Atour (ATAT) Q2 2025 Earnings Call Transcript

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DATE

Tuesday, Aug. 26, 2025 at 7 a.m. ET

CALL PARTICIPANTS

Chairman and Chief Executive Officer — Haijun Wang

Co-Chief Financial Officer — Jianfeng Wu

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RISKS

Adjusted net profit margin is expected to decline year over year in 2025, driven by a shift in revenue mix toward retail and an increase in the effective tax rate, which management projects will rise to 30% in 2025 from 25% in 2024.

Revenues from leased hotels decreased by 17% year over year in 2025, reflecting a reduced number of leased hotels following product mix optimization.

TAKEAWAYS

Net Revenues-- Net revenues were RMB2,469 million in Q2 2025, up 37.4% year over year compared to Q2 2024 and 29.5% quarter over quarter compared to Q1 2025, indicating accelerated top-line growth.

Hotel Network Size-- There were 1,824 hotels in operation at the end of Q2 2025, a 29.2% increase year over year, with 816 hotels under development, highlighting aggressive expansion.

Hotel Openings and Closures-- In the first half of 2025, 239 new hotels opened and 34 closed, with the full-year target maintained at 500 openings and 70-80 closures.

Monetized Hotels Revenue-- Monetized hotels revenue reached RMB1,299 million, up 26.5% year over year compared to Q2 2024 and 25.9% quarter over quarter compared to Q1 2025, reflecting ongoing network expansion.

Leased Hotels Revenue-- Leased hotels revenue was RMB150 million, down 17% year over year compared to Q2 2024 but up 16.4% quarter over quarter compared to Q1 2025, primarily due to a decrease in leased hotel count and higher sequential RevPAR.

Retail Business Revenue-- Retail business revenue was RMB1,020 million, up 79.8% year over year compared to Q2 2024 and 39.1% quarter over quarter compared to Q1 2025, demonstrating outsized growth within the segment.

Gross Margins-- Hotel business gross margin expanded to 38.3% in 2025 from 35.7% in 2024, while retail gross margin improved to 53.3% in 2025 from 50.6% in 2024.

RevPAR (System-wide)-- RevPAR was RMB343 for Q2 2025, at 95.7% of Q2 2024's level, indicating partial recovery amid continued volatility in travel demand.

RevPAR for Mature Hotels-- In Q2 2025, RevPAR for mature hotels was 94.4% of the Q2 2024 level, with OCC at 96.5% and ADR at 97.8%, demonstrating resilience among established locations.

Retail GMV-- Retail GMV reached RMB1,144 million, up 84.6% year over year in Q2 2025, with online channels contributing over 90% of sales.

Membership Base-- Registered individual members surpassed 102 million by the end of Q2 2025, rising 34.7% year over year and marking a milestone for the platform.

Adjusted Net Income-- Adjusted net income was RMB425 million for 2025, increasing 30.2% year over year, with an adjusted net profit margin of 17.3%, down 0.9 percentage points.

Adjusted EBITDA-- Adjusted EBITDA reached RMB610 million in Q2 2025, growing 37.7% year over year.

Cash and Cash Equivalents-- Cash and cash equivalents totaled RMB3,200 million at period end, with net cash of RMB2,649 million as of June 2025.

Full-Year Guidance-- Management projects 30% net revenue growth companywide and 60% retail revenue growth for the full year 2025.

Sahe Hotel Brand-- The Shenzhen flagship achieved RevPAR exceeding RMB800 in its first full month of operation (starting from May 28), with additional high-profile locations scheduled to open in key cities.

SUMMARY

Management signaled confidence in aggressive hotel network expansion through sustained annual openings and a robust pipeline, with quality and customer experience cited as core strategic pillars. The retail segment delivered rapid top-line acceleration, driving a meaningful shift in revenue structure and prompting management to raise full-year segment growth guidance to 60% year over year for 2025. Registered individual members exceeded 102 million by the end of Q2 2025. Margin commentary highlighted improvements at the gross and adjusted EBITDA levels for 2025, while management acknowledged that consolidated adjusted net margin will contract due to tax headwinds and structural revenue mix shifts.

