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TABLE OF CONTENTS
ATOUR LIFESTYLE HOLDINGS LIMITED INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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As filed with the Securities and Exchange Commission on June 8, 2021.

Registration No. 333-            


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



Atour Lifestyle Holdings Limited
(Exact name of Registrant as specified in its charter)



Not Applicable
(Translation of Registrant's name into English)



Cayman Islands
(State or other Jurisdiction of
incorporation or organization)
  7011
(Primary Standard Industrial
Classification Code Number)
  Not Applicable
(I.R.S. Employer
Identification Number)

18th floor, Wuzhong Building,
618 Wuzhong Road, Minhang District,
Shanghai, People's Republic of
China (+86) 021-64059928

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)



COGENCY GLOBAL INC.
122 East 42nd Street, 18th Floor
New York, NY 10168

(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:

Li He, Esq.
Davis Polk & Wardwell LLP
c/o 18th Floor, The Hong Kong
Club Building
3A Chater Road,
Central Hong Kong
+852 2533-3300

 

Allen Wang, Esq.
Benjamin Su, Esq.
Latham & Watkins LLP
18th Floor, One Exchange Square
8 Connaught Place, Central,
Hong Kong +852 2912 2500



Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

           If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    o

           If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

           

Emerging growth company ý

           If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act.    o



       
 
Title of each class of securities
to be registered

  Proposed maximum
aggregate offering
price(2)(3)

  Amount of
registration fee

 

Class A ordinary shares, par value US$0.0001 per share(1)(2)

  US$100,000,000   US$10,910

 

(1)
American depositary shares issuable upon deposit of ordinary shares registered hereby will be registered under a separate registration statement on Form F-6 (Registration No. 333-            ). Each American depositary share represents ordinary shares.

(2)
Includes ordinary shares initially offered and sold outside the United States that may be resold from time to time in the United States either as part of their distribution or within 40 days after the later of the effective date of this registration statement and the date the shares are first bona fide offered to the public, and also includes ordinary shares that are issuable upon the exercise of the underwriters' over-allotment option. These ordinary shares are not being registered for the purpose of sales outside the United States.

(3)
Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.



           The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the United States Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.


The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

   


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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities, and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject To Completion
Preliminary Prospectus Dated                        , 2021

American Depositary Shares

GRAPHIC

Atour Lifestyle Holdings Limited

Representing            Class A Ordinary Shares

        This is an initial public offering of            American depositary shares, or ADSs, of Atour Lifestyle Holdings Limited. Each ADS represents            of our Class A ordinary shares, par value US$0.0001 per share.

        Prior to this offering, there has been no public market for the ADSs or our Class A ordinary shares. We anticipate that the initial public offering price will be between US$            and US$            per ADS. We intend to apply to list the ADSs representing our Class A ordinary shares on the Nasdaq Global Market under the symbol "ATAT".

        Following the completion of this offering, our issued and outstanding share capital will consist of Class A ordinary shares and Class B ordinary shares. Mr. Haijun Wang will beneficially own all of our issued Class B ordinary shares and will be able to exercise        % of the total voting power of our issued and outstanding share capital immediately following the completion of this offering. Holders of Class A ordinary shares and Class B ordinary shares have the same rights except for voting and conversion rights. Each Class A ordinary share is entitled to one vote, and each Class B ordinary share is entitled to ten votes and is convertible into one Class A ordinary share. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any sale, transfer, assignment or disposition of any Class B ordinary shares by a holder thereof to any person who is not an affiliate of Mr. Haijun Wang, or upon a change of ultimate beneficial ownership of any Class B ordinary share to a person who is not an affiliate of Mr. Haijun Wang, each of such Class B ordinary shares will be automatically and immediately converted into one Class A ordinary share. See "Description of Share Capital." Immediately following the completion of this offering, we will be a "controlled company" within the meaning of the Nasdaq rules. See "Principal Shareholders."

        We are an "emerging growth company" under applicable U.S. federal securities laws and are eligible for reduced public company reporting requirements.

        Investing in the ADSs involves risks. See "Risk Factors" beginning on page 21 of this prospectus.

        Neither the United States Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.



PRICE US$            PER ADS



 
  Per ADS   Total

Initial public offering price

  US$               US$            

Underwriting discounts and commissions(1)

  US$               US$            

Proceeds, before expenses, to us

  US$               US$            

(1)
For a description of compensation payable to the underwriters, see "Underwriting."

        The underwriters have an over-allotment option to purchase up to an additional ADSs from us at the initial public offering price, less the underwriting discounts and commissions, within 30 days from the date of this prospectus.

        The underwriters expect to deliver the ADSs against payment in U.S. dollars in New York, New York on or about                        , 2021.

BofA Securities   Citigroup

CICC

 

CMBI



   

        The date of this prospectus is                        , 2021.


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  Page  

Prospectus Summary

    1  

Our Corporate Information

    6  

Implications of Being An Emerging Growth Company

    7  

Implications of Being A Controlled Company

    8  

Conventions Which Apply To This Prospectus

    9  

The Offering

    11  

Our Summary Consolidated Financial Data and Operating Data

    14  

Risk Factors

    21  

Cautionary Statement Regarding Forward-Looking Statements

    71  

Use of Proceeds

    72  

Dividend Policy

    73  

Capitalization

    74  

Dilution

    76  

Enforceability of Civil Liabilities

    78  

Corporate History and Structure

    80  

Management's Discussion and Analysis of Financial Condition and Results Of Operations

    86  

Industry

    119  

Business

    129  

Regulation

    157  

Management

    172  

Principal Shareholders

    181  

Related Party Transactions

    185  

Description of Share Capital

    187  

Description of American Depositary Shares

    200  

Shares Eligible For Future Sale

    208  

Taxation

    210  

Underwriting

    216  

Expenses Relating To This Offering

    224  

Legal Matters

    225  

Experts

    226  

Where You Can Find Additional Information

    227  

        Unless otherwise indicated or the context otherwise requires, all references in this prospectus to "Atour," "we," "us," "our," "ours," "our company," the "Company," or similar terms refer to Atour Lifestyle Holdings Limited, together with its subsidiaries.

        No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the ADSs offered hereby, and only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.

        Neither we nor any of the underwriters has done anything that would permit this offering or possession or distribution of this prospectus or any filed free writing prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus or any free writing prospectus must inform themselves about, and observe any restrictions relating to, the offering of the ADSs and the distribution of this prospectus or any free writing prospectus outside of the United States. This offering is being

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made in the United States and elsewhere solely on the basis of the information contained in this prospectus. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or any sale of the ADSs representing our Class A ordinary shares. Our business, financial condition, results of operations and prospects may have changed since the date on the front cover of this prospectus.

        Until                        , 2021 (the 25th day after the date of this prospectus), all dealers that buy, sell or trade the ADSs, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

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BASIS OF PRESENTATION

        In connection with this offering, we have recently completed certain corporate reorganization transactions, including, through establishing a series of intermediary holding companies to acquire 100% of the equity interest in Shanghai Atour Business Management (Group) Co., Ltd., or Atour Shanghai, and issuing new shares of our company to the affiliates of certain existing equityholders of Atour Shanghai, or the Existing Equityholders. We refer to such reorganization transactions collectively as the "Restructuring" in this prospectus. See "Corporate History and Structure" for a more detailed description of the Restructuring and a diagram depicting our corporate structure upon the completion of the Restructuring.

        We currently conduct all of our businesses through Atour Shanghai and its PRC subsidiaries in China. We are a holding company incorporated in the Cayman Islands on April 10, 2012 in anticipation of future capital raising from international investors. Atour Lifestyle Holdings Limited owns 100% of the equity interest in Atour Hotel (HK) Holdings Limited, or Atour Hong Kong, a company incorporated under the laws of the Hong Kong. Atour Hong Kong owns 100% equity interest in Atour Shanghai. Each of Atour Lifestyle Holdings Limited and Atour Hong Kong currently has no substantial assets or operations, other than their respective holdings of the equity interests of their wholly owned subsidiaries. After the Restructuring, all of our business in China will continue to be conducted through Atour Shanghai and its subsidiaries.

        Upon the consummation of the Restructuring, the affiliates of all Existing Equityholders of Atour Shanghai have acquired, in accordance with applicable PRC laws and regulations, ordinary shares in our company substantially in proportion to their respective equity ownership in Atour Shanghai immediately prior to the Restructuring.

        Upon the consummation of the Restructuring, (i) we have issued new Class A ordinary shares to the affiliates of certain Existing Equityholders of Atour Shanghai in proportion to their respective equity ownership in Atour Shanghai, such that the shareholding structure of our company at the Cayman Islands level is substantially similar to the equity ownership structure of Atour Shanghai prior to the Restructuring, and (ii) the affiliates of such Existing Equityholders have become parties to and are bound by the terms of our shareholders agreement dated March 3, 2021. For financial reporting purposes, the Restructuring was accounted for as a reverse recapitalization of Atour Shanghai. Accordingly, the consolidated financial statements of the Company are prepared as if the corporate structure of the Company immediately after the Restructuring had been in existence throughout the periods presented. This prospectus contains the historical consolidated financial statements of the Company.

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PROSPECTUS SUMMARY

        The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements and the related notes appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in the ADSs discussed under "Risk Factors," "Business," and information contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations" before deciding whether to buy the ADSs.

OVERVIEW

        Setting out as an upper midscale hotel chain group, we are now a leading lifestyle brand in China.

        We are the largest upper midscale hotel chain in China in terms of room number as of the end of 2020, according to Frost & Sullivan. Through our hotel network, loyalty program and data and technology capabilities, we have been tirelessly exploring new possible ways to set the new trends for China's hospitality industry and expand our offerings beyond our hotels. We distinguish ourselves from our peers in the following aspects:

    Hotel network with a distinct portfolio of lifestyle brands.  We offer our guests a diversified collection of lifestyle hotel brands, each created with a unique personality under the unified ethos of inclusivity and presence of humanness. As of March 31, 2021, our hotel network covered 608 hotels spanning 131 cities in China, with a total of 71,121 hotel rooms, including 575 manachised hotels with a total of 66,267 manachised hotel rooms, in addition to a pipeline of 299 hotels with a total of 32,825 rooms under development. Our guests can book a stay with us and access our rich product and service offerings through offline and online channels, including our mobile app and Weixin/WeChat mini program.

    "A-Card" loyalty program with strong customer stickiness.  We built our A-Card loyalty program to enhance our engagement with guests and provide them with a unique and personalized experience. As of March 31, 2021, our A-Card loyalty program had amassed more than 25 million registered individual members. In 2020, approximately 44.7% of our room-nights were sold to our A-Card members.

    Proprietary data and technology capabilities.  To provide our customers with personalized services and products, we have developed a comprehensive digital management system, which improves customer experience and operational efficiency in room reservation, room management, pricing and membership benefits. We use our data technology to identify market trends and inform our hotel management and strategic decisions, and make our hotel services and retail products more relatable to customers through seamless integration into our rooms and other consumption scenarios throughout our hotels.

        In addition, we are the first hotel chain in China to develop a scenario-based retail business, according to Frost & Sullivan. We design our guest room amenities, work closely with manufacturers to deliver top-quality products, and carefully place the relevant products in guest rooms. Each of our guest rooms incorporates a fully immersive shopping destination, enabling us to further strengthen our brand elasticity with our guests. As of March 31, 2021, we had developed a total of 1,136 SKUs for scenario-based retail. The GMV generated from our retail business was RMB82.8 million and RMB107.2 million for 2019 and 2020, respectively, representing a year-over-year increase of 29.5%, and reached RMB32.6 million in the three months ended March 31, 2021. In 2020, the average transaction value per room reservation reached RMB517.5 for our scenario-based retail business.

        We mainly use the manachise model to expand our hotel network in a less capital-intensive manner. We also lease the properties of the hotels we operate. As of March 31, 2021, we had 33 leased hotels and 575 manachised hotels. The number of our manachised hotels grew at a CAGR of 86.2% between 2015 and 2020.

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        We primarily derive our revenues from (i) franchise and management fees from our manachised hotels and sales of hotel supplies to manachised hotels, (ii) operations of our leased hotels, and (iii) sales of our retail products in connection with our scenario-based retail business. We generated net revenues of RMB1,567.1 million and RMB1,566.6 million for the years ended December 31, 2019 and 2020, respectively, and RMB202.2 million and RMB419.9 million (US$64.1 million) for the three months ended March 31, 2020 and 2021, respectively. We had net income of RMB60.8 million and RMB37.8 million for the years ended December 31, 2019 and 2020, respectively, and net loss of RMB76.1 million and net income of RMB11.5 million (US$1.8 million) for the three months ended March 31, 2020 and 2021, respectively. We had EBITDA (non-GAAP) of RMB182.5 million and RMB161.2 million for the years ended December 31, 2019 and 2020, respectively, and negative EBITDA of RMB70.7 million and EBITDA of RMB45.9 million (US$7.0 million) for the three months ended March 31, 2020 and 2021, respectively. For reconciliation of net income to EBITDA (non-GAAP), see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measure."

MARKET OPPORTUNITIES

        Driven by China's continuous and fast economic growth and strong demand for domestic travelling, China's hospitality industry, especially hotel chains, has experienced steady growth in the past few years and witnessed the following key trends.

    Increasing hotel chain penetration rate.  The total number of rooms offered by hotel chains increased with a CAGR of 15.2% from 2015 to 2019. Meanwhile, the hotel chain penetration rate remains at 31.5% in China's hospitality market in 2020, much lower than the average hotel chain penetration rate of 41.9% in the world market and the penetration rate of 72.9% in the more mature U.S. market. The penetration rate of chained operation in China's hospitality industry is anticipated to further increase.

    Consumption upgrades and consumer preference transformation.  In line with continuous consumption upgrades, hoteliers in China have seen a rising demographic of young, discerning travelers who demand creative, elevated yet approachable class of hotels designed to surpass customer expectations in personalized ways. This favorable industry trend has been driving more customers to choose leading hotel brands that are capable of offering a diverse range of compelling products and services across scenario-based shopping, entertainment, culture, food and other lifestyle spheres.

OUR STRENGTHS

        We believe the following competitive strengths contribute to our success and differentiate us from our competitors:

    The No.1 upper midscale hotel chain in China with a diversified brand portfolio;

    Highly efficient manachised model delivering high growth and returns;

    A "standardized" approach to personalized services with a customer-centric culture;

    Innovative scenario-based retail business with compelling private label product offerings;

    Young, loyal and growing customer base served by established direct sales channels;

    Comprehensive technology infrastructure supporting quality customer experience and efficient operation; and

    Visionary and seasoned management team.

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OUR STRATEGIES

        We intend to focus on the following key strategies to solidify our market leadership and achieve sustainable growth:

    Further expand our premium hotel network in China;

    Strengthen our hotel brand portfolio and expand our offerings;

    Bolster our scenario-based retail offerings to enhance customer engagement and monetization;

    Expand membership base and strengthen the lifestyle-centric ecosystem around our hotel offerings; and

    Continue to invest in technology and strengthen our data insights.

OUR CHALLENGES

        Investing in the ADSs involves a high degree of risk. You should carefully consider the risks and uncertainties summarized below, the risks described under the "Risk Factors" section beginning on page 18 of, including the risks described under the subsections headed "Risks Related to Our Business," "Risks Related to Doing Business in China" and "Risks Related to the ADSs and This Offering," and the other information contained in, this prospectus before you decide whether to purchase the ADSs. In particular, as we are a China-based company incorporated in the Cayman Islands, you should pay special attention to the subsection headed "Risks Related to Doing Business in China" below.

        We face risks and uncertainties in realizing our business objectives and executing our strategies, including:

    Our operating results are subject to conditions typically affecting the hospitality industry in China, any of which could reduce our revenues and limit opportunities for growth.

    If we are unable to compete successfully, our financial condition and results of operations may be harmed.

    We may not be able to manage our expected growth, which could adversely affect our operating results.

    Our expansion within existing markets and into new markets may present increased risk.

    We may not be able to successfully identify, secure or operate additional hotel properties.

    Our limited operating history makes it difficult to evaluate our future prospects and results of operations.

    The COVID-19 outbreak has adversely affected, and may continue to adversely affect, our financial and operating performance.

    If our brand reputation is harmed, it could have a material adverse effect on our business and results of operations.

    We may be adversely affected by any negative publicity concerning us and our business, shareholders, affiliates, directors, officers, other employees, business partners, other third parties as well as the industry in which we operate, regardless of its accuracy, that could harm our reputation and business.

    We may not be successful in developing and achieving expected returns from our diversified hotel brand portfolio and co-branding collaboration, which could adversely affect our financial performance and condition.

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    We are subject to various operational risks inherent in the manachise business model.

    We may not be able to successfully attract new franchisees and compete for franchise and management agreements and, as a result, we may not be able to achieve our planned growth.

    Our franchise and management agreements could be terminated early and we may not be able to renew our existing franchise and management agreements or renegotiate new franchise and management agreements when they expire.

        We are a China-based company and we may face risks and uncertainties in doing business in China, including:

    Changes in China's economic, political or social conditions or government policies could have a material adverse effect on our business, financial condition and results of operations.

    Uncertainties with respect to the PRC legal system could limit the legal protections available to you and us.

    The audit report included in this prospectus is prepared by an auditor who is not inspected by the Public Company Accounting Oversight Board and as such, our investors are deprived of the benefits of such inspection.

    The recent enactment of the Holding Foreign Companies Accountable Act may result in de-listing of the ADSs.

    You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us or our management named in the prospectus based on foreign laws.

        In addition to the risks described above, we are subject to risks relating to the ADS and this offering, including, but not limited to, the following:

    An active trading market for our Class A ordinary shares or the ADSs may not develop and the trading price for the ADSs may fluctuate significantly.

    The trading price of the ADSs is likely to be volatile, which could result in substantial losses to investors.

    If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding the ADSs, the market price for the ADSs and trading volume could decline.

    Our dual-class voting structure will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.

    The dual-class structure of our ordinary shares may adversely affect the trading market for the ADSs.

        See "Risk Factors" and other information included in this prospectus for a discussion of these and other risks and uncertainties that we face.

Our Corporate History and Structure

    Our Corporate History

        Atour Shanghai was established in 2013. We currently conduct all of our businesses in China through Atour Shanghai and its subsidiaries.

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        We established Atour Lifestyle Holdings Limited as our holding company in the Cayman Islands on April 10, 2012 in anticipation of future capital raising from international investors. Atour Hong Kong was incorporated on March 5, 2021 in Hong Kong.

        In connection with the Restructuring, Atour Lifestyle Holdings Limited has acquired 100% of the equity interest in Atour Hong Kong, and Atour Hong Kong owns 100% of the equity interest in Atour Shanghai, which controls all of our business operations within the PRC.

    Restructuring

        We completed the Restructuring in May 2021. Upon the consummation of the Restructuring, (i) we have issued new Class A ordinary shares to the affiliates of certain Existing Equityholders of Atour Shanghai such that the shareholding structure of our company at the Cayman Islands level is substantially similar to the equity ownership structure of Atour Shanghai prior to the Restructuring, and (ii) the affiliates of such Existing Equityholders have become parties to and are bound by the terms of our shareholders agreement dated March 3, 2021. For details of the steps taken to effect the Restructuring, see "Corporate History and Strcutrue—Restructuring".

    Our Corporate Structure

        The following diagram illustrates our corporate structure, including all of our significant subsidiaries within and outside of the PRC, immediately upon the completion of this offering.

GRAPHIC


Note:

(1)
Immediately after the completion of this offering, assuming the underwriters do not exercise their option to purchase additional ADSs, (i) Mr. Haijun Wang, our founder, Chairman of Board of Directors, and Chief Executive Officer, will beneficially own        % of our total issued and outstanding ordinary shares and        % of aggregate voting power; (ii) the other existing shareholders, in aggregate, will beneficially own        % of our total issued and outstanding ordinary shares and        % of the aggregate voting power; and (iii) public investors in this offering, in aggregate, will beneficially own        % of our total issued and outstanding ordinary shares and        % of the aggregate voting power.

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OUR CORPORATE INFORMATION

        Our principal executive offices are located at 18th floor, Wuzhong Building, 618 Wuzhong Road, Minhang District, Shanghai, People's Republic of China. Our telephone number at this address is +86-021-64059928. Our registered office in the Cayman Islands is located at P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. Our agent for service of process in the United States is located at 122 East 42nd Street, 18th Floor, New York, NY 10168.

        Investors should contact us for any inquiries through the address and telephone number of our principal executive office. Our principal website is https://www.yaduo.com. The information contained on our website is not a part of this prospectus.

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IMPLICATIONS OF BEING AN EMERGING GROWTH COMPANY

        As a company with less than US$1.07 billion in revenue for the last fiscal year, we qualify as an "emerging growth company" pursuant to the Jumpstart Our Business Startups Act of 2012 (as amended by the Fixing America's Surface Transportation Act of 2015), or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, in the assessment of the emerging growth company's internal control over financial reporting. The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. Pursuant to the JOBS Act, we have elected to take advantage of the benefits of this extended transition period for complying with new or revised accounting standards. As a result, our operating results and financial statements may not be comparable to the operating results and financial statements of other companies who have adopted the new or revised accounting standards.

        We will remain an emerging growth company until the earliest of (i) the last day of our fiscal year during which we have total annual gross revenues of at least US$1.07 billion; (ii) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (iii) the date on which we have, during the previous three-year period, issued more than US$1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a "large accelerated filer" under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of the ADSs that are held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal quarter. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above. See "Risk Factors—Risks Related to the ADSs and This Offering—We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements."

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IMPLICATION OF BEING A CONTROLLED COMPANY

        Upon the completion of this offering, Mr. Haijun Wang, our founder, Chairman of Board of Directors, and Chief Executive Officer will beneficially own        % of our total issued and outstanding ordinary shares, representing        % of our total voting power, assuming that the underwriters do not exercise their option to purchase additional ADSs, or        % of our total issued and outstanding ordinary shares, representing        % of our total voting power, assuming that the option to purchase additional ADSs is exercised by the underwriters in full. As a result, we will be a "controlled company" as defined under the Nasdaq Stock Market Rules because Mr. Haijun Wang will hold more than 50% of the voting power for the election of directors. As a "controlled company," we are permitted to elect not to comply with certain corporate governance requirements. If we rely on these exemptions, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.

