Ladies and gentlemen, thank you for standing by, and welcome to Atour Lifestyle Holdings Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. I would now like to turn the conference over to Mr. Luke Hu, Senior IR Manager. Please go ahead, sir.

Thank you, operator. Good morning and good evening, everyone. Welcome to our fourth quarter and full year 2025 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 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 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 purpose. 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.

[Interpreted] Thank you, Luke. Hello, everyone. Thank you for joining Atour's Fourth Quarter and Full Year 2025 Earnings Call today. Please turn to our results presentation. Looking back at 2025, sustained global competition, structural shifts in consumption and accelerating technological transformation collectively shaped the overarching theme of the year. Amid a volatile recovery, China's travel and consumer markets have become increasingly mature, rational and resilient. In this environment, we are more convinced than ever that only by staying true to our user-first philosophy, relentlessly enhancing user experience and building enduring brand value can we navigate industry cycles in an increasingly competitive maturing market. 2025 marked the successful completion of our Chinese Experience 2000 Premier hotels strategic initiative. In terms of the hotel business, we achieved our scale target of 2,000 premier hotels and further strengthened our brand through differentiated product positioning and customer experiences that resonate. Meanwhile, our retail business sustained strong growth momentum, accounting for nearly 40% of the group's total revenue. Atour Planet further reinforced its leading position in China's sleep market, establishing itself as the preferred choice for consumers. We continue to see growing synergy between our hotel and retail businesses with each strengthening the other to further enrich the value proposition of our Chinese experience. As we enter 2026, we continue to see considerable market uncertainty. However, our strategic direction has never been clearer. We will [Technical Difficulty]

Ladies and gentlemen, please remain on the line. Your conference will resume shortly.

[Interpreted] Yes. Thank you. As we enter 2026, we continue to see considerable market uncertainty. However, our strategic direction has never been clearer. We will embrace change while maintaining a long-term focus. We consistently create value-added experiences with a personal touch through high-quality products and services. Building on this foundation, we have officially launched a new 3-year strategic plan, Chinese experience brand-led excellence. Experience remains the cornerstone of our development and a core driver of growth. We will further reinforce our differentiated experience mode, amplify our strength, pioneer new frontiers and strengthening our leadership within the industry. Brand serves as the anchor of our long-term development and the guiding force behind our strategy. We will firmly follow the course of a lifestyle group, actively exploring and expanding growth path. By using scenarios as a bridge, we will deepen the synergy between our hotel and retail businesses, leveraging our brand to connect across scenarios and deepening our emotional connection and resonance with users. Now I would like to provide more details on our hotel and retail performance for the fourth quarter and full year of 2025. Let's begin with our hotel business. In the fourth quarter, our RevPAR was RMB 335.7, representing 99.6% of the level in the same period of 2024, with the recovery showing sequential improvement trend. Specifically, OCC reached 98.8% and ADR stood at 101.5% of their levels in the same period of 2024. In the fourth quarter, RevPAR for our mature hotels and operation for more than 18 months was 96% of the level in the same period of 2024, while OCC and ADR stood at 97% and 99.6% of 2024 levels for the same period, respectively. In 2025, we opened 488 new hotels. By the end of the fourth quarter, the number of hotels in operation…

Thank you, Haijun. Now I would like to present the company's financial performance for the first quarter and full year of 2025. Revenues from our managed hotels for the first quarter and full year of 2025 grew by 28.1% and 28.0% year-over-year to RMB 1.4 billion and RMB 5.3 billion, respectively. The increases were primarily fueled by the ongoing expansion of our hotel network. Revenues contributed by our leased hotels for the first quarter and full year of 2025 decreased by 9.8% and 15.9% year-over-year to RMB 148 million and RMB 590 million, respectively. The declines were primarily due to a decrease in the number of leased hotels as a result of our product mix optimization. Revenues from our retail businesses for the fourth quarter and full year of 2025 increased by 52.4% and 67.0% year-over-year to RMB 1.2 billion and RMB 3.7 billion, respectively. The increases were driven by growing brand recognition, successful product innovation and a broadened range of product offerings. The gross margin of our hotel business was 35.8% for the fourth quarter and 37.0% for the full year of 2025. The gross margin of our retail business improved year-over-year to 52.6% for both the fourth quarter and the full year of 2025, reflecting the growing contribution from higher-margin products. Selling and marketing expenses accounted for 16.5% and 15.2% of revenues for the fourth quarter and full year of 2025, respectively. The year-over-year increase for the full year was mainly due to investment in brand recognition and the effective development of online channels in line with the growth of our retail business. General and administrative expenses, excluding share-based compensation expenses, accounted for 5.5% and 4.2% of net revenues for the fourth quarter and full year of 2025, respectively. The year-over-year decrease for the full year was primarily…