Co-Chief Financial Officer Jianfeng Wu said, "Gross margin of our hotel businesses extended to 38.3% in 2025 from 35.7% during the same period of 2024, primarily attributable to a lower proportion of leased hotels as a result of our product mix optimization." emphasizing improved profitability through business mix optimization.

Chairman and Chief Executive Officer Haijun Wang confirmed, "We are fully confident in achieving our full-year guidance of 500 new hotel openings and reaching the scale target of 2,000 premier hotels by the end of this year."

Wu noted, "Adjusted EBITDA margin for 2025 was 24.7% (non-GAAP), remaining stable compared to the same period in 2024." reflecting operating efficiency amid sales growth.

Retail growth was supported by record online sales during the June 18 shopping festival, with AtourPlanet ranked first in the bedding category on major third-party platforms, according to management.

INDUSTRY GLOSSARY

RevPAR: Revenue per available room, a hotel industry measure calculated by multiplying occupancy rate (OCC) by average daily rate (ADR).

OCC: Occupancy rate, representing the percentage of occupied rooms relative to total available rooms in a hotel or portfolio.

ADR: Average daily rate, indicating the average rental revenue earned per occupied room over a given time period.

GMV: Gross merchandise value, representing total sales value of merchandise sold over a specific period, typically in retail or e-commerce segments.

Pipelined Hotels: Properties signed for future development but not yet operational.

Monetized Hotels: Hotel properties generating revenue for the company, either through direct operation or franchising.

Full Conference Call Transcript

Haijun Wang: Thank you, Luke. Hello, everyone, and thank you for joining Atour Lifestyle Holdings Limited's second quarter 2025 earnings call today. In the first half of the year, China's travel market went through a period of volatility and adjustment. While overall demand steadily recovered, the industry still faced numerous challenges amidst this high growth cycle. Against this backdrop, we believe that a true industry leader must not only validate its business model through scale, but also build a strong brand moat grounded in customer reputation. Therefore, Atour Lifestyle Holdings Limited will stay true to our founding aspiration. We focus on customers, placing their needs at the forefront and adhering to our business philosophy of serving people.

We continue to drive product innovation and iteration across both our hotel and retail businesses, leveraging differentiated experiential strength to build defensible competitive advantages. This allows us to stay resilient through industry cycles and pursue sustainable long-term growth. Now I would like to provide more details on our business performance for 2025. Let's begin with our hotel business. Please turn to Slide four of our second quarter 2025 results presentation. Our RevPAR was RMB343 in the second quarter, representing 95.7% of its level in the same period of 2024. Specifically, OCC reached 97.4% and ADR stood at 98.2% of their levels in the same period in 2024. Please turn to Slide five.

In the second quarter, RevPAR for our mature hotels in operation for more than eighteen months was 94.4% of the level in the same period of 2024, while OCC and ADR stood at 96.5% and 97.8% of 2024's levels for the same period, respectively. Please turn to Slide six. In the process of expanding our scale, we have always adhered to a long-term growth principle with hotel quality as our top priority. This ensures each new hotel carries forward our brand DNA and delivers consistent experiences, thereby supporting sustainable growth through quality. In the second quarter, we maintained a steady pace of expansion with 118 hotels opened.

By the end of the second quarter, we had a total of 1,824 hotels in operation, representing a 29.2% year-over-year increase. Meanwhile, leveraging our solid brand momentum and continuously enhanced product strength, we have been gradually building differentiated competitive edges with multiple brands and product lines that precisely target various market segments. We offer franchisees a rich and diverse range of investment options. By the end of the second quarter, the number of hotels under development reached 816. The growth of high-quality pipeline projects is viewing strong momentum toward our strategic goal of 2,000 premier hotels. Next, I would like to share the latest developments for Atour Hotel brands. Please turn to Slide seven.