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CONVENTIONS WHICH APPLY TO THIS PROSPECTUS

        Unless we indicate otherwise, all information in this prospectus reflects the following:

    no exercise by the underwriters of their over-allotment option to purchase up to            additional ADSs representing Class A ordinary shares from us; and

        Except where the context otherwise requires and for purposes of this prospectus only:

    "ADR" refers to average daily room rate, which means room revenue divided by the number of rooms in use;

    "ADSs" refers to the American depositary shares, each representing Class A ordinary shares;

    "Atour," "we," "us," "our," "ours," "our company," and the "Company," refer to Atour Lifestyle Holdings Limited, a Cayman Islands company and its subsidiaries;

    "China" or "PRC" refers to the People's Republic of China, excluding, for the purpose of this prospectus only, Taiwan, Hong Kong and Macau Special Administrative Regions;

    "Class A ordinary shares" refers to our Class A ordinary shares with a par value of US$0.0001 per share;

    "Class B ordinary shares" refers to our Class B ordinary shares with a par value of US$0.0001 per share;

    "GMV" refers to gross merchandise value, which is the total value of confirmed orders placed by our end customers with us or our franchisees, as the case may be, and sold as part of our retail business, regardless of whether the products are delivered or returned, calculated based on the prices of the ordered products net of any discounts offered to our end customers;

    "leased hotels" refers to leased-and-operated hotels, which, for the avoidance of doubt, include three hotels that are exclusively operated by us on properties leased by certain designated third parties;

    "manachised hotels" refers to franchised-and-managed hotels;

    "occupancy rate" refers to the number of rooms in use divided by the number of available rooms for a given period;

    "RevPAR" refers to revenue per available room, which is calculated by total revenues during a period divided by the number of available rooms of our hotels during the same period;

    "ordinary shares" prior to the completion of this offering refers to our Class A ordinary shares and Class B ordinary shares;

    "RMB" or "Renminbi" refers to the legal currency of the People's Republic of China;

    "SKU" refers to stock-keeping unit offered in our retail business;

    "Tier 1 cities" refers to the four Chinese cities of Beijing, Shanghai, Guangzhou and Shenzhen;

    "New Tier 1 cities" refers to the 15 Chinese cities of Chongqing, Suzhou, Chengdu, Hangzhou, Wuhan, Nanjing, Tianjin, Qingdao, Changsha, Zhengzhou, Foshan, Hefei, Xi'an, Dongguan and Shenyang;

    "Tier 2 cities" refers to the 30 Chinese cities of Nanning, Ningbo, Wuxi, Quanzhou, Jinan, Nantong, Fuzhou, Yantai, Changzhou, Xuzhou, Dalian, Wenzhou, Kunming, Changchun, Xiamen, Shaoxing, Shijiazhuang, Langfang, Nanchang, Jiaxing, Taizhou, Harbin, Jinhua, Guiyang, Huizhou, Taiyuan, Zhuhai, Baoding, Zhongshan and Lanzhou;

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    "US$," "dollars" or "U.S. dollars" refers to the legal currency of the United States; and

    "U.S. GAAP" refers to the accounting principles generally accepted in the United States of America.

        Unless otherwise noted, all translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi in this prospectus are made at RMB 6.5250 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on December 31, 2020. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated below, or at all. On March 31, 2021 the noon buying rate for Renminbi was RMB6.5518 to US$1.00.

        This prospectus contains information derived from various public sources and certain information from an industry report commissioned by us and prepared by Frost & Sullivan, a third-party industry research firm, to provide information regarding our industry and market position in China. Such information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to these estimates. We have not independently verified the accuracy or completeness of the data contained in these industry publications and reports. The industry in which we operate is subject to a high degree of uncertainty and risk due to variety of factors, including those described in the "Risk Factors" section. These and other factors could cause results to differ materially from those expressed in these publications and reports.

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THE OFFERING

Offering price range

  We currently estimate that the initial public offering price will be between US$        and US$        per ADS.

ADSs offered by us

 

            ADSs (or            ADSs if the underwriters exercise their over-allotment option in full).

The ADSs

 

Each ADS represents            Class A ordinary shares, par value US$0.0001 per share. The depositary will hold the ordinary shares underlying the ADSs through its custodian. You will have rights as provided in the deposit agreement.

 

We do not expect to pay dividends in the foreseeable future. If, however, we declare dividends on our Class A ordinary shares, the depositary will pay you the cash dividends and other distributions it receives on our Class A ordinary shares, after deducting its fees and expenses in accordance with the terms set forth in the deposit agreement.

 

You may surrender the ADSs to the depositary for cancellation to receive Class A ordinary shares. The depositary will charge you fees for any cancellation.

 

We may amend or terminate the deposit agreement without your consent. If you continue to hold the ADSs after an amendment to the deposit agreement, you agree to be bound by the deposit agreement as amended.

 

To better understand the terms of the ADSs, you should carefully read the "Description of American Depositary Shares" section of this prospectus. You should also read the deposit agreement, which is filed as an exhibit to the registration statement that includes this prospectus.

Ordinary shares

 

We will issue            Class A ordinary shares represented by the ADSs in this offering.

 

Following the completion of this offering, our issued and outstanding share capital will consist of Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares and Class B ordinary shares have the same rights except for voting and conversion rights. Each Class A ordinary share is entitled to one vote, and each Class B ordinary share is entitled to ten votes and is convertible into one Class A ordinary share. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any sale, transfer, assignment or disposition of any Class B ordinary shares by a holder thereof to any person who is not an affiliate of Mr. Haijun Wang, or upon a change of ultimate beneficial ownership of any Class B ordinary share to a person who is not an affiliate of Mr. Haijun Wang, each of such Class B ordinary shares will be automatically and immediately converted into one Class A ordinary share.

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All of our outstanding share options, regardless of grant dates, will entitle holders to the equivalent number of Class A ordinary shares once the vesting and exercising conditions on such share-based awards are met.

 

See "Description of Share Capital."

Ordinary shares outstanding immediately after this offering

 

            ordinary shares, comprised of            Class A ordinary shares and            Class B ordinary shares (or            ordinary shares if the underwriters exercise their option to purchase additional ADSs in full, comprised of            Class A ordinary shares and            Class B ordinary shares).

Over-allotment option

 

We have granted the underwriters the right to purchase up to an additional            Class A ordinary share from us within 30 days of the date of this prospectus, to cover over-allotments, if any, in connection with the offering.

Listing

 

We intend to apply to list the ADSs representing our Class A ordinary shares on the Nasdaq Global Market, or Nasdaq under the symbol "ATAT".

Use of proceeds

 

We estimate that the net proceeds to us from the offering will be approximately US$            .

 

We intend to use the net proceeds from the offering for (i) expanding and strengthening our hotel network in China, including funding the capital expenditures and expenses related to opening of new hotels across different Atour hotel brands and the continuous upgrades of existing hotel facilities, (ii) developing new products and services for our diversified hotel portfolio, strengthening our membership program and enhancing our branding efforts, (iii) enhancing our IT infrastructure and technologies, including digital operating systems and data analytics, to further enhance our customer experience as well as operating efficiency, (iv) selectively pursuing strategic transactions including mergers & acquisitions, joint ventures and investments in China's hospitality and lifestyle industry; as of the date of this prospectus, we have not identified any specfic target, and (v) general corporate and working capital purposes. See "Use of Proceeds."

Lock-up

 

We, our directors, executive officers and existing shareholders have agreed with the underwriters, subject to certain exceptions, not to offer, sell, or dispose of any shares of our share capital or securities convertible into or exchangeable or exercisable for any shares of our share capital during the 180-day period following the date of this prospectus. See "Shares Eligible for Future Sale" and "Underwriting" for more information.

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Payment and settlement

 

The underwriters expect to deliver the ADSs against payment therefor through the facilities of The Depository Trust Company on            , 2021.

Depositary

 

The Bank of New York Mellon.

Taxation

 

For Cayman Islands, PRC and U.S. federal income tax considerations with respect to the ownership and disposition of the ADSs, see "Taxation."

Risk Factors

 

See "Risk Factors" and other information included in this prospectus for discussions of the risks relating to investing in the ADSs. You should carefully consider these risks before deciding to invest in the ADSs.

        Unless otherwise indicated, all information contained in this prospectus assumes no exercise of the option granted to the underwriters to purchase up to            additional Class A ordinary shares to cover over-allotments, if any, in connection with the offering.

        The number of ordinary shares that will be outstanding immediately after this offering:

    is based upon 376,970,454 ordinary shares (including 303,289,537 Class A ordinary shares and 73,680,917 Class B ordinary shares) outstanding as of the date of this prospectus;

    assumes no exercise of the underwriters' option to purchase additional ADSs representing Class A ordinary shares;

    excludes 17,923,060 Class A ordinary shares issuable upon the exercise of 17,923,060 share options outstanding as of the date of this prospectus, at a weighted average exercise price of US$0.79 per share, which were granted pursuant to our Public Company Share Incentive Plan; and

    excludes 33,106,486 Class A ordinary shares reserved for future issuances upon the exercise of share options to be granted pursuant to our Public Company Share Incentive Plan.

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OUR SUMMARY CONSOLIDATED FINANCIAL DATA AND OPERATING DATA

        The following summary consolidated statements of comprehensive income data for the years ended December 31, 2019 and 2020, summary consolidated balance sheets data as of December 31, 2019 and 2020, and summary consolidated statements of cash flows data for the years ended December 31, 2019 and 2020 have been derived from the audited consolidated financial statements of the Company included elsewhere in this prospectus, which were prepared and presented in accordance with U.S. GAAP. The following summary consolidated statements of comprehensive income data for the three months ended March 31, 2020 and 2021, summary consolidated balance sheet data as of March 31, 2021 and summary consolidated cash flows data for the three months ended March 31, 2020 and 2021 have been derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus and have been prepared on the same basis as our audited consolidated financial statements. Our historical results are not necessarily indicative of results expected for future periods. You should read this Our Summary Consolidated Financial Data and Operating Data section together with the Company's consolidated financial statements and the related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.

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        The following table presents the Company's summary consolidated statements of comprehensive income data for the years ended December 31, 2019 and 2020 and for the three months ended March 31, 2020 and 2021.

 
  Years Ended   Three Months Ended  
 
  December 31,
2019
  December 31,
2020
  March 31,
2020
  March 31,
2021
 
 
  RMB   RMB   RMB   RMB   US$  
 
  (in thousands)
 

Summary Consolidated Statements of Comprehensive Income Data

                               

Revenues:

                               

Manachised hotels

    840,400     926,307     130,613     254,066     38,778  

Leased hotels

    614,829     496,470     52,661     124,891     19,062  

Retail revenues and others

    111,862     143,775     18,876     40,901     6,243  

Net revenues

    1,567,091     1,566,552     202,150     419,858     64,083  

Operating costs and expenses:

                               

Hotel operating costs

    (1,097,441 )   (1,150,101 )   (222,862 )   (307,402 )   (46,919 )

Other operating costs

    (81,337 )   (78,746 )   (12,104 )   (25,223 )   (3,850 )

Selling and marketing expenses

    (75,745 )   (70,972 )   (11,073 )   (14,302 )   (2,183 )

General and administrative expenses

    (138,241 )   (131,366 )   (30,748 )   (40,617 )   (6,199 )

Technology and development expenses

    (29,363 )   (33,649 )   (8,122 )   (8,467 )   (1,292 )

Pre-opening expenses

    (68,166 )   (61,878 )   (21,286 )   (6,780 )   (1,035 )

Total operating costs and expenses

    (1,490,293 )   (1,526,712 )   (306,195 )   (402,791 )   (61,478 )

Other operating income

    14,602     23,429     8,155     2,208     337  

Income (loss) from operations

    91,400     63,269     (95,890 )   19,275     2,942  

Interest income

    240     707     148     390     60  

Gain from short-term investments

    22,165     11,046     3,431     2,137     326  

Interest expenses

    (4,294 )   (1,481 )   (500 )   (1,565 )   (239 )

Other (expenses) income , net

    (1,187 )   1,883     76     1,022     156  

Income (loss) before income tax

    108,324     75,424     (92,735 )   21,259     3,245  

Income tax (expense) benefit

    (47,493 )   (37,602 )   16,657     (9,790 )   (1,494 )

Net income (loss)

    60,831     37,822     (76,078 )   11,469     1,751  

Less: net loss attributable to non-controlling interests

    (4,129 )   (4,229 )   (2,154 )   (772 )   (118 )

Net income (loss) attributable to the Company

    64,960     42,051     (73,924 )   12,241     1,869  

Less: accretion of redeemable Series C shares

    (48,964 )   (52,881 )   (12,841 )   (13,868 )   (2,117 )

Net income (loss) available to shareholders of the Company

    15,996     (10,830 )   (86,765 )   (1,627 )   (248 )

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        The following table presents the Company's summary consolidated balance sheets data as of December 31, 2019 and 2020 and March 31, 2021:

 
  As of December 31,   As of March 31,  
 
  2019   2020   2021  
 
  RMB   RMB   RMB   US$  
 
  (in thousands)
 

Summary Consolidated Balance Sheets Data:

                         

Cash and cash equivalents

    763,232     824,546     884,941     135,068  

Property and equipment, net

    414,236     467,450     466,896     71,262  

Total assets

    1,648,533     1,985,716     2,107,310     321,637  

Long-term borrowings, non-current portion

    28,294     31,165     42,045     6,417  

Deferred revenue (current and non-current)

    372,467     415,865     439,515     67,083  

Accrued expenses and other payables

    261,315     378,532     419,941     64,096  

Total liabilities

    1,119,778     1,419,919     1,529,618     233,464  

Mezzanine equity

    828,512     881,393     895,261     136,643  

Total deficit

    (299,757 )   (315,596 )   (317,569 )   (48,470 )

        The following table presents the Company's summary consolidated statements of cash flows data for the years ended December 31, 2019 and 2020 and for the three months ended March 31, 2020 and 2021.

 
  Years Ended
December 31,
  Three Months Ended
March 31,
 
 
  2019   2020   2020   2021  
 
  RMB   RMB   RMB   RMB   US$  
 
  (in thousands)
 

Summary Consolidated Statements of Cash Flows Data:

                               

Net cash generated from (used in) operating activities

    224,114     118,670     (230,058 )   5,593     854  

Net cash generated from (used in) investing activities

    264,859     (105,527 )   (102,018 )   (32,205 )   (4,916 )

Net cash (used in) generated from financing activities

    (10,084 )   48,011     38,316     87,007     13,280  

Selected Quarterly Results of Operations

        The following table sets forth our unaudited consolidated quarterly results of operations for the periods indicated. You should read the following table in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus. We have prepared the unaudited consolidated quarterly financial information on the same basis as our consolidated financial statements. The unaudited consolidated quarterly financial information includes all adjustments, consisting only of normal and recurring adjustments, that we consider necessary for a fair representation of our operating

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results for the quarters presented. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Selected Quarterly Results of Operations."

 
  Three Months Ended  
 
  March 31,
2019
  June 30,
2019
  September 30,
2019
  December 31,
2019
  March 31,
2020
  June 30,
2020
  September 30,
2020
  December 31,
2020
  March 31,
2021
 
 
  RMB
  RMB
  RMB
  RMB
  RMB
  RMB
  RMB
  RMB
  RMB
 
 
  (in thousands)
 

Revenues:

                                                       

Manachised hotels

    150,953     203,687     239,324     246,436     130,613     198,584     295,762     301,348     254,066  

Leased hotels

    130,756     154,868     169,457     159,748     52,661     106,442     167,241     170,126     124,891  

Retail revenues and others

    21,155     26,318     28,087     36,302     18,876     32,821     40,812     51,266     40,901  

Net revenues

    302,864     384,873     436,868     442,486     202,150     337,847     503,815     522,740     419,858  

Operating costs and expenses:

                                                       

Hotel operating costs

    (226,707 )   (271,422 )   (288,449 )   (310,863 )   (222,862 )   (265,698 )   (331,203 )   (330,338 )   (307,402 )

Other operating costs

    (14,132 )   (16,480 )   (20,493 )   (30,232 )   (12,104 )   (17,670 )   (22,275 )   (26,697 )   (25,223 )

Selling and marketing expenses

    (14,467 )   (18,503 )   (18,436 )   (24,339 )   (11,073 )   (19,206 )   (20,370 )   (20,323 )   (14,302 )

General and administrative expenses

    (29,059 )   (34,686 )   (34,445 )   (40,051 )   (30,748 )   (33,379 )   (31,579 )   (35,660 )   (40,617 )

Technology and development expenses

    (5,996 )   (6,470 )   (7,917 )   (8,980 )   (8,122 )   (8,027 )   (8,677 )   (8,823 )   (8,467 )

Pre-opening expenses

    (9,523 )   (15,309 )   (18,955 )   (24,379 )   (21,286 )   (24,393 )   (8,662 )   (7,537 )   (6,780 )

Total operating costs and expenses

    (299,884 )   (362,870 )   (388,695 )   (438,844 )   (306,195 )   (368,373 )   (422,766 )   (429,378 )   (402,791 )

Other operating income

    1,012     265     10,023     3,302     8,155     3,065     3,463     8,746     2,208  

Income (loss) from operation

    3,992     22,268     58,196     6,944     (95,890 )   (27,461 )   84,512     102,108     19,275  

Interest income

    56     43     46     95     148     141     220     198     390  

Gain from short-term investments

    4,585     5,427     5,773     6,380     3,431     3,455     1,891     2,269     2,137  

Interest expenses

    (812 )   (1,372 )   (1,237 )   (873 )   (500 )   (571 )   (358 )   (52 )   (1,565 )

Other (expense) income, net

    (486 )   665     (942 )   (424 )   76     605     1,101     101     1,022  

Income (loss) before income tax

    7,335     27,031     61,836     12,122     (92,735 )   (23,831 )   87,366     104,624     21,259  

Income tax (expense) benefit

    (5,465 )   (10,441 )   (20,795 )   (10,792 )   16,657     (2,545 )   (24,966 )   (26,748 )   (9,790 )

Net income (loss)

    1,870     16,590     41,041     1,330     (76,078 )   (26,376 )   62,400     77,876     11,469  

Less: Net (loss) income attributable to non-controlling interests

    (673 )   (50 )   (995 )   (2,411 )   (2,154 )   (1,717 )   (751 )   393     (772 )

Net income (loss) attributable to the Company

    2,543     16,640     42,036     3,741     (73,924 )   (24,659 )   63,151     77,483     12,241  

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Key Operating Data

        The following table presents key operating metrics of the Company for the periods indicated.

 
  As of
December 31,
2019
  As of
December 31,
2020
  As of
March 31,
2021
  As of
May 31,
2021
 

Total hotels(1)

                         

Manachised hotels

    391     537     575     606  

Leased hotels

    29     33     33     33  

All hotels

    420     570     608     639  

Hotel rooms(1)

   
 
   
 
   
 
   
 
 

Manachised hotels

    44,983     61,782     66,267     69,957  

Leased hotels

    4,104     4,836     4,854     4,854  

All hotels

    49,087     66,618     71,121     74,811  

Note:

(1)
Includes 19, 14 and 14 manachised hotels being requisitioned by the government for quarantine needs in response to the COVID-19 outbreak, which were not in operation as of December 31, 2020, March 31, 2021 and May 31, 2021, respectively.

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  Year Ended
December 31,
2019
  Year Ended
December 31,
2020
  Three Months
Ended
March 31, 2020
  Three Months
Ended
March 31, 2021
  Month
Ended
April 30, 2021
  Month
Ended
May 31, 2021
 
 
   
  Exclusive of
requisitioned
hotels(2)
  Inclusive of
requisitioned
hotels
  Exclusive of
requisitioned
hotels(2)
  Inclusive of
requisitioned
hotels
  Exclusive of
requisitioned
hotels(2)
  Inclusive of
requisitioned
hotels
  Exclusive of
requisitioned
hotels(2)
  Inclusive of
requisitioned
hotels
  Exclusive of
requisitioned
hotels(2)
  Inclusive of
requisitioned
hotels
 

Occupancy rate (in percentage)

                                                                   

Manachised hotels

    72.3%     66.9%     63.2%     37.5%     30.7%     59.6%     58.9%     80.0%     79.4%     78.1%     77.7%  

Leased hotels

    83.0%     68.6%     67.6%     34.6%     32.6%     66.1%     66.1%     85.6%     85.6%     82.6%     82.6%  

All hotels

    73.4%     67.1%     63.5%     37.2%     30.8%     60.0%     59.4%     80.4%     79.8%     78.4%     78.1%  

ADR (in RMB)

   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Manachised hotels

    415.9     382.2     379.2     364.0     355.7     370.5     369.2     423.7     422.7     450.6     448.9  

Leased hotels

    530.1     467.7     467.4     444.3     443.8     458.6     458.6     548.3     548.3     573.0     573.0  

All hotels

    429.5     389.8     386.8     371.7     363.4     377.7     376.3     432.9     431.9     459.2     457.6  

RevPAR (in RMB)

   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Manachised hotels

    313.7     268.9     251.6     143.6     114.3     231.5     228.1     353.8     350.5     366.1     363.2  

Leased hotels

    463.7     339.4     334.1     161.4     152.0     320.2     320.2     496.2     496.2     499.7     499.7  

All hotels

    329.5     275.1     258.3     145.4     117.4     238.1     234.7     363.7     360.4     375.1     372.2  

    Note:

(2)
Excludes, for purposes of calculating these key operating metrics, approximately 1,777 thousand, 1,146 thousand, 256 thousand, 43 thousand and 43 thousand room-nights related to hotel rooms that were requisitioned by the government for quarantine needs in response to the COVID-19 outbreak or otherwise became unavailable due to temporary hotel closures in 2020, in the three months ended March 31, 2020 and 2021, and in April and May 2021, respectively. The ADR and RevPAR are calculated based on the tax inclusive room rates.

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  Three Months Ended  
 
  March 31,
2019
  June 30,
2019
  September 30,
2019
  December 31,
2019
  March 31,
2020
  June 30,
2020
  September 30,
2020
  December 31,
2020
  March 31,
2021
 
 
   
   
   
   
  Exclusive of requisitioned hotels(1)   Inclusive of requisitioned hotels   Exclusive of requisitioned hotels(1)   Inclusive of requisitioned hotels   Exclusive of requisitioned hotels(1)   Inclusive of requisitioned hotels   Exclusive of requisitioned hotels(1)   Inclusive of requisitioned hotels   Exclusive of requisitioned hotels(1)   Inclusive of requisitioned hotels  

Occupancy rate (in percentage)

                                                                                     

Manachised hotels

    64.4%     73.2%     76.4%     73.1%     37.5%     30.7%     66.5%     65.2%     77.5%     76.8%     75.4%     74.8%     59.6%     58.9%  

Leased hotels

    78.6%     84.0%     85.8%     83.3%     34.6%     32.6%     73.4%     73.1%     81.7%     81.7%     79.1%     79.1%     66.1%     66.1%  

All hotels

    66.2%     74.4%     77.3%     74.0%     37.2%     30.8%     67.1%     65.8%     77.9%     77.2%     75.7%     75.1%     60.0%     59.4%  

ADR(2) (in RMB)

                                                                                     

Manachised hotels

    397.4     417.6     432.1     410.4     364.0     355.7     336.4     333.0     397.4     395.4     405.4     404.6     370.5     369.2  

Leased hotels

    499.4     534.0     550.5     532.8     444.3     443.8     391.9     391.3     494.0     494.0     511.3     511.3     458.6     458.6  

All hotels

    412.7     432.6     445.4     422.5     371.7     363.4     341.7     338.3     406.1     404.0     414.1     413.1     377.7     376.3  

RevPAR(2) (in RMB)

                                                                                     

Manachised hotels

    266.1     316.5     344.5     315.4     143.6     114.3     235.3     228.4     323.8     318.8     321.0     317.8     231.5     228.1  

Leased hotels

    412.8     471.0     497.5     471.3     161.4     152.0     305.1     303.0     427.5     427.5     428.0     428.0     320.2     320.2  

All hotels

    284.7     334.2     360.0     329.2     145.4     117.4     241.3     234.5     332.6     327.7     329.4     326.1     238.1     234.7  

    Notes:

(1)
Excludes, for purposes of calculating these key operating metrics, approximately 1,146 thousand, 287 thousand, 175 thousand, 169 thousand and 256 thousand room-nights related to hotel rooms that were requisitioned by the government for quarantine needs in response to the COVID-19 outbreak or otherwise became unavailable due to temporary hotel closures in each of the four quarters in 2020 and the first quarter in 2021, respectively.

