Innovative "Hotel +" Thinking: Atour's retail business revenue exceeds hotel revenue

Reporter Liu Wang reports from Beijing

Recently, Atour Group (NASDAQ: ATAT) released its second annual financial report since its listing on the U.S. stock market. With the issuance of the financial report, many hoteliers have raised a question: the second growth point of the hotel is retail?

In 2023, Atour Group's revenue will reach 4.666 billion yuan, a year-on-year increase of 106.2%, and its net profit will reach 739 million yuan, achieving a growth of 669.2%. The adjusted net profit was 903 million yuan, a year-on-year increase of 248.3%. The reporter of "China Business News" noted that this marks the fifth consecutive year of profit for Atour and the fourth consecutive quarter of revenue growth.

The most interesting thing is the retail business of Atour Group. In 2023, the revenue of retail business will increase to 972 million yuan, accounting for 20.81% of the total revenue, which even exceeds the proportion of revenue of Atour's self-operated hotels. Scene retail may gradually become the second growth curve of Atour. Regarding the model, growth and challenges of the retail business, the reporter contacted Atour Group for an interview, but has not replied as of press time.

It can be seen that now all hotel brands are aiming at the mid-to-high-end hotel track where Atour Group is located, and can Atour's "hotel +" idea become the best solution for hotel transformation?

Retail business has become a new growth point

In 2023, Atour Group's retail business contributed 972 million yuan in revenue, of which 412 million yuan in the fourth quarter, nearly half of the full year.

On the one hand, there is a view that Atour is "not doing business", and on the other hand, why Atour's retail business can have such a brilliant performance, whether it is sustainable and universal in the industry and other related topics have been hotly discussed. The reporter noticed that in order to answer these questions, it is necessary to look at Atour's business model of retail.

It is understood that by creating a "lifestyle platform", Atour has closely combined retail business with hotel services to form a "scene retail" model.

Atour has created a multi-dimensional self-operated retail platform by setting up a living hall in the hotel and opening an official flagship store through online channels such as Tmall, JD.com, and self-operated mini programs. Through the experience in the hotel, users can have a more intuitive understanding of the product. At present, Atour's retail business covers multiple series such as sleep, travel, daily chemicals, furniture, gifts, etc., with 700 self-operated products.

At the same time, Atour has established its own IT team, developed back-end ERP, front-end distribution, member CRM and other systems, opened up the data of hotel members and retail members, and realized the integration of online and offline.

In addition, it has continuously upgraded its retail brands, such as upgrading "Atour Life" to "Atour Market", and incubated three major brands, further enriching its product line and enhancing its brand image.

Jiang Changcheng, deputy general manager and partner of Beijing Shuyuan Education Technology Co., Ltd., who has many years of experience in the cultural tourism industry, analyzed the underlying logic of the growth of Atour Hotel's retail business, the core of hotel operation and the core of the retail industry are traffic, and the compound operation of traffic to maximize customer value is the key to the growth of the hotel industry.

Jiang Changcheng believes: "The experience of the hotel industry is in the service scene, involving catering, wine, entertainment, guest rooms, fitness, leisure, body care, etc., these scenes are like a store with experience trial as the core. From this point of view, the hotel is no different from IKEA, Atour chose a high-profit and high-demand sleep series products as a retail start, creating a new growth line for the company. ”

The reporter noticed that among Atour's products, there are many explosive products. For example, the pillow of Atour Planet was once on the hot search. Among the top 5 pillows on Tmall's best-selling list, Atour's pillows account for 3.

In the 2023 financial report, Atour also made a special announcement of its achievements during the "Double 11" period: the GMV of the pillow brand on the third-party e-commerce platform exceeded 250 million yuan, which was 6 times the turnover of the "Double 11" in 2022.

However, there are also doubts in the industry, and there is a view that Atour's retail business is seriously "biased", and the sales of other products except pillows are lackluster. From the product side alone, pillows, as standard products, do not have too strong barriers in nature, do not have the core competitiveness of products, and it is too early for the retail business to become its second growth curve.

But for Atour, the determination to develop retail seems to be great. Wang Haijun, founder and CEO of Atour Group, emphasized in the financial report that "in 2024, Atour will further unleash the synergy between retail and accommodation businesses", continue to enhance brand value, and promote the Chinese experience to new heights.

A new sample of "Hotel +"?

In fact, with the intensification of market competition and the diversification of consumer demand, traditional hotel services have been difficult to meet all the needs of the market, through the "hotel +" model, can help hotels to create a unique brand image, provide differentiated services. Therefore, it has become an industry trend to do "addition" in the accommodation industry.