In the upper midscale market, the parallel development of Atour Series III and Series IV enables us to gain deeper insights into demand across segmented scenarios, driving our further penetration in the upper midscale segment. Among them, Atour Series III consolidates our core brand position in mainstream business travel scenarios. The latest Atour 3.6 version is built on the product philosophy of timeless and humane and focuses on customer needs for both functional space and ambience, further enhancing the convenience and comfort of the stay experience. The first batch of Atour 3.6 hotels have gradually opened and received strong market recognition for their outstanding product strength, which is driving robust signing momentum. Please turn to Slide eight.

As a next-generation benchmark product for the upper midscale market, Atour Series IV focuses on prime locations in higher-tier cities, precisely catering to the blended needs of business trips and urban vacations. On June 28, we celebrated the one-year anniversary of our first Atour 4.0 hotel. By seamlessly integrating spatial aesthetics with local culture, it has established a mode of differentiated experiences, marking a critical transition from product innovation to quality validation. To date, more than 30 Atour 4.0 hotels have opened with over 60 hotels under development in our pipeline. Please turn to Slide nine. Today, increasingly prioritize experiential consumption that fulfills their inner needs.

However, traditional upscale hotels have struggled to keep pace as their facilities and service offerings exhibit a significant mismatch of evolving guest expectations. The introduction of Sahe Hotel represents a successful effort to redefine the standards of upscale hotel experiences. Guided by the brand ethos of oriental serenity, Sahe creates deeply immersive experiences across sleep, healing, and wellness, revolutionizing the traditional hotel's approach to guest care. On May 28, our first Sahe flagship hotel officially opened in Shenzhen and has received widespread acclaim for its distinctive oriental lifestyle experience. As a newly developed upscale brand, Sahe Hotel addresses present needs while anticipating emerging consumption trends.

Looking ahead, Sahe will focus on rigorous site selection in core business districts of first-tier and new first-tier cities, while continuously optimizing its product model based on customer feedback and operating performance. We expect each thoughtfully crafted Sahe hotel to become a lifestyle landmark in every city it enters, demonstrating to both customers and franchisees an innovative model in China's new generation of upscale hotels. Please turn to Slide 10. Atour Lite 3.3 as an extension and upgrade of Atour Lite 3.0 has comprehensively improved its design style, functional modules, and operational model to precisely cater to the needs of young business travelers and franchisees, further enhancing our product competitiveness in the midscale hotel segment.

From an operational standpoint, we continued to improve efficiency and enhance the customer experience. These efforts have produced a strong operating performance in the brand metrics and flagship hotels in key cities, while offering franchisees a sustainable return on investment. We believe the current market environment presents a great opportunity for Atour Lite's growth. As a strategic priority for the group, we will continue to allocate core resources to it. In terms of scale, we are taking a long-term quality-first approach, making steady progress through a rigorous selection process. In brand building, we maintain a youth-focused positioning and continue to strengthen its presence and influence, further widening our differentiated advantage in the midscale hotel segment.

Moving now to our retail business. Please turn to Slide 11. Atour Retail's differentiated advantages stem from a profound understanding of customer needs and steadfast commitment to our natural deep sleep concept. Rather than accelerating product launches, we prioritize excellence in addressing core customer needs and carefully capturing the experiential nuances of different scenarios. Through meticulous refinement, we translate these insights into implementable product functionality, gradually enhancing core competitiveness in a way that cannot be replicated. Fueled by ongoing strong sales of new products and the momentum from promotional campaigns, our retail business maintained robust growth this quarter with GMV rising 84.6% year over year to RMB1,144 million. Online channels continued to account for over 90% of total GMV.

Our retail GMV set a new sales record during the June 18 shopping festival reaching RMB578 million, up more than 86% from the same period last year. During this promotional campaign, AtourPlanet ranked first in terms of sales in the bedding category for the first time on major third-party platforms. This breakthrough signifies that AtourPlanet's deep sleep solutions brand positioning has further consolidated consumer mindshare. Please turn to Slide 12. In the Pillow category, AtourPlanet has maintained its leading position on major third-party platforms this quarter, further cementing our leadership position.

