Atour Lifestyle Holdings Limited Symbol $11.00-$13.00 4.75 million shares Underwriters: BofA Securities, Citigroup, CICC, CMBI Co-Managers: Proposed trade date of 11/14 They are the largest upper midscale hotel chain in China in terms of room number as of the end of 2020, according to Frost & Sullivan.
Not a full write-up because their perceived short term prospects.
Atour Lifestyle Holdings Limited Symbol
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https://www.sec.gov/Archives/edgar/data/1853717/000110465922115175/tm2111252-29_f1a.htm
They are the largest upper midscale hotel chain in China in terms of room number as of the end of 2021, according to Frost & Sullivan. Through their hotel network, loyalty program and data and technology capabilities, they have been tirelessly exploring new possible ways to set the new trends for China’s hospitality industry and expand their offerings beyond their hotels. As of June 30, 2022, their hotel network covered 834 hotels spanning 151 cities in China, with a total of 96,969 hotel rooms, including 801 manachised hotels with a total of 91,911 manachised hotel rooms, in addition to a pipeline of 343 hotels with a total of 37,795 rooms under development. As of June 30, 2022, their A-Card loyalty program had amassed approximately 32 million registered individual members. In 2021, approximately 39.7% of their room-nights were sold to their A-Card members. To provide their customers with personalized services and products, they have developed a comprehensive digital management system, which improves customer experience and operational efficiency in room reservation, room management, pricing and membership benefits.
In addition, they are the first hotel chain in China to develop a scenario-based retail business, according to Frost & Sullivan. They design their guest room amenities, work closely with manufacturers to deliver top-quality products, and carefully place the relevant products in guest rooms. Each of their guest rooms incorporates a fully immersive shopping destination, enabling them to further strengthen their brand elasticity with their guests. As of June 30, 2022, they had developed a total of 1,967 SKUs for scenario-based retail. The GMV generated from their retail business increased by 29.5% from RMB82.8 million in 2019 to RMB107.2 million in 2020, and further substantially by 112.9% to RMB228.2 million in 2021. The GMV generated from their retail business was RMB118.1 million in the six months ended June 30, 2022. In 2021, the average transaction value per scenario-based retail order reached RMB403.0. They mainly use the manachise model to expand their hotel network in a less capital-intensive manner. They also lease the properties of the hotels they operate. As of June 30, 2022, they had 33 leased hotels and 801 manachised hotels. The number of their manachised hotels grew at a CAGR of 62.9% between 2016 and 2021.
They primarily derive their revenues from (i) franchise and management fees from their manachised hotels and sales of hotel supplies to manachised hotels, (ii) operations of their leased hotels, and (iii) sales of their retail products in connection with their scenario-based retail business. They generated net revenues of RMB1,567.1 million, RMB1,566.6 million and RMB2,147.6 million for the years ended December 31, 2019, 2020 and 2021, and RMB990.3 million and RMB966.7 million (US$144.3 million) for the six months ended June 30, 2021 and 2022, respectively. They had net income of RMB60.8 million, RMB37.8 million and RMB139.7 million for the years ended December 31, 2019, 2020 and 2021, and RMB70.7 million and RMB67.5 million (US$10.1 million) for the six months ended June 30, 2021 and 2022, respectively. They had EBITDA (non-GAAP) of RMB182.5 million, RMB161.2 million and RMB299.0 million for the years ended December 31, 2019, 2020 and 2021, and RMB151.5 million and RMB137.4 million (US$20.5 million) for the six months ended June 30, 2021 and 2022, respectively.
The total number of rooms offered by hotel chains increased with a CAGR of 14.5% from 2016 to 2021 in China. Meanwhile, the hotel chain penetration rate remains at 34.4% in China’s hospitality market in 2021, much lower than the average hotel chain penetration rate of 42.7% in the world market and the penetration rate of 73.0% in the more mature U.S. market. The penetration rate of chained operation in China’s hospitality industry is anticipated to further increase.
The PRC government has recently published new policies that significantly affected certain industries, and they cannot rule out the possibility that it will in the future release regulations or policies regarding their industry that could adversely affect their business, financial condition and results of operations. The travel industry has been severely affected by the outbreak of COVID-19 since the beginning of 2020 due to the reduced traveler traffic in China. In addition, countries across the world, including China, have to date adopted and maintained various quarantine and/or control measures for inbound travelers, which limited cross-border people movements and further harmed the travel industry in China. The Chinese government has also implemented strict nationwide containment measures against COVID-19, including travel restrictions, lock-downs of certain cities and hotel closures. Such containment measures have continued to negatively affect the key operating metrics of their leased and manachised hotels, including occupancy rates, ADR and RevPAR. As a result of the initial COVID-19 outbreak in the first half of 2020 in China and excluding the impact of requisitioned hotels, the occupancy rate of their hotels decreased from 73.4% in 2019 to 67.1% in 2020. The ADR of their hotels decreased by 9.2% from RMB429.5 to RMB389.8 during the same years. Their RevPAR, as a result, decreased by 16.5% from RMB329.5 to RMB275.1 during the same years. The occupancy rate of their hotels decreased from 65.1% in the last quarter of 2021 to 50.0% in the first quarter of 2022. Similarly, the ADR of their hotels decreased from RMB409.3 in the last quarter of 2021 to RMB375.4 in the first quarter of 2022. Their RevPAR, as a result, decreased from RMB281.8 in the last quarter of 2021 to RMB198.9 in the first quarter of 2022. As the new outbreaks were gradually brought under control and lockdowns were lifted, their RevPAR experienced recovery in the second quarter of 2022. Since the outbreak of COVID-19 and up to June 30, 2022, the Chinese governmental authorities had accumulatively requisitioned a total of 345 of their hotels (including approximately 4.6 million room-nights) in various locations and during different periods for the accommodation of medical support workers and for quarantine purposes in response to the COVID-19 outbreak. They did not generate any revenue relating to sales based on continuing franchise fees from their manachised hotels used for quarantine purposes as the franchisees of such hotels were not required to pay them any continuing franchise fees during the quarantine periods.
Upon the completion of this offering, Mr. Haijun Wang will beneficially own 73,680,917 Class B ordinary shares and controls the voting power of 44,412,523 Class A ordinary shares. Mr. Haijun Wang will beneficially own approximately 30.2% of their total issued and outstanding share capital immediately after the completion of this offering and 74.1% of the aggregate voting power of their total issued and outstanding share capital immediately after the completion of this offering due to the disparate voting powers associated with their dual-class share structure, assuming the underwriters do not exercise their option to purchase additional ADSs. Rating = 2