Hotel business is becoming increasingly difficult; Huazhu and Atour rely on these to maintain their profits.

How does Huazhu’s light asset transformation respond to industry oversupply?

Interface News Reporter | Chen Yixuan

Interface News Editor | Li Shen

Recently, two leading hotel groups, Huazhu (NASDAQ: HTHT) and Atour (NASDAQ: ATAT), released their performance results for the fourth quarter and the entire year of 2025. Against the backdrop of an overall backlog in hotel construction and oversupply in the industry, both companies still maintained rapid growth in net profit.

Financial data shows that Atour Group achieved revenue of approximately 9.79 billion yuan in 2025, a year-on-year increase of 35.1%, with a net profit attributable to the parent company of approximately 1.621 billion yuan, up 27.4% year-on-year. Huazhu Group achieved revenue of approximately 25.31 billion yuan in 2025, a year-on-year increase of 5.9%, with a net profit attributable to the parent company reaching 5.115 billion yuan, a year-on-year increase of 66.7%.

According to STR (Smith Travel Research) statistics, the overall domestic hotel industry’s revenue per available room (RevPAR) fell by about 5% year-on-year in the first half of 2025. The decline in RevPAR, a key metric for measuring the operational efficiency of individual hotels, indicates pressure on the overall revenue-generating capability of domestic hotels. From the performance of the two companies, it is evident that leading hotel groups are performing better than the market, but they still find it difficult to completely offset the operational pressures faced by individual hotels.

Both Huazhu and Atour show consistency in trends regarding core operational metrics for individual hotels. Huazhu Group’s annual occupancy rate for 2025 fell by about 1.2 percentage points year-on-year, and RevPAR declined by about 1.3% year-on-year. Atour Group’s annual occupancy rate for 2025 decreased by about 1.5 percentage points year-on-year, with RevPAR dropping by about 3.3% year-on-year.

However, in the fourth quarter, both companies began to see improvements in their operational metrics. In the fourth quarter, Huazhu’s RevPAR increased by 1.8%, and the Average Daily Rate (ADR) rose by 4% year-on-year. Atour’s RevPAR decline narrowed to 0.4%, while ADR grew by 1.5% year-on-year.

Huazhu, Atour Q4 and annual core operational indicators; Legacy Huazhu refers to Huazhu (China). Data compiled and illustrated by: Chen Yixuan

Huazhu Group CEO Jin Hui stated at the earnings conference that in the past three months, there has been a gradual improvement in the trend of the Chinese hotel industry, with steady growth in demand for cultural tourism, leisure, and inbound markets, as well as signs of a rebound in the business market, especially in core first- and second-tier cities. Therefore, Huazhu holds a cautiously optimistic attitude towards the overall trend of RevPAR in 2026.

Against this backdrop, in addition to core operational metrics, both Huazhu and Atour are stabilizing profits through diversified business structures.

Huazhu’s profits mainly come from franchise and management businesses, which saw a revenue increase of about 23.1% year-on-year in 2025, with its share continuing to rise. Atour, on the other hand, is driven by growth in retail business, achieving retail revenue of 3.67 billion yuan for the year, up 67% year-on-year, accounting for nearly 40% of total revenue.

Targeting 20,000 Stores: Huazhu Profits from “Management of Stores”

Since clearly proposing a light asset transformation strategy around 2019, Huazhu Group has continuously reduced the proportion of self-operated hotels and has instead expanded through franchise and management output. In 2025, Huazhu Group’s revenue from franchise and management businesses became the dominant part of its revenue structure for the first time.

Huazhu’s annual report shows that revenue from franchise and management (M&F) businesses reached 11.7 billion yuan, while revenue from self-operated (rental and self-owned) hotels was 12.9 billion yuan, a year-on-year decline of 6.5%. In core business segments, the proportion of revenue from franchise and management businesses increased from 49.3% in 2024 to 56.2%.

As of the end of 2025, Huazhu Group had 12,229 franchise and managed stores among its operating hotels, accounting for over 95%, with only 511 self-operated stores remaining, making up less than 5%, a further decline from about 8% at the half-year report. Interface News previously reported that among established international hotel groups, Marriott’s self-operated properties account for only 0.6%, while Hyatt’s self-operated ratio has been compressed to 2.1%.