Based on customer feedback and after several rounds of fine-tuning in material selection, support structure adjustments, and real sleep tests, we officially launched an upgraded version of the Deep Sleep Memory Foam Pillow Series this month. The Deep Sleep Memory Foam Pillow Pro 3.0, this product delivers multiple breakthrough upgrades, including an innovative curve-fitting design and a partition support structure that better cradles the head and naturally fits the curvature of the neck and shoulders. The accompanying pillowcase uses a new weaving technique, which enhances breathability and moisture-wicking while keeping the pillow surface at a stable temperature. Please turn to Slide 13.

Meanwhile, after multiple quarters of dedicated research and functional refinement, the momentum of our comforter category has gradually gained market recognition for its product strength. The Deep Sleep Thermal Regulating Comforter Pro 2.0 summer season continued its strong sales momentum during the second quarter, driving significant growth in category sales. Atour Planet has also surged to the top of the comforter category rankings on the Douyin platform in May. Please turn to Slide 14. This quarter, to address common daily use pain points, we also launched a new product category, the Deep Sleep Fitted Sheet.

Atour Planet's continuously expanding Deep Sleep product portfolio comprehensively covers the diverse needs of customer home sleep microenvironment and demonstrates our capabilities to provide systematic solutions in the sleep segment. Looking ahead to the second half, we will further deepen our presence in the sleep markets by driving more product iterations and category innovations based upon our customer needs. We will enhance our R&D capabilities, strictly adhere to production standards, and optimize supply chain management to advance the upgrading of industry craftsmanship and quality standards. We will remain at the forefront of innovations in consumers' sleep experience and drive high-quality growth in the retail business. Please turn to Slide 15.

Last but not least, I would like to share the progress across our membership business and channel development. With the ongoing refinement of the A Card membership system and the steady expansion of member benefits, our registered individual members surpassed 102 million by the end of the second quarter, representing a 34.7% year-over-year increase. This marks a new phase for our membership program. In terms of channel development, our CRS channel remained at a healthy level, accounting for 61.5% of total room nights sold in the second quarter. The contribution of room nights sold to corporate members was 20%. Please turn to Slide 16.

We believe the core value of our membership business is not on traffic operations, but on building an emotional connection with our customers. Refocusing on customers and responding to their genuine needs is the core value of the continuous evolution of the A Card system. In June, we launched the new Gold Member Growth System to improve Gold Member perception and satisfaction with membership benefits. This system adopts a tier-based benefits release mechanism and extends certain platinum member benefits to them, better aligning with the pace of members' progression and their usage needs, while allowing more high-frequency active customers to enjoy premium benefits earlier.

Looking ahead to the second half of the year, we remain committed to our Chinese experience strategy and will continuously strengthen our fundamental capabilities and reinforce execution standards. Amid a complex and volatile external environment, we will uphold our core values of humanistic care and a customer focus. Through refined service and high-quality products, we aim to set the benchmark for experiences in the industry and as always deliver our warmth and attentiveness to every customer. I will now turn the call over to our Co-CFO, Mr. Jianfeng Wu, who will discuss our financial results.

Jianfeng Wu: Thank you, Haijun. Now I would like to present the company's financial performance for 2025. Please turn to Slide 18 of the result presentation. Our net revenues for 2025 grew by 37.4% year over year and 29.5% quarter over quarter to RMB2,469 million. Revenues from our monetized hotels for 2025 were RMB1,299 million, up 26.5% year over year and 25.9% quarter over quarter. The year-over-year increase was primarily fueled by our ongoing hotel network expansion. The total number of our monetized hotels increased from 1,382 as of 06/30/2024 to 1,800 as of 06/30/2025. The quarter-over-quarter increase was mainly due to an increase in RevPAR. RevPAR for our managed hotels was RMB340 for 2025 compared with RMB302 for the previous quarter.

Revenues contributed by our leased hotels for 2025 were RMB150 million, a decrease of 17% year over year and an increase of 16.4% quarter over quarter. The year-over-year decline was primarily due to a decrease in the number of leased hotels as a result of our product mix optimization. The quarter-over-quarter increase was mainly due to an increase in RevPAR. RevPAR for our leased hotels was RMB513 for 2025 compared with RMB453 for the previous quarter. Revenues from our retail business for 2025 were RMB1,020 million, up 79.8% year over year and 39.1% quarter over quarter.

