Why Investors Favor Chinese Hotel Stocks, Like Atour?

Core Viewpoint - Atour Lifestyle Holdings Ltd. has achieved significant revenue growth through a unique combination of hospitality and retail, but forecasts a slowdown in growth due to economic conditions in China [1][3][16] Revenue Growth - The company's revenue rose 55% last year, with a forecast of 25% growth for the current year, indicating a substantial slowdown [3][4] - In the fourth quarter, Atour's revenue increased by 38.5%, reaching 2.08 billion yuan ($286 million), primarily driven by new hotel openings and retail sales [2][9] Profitability - Atour's profit grew by 50.5% year-on-year in the fourth quarter, totaling 331 million yuan, supported by improving gross margins [15][16] - The retail business has significantly contributed to profitability, achieving a gross profit margin of 49.6% in the fourth quarter, compared to 37.5% for the hotel business [14] Business Model - Atour operates both self-operated and manchised hotels, with a shift towards the manchised model due to its higher margins [10][11] - The retail segment, which includes products like pillows and comforters, has become a major revenue source, accounting for 37% of total revenue in the fourth quarter [11][12] Market Position - Despite economic headwinds, Atour and other Chinese hotel stocks are favored by investors, with Atour trading at a P/E ratio of 23, higher than global peers like Accor [5][6] - The travel industry has shown resilience during China's economic slowdown, benefiting from a surge in "revenge travel" post-pandemic [6][7] Future Outlook - The company plans to add 500 new properties in 2025, which is crucial for maintaining revenue growth amid slowing performance from existing hotels [4][3] - Analysts remain positive on Atour, with unanimous "buy" ratings from 15 analysts, reflecting confidence in its business model and market position [16]