Huazhu Group’s annual report also clearly states that the improvement in profit margins is mainly due to the continuous increase in the proportion of franchise and management businesses. With nearly all store expansions relying on the franchise model, Huazhu’s profit model is rapidly shifting towards “platform management output.”

Jin Hui also mentioned at the earnings conference that 2025 was the year with the most openings in Huazhu’s history, with over 2,400 new stores opened, and it is expected to maintain high growth in the coming years, “The group maintains its target of 20,000 stores by 2030.”

Huazhu typically charges a one-time franchise fee, ongoing management fees, and fees related to the Central Reservation System (CRS) for franchise hotels, with management fees usually taken as a percentage of hotel revenue. Industry estimates suggest that for Huazhu’s mid-range chain hotels, the investment recovery period per store is around 3-5 years under mature operations.

According to Interface News, initiatives such as “reducing per-room construction costs,” “shortening construction periods,” and “modular product design” are key measures that have continuously attracted investors to join Huazhu in recent years. The per-room investment cost for economy hotels in third- and fourth-tier cities generally ranges from 60,000 to 80,000 yuan, while mid-range hotels typically range from 100,000 to 120,000 yuan.

Huazhu’s Hanting 4.0 version released in July 2025 has managed to control the per-room cost to around 69,900 yuan and has shortened the construction period to 30 days through modular construction. For the existing transformation market, the semi-renovation cost for “Hanting Express” can be reduced to about 35,000 yuan, further lowering the investment threshold.

Beyond Selling Pillows: Atour Transforms Hotels into “New Retail”

In terms of store scale, Atour is still in a growth phase. However, it is noteworthy that Atour is approaching a “fully light asset” model. By the end of 2025, Atour had a total of 2,015 operating hotels, of which 1,996 were franchise hotels, with only 19 self-operated (rental) hotels, making the proportion of franchise stores nearly 99%.

From a revenue structure perspective, hotel operations remain Atour’s foundation. In 2025, revenue from franchise hotels reached 5.31 billion yuan, a year-on-year increase of 28%, still the largest source of income. However, it is the rapidly rising retail business in recent years that has truly changed the company’s profit structure.

Atour’s annual report shows that the revenue growth rate of the retail business far exceeds that of the hotel sector, and its cost ratio has decreased from 49.3% to 47.4%, with profitability continuing to improve.

Atour’s founder and CEO Wang Haijun has repeatedly emphasized the strategic significance of the retail business, stating that the retail segment continued to achieve strong growth in 2025, and Atour Planet further solidified Atour’s leading position in the “sleep market” through ongoing product innovation.

Wang Haijun also publicly stated in interviews that from the beginning of the venture, he wanted to make Atour a “lifestyle” brand, and the retail business is a naturally extended result of brand exploration. As early as 2018, internal discussions at the company aimed to increase the proportion of retail revenue to 40%-50%.

This path differs from traditional chain hotel groups. Unlike Huazhu, which focuses on expansion through franchise management, Atour attempts to transform guests into retail consumers through the high-frequency consumption scenario of hotels, forming a new model of “selling goods through hotels.”

Atour’s retail business is deeply centered around sleep scenarios, forming a product matrix centered on pillows and quilts. The deep sleep pillow product has long occupied a core position in retail revenue, and it has gradually expanded to sleep components (temperature-regulating quilts, mattress covers, mattresses) and extended to sleep-related products such as eye masks and pajamas.

In this regard, Wang Haijun’s goal is to focus on four types of products, “iterating repeatedly like the Apple brand.” Currently, Atour has upgraded its deep sleep pillow to the Pro3 series and continues to advance product iteration.

According to Interface News’s analysis, since going public, Atour’s retail business revenue has rapidly surged from 254 million yuan in 2022 to 3.67 billion yuan in 2025. Its share of total revenue has also increased from 11.22% to 37.5%.

Data compiled and illustrated by: Chen Yixuan

Beyond retail, Atour’s “Bamboo House” reading space has also become a standard feature of its stores. “Atour has more than 2,000 hotels, which means there are over 2,000 bookstores,” Wang Haijun said.

However, this model is not without challenges. Some industry insiders have told Interface News that the retail business highly relies on product innovation and brand strength, and the sustainability of “hit products” remains to be observed. On the other hand, the traffic in hotel scenarios has a natural upper limit, and the space for retail conversion is limited, which means that its products are still mainly concentrated in high-adaptation categories such as sleep.