As for the forecast on 2024 full year RevPAR, due to multiple factors affecting its performance, it is rather difficult to give a relatively accurate RevPAR forecast. Seeing from now, the uncertainty of this year exceeds our previous expectation. And in this current environment, our strategy is to prioritize stabilizing our OCC base, while also seize the core opportunities in revenue.

Thank you, Dan. Next question, please?

Thank you. Our next question comes from the line of Xin Chen from UBS. Please ask your question, Xin.

[Foreign Language] We noticed that in Q1, relatively more off-season, the company's revenue from [the two] (ph) business still maintained a very strong growth. Would the company mind sharing your expectations on the Atour revenue over the whole year and your expectations on expenditure in retail business? And the second question is that on product level, the Summer Cool Quilt launch very much achieved good results. Could you share about some follow-up planning on products? Thank you.

[Foreign Language] [Interpreted] Thank you, Chen Xin. Let me first talk about the overall retail business and product planning, and then I'll pass it on to Jianfeng to add on retail financials later. I think, based on our insights into the real sleep needs for users, our strategy with Atour Planet's Deep Sleep products has been kept on becoming known to people outside of the hotel industry and continued to gain users' confidence and recognition. And that promoted the excellent performance of our retail business. Our product R&D capacity based on user needs has been verified, once again, by the outstanding performance of our new product this quarter, Deep Sleep Lightweight Comforter. This year, in the next quarters, we will continue to focus on Deep Sleep products and carry on launching the next-generation of Deep Sleep pillows or Deep Sleep temperature control quilt in the next coming quarters. While continuing to expand the sleep categories, we will also be continually deepening and solidifying our advantages categories. Now, Jianfeng, could you please add some more onto the retail financials?

[Foreign Language] [Interpreted] Thank you, Chen Xin. On our retail, revenue in first quarter reached RMB417 million, maintaining a rapid growth momentum. Based on that strong retail performance, we do expect our retail business to achieve high double-digit year-over-year revenue growth for the full year. Meanwhile, our retail business is still in a process of rapid development. And that means, we will continue to deepen investment in building a solid foundation for longer-term growth, branding and channels. In terms of the sales expenditures you mentioned in your question, Chen Xin, our retail business in first quarter coordinated campaigns and promotions with high efficiency. The sales expenses in the next few quarters will fluctuate slightly, echoing to our rhythm in new product launches and plans on branding campaigns. But it is expected to maintain a relatively stable level for the full year. Now that with our growing scale of retail business, its margin level has been continually improving. And we are confident that the retail business will bring more incremental earnings to the group and more value to our ecosystem. Thank you.

Thank you. Next question, please?

Thank you. The next question comes from [Jiawei Liu from Citi] (ph). Please ask your question, Jiawei.

[Foreign Language] I'll translate my question. About the hotel openings, could you please share the opening goals for Atour Light 3.0 this year? Also, an update on how the Atour 4.0 hotels are coming along? Thanks.

[Foreign Language] [Interpreted] Thank you, Jiawei. Let me answer that question of yours. In first quarter, there was a total of 30 signings for Atour Light 3.0, accounting for more than 15% of our total new signings. As of the end of March, 36 Atour Light 3.0 hotels are in operation. We expect that by the end of this year, the number of Atour Light 3.0 hotels in operation will reach about 100. [Foreign Language] [Interpreted] Like Haijun just now have mentioned, we focus on the concept of Life at Ease and consistently introducing and refining distinctive services at Atour Light 3.0 hotels to better meet the needs of young business travelers and won their recognition. Atour Light 3.0 hotels have had eye-catching performances in first quarter, a commonly off-season. The RevPAR of those Atour Light 3.0 hotels in operation for three months above had exceeded RMB290 in the first quarter and quickly rose to above RMB300 in April, far exceeding the expectations from those franchisees. [Foreign Language] [Interpreted] At the same time, based on the operation status and user feedback we gathered from those Atour Light 3.0 hotels in operation, we are gradually refining the Atour Light 3.0 model to bring better and better experience to users, while also bring sustainable and stable returns to the franchisees. [Foreign Language] [Interpreted] And you mentioned our Atour 4.0. Since Atour 4.0's launch at the end of last year, we have secured more than 30 benchmark projects in the core business areas of key cities. The opening of the first Atour 4.0 hotel is also in busy preparation and will happen soon. It will be worth your waiting. Thank you.

Thank you, Jiawei. And operator, we can take one more question. Thank you.

Thank you. Our final question comes from the line of Lydia Ling from Citi. Please ask your question, Lydia.

[Foreign Language] Thanks, management. And I would like to ask if the management has any plans in terms of the returns to shareholders? Thank you.

[Foreign Language] [Interpreted] Thank you, Lydia. And in terms of shareholder returns, we have always attached importance to and practiced continuous returns to shareholders. In August last year, we announced a one-time dividend. This year, we will continue to act upon the overall operating performance, cash position, future business development plan, industry common practices and to consider plans to increase shareholder returns, including dividends. We are committed to sharing the benefits of development with our shareholders. Thank you.

Thank you, Lydia.

Thank you. And that concludes the question-and-answer session. I'd now like to turn the conference back to Alison Zhang for any additional or closing comments.

Thank you all 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.