In addition to Atour's "hotel + retail", there are also hotels that combine local cultural and tourism resources to explore their own development paths. For example, in Luoyang, there are many hotels that carry out the exploration of "hotel + Hanfu", providing guests with free use of Hanfu services during check-in, and providing makeup services at prices lower than the market standard.

According to Meituan data, in 2023, the number of themed hotels in Luoyang that provide "Hanfu" services will increase by 5 times year-on-year, which is much higher than the 2-fold growth in the country.

In addition, there are also hotels to launch the exploration of "hotel + intangible cultural heritage", such as during the Spring Festival, Hilton Group will combine intangible cultural heritage culture with the Spring Festival to provide a series of experiences full of New Year's flavor, including "intangible cultural heritage taste" buns, red envelope electronic room cards and intangible cultural heritage project experience.

According to the reporter's incomplete statistics, Atour's "hotel + retail" exploration has achieved outstanding performance. Regarding the universality and sustainability of this model, Jiang Changcheng believes that any hotel brand and homestay brand that has confidence in its own brand, service, experience, word-of-mouth, and traffic and objective support can do an extension of its business in this direction.

Chao Chenglin, director of the Industrial Space Research Institute, a business expert, told reporters that the popularity of this model in the hotel industry is expected to gradually increase. However, its sustainability will depend on a variety of factors, including but not limited to market conditions, consumer demand, and its own operational efficiency.

However, Zhan Junhao, founder of Fujian Great Aim Brand Positioning Consulting, mentioned that Atour provides consumers with a richer experience through the deep integration of hotel services and retail business, and this innovative model may become an industry trend. However, in order to become widespread and sustainable, there are many factors such as supply chain, inventory management, and consumer acceptance that need to be considered.

"Atour Hotel's retail growth has had a profound impact on the business model and competitive landscape of the entire hotel industry. On the one hand, it has promoted the development of the hotel industry in the direction of diversification and integration, and on the other hand, it has also intensified the competition in the industry. Atour's model does have the potential to trigger a trend in the industry, leading to more hotel companies trying to enter the retail sector. However, following the herd does not necessarily mean success, the key is whether the company can find its own development path and competitive strategy. Zhan Junhao said.

Stress beyond the highlights

The reporter noted that Atour's retail business is based on the hotel accommodation business. In terms of scale, in the past year, the pace of expansion of Atour has also accelerated. In 2023, Atour Group will open a total of 289 new hotels and 576 newly signed hotels, exceeding the target set at the beginning of the year.

By the end of 2023, the number of hotels in operation of Atour reached 1,210, a year-on-year increase of 30%, of which franchised stores accounted for 97%. However, in terms of the layout of directly operated stores, from 2020 to the end of 2022, the number of Atour self-operated hotels has been 33, but by the end of 2023, it has decreased to 32 compared with the previous year.

There is a view that the role of self-operated hotels cannot be completely ignored, and that directly operated hotels are not only a reflection of the brand image, but also a symbol of the group's strength.

At the same time, although Atour's retail business contributed 972 million yuan in revenue in 2023, its debt problems and operating costs cannot be ignored. Atour's total liabilities rose from RMB1.681 billion in 2021 to RMB4.527 billion in 2023, while total operating costs and expenses in 2023 reached RMB3.8 billion, accounting for more than 80% of total revenue.

In addition, Atour is also facing certain external pressures. According to Frost & Sullivan statistics, from 2021 to 2025, mid-to-high-end chain hotels will become the fastest-growing segment in the entire industry, and from 2017 to 2021, Atour has ranked first in the scale of mid-to-high-end chain hotels in China for five consecutive years.

However, major hotel brands are also making efforts to upgrade products and brand innovation, such as Huazhu Group launched the all-season 5.0 product, BTG Homeinns launched the Homeinn Hotel 4.0 version, and Jin Jiang Hotel CEO Shen Li also said that in the future, it will accelerate the layout of mid-to-high-end and above brands.

Whether Atour's "hotel + retail" can break through the "encirclement" of the three giants in the industry is full of expectations.

Jiang Changcheng believes that in order to maintain or even amplify this growth pole, Atour must reposition and build a collaborative and mutual assistance structure between the hotel industry and the retail industry, reconstruct the business system of traffic management, scene innovation, integrated marketing and user coordination from the perspective of new enterprise positioning, and reconstruct the weight of business modules in accordance with the future development strategy to better adapt to and lead the market. This is also the direction that other hotels should think about and learn from.