(2)
The ADR and RevPAR are calculated based on the tax inclusive room rates.

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RISK FACTORS

        You should carefully consider the risks and uncertainties described below and the other information in this prospectus before making an investment in the ADSs. Our business, financial condition or results of operations could be materially and adversely affected if any of these risks occurs, and as a result, the market price of the ADSs could decline and you could lose all or part of your investment. In particular, as we are a China-based company incorporated in the Cayman Islands, you should pay special attention to the subsection headed "Risks Related to Doing Business in China" below. This prospectus also contains forward-looking statements that involve risks and uncertainties. See "Cautionary Statement Regarding Forward-Looking Statements." Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including the risks and uncertainties described below and elsewhere in this prospectus.

Risks Related to Our Business and Industry

Our operating results are subject to conditions typically affecting the hospitality industry in China, any of which could reduce our revenues and limit opportunities for growth.

        Our operating results are subject to conditions typically affecting the hospitality industry in China, including, among others:

    changes in national, regional or local economic conditions;

    contraction in the global economy or low levels of economic growth;

    competition from other hotels and vacation rental online marketplace companies;

    the attractiveness of our hotels to our guests;

    local market conditions such as an oversupply of, or a reduction in demand for, hotel rooms;

    adverse weather conditions, natural disasters or serious contagious diseases, such as COVID-19;

    the ability of third-party internet and other travel intermediaries who sell our hotel rooms to guests to attract and retain customers;

    the availability and cost of capital necessary for us and third-party hotel owners to fund investments, capital expenditures and service debt obligations;

    delays in or cancellations of planned or future development or refurbishment projects;

    seasonal and cyclical volatility in the hospitality industry;

    changes in desirability of geographic regions of the hotels in our business, geographic concentration of our operations and customers and shortages of desirable locations for development;

    the performance of managerial and other employees of our hotels; and

    increases in operating costs and expenses, particularly rents, due to inflation and other factors.

        Changes in any of these conditions could adversely affect our occupancy rates, ADR and RevPAR, or otherwise adversely affect our results of operations and financial condition.

If we are unable to compete successfully, our financial condition and results of operations may be harmed.

        The hospitality industry in China is highly competitive. Competition for guests and customers is primarily focused on hotel room rates, quality of accommodations, brand recognition, convenience of location, geographic coverage, quality and range of services, other lifestyle offerings, and guest amenities. We mainly compete with other branded and independent hotel operating companies,

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national and international hotel brands and ownership companies. In addition, we may face competition from new entrants in the hospitality industry in China or increased competition from competitors who are expanding rapidly. Such competitors include vacation rental online marketplace companies. New and existing competitors may offer more competitive rates, greater convenience, superior services or amenities, or superior facilities, possibly attracting guests away from our hotels and resulting in lower occupancy rate and ADR for our hotels.

        Competitors may also outbid us in the selection of sites for new leased hotel conversion, negotiate better management terms for potential manachised hotels or offer better terms to our existing manachised hotel owners, thereby slowing our anticipated pace of expansion. Furthermore, our typical guests may change their travel, spending and consumption patterns and choose to stay in other types of hotels. Any of these factors may have an adverse effect on our competitive position, results of operations and financial condition.

We may not be able to manage our expected growth, which could adversely affect our operating results.

        We have experienced substantial growth in the past. Over the past few years, we increased the number of our hotels in China to 608 as of March 31, 2021, and we intend to continue to convert, operate and manage additional hotels in markets where we have a presence and in additional cities in China. Our expansion has placed, and will continue to place, substantial demands on our managerial, financial, operational, IT, and other resources. In order to manage and support our growth, we must continue to improve our existing managerial, operational and IT systems, including our financial and management controls, and recruit, train and retain qualified hotel management and other personnel. Our planned expansion will also require us to maintain consistent and high-quality accommodations and services to ensure that our brand does not suffer as a result of any deviations, whether actual or perceived, in our quality standards. We cannot assure you that we will be able to effectively and efficiently manage the growth of our operations or maintain our quality standards. If we are unable to do so, our results of operations and financial condition may be materially and adversely affected.

Our expansion within existing markets and into new markets may present increased risk.

        Our expansion within markets where we already have a presence may adversely affect the financial performance of our hotels in operation in those markets and, as a result, negatively affect our overall results of operations. Furthermore, expansion into new markets may present operating and marketing challenges that are different from those that we currently encounter in our existing markets. Guests and franchisees in any new market may not be familiar with our brands and we may need more time to build brand awareness in that market through greater investments in advertising and promotional activities than we anticipated. We may find it more difficult in new markets to hire, motivate and keep qualified employees who share our vision, passion and culture. Expansion into new markets may also cause certain of our non-financial key performance indicators to decline, such as our ADR, occupancy rate and RevPAR, as new markets may have lower average hotel room rates than markets in which we currently have a presence and our new hotels tend to have a lower occupancy rate than our more mature hotels. Our inability to anticipate the changing demands that expanding operations will impose on our managerial, operational, IT, and other resources, or our failure to quickly adapt our systems and procedures to the demands of new markets, could result in lost revenues and increased expenses and otherwise harm our results of operations and financial condition.

We may not be able to successfully identify, secure or operate additional hotel properties.

        We plan to open more hotels in markets where we have a presence and new cities in China to further grow our business. We may not be successful in identifying, leasing, managing and operating additional hotel properties at desirable locations and on commercially reasonable terms, or at all. In more developed cities, it may be difficult to increase the number of hotels because we or our

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competitors may already have operations in such cities, rental prices may increase, or our competitors may be able to gain leases of properties before we can do so. In some cases, our competitors may be willing to enter into less favorable lease or hotel management arrangements in order to prevent us from securing a particular property. Alternatively, in less developed cities, demand for our hotels may not increase as rapidly as we may expect. In addition, even if we are able to successfully identify and lease or manage new hotel properties, new hotels may not generate the returns we expect. Furthermore, we may incur costs in connection with evaluating properties and negotiating with property owners, lessors and manachised hotel owners, including properties that we are subsequently unable to lease or manage. If we fail to successfully identify or compete for additional hotel properties, our ability to execute our growth strategy could be impaired and our business and prospects may be materially and adversely affected.

Our limited operating history makes it difficult to evaluate our future prospects and results of operations.

        We believe that our future success depends on our ability to achieve sustainable and profitable growth. We have a limited operating history since we commenced our business operations in China in 2013. Our limited operating history and significant growth make it difficult to evaluate our historical performance or prospects. In addition, fluctuations in results could make period to period comparisons difficult. You should consider our future prospects in light of the risks and challenges encountered by a company with a limited operating history. These risks and challenges include, among others:

    the uncertainties associated with our ability to continue our growth and maintain profitability;

    preserving our competitive position in the upper midscale hotel segment of the hospitality industry in China;

    offering consistent and high-quality accommodations and services to retain and attract guests;

    implementing our strategy and modifying it from time to time to respond effectively to competition and changes in customer preferences;

    our ability to introduce new hotel and other lifestyle offerings to achieve our goal to become a leading lifestyle brand;

    increasing awareness of our Atour brand and continuing to develop customer loyalty; and

    recruiting, training and retaining qualified managerial and other personnel.

        If we are unsuccessful in addressing any of these risks or challenges, our business may be materially and adversely affected.

The COVID-19 outbreak has adversely affected, and may continue to adversely affect, our financial and operating performance.

        The travel industry has been severely affected by the outbreak of COVID-19 since the beginning of 2020 due to the reduced traveler traffic in China. In addition, after COVID-19 was declared by the World Health Organization as a Public Health Emergency of International Concern on January 31, 2020, many foreign countries issued travel bans to China which further harmed the travel industry in China. These measures could slow down the development of the Chinese economy and adversely affect global economic conditions and financial markets.

        The Chinese government has also implemented strict nationwide containment measures against COVID-19, including travel restrictions, lock-downs of certain cities and hotel closures. Such containment measures negatively affected the key operating metrics of our leased and manachised hotels, including occupancy rates, ADR and RevPAR. Specifically, approximately 1,777 thousand room-nights, representing 8.6% of the total available room-nights throughout 2020, became temporarily

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unavailable at various times throughout 2020. As a result of the COVID-19 outbreak in the first half of 2020 in China and excluding the impact of requisitioned hotels, the occupancy rate of our hotels decreased from 73.4% in 2019 to 67.1% in 2020. The ADR of our hotels decreased by 9.2% from RMB429.5 to RMB389.8 during the same years. Our RevPAR, as a result, decreased by 16.5% from RMB329.5 to RMB275.1 during the same years. For our occupancy rate, RevPAR and ADR inclusive of the requisitioned hotels, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Performance Indicators". Since February 2020 and up to the date of this prospectus, the Chinese governmental authorities had accumulatively requisitioned a total of 92 of our hotels (including approximately 1.1 million room-nights) in various locations and during different periods for the accommodation of medical support workers and for quarantine purposes in response to the COVID-19 outbreak. All other than one of these hotels were manachised hotels. As of the date of this prospectus, approximately 98% of our hotels had resumed normal operations, with a small number of manachised hotels remaining subject to governmental requisition for an indefinite period of time because of COVID-19. We did not generate any revenue relating to sales based on continuing franchise fees from our manachised hotels used for quarantine purposes as the franchisees of such hotels were not required to pay us any continuing franchise fees during the quarantine periods.

        Such events also increased the probability that franchisees will be unable to fund working capital and to repay or refinance indebtedness, which may cause our franchisees to declare bankruptcy. Such bankruptcies may result in termination of our franchise and management agreements and eliminate our anticipated income and cash flows. Moreover, bankrupted franchisees may not have sufficient assets to pay termination fees, other unpaid fees, reimbursements or unpaid loans owed to us. The spread of COVID-19 had also adversely affected our suppliers and other business partners. If any of our suppliers and other business partners experiences financial distress, suffers business disruptions, goes out of business or files for bankruptcy due to the COVID-19 outbreak, our business, results of operations and financial condition could be materially and adversely affected. In addition, if any of our employees or customers is suspected of having contracted or has contracted COVID-19 while he or she has worked or stayed in our hotels, we may under certain circumstances be required to quarantine our employees that are affected and the affected areas of our premises.

        As COVID-19 remains a threat, its overall impacts on our business, liquidity and results of operations is unknown at this time. Moreover, COVID-19 may not be eliminated and a similar outbreak may recur. As a result, our occupancy rate in cities where such outbreak recur will be adversely affected. The potential economic downturn brought by and the duration of the COVID-19 pandemic are difficult to assess or predict and their actual effects will depend on many factors beyond our control. To the extent COVID-19 adversely affects our business, financial condition and results of operations, it may also heighten some of the other risks described in this "Risk Factors" section.

If our brand reputation is harmed, it could have a material adverse effect on our business and results of operations.

        We believe our "Atour" and "Yaduo" brands are integral to our success, including the success of our sales and marketing efforts and our efforts to grow through hotel management arrangements. Our continued success in maintaining and enhancing our brand depends, to a large extent, on our ability to provide consistent and high-quality accommodations and services across our hotel chain, and design and introduce new accommodations and services to meet customer demands, as well as our ability to respond to competitive pressures. In addition, we must maintain our hotels' good condition and attractive appearance which requires ongoing renovations and other leasehold improvements, including periodic repair and replacement of furniture, fixtures and equipment. Our future lifestyle brand offerings, if any, also depend on successful execution of our brand strategy and customer perception of us as a leading and pioneering lifestyle brand. If we are unable to maintain and enhance our brand reputation or fail to execute our brand strategy, our occupancy and room rates may decline and our

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new lifestyle brand offerings may not be widely accepted by customers, which would adversely affect our business and results of operations.

We may be adversely affected by any negative publicity concerning us and our business, shareholders, affiliates, directors, officers, other employees, business partners, other third parties as well as the industry in which we operate, regardless of its accuracy, that could harm our reputation and business.

        Our ability to attract and retain customers is highly dependent upon the external perceptions of our services, trustworthiness and business practices. Negative perceptions or publicity about us and our business, shareholders, affiliates, directors, officers, employees, business partners, other third parties as well as the industry in which we operate, even if related to isolated incidents, could erode trust and confidence and damage our reputation among existing and potential customers. In turn, this could decrease the demand for our products and services, increase regulatory scrutiny and detrimentally effect our business. In addition to traditional media, there has been an increasing use of social media platforms and similar devices in China, including instant messaging applications, social media websites and other forms of internet-based communications that provide individuals with access to a broad audience of consumers and other interested persons. Negative publicity concerning these parties could be related to a wide variety of matters, including, but are not limited to:

    alleged misconduct or other improper activities committed by our directors, officers, and employees, our franchisees and their personnel, as well as our business partners;

    false or malicious allegations or rumors about us or our directors, shareholders, affiliates, officers, employees and franchisees;

    complaints by our customers about our products and services;

    security breaches of private customer or transaction data;

    employment-related claims relating to alleged employment discrimination, wage and hour violations; and

    governmental and regulatory investigations or penalties resulting from our failure to comply with applicable laws and regulations.

        The availability of information on instant messaging applications and social media platforms is virtually immediate as is its impact without affording us an opportunity for redress or correction. The opportunity for dissemination of information, including inaccurate information, is seemingly limitless and readily available. Information concerning our company, shareholders, directors, officers and employees may be posted on such platforms at any time. The risks associated with any such negative publicity or incorrect information cannot be completely eliminated or mitigated and may materially harm our reputation, business, financial condition and results of operations.

        Furthermore, our brand name and our business may be harmed by aggressive marketing and communication strategies by competitors and third parties. We may be subject to government or regulatory investigation or third-party claims as a result and we may be required to spend significant time and incur substantial costs to react to and address these consequences. There is no assurance that we will be able to effectively refute each of the allegations within a reasonable period of time, or at all. Additionally, public allegations, directly or indirectly, against us or our business partners, may be posted online by anyone on an anonymous basis. The availability of information on social media platforms is virtually immediate, as is its impact. Social media platforms may not necessarily filter or check the accuracy of information before publishing them and we are often afforded little or no time to respond. As a result, our reputation may be materially and adversely affected and our ability to attract and retain customers and maintain our market share and our financial conditions may suffer.

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We may not be successful in developing and achieving expected returns from our diversified hotel brand portfolio and co-branding collaboration, which could adversely affect our financial performance and condition.

        We intend to diversify our brand portfolio and mix of hospitality offerings. Since 2016, we have launched a variety of new brands to cater to varying customer needs and preferences, including Atour Light, Atour X, Atour S, ZHOTEL and A.T. House. We also collaborated with a variety of reputable third-party brands to develop our themed hotel brands and properties. Going forward, we plan to establish new brands and further collaborate with third-party brands to diversify our brand portfolio. However, any new brands or new co-branding collaboration that we have launched or may launch in the future may not achieve anticipated returns. The development of a new brand requires significant upfront market research and accurate prediction of customer preferences, followed by hotel development process that takes a considerable amount of time. We may not possess enough knowledge or experience in expanding into these new market segments and we may face more competition in such new market segments. We cannot assure you that our efforts in developing new hotel and co-branding collaboration will be successful. If a new hotel brand or a co-branding initiative is not well received by our customers, we may not be able to generate sufficient revenue to offset related costs and expenses, and our overall financial performance and condition may be adversely affected.

Our growth depends on our ability to increase revenues generated by our existing and future hotels and from our existing and future members.

        While sales growth will depend in part on our plans for new hotel openings, deeper penetration into existing and new geographic markets and increased sales at our existing hotels will also affect our sales growth and will continue to be critical factors affecting our revenue and profit. Our ability to increase the revenues generated by our hotels depends in part on our ability to successfully implement our growth strategy and related initiatives. Our ability to penetrate further into the existing geographic markets where we already have a presence depends in part on our ability to successfully market ourselves and to maintain and increase sales to our existing members and attract more members to our A-Card membership program. We may not be able to achieve our targeted sales growth at our existing and future hotels, and sales at such hotels could decrease. In addition, we may not be able to achieve our targeted level of expansion within existing and new geographic markets. The occurrence of any of such events may have a material adverse effect on our business, financial condition and results of operations.

Our costs and expenses may remain constant or increase even if our revenues decline.

        A significant portion of our operating costs for a particular period, including rent, is fixed. Accordingly, a decrease in our revenues could result in a disproportionately higher decrease in our earnings because our operating costs and expenses may not decrease proportionately. For example, during January and February, the months during which the Chinese New Year falls, our occupancy rates tend to decline and our revenues fall, but our expenses do not vary significantly since we continue to pay rent and salary, make regular repairs, conduct maintenance and renovations, and invest in other capital improvements on a continuous basis to maintain the attractiveness of our hotels. In addition, our conversion costs may increase as a result of increasing costs of materials and our labor costs may increase over time. However, we have a limited ability to pass increased costs on to guests through hotel room rate increases. Our total operating costs increased by 2.4% from RMB1,490.3 million in 2019 to RMB1,526.7 million in 2020, while our net revenue decreased slightly from RMB1,567.1 million in 2019 to RMB1,566.6 million in 2020, primarily due to decreases in occupancy rate and ADR of our hotels as a result of the COVID-19 outbreak. Therefore, our costs and expenses may remain constant or increase even if our revenues decline, which would adversely affect our net margins and results of operations.

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Some of our existing development pipeline may not be developed into new hotels, which could materially and adversely affect our growth prospects.

        As of March 31, 2021, we had 299 leased and manachised hotels with a total of 32,825 hotel rooms in our development pipeline, which we define as hotels under construction or approved for development under our hotel brands. The commitments of owners and developers with whom we have contracts are subject to numerous conditions, and the eventual development and construction of our development pipeline not currently under construction is subject to numerous risks, including, in certain cases, the owner's or developer's ability to obtain adequate financing and obtaining governmental or regulatory approvals. As a result, not every hotel in our development pipeline may develop into a new hotel that enters our system.

We are subject to various operational risks inherent in the manachise business model.

        Our success could be adversely affected by the performance of our manachised hotels, which are subject to a variety of risks inherent in our manachise business model. Under the manachise business model, we manage hotels through the on-site hotel managers and HR representatives we appoint to each hotel and collect fees from franchisees. We plan to continue to increase the number of manachised hotels in the future. Our franchisees may not be able to develop hotel properties on a timely basis, which could adversely affect our growth strategy and may impact our ability to collect fees from them on a timely basis.

        We oversee and manage the operations of our manachised hotels pursuant to various franchise and management agreements. However, we are not able to control the actions of our franchisees. Under those franchise and management agreements, our franchisees are typically responsible for developing hotel properties on a timely basis, bearing the costs and expenses of developing and operating the hotels, including costs of renovating the hotels to our standards and recruiting and employing hotel staff. However, if our franchisees have difficulties in accessing capital or are reluctant to make investments for the management or renovation of the hotels, we may not be able to force them to secure the required capital and the quality of our manachised hotels' operations may be thereby diminished. The risk can be magnified where such fanchisees own multiple hotels under our brand.

        Besides, as the hospitality industry in China is subject to various hospitality industry, health and safety, construction, fire prevention and environmental laws and regulations, we cannot ensure that all of our franchisees or manachised hotels comply with these laws and regulations. We normally require our franchisees to secure relevant governmental approvals and permits for operating the hotels in our standard franchise and management agreements and require that our franchisees provide us with some basic approvals and permits, including, among others, business license, special industry license and fire prevention safety inspection certificates. However, some of our franchisees may fail to obtain or renew such approvals or permits in a timely manner, or at all. Any failure to obtain or renew such approvals or permits or to comply with the laws and regulations will negatively effect the operation of our manachised hotels, which will in turn have a material adverse effect on our results of operations.

        As many factors affecting the operations of those hotels are beyond our control, we cannot assure you that the quality of the services in our manachised hotels are consistent with our standards and requirements. Although we send for routine inspection purposes regional managers and members of our quality control team to manachised hotels on a regular basis, we may not be able to identify problems in their operations and make responses on a timely basis. Our manachised hotels are also operated under our brand names. As a result, our image and reputation may suffer due to misuse of our brands by any of our franchisees, which may have a material adverse effect on our business and results of operations. In addition, like any operators in service-oriented industries, we are subject to customer complaints and we may face complaints from unsatisfied customers who are unhappy with the standard of service offered by our franchisees. Any complaints, regardless of their nature and validity,

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may affect our reputation, thereby adversely affecting our results of operations. We may also have to incur additional costs in placating any customers or salvaging our reputation. We have closed a limited number of manachised hotels that did not comply with our brand and operating standards in the past. If any of our franchisees defaults or commits wrongdoing, such franchisee may not be in a position to sufficiently compensate us for losses which we have suffered as a result of such defaults or wrongdoings. While we ultimately can take action to terminate our franchisees that do not comply with the terms of our franchise and management agreements or commit wrongdoing, we may not be able to identify problems and make timely responses and, as a result, our image and reputation may suffer, which may have a material adverse effect on our results of operations.

        In addition to quality standards, safety incidents such as fire accidents may occur at our manachised hotels despite our supervision. Any such occurrence may result in substantial reputational harm to us and our brands. In addition, if such safety incidents occur at any of the manachised hotels that do not possess the relevant licenses, permits or inspection certificate, there could be substantial negative publicity, thereby triggering government actions that could impact our entire hotel network, which in turn will have a material adverse impact on our business, results of operations and financial condition.

        Although our proprietary information system can collect operational and financial data of each hotel, we may not be able to avoid fraud or manipulation of such data by some franchisees, which may adversely affect the ability to effectively respond to potential issues. Moreover, the term of lease for some of the properties of our franchisees is shorter than the typical term of our franchise and management agreements. We cannot assure you that upon expiration, these franchisees will be able to renew their leases in order to perform their franchise and management agreements with us.

We may not be able to successfully attract new franchisees and compete for franchise and management agreements and, as a result, we may not be able to achieve our planned growth.

        Our growth strategy largely depends on our ability to further expand our presence through entering into franchise and management agreements with our franchisees. We believe that our ability to attract new franchisees and compete for franchise and management agreements with them depends primarily on our brand recognition and reputation, the results of our overall operations in general and the success of our current manachised hotels. Other competitive factors for franchise and management agreements include marketing support, membership program, efficiency of our central reservation system ("CRS") and IT infrastructure, our ability to provide systems and support to assist franchisees to operate their hotels cost-effectively.

