Financial Data and Key Metrics Changes - Comparable hotels total revenue was $319 million for Q4 2025 and $1.4 billion for the full year, down approximately 2% and 1% compared to 2024 [21] - Comparable hotels RevPAR for the full year was $118, down 1.6%, with Q4 RevPAR at $107, down 2.6% [23][24] - Comparable hotels adjusted hotel EBITDA was approximately $99 million for Q4 and $474 million for the year, down approximately 8% and 6% compared to 2024 [21][32] - The company achieved an industry-leading comparable hotels EBITDA margin of 31.1% for Q4 and 34.3% for the year, down 210 basis points and 190 basis points respectively [7][31] Business Line Data and Key Metrics Changes - The company adjusted its strategy to optimize the mix of business at hotels, layering additional group business to bolster market share [5][6] - Variable hotel expenses increased only 0.5% in Q4, while total hotel expenses increased by 1% for the quarter and 1.9% for the year [29][31] - The transition of 13 Marriott-managed hotels to franchise is expected to drive operational synergies and increase marketability [8][102] Market Data and Key Metrics Changes - The portfolio is diversified across 84 markets, with strong leisure travel demand, although midweek demand was impacted by government travel pullbacks [5][6] - Top RevPAR performing hotels included the Embassy Suites in Anchorage, Alaska, which was up almost 42%, and the Homewood Suites in Tukwila, Washington, which was up 33% [24] - The company reported that nearly 59% of its hotels had no new upper upscale or upper mid-scale product under construction within a five-mile radius, reducing overall risk [17][106] Company Strategy and Development Direction - The company aims to maximize shareholder value through strategic initiatives, optimizing its portfolio, and capitalizing on market dislocations [5][9] - The long-term goal is to grow the portfolio while managing capital allocation to safeguard against macroeconomic volatility [9][13] - The company plans to reinvest between $80 million and $90 million in its portfolio for 2026, with major renovations planned for approximately 21 hotels [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term outlook for the hospitality industry and the company's ability to drive profitability [20][37] - The guidance for 2026 anticipates comparable hotels RevPAR to be flat at the midpoint, with potential benefits from the FIFA World Cup 2026 [18][36] - Management acknowledged the challenges posed by policy-related disruptions but remains confident in the company's ability to adapt and maximize profitability [37] Other Important Information - The company sold seven hotels for a combined gross sales price of approximately $73 million and repurchased 4.6 million common shares for about $58 million [9][10] - Capital expenditures for the year totaled approximately $88 million, with plans for significant renovations in 2026 [15][16] - The company continues to pay attractive dividends, with distributions totaling approximately $240 million for the full year [17] Q&A Session Summary Question: What was the total drag on RevPAR in 2025 from Liberation Day and the government shutdown? - Management indicated that government-related room nights were down about 12% for the year, with a potential recovery of about a point in occupancy expected in 2026 [40][41] Question: Can you take us through some of the building blocks on the expense side? - Management provided details that variable expenses are expected to be just under 3% for the full year, with fixed expenses around 4.5% [42] Question: How is the RevPAR growth guidance structured for 2026? - Management noted that the guidance assumes little impact from special events, with expectations for occupancy growth as comparisons ease [45][56] Question: What is the focus regarding the transaction market? - Management stated that the current focus is on select dispositions where they can redeploy proceeds into higher producing opportunities [60][61] Question: What trends are being observed in midweek occupancy? - Management reported encouraging signs of midweek occupancy growth, especially post-government shutdown, but noted the need for caution due to weather disruptions [66][69] Question: How does the transition of Marriott-managed hotels impact marketability? - Management confirmed that transitioning to franchise agreements increases marketability and provides flexibility for potential sales [101][102]