These increases were driven by growing recognition of our retail brands and effective product innovation and development as we successfully broadened our range of product offerings. Now let's move to cost and expenses. Please turn to Slide 19. Hotel operating cost for 2025 increased by 15.1% year over year and 21.3% quarter over quarter to RMB893 million. These increases were primarily due to the increases in variable costs, such as supply chain costs and hotel manager costs associated with our ongoing hotel network expansion. Gross margin of our hotel businesses extended to 38.3% in 2025 from 35.7% during the same period of 2024, primarily attributable to a lower proportion of leased hotels as a result of our product mix optimization.

Retail cost for 2025 rose by 70% year over year and 33.5% quarter over quarter to RMB480 million. These increases were associated with the rapid growth of our retail business. Gross margin of our retail business expanded to 53.3% in 2025 from 50.6% during the same period of 2024, primarily attributable to the increasing contribution from higher margin products. Now please turn to Slide 20. Selling and marketing expenses for 2025 were RMB393 million compared with RMB285 million for the same period of 2024. Selling and marketing expenses accounted for 15.9% of net revenues for 2025 compared with 12.5% for the same period of 2024.

The increase was mainly due to the investment in brand recognition and effective development of online channels, in line with the growth of our retail business. General and administrative expenses for the same period for 2025 were RMB90 million, including RMB2 million share-based compensation expenses compared with RMB91 million for the same period of 2024, which included RMB15 million in share-based compensation expenses. General and administrative expenses, excluding share-based compensation expenses, accounted for 3.6% of net revenues for 2025 compared with 4.2% for the same period of 2024. The decrease was primarily due to improved management efficiency and economies of scale. Technology and development expenses for 2025 were RMB42 million compared with RMB36 million for the same period of 2024.

Technology and development expenses accounted for 1.7% of net revenues for 2025 compared with 1.8% for the same period of 2024. Now please turn to Slide 21. Adjusted net income for 2025 was RMB425 million, representing a 30.2% increase year over year. Adjusted EBITDA for the second quarter of 2025 was RMB610 million, up by 37.7% year over year. And adjusted net profit margin for 2025 was 17.3%, representing a decrease of 0.9 percentage points year over year. The decrease was due to a rise in the overall effective tax rate resulting from withholding tax. Adjusted EBITDA margin for 2025 was 24.7%, remaining stable compared to the same period of 2024. Now please turn to Slide 22.

We also maintained a healthy cash position. As of June 2025, our cash and cash equivalents totaled RMB3,200 million with net cash of RMB2,649 million. Please turn to Slide 23. For full year 2025, given ongoing network expansion and rapid growth of our retail business, we currently expect total net revenues to increase by 30% compared with full year 2024. That concludes our financial highlights for 2025. Now let's open for Q&A.

Operator: Thank you. We will now begin the question and answer session. Our first question comes from the line of Lydia Ling from Citi. Please go ahead.

Lydia Ling: Thanks, management, and congratulations on the solid results in the second quarter. I want to ask some questions on the RevPAR trend. Could you share the latest RevPAR trend performance in the third quarter to date, especially during the summer holidays? And what's your latest view on the full year RevPAR trend?

Haijun Wang: Thank you, Lydia. Well, entering the summer season, the market continues to exhibit some characteristics such as the rotating travel hotspots or the divergent regional performances. Overall demand has not yet recovered to the same period last year. However, we have observed that the summer leisure travel still demonstrated some resilience. Therefore, we expect that the RevPAR pressure in Q3 will somewhat ease compared to that of Q2, while further narrowing the decline in year-on-year RevPAR recovery. Nonetheless, full year RevPAR recovery rate is also showing a gradual improving trend. Looking ahead, we believe the industry will continue to face challenges as market supply increases overall.