        The terms of any new franchise and management agreements that we obtain also depend on the terms that our competitors offer for those agreements. In addition, if the availability of suitable locations for new properties decreases, or governmental planning or other local regulations change, the supply of suitable properties for additional manachised hotels could diminish. If the performance of our manachised hotels is less successful than that of our competitors' hotels or if we are unable to offer terms as favorable as those offered by our competitors, we may not be able to compete effectively for new franchise and management agreements and we may not be able to attract as many new franchisees as we expect. As a result, we may not be able to achieve our planned growth and our business and results of operations may be materially and adversely affected.

Our franchise and management agreements could be terminated early and we may not be able to renew our existing franchise and management agreements or renegotiate new franchise and management agreements when they expire.

        We franchise our brands to third parties pursuant to franchise and management agreements or other similar agreements. These franchise and management agreements may be renegotiated or may

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expire. The versions of franchise and management agreements we have used during recent years typically have a fixed term of 8 to 15 years. We plan to renew our existing franchise and management agreements upon expiration or renegotiate with our franchisees for new franchise and management agreements. However, we may be unable to retain our franchisees on satisfactory terms, or at all. In addition, our franchise and management agreements could also be terminated early due to a number of reasons, including property disputes or defects, franchisees' financial difficulties, regulatory non-compliance, and others, many of which are beyond our control. If a significant number of our existing franchise and management agreements expire and new franchisees do not cover those expired franchisees or a significant number of our franchisees terminate the franchise and management agreements with us early, our revenue and profit may decrease in the future, and our results of operations could be materially and adversely affected.

        In addition, disputes could arise between us and our franchisees under our franchise and management agreements. We or our franchisees may take legal actions against each other in connection with such disputes. No assurance can be given as to the outcome of any such legal proceedings, which could have a material adverse effect on our business, results of operations and financial condition. Even if we and our related parties are successful in our attempt to defend ourselves in legal and administrative actions or to assert our rights under various laws, enforcing our rights against the various parties involved may be expensive, time-consuming and ultimately futile. These actions could expose us to negative publicity and to substantial monetary damages and legal defense costs, injunctive relief, and criminal and civil liabilities and/or penalties.

        As the hospitality industry in China is highly competitive, the terms of our franchise and management agreements are influenced by contract terms offered by our competitors. We cannot assure you that the terms of franchise and management agreements for new manachised hotels entered into or renewed in the future will be as favorable as the terms under our existing franchise and management agreements. If such agreements cannot be renewed on satisfactory terms upon expiration, our results of operations could be materially and adversely affected.

Our failure to comply with franchise regulations may result in penalties to us and could have a material adverse effect on our business.

        In China, any entity engaging in franchise activities are subject to the supervision and administration of the Ministry of Commerce, or the MOC, and its local counterparts. Under the relevant regulations, franchisors are required to file their franchise agreements with the MOC or its local counterparts, and are required to report to the MOC regarding the franchise agreements that they executed, canceled, renewed or amended in the previous year within the first quarter of every year. Fifteen days after a franchisor first enters into a franchise agreement, the franchisor is required to make appropriate filing with the MOC or its local counterparts. We cannot guarantee that we will obtain all applicable approvals and make all appropriated filings pursuant to laws and regulations, and such non-compliance could subject us to fines and other penalties that may negatively affect our operation, which could result in a material adverse effect on our business. Besides, given the uncertainties in the interpretation of relevant laws and regulations, our management agreements or trademark license agreements may be determined to be franchise agreements by the relevant authorities, in which case we may be required to obtain approvals or make filings for such activities, and failure to do so may also subject us to fines and other penalties.

        Besides, the franchise activities are subject to various laws and regulations. For example, before entering into franchise agreements, the franchisor is required to correctly, accurately and fully disclose and provide specified written information to the franchisee regarding the franchised businesses, which includes certain proprietary information. If we violate the disclosure requirements related to franchise activities, our franchisees may choose to terminate their franchise agreements with us, and we could be subject to fines and other penalties that may negatively affect our operation, which could result in a

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material adverse effect on our business. Apart from that, all franchise agreements are required to include certain provisions, such as termination rights and payment obligations. If we are required to revise our agreements pursuant to applicable laws and regulations, such revised terms may be less favorable to us, which could materially diminish the economic value of our agreements.

We may not be able to convert leased hotels on a timely or cost-efficient basis, which may adversely affect our growth strategy and business prospects.

        We fund and oversee the conversion of our leased hotels. Our involvement in the conversion of leased properties presents a number of risks, including conversion delays or cost overruns, which may result in increased project costs or lost revenues. We may be unable to recover conversion costs we incur for projects that are not pursued to completion. In addition, properties that we convert could become less attractive due to market saturation or oversupply, meaning we may be unable to recover conversion costs at the expected rate, or at all. Furthermore, we may not have available cash to complete projects that we have commenced, or we may be unable to obtain financing for conversion of future properties on favorable terms, if at all. If we are unable to successfully manage our hotel conversion activities to minimize these risks, our growth strategy and business prospects may be adversely affected.

Our new leased hotels typically incurred significant pre-opening expenses during their development stages and generated relatively low revenues during their ramp-up stages, which may have a significant negative impact on our results of operations.

        During the development stages of each new leased hotel, significant pre-opening expenses will typically be incurred. During the ramp-up stage immediately after the opening of each new leased hotel, its occupancy rate increases gradually and its revenues may be insufficient to cover its operating costs, which are relatively fixed in nature. As a result, most newly opened leased hotels may not achieve profitability until they reach a mature level of operations. We may also be unable to recover development costs we incur for projects that are not completed. Any expansion of our leased hotel portfolio would incur significant pre-opening expenses during the development stage and relatively low revenues during the ramp-up stage of such newly opened leased hotels, whose expenses may have a significant negative impact on our results of operations. Properties that we develop could become less attractive due to market saturation, oversupply or changes in market demand, with the result that we may not be able to recover development costs as we expect, or at all.

Our legal right to lease certain properties to operate our leased hotels could be challenged by property owners or other third parties, which could prevent us from continuing to operate our leased hotels or increase the costs associated with operating these hotels.

        We rely on leases with third parties who either own or lease the properties from the ultimate property owners to operate our leased hotels. The land use rights and other property rights with respect to properties we currently lease for our existing hotels could be challenged. As of the date of this prospectus, our lessors failed to provide us with the valid property ownership certificates and/or the land use rights certificates for approximately 7.4% of all of our leased hotels in terms of gross floor area. While we have performed due diligence to verify the rights of our lessors to lease such properties, including inspecting documentation issued by competent government authorities evidencing these lessors' land use rights and other property rights with respect to these properties, the lessees' rights under those leases could be challenged by other parties including government authorities in China. If the properties are deemed to be illegal constructions or the landlords do not have the rights to lease the properties to the lessees for hotel operations purposes, the lessors (instead of the lessees) may be subject to monetary penalties and the lease agreements may be invalidated. We may therefore be required to relocate our relevant hotels. In addition, some of our properties where our leased hotels are located are owned by governmental and other third-party organizations, and such leases are subject to present and future policies in China related to government-owned properties or other similar types of properties. In the event that we could no longer operate on such sites, we may suffer financial losses.

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        We also cannot assure you that we can always keep good title of the properties we lease currently or will lease in the future, free and clear of all liens, encumbrances and defects. If the ultimate owner of the property changes after the original owner of such property mortgages such property to any third party, lessees' legal rights under the lease agreement may be affected adversely and we may not rank senior in the right of continuing occupying the property. In addition to the above risks, we also face potential disputes with property owners, primary lease holders or third parties. Such disputes, whether or not resolved in our favor, may divert management attention, involve significant cost, harm our reputation and otherwise disrupt our business.

Failure to comply with lease registration under PRC law may subject both parties to such leases to fines or other penalties that may negatively affect our ability to operate our leased hotels.

        Under PRC law, all lease agreements are required to be registered with the local housing bureau, including those relating to the leased properties underlying our leased hotels. While the majority of our standard lease agreements require the lessors to make such registrations, most of our leases entered into in connection with our leased hotels as of the date of this prospectus have not been registered as required by PRC law, which may expose both lessors and lessees to potential monetary fines ranging from RMB1,000 to RMB10,000 for each non-registration. Some of our rights under the unregistered leases may also be subordinated to the rights of other interested third parties.

        In addition, in some instances where the lessors or lessees are not the ultimate owners of hotel properties, no consents or permits have been obtained from the property owners, the primary lease holders or competent government authorities, as applicable, for the subleases of the hotel properties to certain of our hotels, which could potentially invalidate the leases for our hotel properties or lead to the renegotiation of such leases that result in terms less favorable to us or even relocation of our relevant hotels. Some of the properties leased from third parties were also subject to mortgages at the time the leases were signed. Moreover, the property ownership or leasehold in connection with our manachised hotels could be subject to similar third-party claims.

Failure to comply with land- and property-related requirements under PRC law may subject lessors to fines or other penalties that may negatively affect our ability to operate our leased hotels.

        Lessors of our hotel properties are required to comply with various land- and property-related laws and regulations to enable them to lease effective titles of their properties for our hotel use. For example, before any properties located on state-owned land in China with allocated or leased land use rights or on land owned by collective organizations may be leased to third parties, lessors should obtain appropriate approvals from competent government authorities. In addition, properties used for hotel operations and the underlying land should be approved for hospitality use or appropriate commercial use purposes by competent government authorities. Some of the lessors of our hotel properties have not obtained the required governmental approvals, including approvals of the properties for hospitality use purposes. As of the date of this prospectus, for approximately 23.4% of all of our leased hotels in terms of gross floor area, the lessors have not obtained the required governmental approvals for the properties to be used for hospitality use purposes. Failure to comply with the land- and property-related laws and regulations may subject the lessors to monetary fines or other penalties and may lead to the invalidation or termination of the leases and relocation of our relevant leased hotels, and therefore may adversely affect our results of operations. While some lessors have agreed to indemnify lessees against the losses resulting from the lessors' failure to obtain the required approvals, there is no assurance that the lessees will be able to successfully enforce such indemnification obligations against the lessors or that such indemnification can cover losses from all the property defects. As a result, we may suffer significant losses resulting from the lessors' failure to obtain required approvals to the extent that the lessees are not fully indemnified by the lessors.

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The lease agreements for our leased hotels could be terminated early, the existing leases may not be renewed on commercially reasonable terms and the rents paid by us could increase substantially, which could materially and adversely affect our operations.

        The terms of leases for leased hotels typically provide, among other things, that the lease could be terminated under certain legal or factual conditions. If any such lease were terminated early, operations of the related hotel property may be interrupted or discontinued and costs may be incurred by us to relocate to another location. Furthermore, we may be liable to our lessors, guests and other vendors and may be required to pay losses and damages due to our default under relevant contracts. As a result, our business, results of operations and financial condition could be materially and adversely affected.

        Although we intend to renew existing leases of certain of our leased hotels, there can be no assurance that we will be able to renew such leases and maintain current hotel operations on satisfactory terms, or at all. In particular, we may experience increased rent payments and increased operating cost in connection with renegotiating leases. If we fail to maintain current hotel operations on satisfactory terms upon expiration of the leases, the respective operating costs of our company may increase and overall profits generated from hotel operations may decrease. If we are unable to pass on increased costs to our guests through room rate increases, the operating margins and earnings of our company could decrease and our results of operations could be materially and adversely affected.

        Our leases typically allow us to terminate the lease early under limited circumstances, and in some instances, our leases contain a term which requires us to pay the contingent rent for our wrongful early termination of such agreements. If disputes between us and our landlords occur in the future, and resolved in favor of our landlords, we may need to pay losses and damages to the landlords and as a result, our business, results of operations and financial condition could be materially and adversely affected.

Default in payment by franchisees and/or corporate account clients that have large account receivable balances could adversely impact our cash flows, working capital, results of operations and financial condition.

        Our accounts receivable include amounts due from our franchisees and corporate clients whose employees are guests in our leased hotels. Our corporate clients may choose to settle with us directly, and we typically require our franchisees to pay various fees pursuant to their franchise and management agreements with us on a monthly basis. Our net accounts receivable balance was RMB80.3 million, RMB140.1 million and RMB146.3 million as of December 31, 2019 and 2020 and March 31, 2021.

        We are subject to the risk that we may be unable to collect accounts receivable in a timely manner, or at all. An extended period of hotel room vacancy or decrease in room rates, which may be the result of a variety of factors such as unfavorable economic conditions in China and globally, may adversely affect our ability to collect accounts receivable in a timely manner, or at all. Such risk was higher as a result of the outbreak of COVID-19 resulting in financial difficulties of certain of our franchisees. We extended credit terms to certain franchisees during the pandemic as part of our support for franchisees. As a result, our franchisees and/or corporate account clients may not be able to pay us in a timely fashion and our accounts receivable and allowance for doubtful accounts may accordingly increase. Our liquidity and cash flows from operations may be adversely affected if our accounts receivable cycles or collections periods lengthen or if we encounter a material increase in defaults of payment of our account receivable.

        In order to mitigate such risks, we conduct rigorous due diligence checks on prospective franchisees and regularly assess the creditworthiness of corporate account clients. However, these mitigating efforts cannot ensure that we will be able to collect accounts receivable. If the accounts receivable cannot be collected in time, or at all, a significant amount of bad debt expense will occur,

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and our business, financial condition and results of operation will likely be materially and adversely affected.

Interruption or failure of our technology platform or IT system could impair our ability to effectively provide accommodations and services, which could damage our reputation.

        Our ability to provide consistent and high-quality services across our hotel chain depends on the continued operation of our technology platform and IT system. Any damage to, or failure of, our technology platform or IT system could interrupt our service. Our technology platform and IT system are vulnerable to damage or interruption as a result of power loss, telecommunications failures, computer viruses, hackers, fires, floods, earthquakes, or other attempts or incidents to harm our systems, and similar events. We rely on cloud servers maintained by third-party service providers to store most of our data. Problems with our cloud service provider or the telecommunications network providers with whom it contract could adversely affect the experience of our guests. Our cloud service provider could decide to cease providing us with services without adequate prior notice. Any change in service levels at our cloud servers or any errors, defects, disruptions, or other performance problems with our platform could harm our brand and may damage the data of our guests. In addition, our servers may also be vulnerable to break-ins, sabotage and vandalism. Some of our systems are not fully redundant and our disaster recovery planning does not account for all possible scenarios. In addition, our technology platform, IT system and related technologies may become outdated and we may not be able to replace or introduce upgrades as quickly as our competitors or within budgeted costs for such upgrades. If we experience frequent, prolonged or persistent technology platform or IT system failures, the quality of our services and our reputation could be harmed. The steps we need to take to increase the reliability and redundancy of our technology platform and IT system may be costly, which could reduce our operating margin, and may not be successful in reducing the frequency or duration of any failures or service interruptions.

        Moreover, our business also relies upon the overall performance of the internet infrastructure and telecommunications networks in China. Almost all access to the internet is maintained through state-owned telecommunications operators under the administrative control and regulatory supervision of the Ministry of Industry and Information Technology (MIIT). Moreover, we have entered into contracts with various subsidiaries of a limited number of telecommunications service providers at provincial level and rely on them to provide us with data communications capacity through local telecommunications lines. We have limited access to alternative networks or services in the event of disruptions, failures or other problems with China's internet infrastructure or the telecommunications networks provided by telecommunications service providers. Our platform regularly serves a large number of guests, franchisees and suppliers. With the expansion of our business, we may be required to upgrade our technology and infrastructure to keep up with the increasing traffic on our platform. However, we have no control over the costs of the services provided by telecommunications service providers. If the prices we pay for telecommunications and internet services rise significantly, our results of operations may be materially and adversely affected.

If our IT capabilities and infrastructure fail to keep up with our growing business needs, industry trends or technological developments, our business, results of operations and financial condition may be materially and adversely affected.

        We have experienced substantial growth in the past and plan to further expand our business in the future. Our expansion has placed, and will continue to place, substantial demands on our IT capabilities and infrastructure. In order to manage and support our growth, we must continue to improve our IT systems, including investments in IT infrastructure and recruitment and training of IT personnel. We cannot assure you that the development of our IT capabilities and infrastructure will keep up with our

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growing business needs. If we fail to do so, our business, results of operations and financial considtion may be materially and adversely affected.

        Furthermore, the hospitality industry is rapidly evolving and subject to continuous technological changes. Our success will depend on our ability to keep up with the changes in technology and user behavior resulting from new developments and innovations. For example, as we provide our product and service offerings across a variety of mobile systems and devices, we are dependent on the interoperability of our services with popular mobile devices and mobile operating systems that we do not control, such as Android and iOS. If any changes in such mobile operating systems or devices degrade the functionality of our services or give preferential treatment to competitive services, the usage of our services could be adversely affected. In addition, we have invested in developing our data analytics and other technologies to improve our customer services and operational efficiency, but there is no guarantee that such investments may result in our anticipated outcomes or returns.

        Technological innovations may also require substantial capital expenditures in product or service development as well as in modification of products, services or infrastructure. We cannot assure you that we can obtain financing to cover such expenditure. See "—We require significant capital to fund our operations, growth and technological investments. If we cannot obtain sufficient capital on acceptable terms, our business, financial condition and prospects may suffer." If we fail to adapt our products and services to such changes in an effective and timely manner, we may suffer from decreased user traffic and user base, which, in turn, could materially and adversely affect our business, financial condition and results of operations.

The growth of third-party websites and other hotel reservation intermediaries and travel consolidators may adversely affect our margins and profitability.

        Some of our hotel rooms are reserved through third-party websites and other hotel reservation intermediaries and travel consolidators to whom we pay commissions for such services, including Trip.com, who is also our shareholder. We believe that such intermediaries and consolidators aim to have consumers develop loyalties to their reservation systems rather than to hotel brands such as ours. In addition, as the competitive landscape of the third-party hotel reservation intermediary business changes, we may be forced to enter into exclusive agreement with one of them or other types of arrangments, which may further strengthen such intermediary's market position at the expense of ours. If these intermediaries and consolidators become a significant channel through which our guests make reservations, they may be able to negotiate higher commissions, reduced room rates, or other significant concessions from us, which could adversely affect our margins and profitability. These intermediaries and consolidators also may reduce our bookings by de-ranking our hotels in search results on their platforms. Although our contracts with many hospitality intermediaries offer preferential commission rates to hotels, we may not be able to renegotiate these contracts upon their expiration with terms as favorable as existing terms of these contracts.

We face risks associated with the misconduct of our employees, business partners and their employees and other related personnel.

        We rely on our employees to maintain and operate our business and have implemented an internal code of conduct to guide the actions of our employees. However, we do not have control over the actions of our employees, our business partners and their employees, and any misbehavior of our employees could materially and adversely affect our reputation and business. Despite the security measures we have implemented, we may be vulnerable to misconduct committed by our employees, our business partners and their employees and other related personnel. If an actual or perceived misconduct occurs, the market perception of the effectiveness of our services could be harmed, we may lose current and potential customers, and we may be exposed to legal and financial risks, including

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those from legal claims, regulatory fines and penalties, which in turn could adversely affect our business, reputation and results of operations.

If we fail to maintain our relationships with our members and corporate account clients, our business and financial condition could be materially and adversely affected.

        Historically, we have derived a portion of our revenues from our loyalty program members and from our cooperation arrangements with certain corporate account clients. In 2020, approximately 80.1% of our room-nights were sold to our A-Card members and corporate account clients through our direct sales channels. We expect that these members and corporate account clients will contribute to the growth of our business in the near future.

        We cannot assure you that our members will remain loyal patrons of our hotels and that our corporate account clients will agree to renew the relevant cooperation agreements upon their expiration, or enter into new agreements with us on substantially similar terms. Our negotiating position with corporate account clients also is limited given the competition in China's hospitality industry. If we fail to enhance or maintain our relationships with our members, and the frequency of member stays at our hotels declines as a result, or if our corporate account clients decline to renew their cooperation agreements or propose new agreements with commercial terms less favorable to us, our business and financial condition could be materially and adversely affected.

The cessation, reduction or taxation of program benefits of our A-Card loyalty program could adversely affect our brand and guest loyalty.

        We manage the A-Card loyalty program for our brand. Program members accumulate points based on eligible stays and hotel charges as well as purchase of our retail products and redeem the points for a range of benefits including free rooms and other items of value. The program is an important aspect of our business and of the affiliation value for hotel owners under franchise and management agreements. Currently, the program benefits are not taxed as income to members under PRC tax laws. If the program awards and benefits are materially altered, curtailed or taxed such that a material number of A-Card members choose to no longer participate in the program, this could adversely affect our business.

Scalpers may exploit our A-Card loyalty program by reserving rooms at member-only price and resell such room reservation to our prospective guests, which could adversely affect our guests' hotel experience and harm our brand and business.

        We offer our A-Card members certain discounts to room price as part of the membership benefits. Scalpers have tried to and may continue to exploit these A-Card room discounts by reserving rooms at a lower member-only price and resell to a non-member guest at a higher price. Such exploitation not only results in losses of our revenue but also adversely affects our guests' hotel experience and harms our brand and business. To prevent such exploitation and ensure the quality of our guests' hotel experience, we have taken various measures. Nevertheless, there can be no assurance that our efforts against such exploitation will be successful. If we fail to effectively prevent scalpers from exploiting our A-Card loyalty program, our guests' hotel experience could be harmed and we will suffer loss of revenue, which could in turn adversely affect our brand, reputation and business.

We face various risks associated with our brand license agreements in connection with our themed hotels and our licensors which could adversely affect our business and results of operations.

        Our themed hotels are developed under license agreements which grant us the right to use certain intellectual property such as our business partners' brand names, trademarks and logos. These license agreements typically have terms between one to 10 years, some of which are not automatically

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renewable, and give the licensor the right to terminate the license agreement due to certain reasons like material breach or non-performance of such license agreements. We may not be able to renew any or some of the existing license agreements. We believe our ability to retain our license agreements depends, in large part, on our relationships with our licensors. Any events or developments adversely affecting those relationships could adversely affect our ability to maintain and renew our license agreements on similar terms or at all. The termination or lack of renewal of one or more of our license agreements, or the renewal of a license agreement on less favorable terms, could have a material adverse effect on our business, financial condition and results of operations. While we may enter into additional license agreements in the future, the terms of such license agreements may be less favorable than the terms of our existing license agreements. In addition, our collaboration with licensors are generally non-exclusive. Licensors may work with our competitors or new participants in the market. This lowers entry barrier for market players who plan to enter the themed hotel market and operate hotels based on the same non-exclusive licensed intellectual property rights, resulting in more competition and creating pricing pressure.

        If we breach any obligations set forth in any of our license agreements, we could be subject to monetary and other penalties and our rights under such license agreements could be terminated, either of which could have a material adverse effect on our business, financial condition and results of operations.

        The success of our themed hotels is also partially dependent on the reputation of our licensors and their intellectual property rights and the ability of our licensors to protect and maintain the intellectual property rights that we use in connection with our hotels, all of which may be harmed by factors outside our control, including unfavorable publicity or negative news regarding us or our licensors, which could adversely affect our reputation and our results of operations.

Any failure to protect our trademarks and other intellectual property rights could have a negative impact on our business.

