Atour sold more than 12 million pillows in the first half of 2026, with pillow and quilt sales accounting for 40% of its total revenue during this period. The Deep Sleep Memory Pillow Pro series surpassed 12 million units sold by the end of June 2026, reflecting the growing retail segment within Atour’s business model.
Atour’s retail revenue surged from 254 million yuan in 2022, representing 11.22% of total revenue, to 3.67 billion yuan in 2025, which equated to 37.5% of total revenue. In H1 2026, retail revenue further increased to comprise 41% of total revenue. This segment grew 63.2%
year on year in Q2 2026. Atour expanded its product offering beyond pillows and quilts with new items such as fitted sheets and loungewear. However, increased marketing expenses rose 54% year on year to 606 million yuan in Q2 2026, with retail costs up 70%, reflecting heavy investment in customer acquisition. The company sourced pillows from OEM factories in Dongguan, Guangdong, where franchisees purchase the pillows at 17% to 35% of the retail price. Gross profit margin in retail rose from 37% in 2021 to 53.3% in Q2 2026.
Huazhu’s Asset-Light Franchise Expansion
Huazhu opened 498 new stores in Q2 2026, with only one
store funded directly by the company and the remainder franchised. By June 2026, Huazhu operated over 13,000 hotels worldwide, 93% under management, franchising, or licensing agreements, while just 7% were self-operated. Total revenue reached 13.117 billion yuan in H1 2026, up 11.0% year on year, and net profit remained stable at 2.394 billion yuan. Management and franchising revenues grew 22.9% to 6.592 billion yuan, constituting 50.4% of total revenue. The self-operated segment shrank for eight consecutive quarters since Q2 2024.
Huazhu’s hotel operating costs increased 7.4% year on year, significantly below its revenue growth. The group implements an asset-light business
model reliant on franchisees to bear capital expenditures, supporting rapid expansion while maintaining lower operating cost growth.
Hotel Occupancy and Revenue Dynamics
Atour’s overall RevPAR (revenue per available room) in Q2 2026 rose 0.7%, with an average room rate of 437.9 yuan, up 1.2% year on year. However, mature stores open longer than 18 months saw RevPAR decline 3% year on year to 336.8 yuan, occupancy rates fell 0.8 percentage points, and average room rates dropped 1.7%. Atour operates 2,175 stores, 2,156 under franchise agreements. Franchisees incur hotel construction, management fees, and mandatory purchases of pillows from headquarters, transferring retail profits to Atour’s central retail
team.
Huazhu’s overall hotel occupancy rate decreased from 81.0% in H1 2025 to 79.8% in Q2 2026, marking six straight quarters of decline. Available rooms increased 12.7% year on year, but paying guest numbers did not rise proportionally. Directly-operated Huazhu stores had an 86 yuan higher room rate and 3.2% higher occupancy than franchise stores in Q2 2026. Revenue per available room also favored directly-operated properties by 81 yuan. In Q2, Huazhu closed 176 stores, 157 of which were franchises, with annual closures expected between 600 and 700 stores.
Increasing Competition in Bedding Retail
Atour faces growing competition in the bedding market. Huazhu introduced memory
pillows priced at 269 yuan and 369 yuan, undercutting Atour’s pricing by approximately 30 yuan. Other hotel brands such as All Seasons, Orange, and Lanxu are expanding bedding product sales. Atour’s declining room revenues at mature stores highlight pressure amid rising retail reliance and competitive product offerings.
Franchise stores across the industry generally have lower occupancy and revenue per available room compared to directly-operated stores. Franchisees also face additional fees, including commission rates exceeding 12% on central reservation system bookings, which impact profitability.
Shift from Room Rates to Diversified Revenue
Atour emphasizes retail sales of pillows and related products as a core revenue stream alongside its hotel
operations. Huazhu advances an asset-light model focused on expanding management and franchising businesses rather than direct hotel ownership. Both companies show the hospitality sector’s shift away from sole dependence on room-rate profits toward integrated retail and franchise revenue models.
Atour’s management raised its full-year retail revenue growth target to 40% in 2026, reflecting confidence in this diversification. Huazhu also reaffirmed confidence in its asset-light approach, raising its full-year guidance despite market challenges. These strategies illustrate how leading hotel chains in China are transforming traditional business models to spur revenue growth beyond lodging fees.