However, Atour Lifestyle Holdings Limited will consistently leverage our differentiated experiential advantages by refocusing on users, while continuously strengthening our product excellence and brand premium capabilities. In terms of revenue management, we shall maintain a more balanced strategy between OCC and ADR to enhance overall profitability. We are confident that this approach is the key to navigating market cycles and it will serve as a touchstone for our brand's resilience. Thank you.

Operator: One moment for the next question. The next question comes from the line of Xin Chen from UBS. Please go ahead.

Xin Chen: Let me translate to English. May I have the management share whether there are any changes to the 2025 guidance on hotel openings and closures? Additionally, what is the recent trend in franchise signings with the increasing competition in the market? Will this impact the company's future development plans?

Haijun Wang: Thank you, Xin Chen. Let me try to answer your question and allow me to share Atour Lifestyle Holdings Limited's long-term development plans from multiple perspectives, including store openings, closures, and signings. Firstly, regarding new openings. In the first half of this year, we opened a total of 239 new hotels. By the end of the second quarter, pipeline hotel numbers reached 816. Based upon this, we are fully confident in achieving our full year guidance of 500 new hotel openings and finally reaching the scale target of 2,000 premier hotels by the end of this year. Secondly, on closures.

As for our hotels in operation, we conduct ongoing evaluations from operational to experiential perspectives and terminate partnerships with those that do not meet our experience consistency standards. In the first half of the year, we closed 34 hotels and we expect the full year number of closures to be between 70 to 80. Moving forward, we will maintain a certain active replacement rate to ensure every operating hotel is a differentiated high-quality property. Thirdly, the next point on our future approach to signings. Firstly, we will position precisely in terms of location leveraging the network management advantages outlined in our site selection tool.

Secondly, despite the current market environment with turbulences going on, we shall continue with the high standards on signings to ensure our high-quality growth in scale. These strategies will allow us to not only offer better products and experiences but also create a win-win sustainable growth for our brand and the franchisees. Last but not least, when we look back at the development history of China's chain hotel industry, most players have inevitably followed a path of prioritizing scale first. But the industry would sooner or later eventually shift from competition on scale towards competition on quality. Meanwhile, we at Atour Lifestyle Holdings Limited consistently kept to our strategic focus of quality premier hotels throughout the whole time.

In the future, we will continue to enforce strict quality control throughout the entire life cycle of hotels from signing and opening to operations and build a brand moat with our high standards and consistently practicing and promoting our development philosophy of long-termism. Thank you.

Operator: The next question comes from the line of Sijie Lin from CICC. Please go ahead.

Sijie Lin: Thank you, management. Congrats for another strong quarter. My question is on the retail business because we noticed that Atour Lifestyle Holdings Limited's retail business continued its outstanding performance during Q2, which spans across the 618 online shopping festival period. And that you have raised full year revenue guidance. Could you share with us what's the full year revenue guidance for the retail business? Additionally, could you please discuss more about the future development of the retail business, maybe including the rollout pace of new sleep products? And is there any bottlenecks or challenges among development? Thank you.

Haijun Wang: Thank you, Sijie. Let me answer your question regarding revenue guidance. In the second quarter, Atour Lifestyle Holdings Limited's retail business achieved outstanding performance. Looking at the full year, we will continue to launch new products as planned and further refine our product metrics. This month, we launched the Deep Sleep Memory Foam Pillow Pro 3.0 and the Deep Sleep Thermal Regulating Comforter Pro 2.0 all season. Both have received very positive market feedback. Upgraded versions of the Deep Sleep Thermal Regulating Comforter series will also be rolled out in the near future to further enrich our Deep Sleep product line.

Considering the positive development momentum of the retail business, we are confident in achieving our full year targets and have therefore raised our full year guidance of retail business growth to 60% year over year. Now let me discuss the future plans for the retail business of ours. Through long-term exploration, we have already recognized that the sustained popularity of our AtourPlanet sleep products is rooted in our deep understanding of user needs and the successful implementation of an experience-driven business model. However, we do see intensifying competitions going on with new entrants and imitators joining the fray. As a relatively new player, we see ourselves coming into this industry.