        We believe our brand, trade name, trademarks and other intellectual property are critical to our success. "Atour" and "Yaduo" represent a well recognized brand in China's hospitality industry and the success of our business depends in part upon our continued ability to use our brand, trade names and trademarks to increase brand awareness and to further develop our brand. Although we have registered "Yaduo", "Atour" and other logos related to our business as trademarks in China, there is no assurance that any issued patents or registered trademarks will adequately protect our intellectual property, or that such patents and trademarks will not be challenged by third parties or found by a judicial authority to be invalid or unenforceable. Besides, our trade secrets may leak or otherwise become available to, or be independently discovered by, our competitors or other third parties. Some of our trademark applications may not be granted for various reasons, including existence of prior registrations, applications or rights, or rejection by the authorities in their discretion. If our trademark applications are not granted, we may have to use different marks for affected products or services, or seek other alternative arrangements, which might not be available on commercially reasonable terms, if at all.

        In addition, we consider our technology platform and IT system to be key components of our competitive advantage and our growth strategy. There can be no assurance that our future computer software copyright applications will be granted. Monitoring and preventing the unauthorized use of our intellectual property is difficult. Any unauthorized use of our intellectual property by third parties may adversely affect our current and future revenues and our reputation. If there is a third party using similar brand or logos that attempt to cause confusion or diversion of customer demands away from us, preventing such behavior could be difficult, costly and time-consuming and the steps we take may be inadequate to prevent the infringement or misappropriation of our intellectual property. The unauthorized use of our trademarks or the use of confusingly similar brands could diminish the value of our brand and its market acceptance, competitive advantages and goodwill.

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        The measures we take to protect our brand, trade names, trademarks and other intellectual property rights may be costly, involve substantial management time and resources to enforce and may fail to prevent their unauthorized use by third parties. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources, and could put our intellectual property at risk of being invalidated or narrowed in scope. There is no assurance that we will prevail in such litigation, and even if we do prevail, we may not obtain a meaningful recovery. Furthermore, the application of laws governing intellectual property rights in China is uncertain and evolving, and could involve substantial risks to us. If we are unable to adequately protect our brand, trade names, trademarks and other intellectual property rights, we may lose these rights and our business may suffer materially.

        In addition, once our registered trademarks have expired, we will be able to renew our trademark registrations for another ten years upon paying a renewal fee. If we are unable to renew or maintain one or more trademark registrations, our ability to use such trademarks could be impaired, which could materially and adversely affect the performance of our existing franchise and management agreements, our ability to enter into future franchise and management agreements, and our business and results of operations.

We may be liable for intellectual property infringement relating to intellectual properties of third parties, which may materially and adversely affect our business, financial condition and prospects.

        We cannot assure you that other aspects of our operations do not or will not infringe upon or violate intellectual property rights (including but not limited to trademarks, patents, copyrights, know-how) or other rights (including but not limited to portraiture right) owned or held by third parties. We have been involved in claims against us alleging our infringement of third-party intellectual property rights on certain computer software. Any such intellectual property rights infringement claim could result in costly remedial measures and may adversely affect our business and financial condition. We have adopted systematic methods to reduce our exposure to the risks of intellectual property infringement claims. However, we cannot assure you those methods are sufficient to shield us from third party liabilities for intellectual property infringement, or our efforts will be considered favorably by a given court or relevant governmental authority. Liabilities for intellectual property infringement, or allegations of such infringement, may impose a burden on our management, cause penalties, lead to unfavorable media coverage and damage to our reputation, or even cause PRC authorities to impose sanctions on us, including, in serious cases, suspending our operation, which may materially and adversely affect our business, financial condition and prospects.

Failure to retain our senior management team and other key employees could harm our business and operations.

        Our future success significantly depends upon the continuing service of our senior management team, including, our founder, Chairman of Board of Directors and Chief Executive Officer, Mr. Haijun Wang. If one or more members of our senior management team or other key employees are unable or unwilling to continue in their present position, we may not be able to replace them easily, or at all. As a result, our business could be severely disrupted and our financial condition and results of operations could be materially and adversely affected. We do not carry key person insurance on any of our senior management team. In addition, our senior management team has limited experience in running public companies, which will require us to expend additional resources in hiring additional support staff and incur additional costs and expenses.

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If we are not able to recruit, train and retain qualified managerial and other employees, our brand and our business may be materially and adversely affected.

        Our ability to continue to conduct and expand our operations depends on our ability to attract and retain a large and growing number of qualified personnel in China. Our ability to meet our labor needs, including our ability to find qualified personnel to fill positions that become vacant, while controlling labor costs, is generally subject to numerous external factors, including the availability of a sufficient number of qualified persons in the work force of the markets in which we operate, unemployment levels within those markets, prevailing wage rates, changing demographics, health and other insurance costs and adoption of new or revised employment and labor laws and regulations. If we are unable to locate, attract or retain qualified personnel, or manage leadership transition successfully, the quality of service we provide to customers and franchisees may decrease and our financial performance may be adversely affected. In addition, if our costs of labor or related costs increase for other reasons or if new or revised labor laws, rules or regulations or healthcare laws are adopted or implemented that further increase our labor costs, our financial performance could be materially and adversely affected.

        In particular, our hotel managers and HR representatives are responsible for managing our manachised hotels and interact with our guests on a daily basis and are critical to maintaining our consistent and high-quality accommodations and services, as well as our established brand and reputation. We aim to recruit, train and retain entrepreneurial, motivated and customer-oriented hotel managers and HR representatives with backgrounds and experience in hotel, service and other industries. We must recruit and train qualified hotel managers and HR representatives on a timely basis to keep pace with our rapid growth. There may be a limited supply of such qualified individuals in some of the metropolitan markets in China where we have operations and other cities into which we intend to expand. In addition, criteria such as dedication to work and commitment to high-quality of customer service are difficult to ascertain during the recruitment process. We also must provide continuous training to our hotel managers and HR representatives so that they can stay abreast of changes in our hotel operations and consumer preferences and demands, and meet and implement our quality standards. If we fail to recruit, train and retain qualified hotel managers and HR representatives, our quality standards may decrease in one or more of our hotels and our manachised hotels' operation may be adversely affected, which in turn may have a material and adverse effect on our brand, our business, and our financial condition and results of operations.

We may not be successful in developing and achieving expected returns from our new products or services, including our innovative scenario-based retail services.

        In addition to our hotel offerings, we are also currently engaged in other innovative business lines, including our scenario-based retail (including our expanding private label product offerings). There is no guarantee that we may further expand our product service offerings, attract more customers, and drive customer spendings on such businesses.

        In particular, our scenario-based retail services are subject to various potential liabilities and risks commonly associated with e-commerce or online retail, including, among others:

    product liability disputes and related liabilities;

    food safety disputes and related liabilities;

    intellectual property infringement disputes and related liabilities;

    portrait right infringement disputes and liabilities associated with the marketing materials that we use to promote our products;

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    disputes and liabilities related to pricing, advertisements, consumer protection, privacy and data security;

    non-compliance risks under various laws and regualtions, including those laws and regulations relating to online platforms.

    risks related to refund policy, storage and transportation of our products;

    fluctuations in the price of raw materials;

    reliance on third-party manufactuers for our private label products and their ability to produce and supply products in compliance with our specifications;

    lack of effective control over our franchisees, who act as distributors for our retail products; and

    inventory impairment risks.

        Going forward, we plan to build lifestyle brands around hotel offerings and further diversify our non-hotel brand portfolio. However, any new products or services that we have launched or may launch in the future may not achieve anticipated returns. The development of a new product or service requires significant upfront market research and accurate prediction of customer preferences, followed by development process that takes a considerable amount of time as well as significant sales and marketing activities. We cannot assure you that our efforts in developing new products or services will be successful. If a new product or service is not well received by our customers, we may not be able to generate sufficient revenue to offset related costs and expenses, and our overall financial performance and condition may be adversely affected.

If we were to be sued for product liability, we could face substantial liabilities that exceed our resources.

        The third-party and private label products that we sell through our scenario-based retail business could lead to the filing of product liability claims where someone may allege that the products that we sold failed to perform as designed or caused certain injuries or losses. We may be subject to product liability claims resulting from misuse of the products that we sold and we currently do not maintain any product liability insurance. A product liability claim could result in substantial damages and be costly and time-consuming for us to defend. If we cannot successfully defend ourselves against product liability claims, we will incur substantial liabilities and reputational harm. In addition, regardless of merit or eventual outcome, product liability claims may result in:

    costs of litigation;

    distraction of management's attention from our primary business;

    the inability to market relevant products on our retail stores and online platforms;

    decreased demand for such products;

    damage to our business reputation;

    substantial monetary awards to customers or other claimants;

    loss of sales; or

    termination of existing agreements by our partners and potential partners failing to partner with us.

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Any lack of requisite approvals, licenses or permits applicable to our online retail business may have a material and adverse impact on our business, financial condition and results of operations.

        Our online retail business is subject to governmental supervision and regulation by the relevant PRC governmental authorities, including but not limited to the Ministry of Commerce and the MIIT. Together, these government authorities promulgate and enforce regulations that cover many aspects of the operation of the online retail industry, including entry into the industry, the scope of permissible business activities, licenses and permits for various business activities, and foreign investment. If the PRC government considers that we were operating without the proper approvals, licenses or permits, it has the power, among other things, to levy fines, confiscate our income, revoke our business licenses, and require us to discontinue our relevant business or impose restrictions on the affected portion of our business. Any of these actions by the PRC government may have a material and adverse effect on our results of operations. In addition, if we are unable to maintain and renew one or more of our licenses and certificates, or making appropriate reports or filings, we may be subject to sanctions and enforcement actions, which could adversely and materially affect our business, financial condition and results of operations.

If we are unable to conduct sales and marketing activities cost-effectively, our business, financial condition and results of operations may be materially and adversely affected.

        We rely on our sales and marketing efforts to enlarge our customer base and drive the spending of our customers. In particular, effective sales and marketing activities are crucial to the expansion and success of our scenario-based retail business. Our sales and marketing activities may not be well received by the market and may not result in the levels of sales that we anticipate. We also may not be able to retain or recruit a sufficient number of experienced sales and marketing personnel, or to train newly hired sales and marketing personnel, which we believe is critical to implementing our sales and marketing strategies cost-effectively. Further, sales and marketing approaches and tools in China's hospitality industry are evolving rapidly. This requires us to continually enhance the effectiveness and efficiency of our sales and marketing activities and experiment with new methods to keep pace with industry developments and customer preferences. Failure to engage in sales and marketing activities in a cost-effective manner may reduce our market share, cause our sales to decline, slow down the growth of our scenario-based retail business, negatively impact our profitability, and materially harm our business, financial condition and results of operations.

We may be liable for improper use or appropriation of personal information provided by our customers.

        Our business involves collecting and retaining large volumes of internal and customer data, including personal information as our various information technology systems enter, process, summarize and report such data. We also maintain information about various aspects of our operations as well as regarding our employees. The integrity and protection of our customer, employee and company data is critical to our business. Our customers and employees expect that we will adequately protect their personal information. We are required by applicable laws to keep strictly confidential the personal information that we collect, and to take adequate security measures to safeguard such information.

        The PRC regulatory and enforcement regime regarding privacy and data security is evolving. The PRC Criminal Law, as amended by its Amendment 7 (effective on February 28, 2009) and Amendment 9 (effective on November 1, 2015), prohibits institutions, companies and their employees from selling or otherwise illegally disclosing a citizen's personal information obtained during the course of performing duties or providing services or obtaining such information through theft or other illegal ways. On November 7, 2016, the Standing Committee of the PRC National People's Congress issued the Cyber Security Law of the PRC, which became effective on June 1, 2017. Pursuant to the Cyber Security Law of the PRC, network operators must not, without users' consent, collect their personal information, and may only collect users' personal information necessary to provide their services. Providers are also

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obliged to provide security maintenance for their products and services and shall comply with provisions regarding the protection of personal information as stipulated under the relevant laws and regulations. The Civil Code of the PRC (issued by the PRC National People's Congress on May 28, 2020 and effective from January 1, 2021) provides main legal basis for privacy and personal information infringement claims under the Chinese civil laws. PRC regulators, including the Cyberspace Administration of China, MIIT, and the Ministry of Public Security have been increasingly focused on regulation in the areas of data security and data protection. We expect that these areas will receive greater and continued attention and scrutiny from regulators and the public going forward, which could cause us to incur substantial compliance costs and subject us to heightened risks and challenges associated with data security and protection. If we are unable to manage these risks, we could become subject to civil litigations brought by relevant individuals; administrative penalties, including fines, suspension of business, website closure, and revocation of prerequisite licenses; and our reputation and results of operations could be materially and adversely affected.

        While we take various measures to comply with all applicable data privacy and protection laws and regulations, there is no guarantee that our current security measures and those of our third-party service providers may always be adequate for the protection of our customer, employee or company data; and like all companies, we have experienced data incidents from time to time. In addition, given the size of our customer base and the types and volume of personal data on our system, we may be a particularly attractive target for computer hackers, foreign governments or cyber terrorists. Unauthorized access to our proprietary internal and customer data may be obtained through break-ins, sabotage, breach of our secure network by an unauthorized party, computer viruses, computer denial-of-service attacks, employee theft or misuse, breach of the security of the networks of our third-party service providers, or other misconduct. Because the techniques used by computer programmers who may attempt to penetrate and sabotage our proprietary internal and customer data change frequently and may not be recognized until launched against a target, we may be unable to anticipate these techniques. Unauthorized access to our proprietary internal and customer data may also be obtained through inadequate use of security controls. Any of such incidents may harm our reputation and adversely affect our business and results of operations. In addition, we may be subject to negative publicity about our security and privacy policies, systems, or measurements from time to time.

        Any failure to prevent or mitigate security breaches, cyber-attacks or other unauthorized access to our systems or disclosure of our customers' data, including their personal information, could result in loss or misuse of such data, interruptions to our service system, diminished customer experience, loss of customer confidence and trust, impairment of our technology infrastructure, and harm our reputation and business, resulting in significant legal and financial exposure and potential lawsuits.

We are subject to various hospitality industry, health and safety, construction, fire prevention and environmental laws and regulations that may subject us to liability.

        Each hotel in our chain must hold a basic business license and a special industry license issued by the local public security bureau and must have hotel operation included in the business scope of their respective business license. In addition, each of our hotels must complete fire prevention safety inspection/commitment with the local public security bureau and obtain hygiene permits and environmental impact assessment approvals. We also need to obtain approvals and make filings for most of our hotel construction projects with fire prevention authorities and construction authorities. Our business also is subject to various health and safety and environmental laws and regulations that affect our operations and conversion activities in the jurisdictions in which we operate, including construction, building, zoning, environmental protection, food safety, public safety, health and sanitary requirements.

        As of the date of this prospectus, a small number of our leased hotels have not obtained approvals from or made appropriate filings with applicable fire prevention authorities, construction authorities,

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environmental protection authorities or public security bureau, and a small number of our hotels selling or serving food have not obtained the relevant approvals from health administrations for such activities. As a result of these non-compliance matters, we have been and may be subject to monetary damages, the suspension or disruption of our operations or conversion activities, or other administrative penalties or investigations, which could materially and adversely affect our financial condition and results of operations.

        We cannot assure you that we or our employees comply with or will comply with all present and future laws and regulations related to our business, including without limitation to hospitality industry, health, safety, construction, fire prevention and environmental laws and regulations. Such non-compliance may subject us to monetary damages, the imposition of fines or other administrative penalties or investigations against us, or the suspension of our operations or conversion activities, which in turn could materially and adversely affect our financial condition and results of operations. Furthermore, new regulations could also require us to retrofit or modify our hotels or incur other significant expenses. Any failure by us to control the use of, or to adequately restrict the discharge of, hazardous substances in our conversion activities, or otherwise operate in compliance with environmental laws, could subject us to potentially significant monetary damages and fines or suspension of our business operations, which could materially and adversely affect our financial condition and results of operations.

        Owners of our manachised hotels are subject to these same permit and safety requirements. Although our manachised hotel arrangements require the hotel owners to obtain and maintain all required permits or licenses, we have limited control over the manachised hotel owners. Any failure to obtain and maintain the required permits or licenses may require us to delay opening of a manachised hotel or to forgo or terminate our manachised hotel arrangement, which could harm our brand, result in lost management revenues and subject us to potential indirect liability. Each of the foregoing could materially and adversely affect our financial condition and results of operations.

Accidents, injuries or prohibited activities in our hotels may adversely affect our reputation and subject us to liability.

        There are inherent risks of accidents, injuries or prohibited activities (such as illegal drug use, gambling, violence or prostitution by guests) taking place in hotels. The occurrence of one or more accidents, injuries or prohibited activities at any of our hotels could adversely affect our safety reputation among guests, harm our brand, decrease our overall occupancy rates, and increase our costs by requiring us to implement additional safety measures. In addition, if accidents, injuries or prohibited activities occur at any of our hotels, we may be held liable for costs or damages and fines. Our current property and liability insurance policies may not provide adequate or any coverage for such losses, and we may be unable to renew our insurance policies or obtain new insurance policies without increases in premiums and deductibles or decreases in coverage levels, or at all.

The restaurants operated by our hotels face risks related to instances of food-borne illnesses and other food safety accidents.

        Some of our hotels directly operate the restaurant located in the hotels. The restaurant business is susceptible to food-borne illnesses and other food safety accidents. We cannot assure you that our internal controls and training will be effective in preventing all food-borne illnesses.

        Furthermore, our reliance on third-party food suppliers and distributors increases the risk that food-borne illness incidents could be caused by third-party food suppliers and distributors outside of our control and the risk of multiple locations being affected rather than a single restaurant. New illnesses resistant to any precautions may develop in the future, or diseases with long incubation periods could arise that could give rise to claims or allegations on a retroactive basis. Reports in the

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media of instances of food-borne illnesses could result in fines and other penalties and, if highly publicized, negatively impact restaurant sales, forcing the closure of some restaurants and affect our customers' confidence in our hotel business. Furthermore, other illnesses, such as hand, foot and mouth disease or avian influenza, could adversely affect the supply of some of the restaurants' food products and significantly increase such restaurants' costs, which may also adversely affect the results of operations of the relevant hotels.

Our financial and operating performance may be adversely affected by epidemics, adverse weather conditions, natural disasters and other catastrophes.

        Losses caused by epidemics, adverse weather conditions, natural disasters and other catastrophes, earthquakes or typhoons, are either uninsurable or too expensive to justify insuring against in China. In the event an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a hotel, as well as the anticipated future revenue from the hotel. In that event, we might nevertheless remain obligated for any financial obligations related to the hotel. Similarly, war (including the potential for war), terrorist activity (including threats of terrorist activity) and travel-related accidents, as well as geopolitical uncertainty and international conflict, may affect travel and may in turn have a material adverse effect on our business and results of operations. In addition, we may not be adequately prepared in contingency planning or recovery capability in relation to a major incident or crisis, and as a result, our operational continuity may be adversely affected and our reputation may be harmed.

We have limited insurance coverage.

        Our property insurance covers the assets that we own at our leased hotels and the buildings in which our leased hotels operate. We also require our manachised hotel owners to purchase customary insurance policies but they may fail to satisfy these requirements. If we are held liable for amounts and claims exceeding the limits of our insurance coverage or outside the scope of our insurance coverage, our business, results of operations and financial condition may be materially and adversely affected. Even if the amounts and claims are within the limits and scope of our insurance coverage, the insurance provider may not be able to make the compensation payment to us in a timely manner. Any business disruptions or natural disasters may result in us incurring substantial costs and diversion of our corporate and business resources.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud.

        Prior to this offering, we have been a private company with limited accounting personnel and other resources with which to address our internal control over financial reporting in accordance with the requirements applicable to a U.S. public company. In connection with the audits of our consolidated financial statements as of and for the fiscal years ended December 31, 2019 and 2020, we and our independent registered public accounting firm identified one material weakness in our internal control over financial reporting. As defined in the standards established by the U.S. Public Company Accounting Oversight Board, or PCAOB, a "material weakness" is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

        The material weakness identified is our company's lack of sufficient financial reporting and accounting personnel with appropriate knowledge of U.S. GAAP and SEC reporting requirements to properly address complex U.S. GAAP accounting issues and related disclosures in accordance with U.S. GAAP and financial reporting requirements set forth by the SEC. Neither we nor our independent registered public accounting firm undertook a comprehensive assessment of our internal

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control for purposes of identifying and reporting material weaknesses and other control deficiencies in our internal control over financial reporting. Had we performed a formal assessment of our internal control over financial reporting or had our independent registered public accounting firm performed an audit of our internal control over financial reporting, additional deficiencies may have been identified.

        Following the identification of the material weakness and other control deficiencies, we have taken measures and plan to continue to take measures to remediate these deficiencies. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Internal Control Over Financial Reporting." However, the implementation of these measures may not fully address such weakness and deficiencies in our internal control over financial reporting. Our failure to correct these deficiencies or our failure to discover and address any other deficiencies could result in inaccuracies in our financial statements and impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. Moreover, ineffective internal control over financial reporting could significantly hinder our ability to prevent fraud.

        After we become a public company in the United States, we will be subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, will require that we include a report from management on our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report for the fiscal year ending December 31, 2022. In addition, once we cease to be an "emerging growth company" as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal control over financial reporting or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.

        During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other or more material weaknesses or deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations and lead to a decline in the trading price of the ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our consolidated financial statements for prior periods.

If we grant employee share options and other share-based compensation in the future, our net profit could be adversely affected.

        In 2017, our PRC subsidiary Atour Shanghai adopted the 2017 Share Incentive Plan, or the 2017 PRC Plan. In 2021, we adopted the Public Company Share Incentive Plan, or the Public Company Plan, at the Cayman Islands' level in preparation for this offering, to replace the 2017 PRC Plan. The purpose of the Public Company Plan is to recognize and reward participants for their contribution to

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our company, to attract suitable personnel and to provide incentives to them to remain with and further contribute to us. See "Management—Public Company Plan."

        Under the Public Company Plan, the maximum aggregate number of Class A ordinary shares we are authorized to issue pursuant to equity awards granted thereunder, subject to certain adjustments pursuant to the terms thereof, is 51,029,546 Class A ordinary shares, which have been reserved for issuance pursuant to the Public Company Plan accordingly. The awards representing 14,196,882 Class A ordinary shares previously granted to participants under the 2017 PRC Plan have been fully replaced by the awards issued under the Public Company Plan prior to the completion of this offering. As of the completion of this offering, a total of                 share options corresponding to                 underlying Class A ordinary shares have been granted to the participants under the Public Company Plan, including 14,196,882 share options granted or will be granted to participants under the 2017 PRC Plan in exchange for cancellation of their outstanding awards previously granted under the 2017 PRC Plan.

        Pursuant to the Public Company Plan, the vesting condition for 14,849,482 share options granted thereunder will be satisfied upon completion of this offering; and as a result, we expect to, upon the date of the completion of this offering, record a material amount of cumulative share-based compensation expenses for those awards for which the vesting conditions have been satisfied as of such date. Had such vesting condition been satisfied as of March 31, 2021, we would have recognized share-based compensation expenses of RMB51.9 million (US$7.9 million) for those awards for which service conditions had been satisfied as of such date.

