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Why Investors Favor Chinese Hotel Stocks, Like Atour?

The hotel operator's revenue rose 55% last year, but it forecast the growth would slow to about half that level in 2025

Key Takeaways:

Atour's revenue rose 38.5% in the fourth quarter, mostly due to new hotel openings and strong growth for its retail business selling products like pillows and comforters

The company forecast its retail business would grow at least 35% this year, marking a sharp slowdown from its 128% growth in 2024

Hotel operator or e-commerce company?

Atour Lifestyle Holdings Ltd. (ATAT.US) seems to have found a sweet spot in between the two, recording strong revenue growth and fat profits by providing travelers with comfortable rooms and beds, and then selling them room-based related products like pillows and comforters. Its unusual combination of hospitality and retail have given the company’s enviable gross margins compared to other hotel companies, since retail typically carries higher margins than hotel operations.

All of those factors were evident in the company's latest quarterly report, which showed Atour's revenue rose 38.5% in the fourth quarter, while its profit rose by an even stronger 50.5%. But the report was also filled with signals that show the company's growth is rapidly slowing with China's slowing economy. And at this point, most or all of the growth is coming from new hotel openings rather than improving performance by individual hotels.

Atour certainly isn't alone in this regard, and it seems quite possible that the company could slip into revenue contraction in 2026 if China's economy doesn't stabilize soon. Reflecting its slowdown, the company forecast 25% revenue growth this year, making it one of the few companies bold enough to give out such a forecast in the face of so many economic uncertainties.

Such a growth rate would represent a halving of the company's 55% revenue growth for all of 2024. It also trails the ...