How far has hotel demand recovered?

  • STR data show that China’s hotel revenue per available room (RevPAR) was flat in August and rose 1% in September, after falling 4% year over year in July due to adverse weather. Average room rates ranged from flat to up 1% over the same period, supporting the recovery.
  • Industry RevPAR still fell 1% year over year for the third quarter as a whole, weaker than the flat reading in the first quarter and 1% growth in the second. Luxury and economy hotels grew 2% and 1% respectively, while midscale hotels fell 6%.
  • Goldman Sachs expects domestic RevPAR at Huazhu and Atour to be flat to slightly higher year over year in the third quarter, supported by hotel upgrades and measures to reduce cannibalization from new hotels; Jin Jiang and BTG Hotels are expected to decline 2% and 1% respectively. Year-over-year comparison bases are higher closer to year-end, and Huazhu and Atour appear more likely to meet their full-year guidance for flat RevPAR.

Why does pressure persist as hotel openings accelerate?

  • Goldman Sachs expects the number of new hotels opened by Huazhu and Atour in the third quarter to improve from each of the first two quarters, with closures relatively stable quarter over quarter. However, operators acknowledge that openings in the first nine months lagged the prior-year pace, while maintaining their full-year targets.
  • Industry competition has driven same-store RevPAR down by low- to mid-single-digit percentages year over year over the past few quarters. Some franchisees in non-core locations have seen lower returns on their investments than originally expected and are therefore hesitant to open hotels; licensing, approvals and construction times have also caused delays.
  • As of the end of September, the domestic supply of hotels with more than 15 rooms had grown 6% year to date, below the 8%–9% recorded in the same period a year earlier. Whether the recovery in openings can continue will affect Goldman Sachs’s assessment of hotel network expansion and earnings growth.

What is driving growth at Huazhu and Atour?

  • Goldman Sachs expects Huazhu’s total third-quarter revenue to rise 8% year over year, below the 11% growth in the first two quarters. China revenue growth of 12% is partly offset by a 10% decline in overseas revenue. The bank assumes supply-chain initiatives will lift the monetization rate for franchised and managed hotels in China to 13.7%, up from 13.4% in the second quarter.
  • Atour’s online retail tracking data show gross merchandise value grew 60% year over year in the third quarter, down from 77% and 82% in the first and second quarters. Given the historical 15%–20% discrepancy between tracking data and actual disclosed trends, Goldman Sachs estimates retail revenue growth of about 40%.
  • Goldman Sachs expects Atour’s total third-quarter revenue to rise 32% year over year and EBITDA to grow 23% to 842 million yuan. Because the lower-margin retail and supply-chain businesses account for a growing share, overall EBITDA margin is expected to fall 1.7 percentage points year over year.

Why is revenue growth slowing at online travel platforms?

  • Goldman Sachs expects Tongcheng Travel’s third-quarter revenue to grow 5% year over year, within the company’s guidance range of 2%–7%. Accommodation revenue growth of 6% and growth of 36% in other revenue, mainly hotel management, offset a 4% decline in transportation revenue. Following tighter regulation of railway ticket-snatching services, Tongcheng is adjusting its transportation monetization strategy.
  • Goldman Sachs expects Trip.com Group’s domestic revenue to fall 5% year over year, including a 30% decline in transportation ticketing revenue: the company adjusted its hotel monetization rate in August and has promoted value-added services such as insurance more cautiously. Meanwhile, revenue from the overseas Trip.com platform is expected to grow 45%, driving group revenue growth of 4%.
  • Goldman Sachs expects Trip.com Group’s third-quarter earnings before interest and tax to fall 3% year over year to 6 billion yuan. Although losses at the Trip.com platform itself continue to narrow, the growing share of loss-making overseas businesses is still expected to reduce the group’s EBIT margin by 2.1 percentage points year over year to 31.3%.

Which companies does Goldman Sachs favor, and why?

  • Goldman Sachs believes its third-quarter EBITDA and earnings forecasts for Huazhu and Atour are above market consensus, those for the two online travel platforms are broadly in line, and those for Jin Jiang and BTG Hotels are below consensus. Among Chinese hotel stocks, the bank prefers Huazhu and Atour because of greater visibility into hotel network expansion and earnings growth.
  • Goldman Sachs is also positive on the long-term growth potential of Trip.com Group’s overseas expansion. In the short term, domestic airfares after Golden Week were broadly flat year over year and passenger traffic fell 2%–3% year over year; hotel RevPAR has fallen 2%–3% year over year so far in October. The bank expects the high year-over-year comparison base facing hotels to fade in the fourth quarter of 2026, earlier than the first half of 2027 for transportation and online travel businesses.