        We believe the granting of share-based awards is of significant importance to our ability to attract and retain key personnel and employees, and we expect to grant additional share-based awards to our employees in the future. As a result, our expenses associated with share-based awards may increase, which may have an adverse effect on our results of operations.

Failure to comply with PRC laws and regulations related to labor and employee benefits may subject us to penalties or additional cost.

        Companies operating in China are required to comply with various laws and regulations related to labor and employement benefits. For example, companies are required to participate in various government-sponsored employee benefit plans, including certain social insurance, housing provident funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of employees up to a maximum amount specified by the local government from time to time at locations where our employees are based. The requirement of employee benefit plans has not been implemented consistently by the local governments in China given the different levels of economic development in different locations. Apart from that, if a company intends adopt flexible working hour arrangement and comprehensive working hour scheme, it shall fulfill the requirements in relavant regulations, and make filings with labor authorties, or the company will be subject to penalties and may be required to pay extra fees to its employees.

        We cannot assure you that we have complied or will be able to comply with all labor-related law and regulations, including those relating to obligations to make social insurance payments, contribute to the housing provident funds, as well as make all filing for comprehensive working hour scheme. Besides, to efficiently administrate the contribution of employment benefit plans of our employees in some cities, we engage third-party agents to make the contribution for our employees. Our failure to make contributions to various employee benefit plans and in complying with applicable PRC labor-related laws may subject us to fines, penalties, government investigations or labor disputes and we could be required to make up the contributions for these plans as well as to pay late fees and fines, which may adversely affect our financial condition and results of operations.

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We have entered into, and may in the future enter into, stratetgic transactions to complement our organic growth which may not be successful.

        We have entered into, and may in the future enter into, strategic transactions to complement our organic growth, including pursuing selective acquisitions, asset dispositions, joint venture and other types of alliances with business partners. Our potential acquisition and investment targets include high quality manachised hotels, boutique regional hotels and influential lifestyle brands. If we decide to pursue strategic transactions, we may not be successful in identifying suitable opportunities or completing such transactions or investments, and our competitors may be more effective in executing and closing strategic arrangements in competitive bid situations than us. Our ability to enter into and complete strategic transactions may be restricted by, or subject to, various approvals under PRC law or may not otherwise be possible, may result in a possible dilutive issuance of our securities, or may require us to seek additional financing. We also may experience difficulties integrating acquired operations, services, corporate cultures and personnel into our existing business and operations. Strategic transactions may also expose us to potential risks, including risks associated with unforeseen or hidden liabilities, the diversion of resources from our existing business, and the potential loss of, or harm to, relationships with our employees or guests as a result of our integration of new businesses. In addition, following completion of strategic transactions, our management and resources may be diverted from their core business activities due to the integration process, which may harm the effective management of our business. Furthermore, we may not achieve the expected level of any synergy benefits on integration and/or the actual cost of delivering such benefits may exceed the anticipated cost. Any of these factors may have an adverse effect on our competitive position, results of operations and financial condition.

We require significant capital to fund our operations, growth and technological investments. If we cannot obtain sufficient capital on acceptable terms, our business, financial condition and prospects may suffer.

        We require significant capital and resources for our operations and continued growth. We expect to make significant investments in the expansion and operations of our hotel network and lifestyle brand portfolio, and the development of our technological capabilities, which may increase our net cash used in operating activities. Our sales and marketing expenses may also increase to retain existing customers and attract new customers.

        Our ability to obtain additional capital in the future is subject to a number of uncertainties, including our future business development, financial condition and results of operations, general market conditions for financing activities by companies in our industry, and macro-economic and other conditions in China and globally. If we cannot obtain sufficient capital on acceptable terms to meet our capital needs, we may not execute our growth strategies, and our business, financial condition and prospects may be materially and adversely affected.

If we are unable to access funds to maintain our hotels' condition and appearance, or if our franchisees fail to make investments necessary to maintain or improve their properties, the attractiveness of our hotels and our reputation could suffer and our hotel occupancy rates may decline.

        In order to maintain our hotels' condition and attractiveness, ongoing renovations and other leasehold improvements, including periodic replacement of furniture, fixtures and equipment, are required. In particular, we manachise properties leased or owned by franchisees under the terms of franchise and management agreements, substantially all of which require our franchisees to comply with standards that are essential to maintaining the relevant product integrity and our reputation. We depend on our franchisees to comply with these requirements by maintaining and improving properties through investments, including investments in furniture, fixtures, amenities and personnel. Such investments and expenditures require ongoing funding and, to the extent we or our franchisees cannot fund these expenditures from existing cash or cash flow generated from operations, we or our franchisees must borrow or raise capital through financing. We or our franchisees may not be able to access capital and our franchisees may be unwilling to spend available capital when necessary, even if required by the terms of our franchise and management agreements. If we or our franchisees fail to make investments necessary to maintain or improve the properties, our hotel's attractiveness and reputation could suffer, we could lose market share to our competitors and our RevPAR may decline.

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Increasing focus on environmental, social and governance matters may impose additional costs on us or expose us to additional risks. Failure to comply with the laws and regulations on environmental, social and governance matters may subject us to penalties and adversely affect our business, financial condition and results of operation.

        The PRC government and public advocacy groups have been increasingly focused on environment, social and governance ("ESG") issues in recent years, making our business more sensitive to ESG issues and changes in governmental policies and laws and regulations associated with environment protection and other ESG-related matters. Investor advocacy groups, certain institutional investors, investment funds, and other influential investors are also increasingly focused on ESG practices and in recent years have placed increasing importance on the implications and social cost of their investments. Regardless of the industry, increased focus from investors and the PRC government on ESG and similar matters may hinder access to capital, as investors may decide to reallocate capital or to not commit capital as a result of their assessment of a company's ESG practices. Any ESG concern or issue could increase our regulatory compliance costs. If we do not adapt to or comply with the evolving expectations and standards on ESG matters from investors and the PRC government or are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, we may suffer from reputational damage and the business, financial condition, and the price of the ADSs could be materially and adversely effected.

We may be involved in legal and administrative proceedings in the ordinary course of our business. Any adverse outcome of these legal proceedings could have a material adverse effect on our business, results of operations and financial condition.

        We, our shareholders, directors, officers, employees or affiliates are or may be involved in various legal and administrative proceedings in the ordinary course of business from time to time, involving governmental authorities, competitors, business partners, customers and employees, among others. Claims arising out of actual or alleged violations of law could be asserted under a variety of laws, including but not limited to intellectual property laws, contract laws, tort laws, unfair competition laws, labor and employment laws, privacy laws, tax laws, foreign exchange laws, and property laws. No assurances can be given as to the outcome of any pending legal and administrative proceedings, which could have a material adverse effect on our business, results of operations and financial condition. Even if we and our related parties are successful in our attempt to defend ourselves in legal and administrative actions or to assert our rights under various laws, enforcing our rights against the various parties involved may be expensive, time-consuming and ultimately futile. These actions could expose us to negative publicity and to substantial monetary damages and legal defense costs, injunctive reliefs, and criminal and civil liabilities and/or penalties.

We are subject to third-party payment processing-related risks.

        We accept payments through major third-party online payment channels in China, as well as bank transfers and credit cards. We may also be susceptible to fraud, user data leakage and other illegal activities in connection with the various payment methods we offer. In addition, our business depends on the billing, payment and escrow systems of the third-party payment service providers to maintain accurate records of payments by customers and collect such payments. If the quality, utility, convenience or attractiveness of these payment processing and escrow services declines, or if we have to change the pattern of using these payment services for any reason, the attractiveness of our company could be materially and adversely affected. We are also subject to various rules, regulations and requirements, regulatory or otherwise, governing electronic funds transfers which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, we may be subject to fines and higher transaction fees and become unable to accept the current online payments solutions from our customers, and our business, financial condition and results

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of operations could be materially and adversely affected. Business involving online payment services is subject to a number of risks that could materially and adversely affect third-party online payment service providers' ability to provide payment processing and escrow services to us, including:

    dissatisfaction with these online payment services or decreased use of their services;

    increasing competition, including from other established Chinese internet companies, payment service providers and companies engaged in other financial technology services;

    changes to rules or practices applicable to payment systems that link to third-party online payment service providers;

    breach of customers' personal information and concerns over the use and security of information collected from our customers;

    service outages, system failures or failures to effectively scale the system to handle large and growing transaction volumes;

    increasing costs to third-party online payment service providers, including fees charged by banks to process transactions through online payment channels, which would also increase our costs of revenues; and

    failure to manage funds accurately or loss of funds, whether due to employee fraud, security breaches, technical errors or otherwise.

Seasonality of our business and national or regional special events may cause fluctuations in our results of operations and financial condition, and adversely affect our profitability.

        The hospitality industry is subject to fluctuations in revenues due to seasonality. The periods during which our properties experience higher revenues vary from property to property, depending principally upon their location, type of property and competitive mix within the specific location. Generally, the first quarter, in which both the New Year and Spring Festival holidays fall, accounts for a lower percentage of our annual revenues than the other quarters of the year. In addition, certain special events, such as large-scale exhibition, concerts or sports events, may increase the demand for our hotels significantly as such special events may attract travelers into and within the regions in China where we operate hotels. Based on historical results, we generally expect our net revenues generated from our hotel offerings to be higher in the second and third quarters of each year than in each of the first and fourth quarters due to general travel and consumption patterns in China.

Our advertising, promotional and branding content may subject us to penalties and other administrative actions.

        Under PRC advertising laws and regulations, we are obligated to monitor our advertising, promotional and branding content to ensure that such content is true and accurate and in full compliance with applicable laws and regulations. Violation of these laws and regulations may subject us to penalties, including fines, confiscation of our advertising income, orders to cease dissemination of the advertisements and orders to publish an announcement correcting the misleading information. In circumstances involving serious violations by us, PRC government authorities may force us to terminate our advertising operations or revoke our licenses.

        We cannot assure you that all the content contained in our advertisements or other branding content or materials is true and accurate as required by, and complies in all aspects with, the advertising laws and regulations, especially given the uncertainty in the interpretation of these PRC laws and regulations. We conduct certain advertising, promotional and branding activities through social media and other online channels, and relevant content may also be subject to these PRC advertising laws and regulations. If we are found to be in violation of applicable PRC advertising laws and

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regulations, we may be subject to penalties and our reputation may be harmed, which may negatively affect our business, financial condition, results of operations and prospects.

Risks Related to Doing Business in China

Changes in China's economic, political or social conditions or government policies could have a material adverse effect on our business, financial condition and results of operations.

        We conduct all of our operations in China and all of our revenue is derived from our operations in China. Accordingly, our results of operations and prospects are, to a significant degree, subject to economic, political and legal developments in China. The economy of China differs from the economies of most developed countries in many respects, including the extent of government involvement, its level of development, its growth rate and its control over foreign exchange. In recent years, the PRC government has implemented measures emphasizing market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises. However, a significant portion of productive assets in China is still owned by the PRC government. The PRC government continues to play a significant role in regulating industrial development. It also exercises significant control over China's economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policies, restricting the inflow and outflow of foreign capital and providing preferential treatment to particular industries or companies. The PRC government also has significant authority to exert influence on the ability of a China-based company, such as our company, to conduct its business. As the PRC economy has become increasingly linked with the global economy, China is affected in various respects by downturns and recessions of major economies around the world. The various economic and policy measures enacted by the PRC government to forestall economic downturns or bolster China's economic growth could materially affect our business. Any adverse change in the economic conditions in China, policies of the PRC government or laws and regulations in China could have a material adverse effect on the overall economic growth of China and, in turn, our business.

Uncertainties with respect to the PRC legal system could limit the legal protections available to you and us.

        Our operating subsidiaries are incorporated under and governed by the laws of the PRC. The PRC legal system is based on written statutes. Prior court decisions may be cited for reference, but have limited precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general, such as foreign investment, corporate organization and governance, commerce, taxation and trade. As a significant part of our business is conducted in China, our operations are principally governed by PRC laws and regulations. However, since the PRC legal system continues to evolve rapidly, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties, which may limit legal protections available to us. Uncertainties due to evolving laws and regulations could also impede the ability of a China-based company, such as our company, to obtain or maintain permits or licenses required to conduct business in China. In the absence of required permits or licenses, governmental authorities could impose material sanctions or penalties on us. In addition, some regulatory requirements issued by certain PRC government authorities may not be consistently applied by other PRC government authorities (including local government authorities), thus making strict compliance with all regulatory requirements impractical, or in some circumstances impossible. For example, we may have to resort to administrative and court proceedings to enforce the legal protection that we enjoy either by law or contract. However, since PRC administrative and court authorities have discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to predict the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all and

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may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, could materially and adversely affect our business and impede our ability to continue our operations.

        Furthermore, if China adopts more stringent standards with respect to environmental protection or corporate social responsibilities, we may incur increased compliance cost or become subject to additional restrictions in our operations.

        Furthermore, intellectual property rights and confidentiality protections in China may not be as effective as in the United States or other countries. In addition, we cannot predict the effect of future developments in the PRC legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. These uncertainties could limit the legal protections available to us and other foreign investors, including you. In addition, any litigation in China may be protracted and result in substantial costs and diversion of our resources and management attention.

Uncertainties exist with respect to the enactment timetable, interpretation and implementation of the laws and regulations with respect to our online platform business operation.

        Our online platform business is subject to various internet-related laws and regulations. These internet-related laws and regulations are relatively new and evolving, and their enactment timetable, interpretation and implementation involve significant uncertainties.

        For example, On February 7, 2021, the State Administration for Market Regulation, or the SAMR, promulgated Guidelines to Anti-Monopoly in the Field of Platform Economy, or the Anti-Monopoly Guidelines for Platform Economy. The Anti-Monopoly Guidelines for Platform Economy provides operational standards and guidelines for identifying certain internet platforms' abuse of market dominant position which are prohibited to restrict unfair competition and safeguard users' interests, including without limitation, prohibiting personalized pricing using big data and analytics, selling products below cost without reasonable causes, actions or arrangements seen as exclusivity arrangements, using technology means to block competitors' interface, using bundle services to sell services or products. In addition, internet platforms' compulsory collection of user data may be viewed as abuse of dominant market position that may have the effect to eliminate or restrict competition. In October 2020, the Standing Committee of the National People's Congress officially released the draft for the first reading of the Personal Information Protection Law, or the Draft Personal Information Protection Law. The Draft Personal Information Protection Law provides the basic regime for personal information protection, including without limitation, stipulating an expanded definition of personal information, providing a long-arm jurisdiction in cross-border scenarios, emphasizing individual rights, and prohibiting rampant infringement of personal information, such as stealing, selling, or secretly collecting personal information.

        On August 31, 2018, the Standing Committee of the National People's Congress promulgated the E-commerce Law, which came into effect on January 1, 2019. The E-commerce Law imposes a series of requirements on e-commerce operators including e-commerce platform operators, merchants operating on the platform and the individuals and entities carrying out business online. The platform governance measures we adopt in response to the enhanced regulatory requirements may fail to meet these requirements and may lead to penalties or our loss of merchants to those platforms, or to complaints or claims made against us by customers on our platforms.

        As there are uncertainties regarding the enactment timetable, interpretation and implementation of the existing and future internet-related laws and regulations, we cannot assure you that our business operations will comply with such regulations in all respects and we may be ordered to terminate certain

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of our business operations that are deemed illegal by the regulatory authorities and become subject to fines and/or other sanctions.

The audit report included in this prospectus is prepared by an auditor who is not inspected by the Public Company Accounting Oversight Board and as such, our investors are deprived of the benefits of such inspection.

        As a public company with securities listed on a national exchange, we will be required to have our financial statements audited by an independent registered public accounting firm registered with the PCAOB. A requirement of being registered with the PCAOB is that if requested by the SEC or PCAOB, such accounting firm is required to make its audits and related audit work papers be subject to regular inspections to assess its compliance with the applicable professional standards. Since our auditor is located in China, a jurisdiction where the PCAOB has been unable to conduct inspections without the approval of the Chinese authorities due to various state secrecy laws and the revised Securities Law, the PCAOB currently does not have free access to inspect the work of our auditor. This lack of the PCAOB inspections in China prevents the PCAOB from fully evaluating audits and quality control procedures of our auditor. As a result, we and investors in our ordinary shares are deprived of the benefits of such PCAOB inspections, which could cause investors in our stock to lose confidence in our audit procedures and the quality of our financial statements.

The recent enactment of the Holding Foreign Companies Accountable Act may result in de-listing of the ADSs.

        Over the past decade, U.S. SEC and PCAOB and the Chinese counterparts, namely, the China Securities Regulatory Commission, or the CSRC, and PRC Ministry of Finance have been in an impasse over the ability of the PCAOB to have access to the audit work papers and inspect the audit work of China based accounting firms, including our auditor. In May 2013, the PCAOB entered into a Memorandum of Understanding on Enforcement Cooperation (the "MOU") with the CSRC, and the PRC Ministry of Finance, which establishes a cooperative framework between the parties for the production and exchange of audit documents relevant to investigations undertaken by the PCAOB, the CSRC or the PRC Ministry of Finance in the United States and the PRC, respectively. Despite the MOU, on December 7, 2018, the SEC and the PCAOB issued a joint statement highlighting continued challenges faced by the U.S. regulators in their oversight of financial statement audits of U.S.-listed companies with significant operations in China. On April 21, 2020, the SEC and the PCAOB reiterated in another joint statement the greater risk associated with the PCAOB's inability to inspect audit work paper and practices of accounting firms in China, with respect to their audit work of U.S. reporting companies.

        As part of a continued regulatory focus in the United States on access to audit and other information currently protected by laws in China, on December 2, 2020, U.S. Congress passed S. 945, the Holding Foreign Companies Accountable Act (the "HFCAA"). The HFCAA has been signed by the President into law. Pursuant to the HFCAA, the SEC is required to propose rules to prohibit the securities of any registrant from being listed on any of the U.S. securities exchanges or traded "over the counter" if the PCAOB is unable to inspect the work of the accounting firm for three consecutive years. On March 24, 2021, the SEC issued amendments to Form 20 and sought public comment in response to the HFCAA. Consistent with the HFCAA, these amendments require the submission of documentation to the SEC establishing that a "commission-identified registrant" (as defined in the amendments) is not owned or controlled by a governmental entity in that foreign jurisdiction and also require disclosure in a foreign issuer's annual report regarding the audit arrangements of, and governmental influence on, such registrant. As of the date of this prospectus, the SEC is also actively assessing how best to implement other requirements of the HFCAA, including the identification process and the trading prohibition requirements.

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        The enactment of the HFCAA and other efforts to increase U.S. regulatory access to audit work papers could cause investor uncertainty for affected issuers, including us, and the market price of the ADSs could be adversely affected as uncertainty remains over whether there will be a compromise solution. In the worst case, the ADSs could be delisted if we were unable to cure the situation to meet the PCAOB inspection requirement in time.

        In addition, on August 6, 2020, the President's Working Group on Financial Markets, or PWG, released a report recommending that the SEC take steps to implement the five recommendations, including enhanced listing standards on U.S. stock exchanges with respect to PCAOB inspection of accounting firms. This would require, as a condition to initial and continued listing on a U.S. stock exchange, PCAOB access to work papers of the principal audit firm for the audit of the listed company. The report permits the new listing standards to provide for a transition period until January 1, 2022 for listed companies, but would apply immediately to new listings once the necessary rulemakings and/or standard-setting are effective. It is unclear if and when the SEC will make rules to implement the recommendations proposed in the PWG report, especially in light of its ongoing rulemaking pursuant to the HFCAA. Any of these factors and developments could potentially lead to a material adverse effect on our business, prospects, financial condition and results of operations.

Proceedings instituted by the SEC against Chinese affiliates of the "big four" accounting firms, including our independent registered public accounting firm, could result in financial statements being determined to not be in compliance with the requirements of the Exchange Act.

        In December 2012, the SEC instituted administrative proceedings against the "big four" PRC-based accounting firms, including our independent registered public accounting firm, alleging that these firms had violated U.S. securities laws and the SEC's rules and regulations thereunder by failing to provide to the SEC the firms' audit work papers with respect to certain PRC-based companies that are publicly traded in the United States.

        On January 22, 2014, the administrative law judge, or the ALJ, presiding over the matter rendered an initial decision that each of the firms had violated the SEC's rules of practice by failing to produce audit papers and other documents to the SEC. The initial decision censured each of the firms and barred them from practicing before the SEC for a period of six months.

        On February 6, 2015, the four China-based accounting firms each agreed to a censure and to pay a fine to the SEC to settle the dispute and avoid suspension of their ability to practice before the SEC and audit U.S.-listed companies. The settlement required the firms to follow detailed procedures and to seek to provide the SEC with access to Chinese firms' audit documents via the CSRC. Under the terms of the settlement, the underlying proceeding against the four China-based accounting firms was deemed dismissed with prejudice four years after entry of the settlement. The four-year mark occurred on February 6, 2019. While we cannot predict if the SEC will further challenge the four China-based accounting firms' compliance with U.S. law in connection with U.S. regulatory requests for audit work papers or if the results of such a challenge would result in the SEC imposing penalties such as suspensions, if the accounting firms are subject to additional remedial measures, our ability to file our financial statements in compliance with SEC requirements could be impacted. A determination that we have not timely filed financial statements in compliance with the SEC requirements could ultimately lead to the delisting of the ADSs from the Nasdaq or the termination of the registration of our Class A ordinary shares under the Securities Exchange Act of 1934, or both, which would substantially reduce or effectively terminate the trading of the ADSs in the United States.

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You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us or our management named in the prospectus based on foreign laws.

        We are an exempted company incorporated under the laws of the Cayman Islands. We conduct all of our operations in China. In addition, all our senior executive officers reside within China for a significant portion of the time and all of them are PRC nationals. As a result, it may be difficult for our shareholders to effect service of process upon us or those persons inside China.

        The recognition and enforcement of foreign judgments are basically provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States, the Cayman Islands or many other countries and regions. Therefore, recognition and enforcement in China of judgments of a court in any of these non-PRC jurisdictions in relation to any matter not subject to a binding arbitration provision may be difficult or impossible. In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment if it is decided as having violated the basic principles of PRC laws or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States or the Cayman Islands.

        The SEC, U.S. Department of Justice and other U.S. authorities often have substantial difficulties in bringing and enforcing actions against non-U.S. companies and non-U.S. persons, including company directors and officers, in certain emerging markets, including China. Legal and other obstacles to obtaining information needed for investigations or litigation or to obtaining access to funds outside the United States, lack of support from local authorities, and other various factors make it difficult for the U.S. authorities to pursue actions against non-U.S. companies and individuals, who may have engaged in fraud or other wrongdoings. Additionally, public shareholders investing in the ADSs have limited rights and few practical remedies in emerging markets where we operate, as shareholder claims that are common in the United States, including class actions under securities law and fraud claims, generally are difficult or impossible to pursue as a matter of law or practicality in many emerging markets, including China. As a result of all of the above, you may have more difficulties in protecting your interests in your emerging market investments.

