By the end of the second quarter of 2026, Atour had sold more than 12 million pillows, pushing pillow and quilt sales to account for 40% of its total revenue, marking a strategic shift in hotel revenue models away from reliance on room rates.
Atour’s Rapid Retail Growth and Profit Margins
Atour’s retail revenue increased substantially from 254 million yuan in 2022, representing 11.22% of its total revenue, to 3.67 billion yuan in 2025, or 37.5% of total revenue. This growth accelerated further in early 2026, with retail income constituting 41% of total revenue in the first half and rising 63.2% year-on-year in Q2 2026. The company
raised its full-year retail growth target to 40%, reflecting confidence in the retail sector, driven mainly by the Deep Sleep Memory Pillow Pro series, which sold over 12 million units by mid-2026. Sales of the Deep Sleep Temperature Control Quilt Pro 3.0 also boosted gross merchandise value in the quilt category by more than 80% year on year.
Atour has broadened its sleep product portfolio beyond pillows and quilts to fitted sheets and loungewear, aiming to develop an Atour-branded home lifestyle. Despite profitability gains, sales and marketing expenses surged 54% year on year to 606 million yuan in Q2 2026,
with retail costs rising 70%. The sales expense ratio grew from 6.2% in 2022 to 13.5% in Q2 2026, indicating increased spending on customer acquisition.
Production Cost Structure and Competitive Landscape
Atour sources its pillows from OEM factories in Dongguan, Guangdong Province, selling them to franchise stores at 17% to 35% of the retail price. This supply model supports rising gross profit margins, which climbed from 37% in 2021 to over 50% in 2024, reaching 53.3% in Q2 2026. However, the low technical threshold of the bedding industry has intensified competition. Brands like Huazhu have introduced memory pillows priced lower than Atour’s, while other hotel groups
including All Seasons, Orange, and Kaiyuan Group have also entered the bedding market.
Atour’s Hotel Business Performance
Atour’s overall revenue per available room (RevPAR) increased 0.7% in Q2 2026, with the average room rate rising 1.2% year on year to 437.9 yuan. However, mature stores open for over 18 months experienced a 3% decline in RevPAR, with average room rates falling 1.7% and occupancy rates dropping 0.8 percentage points year on year. Atour operates 2,175 stores, of which 2,156 are franchise locations required to purchase pillows from the headquarters’ retail division. Franchisees bear hotel construction and fees, while serving as retail channels for Atour
pillows, contributing to group profit but adding sales targets to store employees.
Huazhu’s Franchise Model and Expansion
Huazhu opened 498 new stores in a single quarter, directly funding only one, with the remainder franchised, enabling rapid asset-light expansion. By June 2026, Huazhu operated over 13,000 hotels globally, with 93% under franchise, management, or licensing models and only 7% self-operated. Huazhu’s total revenue grew 11% year on year to 13.117 billion yuan in H1 2026, and net profit remained stable at 2.394 billion yuan. Management, franchising, and licensing revenue increased 22.9% to 6.592 billion yuan, accounting for 50.4% of total revenue, while self-operated business revenue decreased
by 4.9% year on year.
Occupancy Rates, Store Closures, and Franchisee Challenges
Huazhu’s overall occupancy rate fell to 79.8% in Q2 2026 from 81.0% in Q2 2025, marking six consecutive quarters of year-on-year decline. Available rooms increased 12.7% year on year, but paying guest numbers lagged behind. The company plans to close 600-700 stores in 2026, with 176 closures occurring in Q2, 157 of which were franchise locations. Franchisees face significant costs, including paying approximately 8% commission on bookings via Huazhu’s central reservation system and additional fees that push total commission above 12%. Furthermore, franchisee-operated stores report lower performance than Huazhu’s directly operated ones; in Q2 2026,
direct stores had room rates 86 yuan higher, occupancy rates 3.2 percentage points higher, and RevPAR 81 yuan higher than franchise stores.
Hotel Industry Trends Toward Revenue Diversification and Asset-Light Models
Both Atour and Huazhu reflect broader hotel industry trends moving away from reliance on room rate profits toward diversified revenue streams. Atour leverages hotel stays as immersive experiences to drive retail pillow and bedding sales, now a major revenue pillar. Huazhu focuses on expanding through franchise and management contracts, reducing asset ownership to lower costs and increase scalability. However, declining occupancy and mature store performance challenges indicate limits to growth from traditional room revenue, pushing hotel groups to
cultivate alternative income sources and refine asset-light franchise strategies.