We need to stay focused, solidify our fundamental capabilities in two folds. On one hand, we shall continuously optimize our supply chain as a strong foundation for our long-term development. While on the other hand, we will strengthen R&D innovation and quality control to drive the overall improvement of industry standards with higher benchmarks. This is precisely a continuation and practice of the long-term philosophy of high-quality growth that our hotel business upholds. Thank you.

Operator: Thank you. Next question comes from Dan Chee of Morgan Stanley. Please go ahead.

Dan Chee: We observed the growth rate of the retail segment business. Revenue is a lot faster than the hotel segment. So there has been some structural change on the growth rate of the company's revenue outlook. The tax rate was also high this quarter similar to the first quarter. I would like to understand the company's latest view on the full year adjusted net income margin. Can it still stay stable at 18% like last year as previously guided?

Haijun Wang: Thank you, Dan. In 2024, our group's adjusted net profit margin was approximately 18%. This year, due to the rapid growth of our retail business, our revenue structure shifted. In the first half of the year, retail revenue accounted for around 38% of the total, up from around 29% last year. The contribution from retail revenue continues to increase. It is exerting a structural impact on our overall net profit margin, but we have maintained a relatively stable pre-tax profit margin through improved management efficiency. Meanwhile, as we have officially launched a comprehensive shareholder return program combining dividend and share repurchases this year, of which the funding source comes from our net income profit distribution of our domestic subsidiaries.

Accordingly, the associated withholding tax will increase our overall effective tax rate this year. The adjusted comprehensive tax rate is expected to rise to 30% this year compared to last year's 25%. That will to some extent affect our full year net profit margin. As a result, we anticipate a year-on-year decline in full year net profit margin.

Operator: One moment for the next question. Our next question comes from the line of Simon Cheung of Goldman Sachs. Please go ahead.

Simon Cheung: Let me translate that into English. Regarding the hotel brands, I have questions on the two hotel brands that they have, maybe, more strategic focus or newly launched recently. One is Sahe, whereby they launched a new hotel and their market reception has been excellent. Wondering whether they have any targets in terms of the number of hotels as well as the district or regions where they're to be focusing on? Secondly, also on Atour Lite, I think the number of hotel count almost reaching 180 for this quarter. Wondering if there's any update on the feedback and specifically, the version 3.3 has been quite well received. So wondering if there's going to be any feedback that management can share.

Thank you.

Haijun Wang: Thank you, Simon. First, regarding the question of Sahe. Since its opening, Sahe has been highly praised by our users because of the design style and service quality and the particularly standout operational performance. The flagship store of Sahe Hotel in Shenzhen achieved a comprehensive RevPAR exceeding RMB800 in its first full month operation that started from May 28. Currently, several high-quality projects in key cities such as Guangzhou, Shanghai, and Shenzhen are poised to open successively. For Sahe, we will adhere to a quality-first approach because we need to control the scale of expansion while deepening the brand's presence and aiming to set a benchmark in experience and supporting its growth with a long-termism mindset.

I'll talk about Atour Lite. In the second quarter, the overall operational performance of Atour Lite 3.0 was outstanding with the RevPAR recovery rate outperforming our group's average, demonstrating a strong product potential and very efficient location of the Atour Lite brand. Atour Lite 3.3 version upgraded from the basis of Atour Lite 3.0 has also been highly favored by franchisees since its launch and picked up a very strong signing momentum. Our first Atour Lite 3.3 hotel has opened last week and the first batch of more locations will open soon.

Looking forward, we do believe in Atour Lite to be a strategic priority for our group and we'll continue to invest in this brand with our core resources, meticulously refine the product quality, enhance operational efficiency, and also focus on core urban areas and key business districts. With a long-term vision and steady deliberate efforts, we aim to lay a solid foundation for achieving a goal of 1,000 Atour Lite hotels. Thank you.

Operator: There are no further questions at this time. That concludes today's question and answer session. I'd like to turn the call back to Mr. Luke Hu for any additional or closing remarks.

Luke Hu: Thank you for joining us today. If you have any further questions, please feel free to contact our IR team, and we look forward to speaking with you again next quarter. Thank you, and goodbye.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

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