We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business.

        We are a Cayman Islands holding company and we rely principally on dividends and other distributions on equity from our PRC subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and services of any debt we may incur. Our PRC subsidiaries' ability to distribute dividends is based upon its distributable earnings. Current PRC regulations permit our PRC subsidiaries to pay dividends to their respective shareholders only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, each of our PRC subsidiaries is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. These reserves are not distributable as cash dividends. If our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us.

        To address the persistent capital outflow and the RMB's depreciation against the U.S. dollar, the People's Bank of China and the State Administration of Foreign Exchange, or SAFE, have implemented a series of capital control measures since 2016, including stricter vetting procedures for

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China-based companies to remit foreign currency for overseas acquisitions, dividend payments and shareholder loan repayments. For instance, the Circular on Promoting the Reform of Foreign Exchange Management and Improving Authenticity and Compliance Review, or the SAFE Circular 3, issued on January 26, 2017, provides that the banks shall, when dealing with dividend remittance transactions from domestic enterprise to its offshore shareholders of more than US$50,000, review the relevant board resolutions (or resolutions of partners), original tax filing form and audited financial statements of such domestic enterprise based on the principle of genuine transaction. The PRC government may strengthen its capital controls from time to time and our PRC subsidiaries' dividends and other distributions may be subject to tightened scrutiny in the future. Any limitation on the ability of our PRC subsidiaries to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

        In addition, the Enterprise Income Tax Law and its implementation rules provide that a withholding tax at a rate of 10% will be applicable to dividends payable by Chinese companies to non-PRC resident enterprises unless reduced under treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC resident enterprises are tax resident.

The custodians or authorized users of our controlling non-tangible assets, including chops and seals, may fail to fulfill their responsibilities, or misappropriate or misuse these assets.

        Under PRC law, legal documents for corporate transactions, including agreements and contracts, are executed using the chop or seal of the signing entity or with the signature of a legal representative whose designation is registered and filed with SAMR. A company chop or seal may serve as the legal representation of the company towards third parties even when unaccompanied by a signature.

        In order to secure the use of our chops and seals, we have established internal control procedures and rules for using these chops and seals. In any event that the chops and seals are intended to be used, the responsible personnel will submit the application, which will then be verified and approved by authorized employees in accordance with our internal control procedures and rules. In addition, in order to maintain the physical security of our chops, we generally have them stored in secured locations accessible only to authorized employees.

        Although we monitor such authorized employees, the procedures may not be sufficient to prevent all instances of abuse or negligence. There is a risk that our employees could abuse their authority, for example, by entering into a contract not approved by us or seeking to gain control of one of our subsidiaries. If any employee obtains, misuses or misappropriates our chops and seals or other controlling non-tangible assets for whatever reason, we could experience disruption to our normal business operations. We may have to take corporate or legal action, which could involve significant time and resources to resolve and divert management from our operations.

PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may restrict or delay us from using the proceeds of this offering to make loans or additional capital contributions to our PRC subsidiaries, which could adversely affect our liquidity and our ability to fund and expand our business.

        Any funds we transfer to our PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, are subject to approval by or registration with relevant governmental authorities in China. According to the relevant PRC regulations on foreign-invested enterprises, or FIEs, in China, capital contributions to our PRC subsidiaries are subject to registration with SAMR or its local counterpart and registration with a local bank authorized by SAFE. In addition, (i) any foreign loan procured by our PRC subsidiaries is required to be registered with SAFE or its local branches and

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(ii) any of our PRC subsidiaries may not procure loans which exceed the difference between its total investment amount and registered capital or, as an alternative, they may only procure loans subject to the calculation approach and limitation as provided by the People's Bank of China.

        On March 30, 2015, the SAFE promulgated the Circular on Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement of Foreign-Invested Enterprises, or SAFE Circular 19, which took effect as of June 1, 2015. SAFE Circular 19 launched a nationwide reform of the administration of the settlement of the foreign exchange capitals of FIEs and allows FIEs to settle their foreign exchange capital at their discretion, but continues to prohibit FIEs from using the renminbi fund converted from their foreign exchange capital for expenditure beyond their business scopes, providing entrusted loans or repaying loans between nonfinancial enterprises. The SAFE issued the Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or SAFE Circular 16, effective on June 9, 2016. Pursuant to SAFE Circular 16, enterprises registered in China may also convert their foreign debts from foreign currency to renminbi on a self-discretionary basis. SAFE Circular 16 provides an integrated standard for conversion of foreign exchange under capital account items (including, but not limited, to foreign currency capital and foreign debts) on a self-discretionary basis which applies to all enterprises registered in China. SAFE Circular 16 reiterates the principle that renminbi converted from foreign currency-denominated capital of a company may not be directly or indirectly used for purposes beyond its business scope or prohibited by PRC laws or regulations, while such converted renminbi shall not be provided as loans to its non-affiliated entities. On October 23, 2019, SAFE further issued the Circular of the State Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-Border Trade and Investment, or the Circular 28, which took effect on the same day. Circular 28 allows non-investment foreign-invested enterprises to use their capital funds to make equity investments in China as long as such investments do not violate then effective negative list for foreign investments and the target investment projects are genuine and in compliance with laws. In addition, Circular 28 stipulates that qualified enterprises in certain pilot areas may use their capital income from registered capital, foreign debt and overseas listing, for the purpose of domestic payments without providing authenticity certifications to the relevant banks in advance for those domestic payments. As this circular is relatively new, there remains uncertainty as to its interpretation and application and any other future foreign exchange-related rules. Violations of these circulars could result in severe monetary or other penalties.

Fluctuations in exchange rates could have an adverse effect on our results of operations and the value of your investment.

        The value of the renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions in China and by China's foreign exchange policies. Since June 2010, the renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. Since October 1, 2016, renminbi has joined the International Monetary Fund's basket of currencies that make up the Special Drawing Right (SDR) along with the U.S. dollar, the euro, the Japanese yen and the British pound. In the fourth quarter of 2016 the renminbi has depreciated significantly in the backdrop of a surging U.S. dollar and persistent capital outflows of China. With the development of the foreign exchange market and progress towards interest rate liberalization and renminbi internationalization, the PRC government may in the future announce further changes to the exchange rate system, and we cannot assure you that the renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the renminbi and the U.S. dollar in the future.

        There remains significant international pressure on the Chinese government to adopt a flexible currency policy to allow the renminbi to appreciate against the U.S. dollar. Significant revaluation of the RMB may have a material adverse effect on your investment. All of our net revenues and costs are

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denominated in renminbi. Any significant revaluation of RMB may adversely affect our revenues, earnings and financial position, and the value of, and any dividends payable on, the ADSs in U.S. dollars. To the extent that we need to convert U.S. dollars into renminbi for capital expenditures and working capital and other business purposes, appreciation of renminbi against the U.S. dollar would have an adverse effect on the RMB amount we would receive from the conversion. Conversely, a significant depreciation of renminbi against the U.S. dollar may significantly reduce the U.S. dollar equivalent of our earnings, which in turn could adversely affect the price of the ADSs, and if we decide to convert RMB into U.S. dollars for the purpose of making payments for dividends on our Class A ordinary shares or ADSs, strategic acquisitions or investments or other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us.

        Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert renminbi into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.

Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.

        The PRC government imposes controls on the convertibility of the renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We receive all of our revenues in renminbi. Under our current corporate structure, our Cayman Islands holding company primarily relies on dividend payments from our PRC subsidiaries to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of SAFE by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of SAFE, cash generated from the operations of our PRC subsidiaries in China may be used to pay dividends to our company. However, approval from or registration with appropriate government authorities is required where renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. As a result, we need to obtain SAFE approval to use cash generated from the operations of our PRC subsidiaries to pay off their respective debt in a currency other than renminbi owed to entities outside China, or to make other capital expenditure payments outside China in a currency other than renminbi. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of the ADSs.

Certain PRC regulations may make it more difficult for us to pursue growth through acquisitions.

        Among other things, the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in 2006 and amended in 2009, establish additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. Such regulation requires, among other things, that the PRC Ministry of Commerce, or the MOFCOM, under certain circumstances, be notified in advance of any change-of-control transaction in which a foreign investor takes control of an affiliated PRC domestic enterprise. Moreover, the Anti-Monopoly Law requires that the SAMR should

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be notified in advance of any concentration of undertaking if certain thresholds are triggered. Transactions which are deemed concentrations and involve parties with specified turnover thresholds must be cleared by the SAMR before they can be completed. In addition, the PRC national security reviews rules which became effective in September 2011 requiring mergers and acquisitions by foreign investors of PRC companies engaged in military-related or certain other industries that are crucial to national security be subject to security review before consummation of any such acquisition. We may pursue potential strategic acquisitions that are complementary to our business and operations. Complying with the requirements of these regulations to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval or clearance from the MOFCOM and the SAMR, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

PRC regulations relating to offshore investment activities by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries' ability to increase their registered capital or distribute profits to us, or may otherwise adversely affect us.

        The SAFE issued Circular on Several Issues concerning Foreign Exchange Administration for Domestic Residents to Engage in Financing and in Return Investments via Overseas Special Purpose Companies, or Circular No. 75, on October 21, 2005, which became effective on November 1, 2005. Under Circular 75, prior registration with the local SAFE branch is required for PRC residents to establish or to control an offshore company for the purposes of financing that offshore company with assets or equity interests in an onshore enterprise located in the PRC. In July 2014, SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents' Offshore Investment and Financing and Roundtrip Investment Through Special Purpose Vehicles, or SAFE Circular 37. SAFE Circular 37 requires PRC residents (including PRC individuals and PRC corporate entities) to register with SAFE or its local branches in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing with such PRC residents' legally owned assets or equity interests in domestic enterprises or offshore assets or interests. SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future. See "Regulation—Regulations on Offshore Financing".

        We are committed to complying with and to ensuring that our shareholders and beneficial owners who are subject to these regulations will comply with the relevant SAFE rules and regulations. However, due to inherent uncertainty in the implementation of the regulatory requirements by the PRC authorities, such registration might not be always practically available in all circumstances as provided in those regulations.

        We have requested shareholders or beneficial owners who directly or indirectly hold shares in our Cayman Islands holding company and are known to us as being PRC residents to complete their registration with or to obtain approval by the local SAFE, the National Development and Reform Commission, or the NDRC, or MOFCOM branches. However, we may not be informed of the identities of all the PRC individuals or entities holding direct or indirect interest in our company, nor can we compel our beneficial owners to comply with the SAFE registration requirements. As a result, we cannot assure you that all of our shareholders or beneficial owners who are PRC residents have complied with, and will in the future make, obtain or update any applicable registrations or approvals required by SAFE, NDRC and MOFCOM regulations. Any failure or inability by such shareholders, beneficial owners or our subsidiaries to comply with SAFE, NDRC and MOFCOM regulations may subject us to fines or legal sanctions, such as restrictions on our cross-border investment activities or our PRC subsidiary's ability to distribute dividends to, or obtain foreign exchange-denominated loans from, our company or prevent us from making distributions or paying dividends. As a result, our business operations and our ability to make distributions to you could be materially and adversely affected.

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Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.

        Pursuant to SAFE Circular 37, PRC residents who participate in share incentive plans in overseas non-publicly-listed companies may submit applications to SAFE or its local branches for the foreign exchange registration with respect to offshore special purpose companies. In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed Company, or the SAFE Circular 7. Pursuant to these rules, PRC citizens and non-PRC citizens who reside in China for a continuous period of not less than one year who participate in any stock incentive plan of an overseas publicly listed company, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could be the PRC subsidiaries of such overseas-listed company, and complete certain other procedures. In addition, an overseas-entrusted institution must be retained to handle matters in connection with the exercise or sale of stock options and the purchase or sale of shares and interests. We and our executive officers and other employees who are PRC citizens or who reside in the PRC for a continuous period of not less than one year and who have been granted options will be subject to these regulations when our company becomes an overseas-listed company upon the completion of this offering. Failure to complete the SAFE registrations may subject them to fines and legal sanctions, and there may be additional restrictions on the ability of them to exercise their stock options or remit proceeds gained from sale of their stock into the PRC. We also face regulatory uncertainties that could restrict our ability to adopt additional incentive plans for our directors, executive officers and employees under PRC law. See "Regulation—Regulations on Employee Share Option Plans."

        In addition, the State Administration of Taxation, or SAT, has issued circulars concerning employee share options or restricted shares. Under these circulars, employees working in the PRC who exercise share options, or whose restricted shares or restricted share units vest, will be subject to PRC individual income tax. Our PRC subsidiaries have obligations to file documents related to employee share options or restricted shares with relevant tax authorities and to withhold individual income taxes of those employees related to their share options, restricted shares or restricted share units. In addition, the sales of the ADSs or shares held by such PRC individual employees after their exercise of the options, or the vesting of the restricted shares or restricted share units, are also subject to PRC individual income tax. If the employees fail to pay, or the PRC subsidiaries fail to withhold, their income taxes according to relevant laws, rules and regulations, the PRC subsidiaries may face sanctions imposed by the tax authorities or other PRC government authorities. See "Regulation—Regulations on Employee Share Option Plans."

If we are classified as a PRC resident enterprise for PRC enterprise income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders and ADS holders.

        Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with its "de facto management body" within the PRC is considered a "resident enterprise" and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules define the term "de facto management body" as the body that exercises full and substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise. In 2009, the SAT, issued a circular, known as SAT Circular 82, and was amended on 2017, which provides certain specific criteria for determining whether the "de facto management body" of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the SAT's general position on how the "de facto management body" test should be applied in determining the tax resident status of all offshore enterprises. According to SAT Circular 82,

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an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its "de facto management body" in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the senior management and core management departments in charge of its daily operations function have their presence mainly in the PRC; (ii) its financial and human resources decisions are subject to determination or approval by persons or bodies in the PRC; (iii) its major assets, accounting books, company seals, and minutes and files of its board and shareholders' meetings are located or kept in the PRC; and (iv) not less than half of the enterprise's directors or senior management with voting rights habitually reside in the PRC.

        We believe our company is not a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term "de facto management body." If the PRC tax authorities determine that our company is a PRC resident enterprise for enterprise income tax purposes, we will be subject to PRC enterprise income on our worldwide income at the rate of 25%. Furthermore, we will be required to withhold a 10% withholding tax from dividends we pay to our shareholders (including our ADS holders) that are non-resident enterprises. In addition, non-resident enterprise shareholders (including our ADS holders) may be subject to PRC tax at a rate of 10% on gains realized on the sale or other disposition of ADSs or Class A ordinary shares, if such gain is treated as derived from a PRC source. Furthermore, if we are deemed a PRC resident enterprise, dividends paid to our non-PRC individual shareholders (including our ADS holders) and any gain realized on the sale or other disposition of ADSs or Class A ordinary shares by such shareholders (including ADS holders) may be subject to PRC tax at a rate of 20% (which in the case of dividends may be withheld at source). These rates may be reduced by an applicable tax treaty, but it is unclear whether non-PRC shareholders (including ADS holders) of our company would, in practice, be able to obtain the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in the ADSs or Class A ordinary shares.

We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.

        On February 3, 2015, the SAT issued the Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises, or SAT Bulletin 7. SAT Bulletin 7 extends its tax jurisdiction to transactions involving the transfer of taxable assets through offshore transfer of a foreign intermediate holding company. In addition, SAT Bulletin 7 has introduced safe harbors for internal group restructurings and the purchase and sale of equity securities through a public securities market. SAT Bulletin 7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets.

        On October 17, 2017, the SAT issued the Public Notice on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises, or SAT Bulletin 37, which came into effect on December 1, 2017. The SAT Bulletin 37 further clarifies the practice and procedure of the withholding of non-resident enterprise income tax.

        Where a non-resident enterprise transfers taxable assets indirectly by disposing of the equity interests of an overseas holding company, which is an Indirect Transfer, the non-resident enterprise as either transferor or transferee, or the PRC entity that directly owns the taxable assets, may report such Indirect Transfer to the relevant tax authority. Using a "substance over form" principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the

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applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.

        We face uncertainties as to the reporting and other implications of certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring, sale of the shares in our offshore subsidiaries and investments. Our company may be subject to filing obligations or taxed if our company is transferor in such transactions, and may be subject to withholding obligations if our company is transferee in such transactions, under SAT Bulletin 7 and/or SAT Bulletin 37. For transfer of shares in our company by investors who are non-PRC resident enterprises, our PRC subsidiaries may be requested to assist in the filing under SAT Bulletin 7 and/or SAT Bulletin 37. As a result, we may be required to expend valuable resources to comply with SAT Bulletin 7 and/or SAT Bulletin 37 or to request the relevant transferors from whom we purchase taxable assets to comply with these bulletins, or to establish that our company should not be taxed under these bulletins, which may have a material adverse effect on our financial condition and results of operations.

Regulation and censorship of information disseminated over the internet in China may adversely affect our business and reputation and subject us to liability for information displayed on our website.

        The PRC government has adopted regulations governing internet access and the distribution of news and other information over the internet. Under these regulations, internet content providers and internet publishers are prohibited from posting or displaying over the internet content that, among other things, violates PRC laws and regulations, impairs the national dignity of China, or is reactionary, obscene, superstitious, fraudulent or defamatory. Failure to comply with these requirements may result in the revocation of licenses to provide internet content and other licenses, and the closure of the concerned websites. The website operator may also be held liable for such censored information displayed on or linked to the websites. If our self-owned online store or content is found to be in violation of any such requirements, we may be penalized by relevant authorities, and our operations or reputation could be adversely affected.

Risks Related to the ADSs and This Offering

An active trading market for our Class A ordinary shares or the ADSs may not develop and the trading price for the ADSs may fluctuate significantly.

        We have been approved to list the ADSs on the Nasdaq. We have no current intention to seek a listing for our ordinary shares on any stock exchange. Prior to the completion of this offering, there has been no public market for the ADSs or our ordinary shares, and we cannot assure you that a liquid public market for the ADSs will develop. The initial public offering price for the ADSs was determined by negotiation between us and the underwriters based upon several factors, and we can provide no assurance that the trading price of the ADSs after this offering will not decline below the initial public offering price. As a result, investors in our securities may experience a significant decrease in the value of their ADSs.

        In addition, investing in securities of issuers based in emerging market countries, including China, frequently involves a greater degree of risks and uncertainties when compared to investments in securities of issuers located in more established markets. These factors may affect your ability to sell the ADSs at your desired price and time. If an active and liquid market for the ADSs does not develop or is not maintained, the market price and liquidity of the ADSs may be materially and adversely affected.

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We will incur additional costs as a result of being a public company.

        Upon completion of this offering, we will become a public company and expect to incur significant legal, accounting and other expenses that we did not incur as a private company. These additional costs could negatively affect our financial results. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations implemented by the Nasdaq, may increase legal and financial compliance costs and make some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management's time and attention from revenue-generating activities to compliance activities. If, notwithstanding our efforts to comply with new laws, regulations and standards, we fail to comply, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

You must rely on the judgment of our management as to the use of the net proceeds from this offering, and such use may not produce income or increase our ADS price.

        Our management will have considerable discretion in the application of the net proceeds received by us.

        You will not have the opportunity, as part of your investment decision, to assess whether proceeds are being used appropriately. The net proceeds may be used for corporate purposes that do not improve our efforts to achieve or maintain profitability or increase our ADS price. The net proceeds from this offering may be placed in investments that do not produce income or that lose value.

The trading price of the ADSs is likely to be volatile, which could result in substantial losses to investors.

        The trading price of the ADSs is likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, including the performance and fluctuation of the market prices of other companies with business operations located mainly in China that have listed their securities in the United States. In addition to market and industry factors, the price and trading volume for the ADSs may be highly volatile for factors specific to our own operations, including the following:

    variations in our net revenues, earnings and cash flows;

    announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors;

    announcements of new offerings, solutions and expansions by us or our competitors;

    changes in financial estimates by securities analysts;

    detrimental adverse publicity about us, our services or our industry;

    announcements of new regulations, rules or policies relevant to our business;

    additions or departures of key personnel;

    our controlling shareholder's business performance and reputation;

    release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; and

    potential litigation or regulatory investigations.

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        Any of these factors may result in large and sudden changes in the volume and price at which the ADSs will trade.

        In the past, shareholders of public companies have often brought securities class-action suits against those companies following periods of instability in the market price of their securities. If we were involved in a class-action suit, it could divert a significant amount of our management's attention and other resources from our business and operations and require us to incur significant expenses to defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.

Because our initial public offering price is substantially higher than our net tangible book value per share, you will experience immediate and substantial dilution.

        If you purchase ADSs in this offering, you will pay more for the ADSs than the amount paid by our existing shareholders for their ordinary shares on a per ADS basis. As a result, you will experience immediate and substantial dilution of approximately US$            per ADS, representing the difference between the initial public offering price of US$            per ADS and our net tangible book value per ADS as of March 31, 2021, after giving effect to the net proceeds we receive from this offering. See "Dilution" for a more complete description of how the value of your investment in the ADSs will be diluted upon the completion of this offering.

If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding the ADSs, the market price for the ADSs and trading volume could decline.

        The trading market for the ADSs will be influenced by research or reports that industry or securities analysts publish about our business. If one or more analysts who cover us downgrade the ADSs, the market price for the ADSs would likely decline. If one or more of these analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume for the ADSs to decline.

Our dual-class voting structure will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.

        Our authorized and issued ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares will be entitled to one vote per share, while holders of Class B ordinary shares will be entitled to ten votes per share. We will issue Class A ordinary shares represented by the ADSs in this offering. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holders thereof, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances.

        Upon the completion of this offering, Mr. Haijun Wang will beneficially own            Class B ordinary shares. Mr. Haijun Wang will beneficially own approximately            % of our total issued and outstanding share capital immediately after the completion of this offering and            % of the aggregate voting power of our total issued and outstanding share capital immediately after the completion of this offering due to the disparate voting powers associated with our dual-class share structure, assuming the underwriters do not exercise their option to purchase additional ADSs. As a result of the dual-class share structure and the concentration of ownership, holders of Class B ordinary shares will have considerable influence over matters such as decisions regarding mergers and consolidations, election of directors, and other significant corporate actions. Such holders may take actions that are not in the best interest of us or our other shareholders. This concentration of

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ownership may discourage, delay, or prevent a change in control of our company, which could have the effect of depriving our other shareholders of the opportunity to receive a premium for their shares as part of a sale of our company and may reduce the price of the ADSs. This concentrated control will limit your ability to influence corporate matters and could discourage others from pursuing any potential merger, takeover, or other change of control transactions that holders of Class A ordinary shares and ADSs may view as beneficial.

The dual-class structure of our ordinary shares may adversely affect the trading market for the ADSs.