Core Insights - The hotel prices in major Chinese cities have significantly declined, with many budget and mid-range brands experiencing price drops of over 10%, and some exceeding 20% [6][10][16] - The average daily rate (ADR) for Atour Hotels has fallen below levels seen five years ago, with a reported decline of 19% in the Beijing area [10][11] - The hotel market is facing a supply-demand imbalance, leading to decreased occupancy rates and revenue per available room (RevPAR) across various hotel brands [14][15] Price Trends - From August 1 to September 1, 2023, hotel prices in Beijing, Shanghai, Guangzhou, and Shenzhen showed a general downward trend, with 9 out of 10 observed hotel brands reporting average price declines [6][8] - Economic and mid-range hotel brands were the most affected, with brands like Home Inn and Hanting experiencing price drops of 27.2% and 24.1%, respectively [6][7] - High-end brands like Sheraton showed more stability, with a price drop of only 8%, while Hilton was the only brand to see a price increase of 3.5% [7] OTA Price Variations - Price fluctuations among different Online Travel Agencies (OTAs) were notable, with Ctrip offering the lowest average prices in Beijing at 572.9 yuan, while Tongcheng had the highest at 594.2 yuan [8][9] - In the transition to the off-peak season, Ctrip's prices dropped significantly by 13% to 498.4 yuan, while Qunar also saw a decline of 12.5% [9][18] Atour Hotel Performance - Atour's ADR for Q1 2025 was reported at 418 yuan, lower than the 429.5 yuan seen in 2019, indicating a downward trend in pricing [10][11] - The company's RevPAR has also declined, with a 7.3% year-on-year drop reported for Q1 2025 [10][11] Market Dynamics - The hotel market is experiencing a supply expansion that outpaces demand recovery, leading to lower occupancy rates and increased pressure on pricing [14][15] - The average occupancy rate for five-star hotels fell to 58.25% in Q2 2024, reflecting the challenges faced by the industry [15] Regional Observations - In Beijing, the average hotel price dropped by 13.5%, with significant declines in brands like Orange Crystal and Home Inn [16] - In Shanghai, the average price fell by 14.6%, with Vienna experiencing a notable drop of 28.1% [16] Future Outlook - The hotel industry is expected to face continued challenges, with predictions of a decline in RevPAR for Q3 2024, although the rate of decline may be less severe than in Q2 [14]

Summary of Hotel and Tourism Industry Conference Call Industry Overview - The hotel industry during the 2024 May Day holiday exceeded expectations, driven by long holiday opportunities leading to increased inter-provincial and long-distance travel, particularly in lower-tier cities. Coastal cities showed better performance compared to last year, and the 144-hour visa-free transit policy boosted foreign tourist numbers. Hotel prices, including those of Huazhu and Jinjiang, saw approximately a 10% increase [1][4][25]. Key Insights - **Performance by Hotel Tier**: Different tiers of hotels showed varied performance during the holiday. High-end hotels experienced significant growth in occupancy rates, while mid-range hotels saw increases in both price and traffic. Economy hotels had relatively smaller increases [1][5]. - **RevPAR Growth**: During the 2024 May Day period, Huazhu's RevPAR was 110.3 RMB, and Jinjiang's was 118.4 RMB, both showing over 10 percentage points growth compared to the previous year. This growth suggests a potential similar trend for Q2 and raises expectations for summer data [1][6][7]. - **Regional Performance**: The Southwest and South China regions performed particularly well, while the Northwest region, except for Xinjiang, showed weaker results [2][4]. Additional Important Points - **Government Initiatives**: The government is considering issuing accommodation vouchers through OTA platforms to stimulate tourism and related services, expected to launch before the summer [3][25]. - **Supply Dynamics**: Huazhu plans to open 2,400 new stores in 2025, focusing on lower-tier markets, while Jinjiang's pace is slower with fewer than 300 new openings. The overall slowdown in supply growth is seen as positive for the chain hotel market [12][13]. - **Business Travel Trends**: Business travel demand remained stable in April, with Huazhu's demand holding steady year-on-year, while Jinjiang experienced a decline due to first-quarter reforms [10][11]. - **Market Outlook**: The overall hotel industry is expected to remain flat or decline by 1-2% in 2025, with Jinjiang projected to decline by about 5% and Yaduo by 2-3% [21]. Conclusion - The hotel industry is experiencing a positive trend driven by increased travel demand and government support. However, the performance varies significantly across different hotel tiers and regions. The supply dynamics and business travel trends will play a crucial role in shaping the industry's outlook for the coming months.