[Operator Instructions] We will now take up this question from the line of [indiscernible] from CICC.

[Foreign Language] So we've noticed that the overall industry supply growth has slowed slightly. Therefore, we'd like to ask about the recent sentiment among franchisees regarding new signings. And additionally, could you please also provide some guidance on new openings in 2026?

[Interpreted] Okay. Let me answer your question. Thank you, [indiscernible]. We have also observed fluctuations in the overall industry supply growth rate. However, if we look deeper, what's behind this is that after years of rapid expansion, the industry is now undergoing a profound structural upgrade and gradually moving towards a new stage of high-quality development. As for franchisees, we have also observed that they are now becoming more rational and discerning. However, I believe this shift towards rationality for them is actually positive for the long-term healthy development of our industry because when franchisees exercise greater caution in negotiating rents, choosing locations and selecting hotel brands, they are essentially facilitating a market screening process of survival of the fittest. The mutual selection between mature brands and quality franchisees will lead to a more solid foundation for cooperation. As regard to Atour's own strategic pace, high-quality supply in the market remains scarce. We have never advocated for purely scale-driven growth. However, high-quality distinctive growth is actually the direction of our long-term pursuit. We remain positive and optimistic about the signing momentum for 2026, and we will ensure that every newly signed project is more competitive in the market. In terms of new openings, well, thanks to the continued implementation of our premier hotel strategy, new hotels opened in 2025 have shown significant improvement in both of their location selection and property quality. In 2026, we will continue to uphold strict quality requirements, focusing on the core cities and the key commercial areas. On the basis of ensuring higher quality, we aim to achieve a similar scale of openings as last year.

Our next question comes from the line of Simon Cheung from Goldman Sachs.

[Foreign Language] Maybe can management share with us what do you think is going to be the outlook for the hotel industry in 2026? And also perhaps can comment about the first quarter RevPAR performance so far quarter-to-date as well as your view on the RevPAR trend for the rest of the year.

[Interpreted] Thank you, Simon, and let me take your question. In 2025, the hotel industry experienced a moderate recovery with a continued restoration of supply and demand dynamics. The 2025 full year RevPAR recovery showed a trend of sequential improvement throughout the whole year. In 2026, the overall industry supply growth may slow down furthermore, Leisure demand remains strong. For example, during the Spring Festival holiday this year, both the ADR and occupancy performed well, exceeding levels from the same period of last year. Based upon this, we expect the RevPAR in Q1 to continue the trend of improvement with a positive momentum. We will not provide specific guidance for RevPAR in 2026. But for the full year, the market environment is still changing relatively quickly. However, favorable policies and the continued recovery of business travel also provide positive factors. Our goal, however, still remains clear. That is to adhere to our strategic focus amidst market volatility. Therefore, we will persist with and deepen the differentiated experience advantages of Atour, maintaining our more balanced and refined revenue management strategy for both ADR and OCC to consolidate and enhance the performance of RevPAR recovery and solidify our long-term value of the brand.

We will now take our next question from Lydia Ling from Citi.

[Foreign Language] Lydia from Citi. And so my question is on the retail business, which actually had very strong growth last year. So could you share your plans for the retail business for this year? And also any new product plans and also new category launch? What will be your retail revenue target for 2026?

