Summary of Key Points from the Conference Call Industry Overview - **Industry**: China Hotel Sector - **Context**: The industry is transitioning into a more normalized phase after post-pandemic volatility, with supply growth slowing due to structural reasons [1][4] Core Insights - **Supply Growth**: - Supply growth has decelerated from double-digit expansion in 1H25 to approximately 7-8% year-over-year in 2H25, and further to 5-6% in 4Q25. This trend is expected to continue into 2026 [4] - Factors contributing to this slowdown include softer RevPAR performance and the end of the post-pandemic rebound, leading to more cautious investment decisions [4] - **RevPAR Outlook**: - Both H World and Atour expect RevPAR to improve year-over-year in 2026, but with differing levels of optimism. H World is more positive about a return to growth, while Atour remains cautious due to macro uncertainties, particularly in business travel [4] - **Regulatory Environment**: - Regulatory scrutiny on Trip.com is expected to have limited direct impact on large hotel groups like H World and Atour, as Trip.com accounts for a small percentage of their traffic. However, it may improve industry transparency and pricing norms [5] Company-Specific Insights - **H World and Atour**: - Both companies are expected to outgrow the industry with sustainable hotel expansion and projected EPS CAGRs of 19% and 27% from 2025 to 2027, respectively [1] - H World and Atour are trading at P/E ratios of 20x and 17x for 2026E, respectively, following strong performance in 2025 [1] - **Atour's Retail Business**: - Atour's retail segment is viewed as a core engine for long-term revenue growth, targeting a five-year CAGR of over 15%, which is expected to outpace hotel revenue growth. The current retail revenue constitutes about 40% of total revenue [5] - The total market for Atour's retail products is approximately RMB 300 billion, with significant room for growth as online penetration and brand awareness increase [5] Additional Considerations - **Market Performance**: - In 2025, H World and Atour's stock prices increased by 42% and 47%, respectively, compared to a 28% increase in MSCI China [1] - **Investment Recommendation**: - The recommendation is to accumulate Atour shares, given its growth potential and current valuation compared to H World [5]