[Interpreted] Okay. Thank you, Lydia. Let me first share the overall direction and product plans for our retail business. Over the past few years, it is fair to say that Atour Planet has adhered to the development philosophy of innovation-driven and product-driven. We not only released the industry's first Deep Sleep standard, but also propelled the leapfrog growth in the retail business, truly leading the progress and upgrade of China's sleep industry. Moving forward, Atour Planet will enter a phase of deepening core capabilities, consolidating our competitive advantages from all dimensions. We aim to avoid homogenized competition with those emulators and followers and forge a unique development path for Atour Planet. In terms of category planning, Atour Planet will continue our focus on the Deep Sleep track. Firstly, we will continue to strengthen our core categories, and that will be the pillow category, to name one of them. Our goal for the pillow category is to maintain our absolute leading position, establishing a decisive advantage. While we expect the comfortable category to achieve an even faster growth than pillows, further increasing market share. Secondly, new categories such as fitted sheets and loungewear will accelerate breakthroughs, achieving scale growth through blockbuster product iterations and category matrix expansion. Besides, mattresses and other sleep accessories will also be as extended categories, collectively completing our Deep Sleep ecosystem layout of Atour Planet. Next, I would like to share our outlook for the retail revenue. In 2025, both scale and the brand reputation of our retail business reached new heights. Looking at 2026, we expect retail revenue to grow by 25% to 30% year-on-year. while maintaining the healthy scale growth, we are more focused on the continued consolidation of our core competitiveness. By continuously enhancing product strength and brand power, we aim to achieve a longer-term sustainable development for retail business.

Next question comes from Ronald Leung of Bank of America.

[Foreign Language] Let me ask my question in English. So I have a financial question. So we noticed that the company's actual net profit margin in 2025 was better than initially expected at the beginning of the year. Could you talk about your expected trend for the net profit margin in Q2 set?

[Interpreted] Thank you, Ronald. Well, indeed, for the full year of 2025, our group's adjusted net profit margin was approximately 17.9%. At the beginning of the year, we had estimated that there's going to be changes in revenue structure and a higher effective tax rate, and they would exert some drag on our profit margin. However, through refined operational management, our profit margins of all business units continued to improve. And coupled with the policy subsidies being embodied intensively during quarter 4, eventually, our 2025 net profit margin roughly leveled with that of 2024. Looking ahead to 2026, as our business continues to evolve, the revenue mix of our manachised business, supply chain business and retail business will continue to change. At the same time, based on the new 3-year strategy of Chinese experience brand-led excellence, we will allocate resources with a longer-term perspective. For instance, to strengthen key positions through workforce expansion and to enhance digital operational capabilities to support the group's long-term development. Therefore, we anticipate that both our G&A and R&D expense ratios will increase this year. Therefore, at this starting point of the year, we preliminarily expect the group's net profit margin for 2026 to decline slightly year-on-year.

We will now take our next question from Dan Chee of Morgan Stanley.

[Foreign Language] Please allow me to translate my question. My question is relating to the hotel closures. We saw that company closed 92 hotels in 2025 full year, including 7 leased and owned hotel -- leased and operated hotels. This was slightly higher than the initial estimate at the beginning of last year. Could you share the company's plan on hotel closure for the full year of 2026, providing that gross opening in 2026 is flat year-on-year?

[Interpreted] Thank you, Dan. Regarding closures, just like what we have been consistently communicating with the market, our core consideration for closure decisions is the consistency of experience. The goal is to continuously strengthen the operational quality and experience standards of our hotels in operation. In 2025, we rigorously maintained quality control over our operating hotels and thereby closing a total of 92 hotels. In 2026, to ensure the quality level of our overall hotel network, we will still maintain a certain proactive elimination rate, terminating cooperation with hotels that fail to meet a tours experiential standards in order to continuously consolidate our brand value in the long term. Nonetheless, based on the optimization and adjustments already made in 2025, now the foundation of our existing hotel portfolio is more solid. Therefore, we expect the number of closures in 2026 to decrease. Our current planned target is to close around 80 hotels within the year. Thank you.

Thank you. That concludes today's question-and-answer session. I would like to now turn the conference back to Mr. Luke Hu 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 speaking with you again next quarter. Thank you, and goodbye.

This concludes today's conference call. Thank you for participating. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]