        Certain shareholder advisory firms have announced changes to their eligibility criteria for inclusion of shares of public companies on certain indices, including the S&P 500, to exclude companies with multiple classes of shares and companies whose public shareholders hold no more than 5% of total voting power from being added to such indices. In addition, several shareholder advisory firms have announced their opposition to the use of multiple class structures. As a result, the dual class structure of our ordinary shares may prevent the inclusion of the ADSs representing Class A ordinary shares in such indices and may cause shareholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure. Any such exclusion from indices could result in a less active trading market for the ADSs. Any actions or publications by shareholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of the ADSs.

We will be a "controlled company" as defined under the Nasdaq Stock Market corporate governance rules. As a result, we will qualify for, and intend to rely on, exemptions from certain corporate governance requirements that would otherwise provide protection to shareholders of other companies.

        Following the completion of this offering, we will be a "controlled company" as defined under the Nasdaq corporate governance rules because Mr. Haijun Wang will own more than 50% of our total voting power. For so long as we remain a controlled company, we may rely on certain exemptions from the corporate governance rules, including the rule that we have to establish a nominating and corporate governance committee composed entirely of independent directors. As a result, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements. Even if we cease to be a controlled company, we may still rely on exemptions available to foreign private issuers, including being able to adopt home country practices in relation to corporate governance matters. See the sections of this prospectus captioned "—We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies" and "—As an exempted company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with the Nasdaq corporate governance listing standards."

The sale or availability for sale of substantial amounts of ADSs could adversely affect their market price.

        Sales of substantial amounts of ADSs in the public market after the completion of this offering, or the perception that these sales could occur, could adversely affect the market price of the ADSs and could materially impair our ability to raise capital through equity offerings in the future. The ADSs sold in this offering will be freely tradable without restriction or further registration under the Securities Act, and shares held by our existing shareholders may also be sold in the public market in the future, subject to the restrictions in Rule 144 and Rule 701 under the Securities Act and the applicable lock-up agreements. There will be            ADSs (representing            ordinary shares) issued and outstanding immediately after this offering, or            ADSs (representing            ordinary shares) if the underwriters exercise their option to purchase additional ADSs in full. In connection with this offering, we, our directors, executive officers, existing shareholders and holders of share-based awards

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have agreed, subject to certain exceptions, not to sell any ordinary shares or ADSs for 180 days. However, the underwriters may release these securities from these restrictions at any time, subject to applicable regulations of the Financial Industry Regulatory Authority, Inc. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of the ADSs. See "Underwriting" and "Shares Eligible for Future Sale" for a more detailed description of the restrictions on selling our securities after this offering.

Techniques employed by short sellers may drive down the market price of the ADSs.

        Short selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is in the short seller's interest for the price of the security to decline, many short sellers publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a security short. These short attacks have, in the past, led to selling of shares in the market.

        Public companies that have substantially all of their operations in China have been the subject of short selling. Much of the scrutiny and negative publicity have centered on allegations of a lack of effective internal control over financial reporting resulting in financial and accounting irregularities and mistakes, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result, many of these companies are now conducting internal and external investigations into the allegations and, in the interim, are subject to shareholder lawsuits and/or SEC enforcement actions.

        It is not clear what effect such negative publicity could have on us. If we were to become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we could have to expend a significant amount of resources to investigate such allegations and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the relevant short seller by principles of freedom of speech, applicable state law or issues of commercial confidentiality. Such a situation could be costly and time-consuming, and could distract our management from growing our business. Even if such allegations are ultimately proven to be groundless, allegations against us could severely impact our business operations, and any investment in the ADSs could be greatly reduced or even rendered worthless.

Because we do not expect to pay dividends in the foreseeable future after this offering, you must rely on a price appreciation of the ADSs for a return on your investment.

        We currently intend to retain most, if not all, of our available funds and any future earnings after this offering to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in the ADSs as a source for any future dividend income.

        Our board of directors has discretion as to whether to distribute dividends, subject to certain requirements of Cayman Islands law. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our directors. In either case, all dividends are subject to certain restrictions under Cayman Islands law, namely that our company may pay a dividend out of either profit or a share premium account, provided always that in no circumstances may a dividend be paid if this would result in the Company being unable to pay its debts as they fall due in the ordinary course of business.

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        Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in the ADSs will likely depend entirely upon any future price appreciation of the ADSs. There is no guarantee that the ADSs will appreciate in value after this offering or even maintain the price at which you purchased the ADSs. You may not realize a return on your investment in the ADSs and you may even lose your entire investment in the ADSs.

The approval of the China Securities Regulatory Commission may be required in connection with this offering under PRC law.

        The Regulations on Mergers of Domestic Enterprises by Foreign Investors, or the M&A Rules, purport to require offshore special purpose vehicles that are controlled by PRC companies or individuals and that have been formed for the purpose of seeking a public listing on an overseas stock exchange through acquisitions of PRC domestic companies or assets to obtain CSRC approval prior to publicly listing their securities on an overseas stock exchange. The interpretation and application of the regulations remain unclear. If CSRC approval is required, it is uncertain how long it will take for us to obtain such approval, and any failure to obtain or a delay in obtaining CSRC approval for this offering may subject us to sanctions imposed by the CSRC and other PRC regulatory agencies.

        Our PRC counsel, has advised us that, based on its understanding of the current PRC laws and regulations, we will not be required to submit an application to the CSRC for the approval of this offering and the listing and trading of the ADSs on the Nasdaq under the M&A Rules because (i) the CSRC currently has not issued any definitive rule or interpretation concerning whether offerings like ours under this prospectus are subject to this regulation; (ii) Atour Shanghai was a foreign-invested enterprise before it was acquired by Atour Hong Kong.

        However, our PRC legal counsel has further advised us that there remains some uncertainty as to how the M&A Rules will be interpreted or implemented in the context of an overseas offering, and its opinions summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations in any form relating to the M&A Rules. We cannot assure you that relevant PRC government agencies, including the CSRC, would reach the same conclusion as our PRC legal counsel, and hence, we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory agencies. If it is determined in the future that CSRC approval is required for this offering, we may face sanctions by the CSRC or other PRC regulatory agencies for failure to seek CSRC approval for this offering. These regulatory agencies may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from this offering into China or take other actions that could have a material adverse effect on our business, financial condition, results of operations and prospects, as well as the trading price of the ADSs. The CSRC or other PRC regulatory agencies also may take actions requiring us, or making it advisable for us, to halt this offering before settlement and delivery of the ADSs offered hereby. Consequently, if you engage in market trading or other activities in anticipation of and prior to settlement and delivery, you do so at the risk that settlement and delivery may not occur. In addition, if the CSRC or other regulatory agencies later promulgate new rules or explanations requiring that we obtain their approvals for this offering, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties and/or negative publicity regarding such an approval requirement could have a material adverse effect on the trading price of the ADSs.

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You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.

        We are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of association, the Companies Act (As Revised) of the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders to take action against our directors, actions by our minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England and Wales, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law may be narrower in scope or less developed than they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States. In addition, while under Delaware law, controlling shareholders owe fiduciary duties to the companies they control and their minority shareholders, under Cayman Islands law, our controlling shareholders do not owe any such fiduciary duties to our company or to our minority shareholders. Accordingly, our controlling shareholders may exercise their powers as shareholders, including the exercise of voting rights in respect of their shares, in such manner as they think fit, subject only to very limited equitable constraints. One of the examples of such constraint is that the exercise of voting rights to amend the memorandum or articles of association of a Cayman Islands company must be exercised in good faith for the benefit of the Company as a whole.

        Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records (other than the memorandum and articles of association, special resolutions which have been passed by shareholders, register of mortgages and charges, and a list of current directors) or to obtain copies of lists of shareholders of these companies. Our directors have discretion under our articles of association that will become effective immediately prior to completion of this offering to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

        Certain corporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies incorporated in other jurisdictions such as the United States. If we choose to follow home country practice, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.

        As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by our management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States. For a discussion of significant differences between the provisions of the Companies Act (As Revised) of the Cayman Islands and the laws applicable to companies incorporated in the United States and their shareholders, see "Description of Share Capital—Differences in Corporate Law."

It may be difficult for overseas regulators to conduct investigations or collect evidence within China.

        Shareholder claims that are common in the United States, including securities law class actions and fraud claims, generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to obtaining information needed for

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shareholder investigations or litigation outside China or otherwise with respect to foreign entities. Although the local authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such regulatory cooperation with the securities regulatory authorities in the Unities States have not been efficient in the absence of a mutual and practical cooperation mechanism. According to Article 177 of the PRC Securities Law which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. While detailed interpretation of or implementation of rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your interests.

Certain judgments obtained against us by our shareholders may not be enforceable.

        We are an exempted company limited by shares incorporated under the laws of the Cayman Islands and substantially all of our assets are located outside of the United States. All of our current operations are conducted in China. In addition, most of our current directors and officers are nationals and residents of countries other than the United States. Substantially all of the assets of these persons are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers. For more information regarding the relevant laws of the Cayman Islands and China, see "Enforceability of Civil Liabilities." However, the deposit agreement gives you the right to submit claims against us to binding arbitration, and arbitration awards may be enforceable against us and our assets in China even when court judgments are not.

ADSs holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.

        The deposit agreement governing the ADSs representing our Class A ordinary shares provides that, to the fullest extent permitted by law, ADS holders waive the right to a jury trial for any claim they may have against us or the depositary arising out of or relating to our shares, the ADSs or the deposit agreement, including any claim under the U.S. federal securities laws.

        If we or the depositary were to oppose a jury trial based on this waiver, the court would have to determine whether the waiver was enforceable based on the facts and circumstances of the case in accordance with applicable state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York, which govern the deposit agreement, or by a federal or state court in the State of New York, which has nonexclusive jurisdiction over matters arising under the deposit agreement. In determining whether to enforce a contractual pre-dispute jury trial waiver, courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this would be the case with respect to the deposit agreement and the ADSs. It is advisable that you consult legal counsel regarding the jury waiver provision before investing in the ADSs.

        If you or any other owners or holders of ADSs bring a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, including claims under federal securities laws, you or such other owners or holders may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us or the

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depositary. If a lawsuit is brought against us or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have, including outcomes that could be less favorable to the plaintiff(s) in any such action.

        Nevertheless, if this jury trial waiver is not permitted by applicable law, an action could proceed under the terms of the deposit agreement with a jury trial. No condition, stipulation or provision of the deposit agreement or the ADSs serves as a waiver by any owner or holder of ADSs or by us or the depositary of compliance with any substantive provision of the U.S. federal securities laws and the rules and regulations promulgated thereunder.

The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to direct the voting of the Class A ordinary shares underlying the ADSs.

        As an exempted company incorporated in the Cayman Islands, we are not obliged by the Companies Act (As Revised) to call shareholders' annual general meetings. Our Amended and Restated Memorandum and Articles of Association provide that we may (but are not obliged to) each year hold a general meeting as our annual general meeting. As a holder of ADSs, you will not have any direct right to attend general meetings of our company or to cast any votes at such meetings. You will only be able to exercise the voting rights which attach to the Class A ordinary shares underlying the ADSs indirectly by giving voting instructions to the depositary in accordance with the provisions of the deposit agreement. Under the deposit agreement, you may vote only by giving voting instructions to the depositary, as holder of the Class A ordinary shares underlying the ADSs. Upon receipt of your voting instructions, the depositary may try to vote the Class A ordinary shares underlying the ADSs in accordance with your instructions. If we ask for your instructions, then upon receipt of your voting instructions, the depositary will try to vote the underlying Class A ordinary shares in accordance with those instructions. If we do not instruct the depositary to ask for your instructions, the depositary may still vote in accordance with instructions you give, but it is not required to do so. You will not be able to directly exercise any right to vote with respect to the underlying Class A ordinary shares unless you cancel the ADSs and withdraw the shares and become the registered holder of such shares prior to the record date for the general meeting. When a general meeting is convened, you may not receive sufficient advance notice of the meeting to enable you to withdraw the shares underlying the ADSs and become the registered holder of such shares prior to the record date for the general meeting to allow you to attend the general meeting and to vote directly with respect to any specific matter or resolution to be considered and voted upon at the general meeting. In addition, under our amended and restated articles of association that will become effective immediately prior to completion of this offering, for the purposes of determining those shareholders who are entitled to attend and vote at any general meeting, our directors may close our register of members and/or fix in advance a record date for such meeting, and such closure of our register of members or the setting of such a record date may prevent you from withdrawing the Class A ordinary shares underlying the ADSs and becoming the registered holder of such shares prior to the record date, so that you would not be able to attend the general meeting or to vote directly. Where any matter is to be put to a vote at a general meeting, the depositary will notify you of the upcoming vote and deliver our voting materials to you, if we ask it to. We cannot assure you that you will receive the voting materials in time to ensure you can direct the depositary to vote your shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for their manner of carrying out your voting instructions. This means that you may not be able to exercise your right to direct how the shares underlying the ADSs are voted and you may have no legal remedy if the shares underlying the ADSs are not voted as you requested.

You may be subject to limitations on the transfer of the ADSs.

        The ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems it expedient in connection with the performance

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of its duties and in emergencies, and on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of the ADSs generally when our share register or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.

We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.

        We are an "emerging growth company," as defined in the JOBS Act, and we may take advantage of certain exemptions from requirements applicable to other public companies that are not emerging growth companies, including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 for so long as we remain an emerging growth company. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information they may deem important.

We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies.

        Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:

    the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q, quarterly certifications by the principal executive and financial officers or current reports on Form 8-K;

    the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;

    the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and

    the selective disclosure rules by issuers of material nonpublic information under Regulation FD.

        We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of the Nasdaq. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. For example, U.S. domestic issuers are required to file annual reports within 60 to 90 days from the end of each fiscal year. As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.

As an exempted company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with the Nasdaq corporate governance listing standards.

        As an exempted company incorporated in the Cayman Islands and listed on the Nasdaq, we are subject to corporate governance listing standards of Nasdaq. However, Nasdaq rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the Nasdaq corporate governance listing standards. We currently intend to follow

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Cayman Islands corporate governance practices in lieu of the corporate governance requirements of the Nasdaq that listed companies must have: (i) a majority of independent directors; (ii) a nominating/corporate governance committee composed entirely of independent directors; and (iii) a majority of independent directors and that the audit committee consist of at least three members. To the extent that we choose to follow home country practice in the future, our shareholders may be afforded less protection than they otherwise would enjoy under Nasdaq corporate governance listing standards applicable to U.S. domestic issuers.

There can be no assurance that we will not be a passive foreign investment company, or PFIC, for the current or any future taxable year, which could result in adverse U.S. federal income tax consequences to U.S. investors in the ADSs or our Class A ordinary shares.

        In general, a non-U.S. corporation is a PFIC for U.S. federal income tax purposes for any taxable year in which (i) 50% or more of the average value of its assets (generally determined on a quarterly basis) consists of assets that produce, or are held for the production of, passive income, or (ii) 75% or more of its gross income consists of passive income. For purposes of these calculations, a non-U.S. corporation that owns, directly or indirectly, at least 25% by value of the shares of another corporation is treated as if it held its proportionate share of the assets of the other corporation and received directly its proportionate share of the income of the other corporation. Passive income generally includes dividends, interest, rents, royalties (other than certain royalties derived in an active business), and certain investment gains. Cash is generally a passive asset for these purposes. Goodwill is generally characterized as an active asset to the extent it is associated with business activities that produce active income.

        Based on the manner in which we currently conduct our business, the expected composition of our income and assets and the expected value of our assets (including goodwill, which is based on the expected price of the ADSs in this offering), we do not expect to be a PFIC for our current taxable year or the foreseeable future. However, our PFIC status for any taxable year is an annual factual determination that can be made only after the end of that year. Our PFIC status for any taxable year will depend on the composition of our income and assets and the value of our assets from time to time, including the value of our goodwill (which may be determined, in large part, by reference to our market capitalization, which could be volatile). Therefore, our risk of being or becoming a PFIC will increase if our market capitalization declines while we hold a substantial amount of cash (including cash raised in this offering) and financial investments. In addition, if in the future we change the type of services we provide with respect to our franchised hotels, our PFIC status for any taxable year may depend on whether and to what extent our income from franchised hotels will be treated as derived in the active conduct of a trade or business within the meaning of applicable Treasury regulations. Because of these uncertainties, there can be no assurance that we will not be a PFIC for our current or any future taxable year. If we were a PFIC for any taxable year during which a U.S. taxpayer held ADSs or Class A ordinary shares, the U.S. taxpayer generally would be subject to adverse U.S. federal income tax consequences, including increased tax liability on disposition gains and "excess distributions" (subject to alternative treatment if the U.S. taxpayer is able to and does make a valid mark-to-market election) and additional reporting requirements. See "Taxation—Material U.S. Federal Income Tax Considerations—Passive Foreign Investment Company Rules."

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains statements that constitute forward-looking statements. Many of the forward-looking statements contained in this prospectus can be identified by the use of forward-looking words such as "anticipate," "believe," "could," "expect," "should," "plan," "intend," "estimate" and "potential," among others.

        Forward-looking statements appear in a number of places in this prospectus and include, but are not limited to, statements regarding our intent, belief or current expectations. Forward-looking statements are based on our management's beliefs and assumptions and on information currently available to our management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those identified under the section entitled "Risk Factors" in this prospectus. These risks and uncertainties include factors relating to:

    general economic, political, demographic and business conditions in China and globally;

    fluctuations in inflation and exchange rates in China and globally;

    our ability to implement our growth strategy;

    our ability to compete and conduct our business in the future;

    the availability of qualified personnel and the ability to retain such personnel;

    the expected growth and competition in the hospitality industry in China;

    changes in government policies and regulation;

    other factors that may affect our financial condition, liquidity and results of operations; and

    other risk factors discussed under "Risk Factors."

        Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

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USE OF PROCEEDS

        We expect to receive total estimated net proceeds from this offering of approximately US$             million, or approximately US$             million if the underwriters exercise their option to purchase additional ADSs in full, based on the midpoint of the estimated initial public offering price range set forth on the front cover of this prospectus, after deducting underwriting discounts and commissions. A US$1.00 increase (decrease) in the assumed initial public offering price of US$            per ADS would increase (decrease) the net proceeds to us from this offering by US$            million, assuming the number of ADSs offered by us, as set forth on the front cover of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us.

        We plan to use the net proceeds of this offering primarily for the following purposes:

    approximately        % for expanding and strengthening our hotel network in China, including funding the capital expenditures and expenses related to opening of new hotels across different Atour hotel brands and the continuous upgrades of existing hotel facilities;

    approximately        % for developing new products and services for our diversified hotel portfolio, strengthening our membership program and enhancing our branding efforts;

    approximately        % for enhancing our IT infrastructure and technologies, including digital operating systems and data analytics, to further enhance our customer experience as well as operating efficiency;

    approximately        % for selectively pursuing strategic transactions including mergers & acquisitions, joint ventures and investments in China's hospitality and lifestyle industry; as of the date of the prospectus, we have not identified any specific target; and

    approximately        % for general corporate and working capital purposes.

        If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus. In utilizing the proceeds from this offering, we are permitted under PRC laws and regulations to provide funding to our PRC subsidiaries only through loans or capital contributions, and only if we satisfy the applicable government registration and approval requirements. We cannot assure you that we will be able to meet these requirements on a timely basis, if at all. See "Risk Factors—Risks Related to Doing Business in China—PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may restrict or delay us from using the proceeds of this offering to make loans or additional capital contributions to our PRC subsidiaries, which could adversely affect our liquidity and our ability to fund and expand our business." Additionally, while there is no statutory limit on the amount of capital contribution that we can make to our PRC subsidiaries, loans provided to our PRC subsidiaries are subject to certain statutory limits. See "Regulation—Regulations on Offshore Financing" for more information about such statutory limits.

        We are able to use all of the net proceeds from this offering for investment in our operations in the PRC by funding our PRC subsidiaries through capital contributions which is not subject to any statutory limit on the amount under PRC laws and regulations. We expect that the net proceeds from this offering to be used in the PRC will be in the form of RMB and, therefore, our PRC subsidiaries will need to convert any capital contributions or loans from U.S. dollars into Renminbi in accordance with applicable PRC laws and regulations. All of the net proceeds from this offering would be available for investment in our operations in the PRC, subject to the foregoing statutory limits on the amount of loans provided to our PRC subsidiaries and the laws and regulations on the conversion from U.S. dollars into Renminbi.

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DIVIDEND POLICY

        We have not previously declared or paid any cash dividend or dividend in kind.

        We are a holding company incorporated in the Cayman Islands. We rely principally on dividends from our PRC subsidiaries for our cash requirements, including any payment of dividends to our shareholders. PRC regulations may restrict the ability of our PRC subsidiaries to pay dividends to us. See "Regulation—Regulations on Dividend Distribution." and "Risk Factors—Risks Related to Doing Business in China—Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment."

        Our board of directors has discretion as to whether to distribute dividends, subject to certain requirements of Cayman Islands law. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. Under Cayman Islands law, a Cayman Islands company may pay a dividend out of either profit or share premium account, provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant. If we pay any dividends on our ordinary shares, we will pay those dividends which are payable in respect of the ordinary shares underlying the ADSs to the depositary, as the registered holder of such ordinary shares, and the depositary then will pay such amounts to the ADS holders in proportion to the Class A ordinary shares underlying the ADSs held by such ADS holders, subject to the terms of the deposit agreement, net of the fees and expenses payable thereunder. See "Description of American Depositary Shares."

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CAPITALIZATION

        We completed the Restructuring in May 2021. Upon the consummation and of the Restructuring, we have issued new Class A ordinary shares to affiliates of certain Existing Equityholders pursuant to the Restructuring, such that our shareholding structure substantially reflects Atour Shanghai's ownership structure prior to the Restructuring. As a result of the Restructuring, we (i) beneficially own 100% of equity interest in Atour Shanghai through Atour Hong Kong, and (ii) have consolidated the financial results of Atour Shanghai and its subsidiaries in our consolidated financial statements in accordance with U.S. GAAP. For detailed discussion of the steps taken to effect the Restructuring, see "Corporate History and Structure—Restructuring". In connection with the Restructuring, our authorized share capital was classified into Class A ordinary shares and Class B ordinary shares on February 3, 2021.

        The table below sets forth our capitalization as of March 31, 2021:

    on an actual basis;

    on a pro forma basis to give effect to (i) the termination of the preferential rights held by certain equity holders of Atour Shanghai on April 8, 2021; (ii) the repurchase of 8,822,664 ordinary shares from a shareholder with a cash consideration of RMB111.26 million in May 2021; and (iii) the distribution of RMB20.6 million in cash to certain shareholders in May 2021; and

    on a pro forma as adjusted basis to give effect to (i) the termination of the preferential rights held by certain equity holders of Atour Shanghai on April 8, 2021; (ii) the repurchase of 8,822,664 ordinary shares from a shareholder with a cash consideration of RMB111.26 million in May 2021; (iii) the distribution of RMB20.6 million in cash to certain shareholders in May 2021; and (iv) the issuance and sale of             Class A ordinary shares in this offering, and the receipt of approximately US$             million in estimated net proceeds, considering an offering price of US$            per ADS (the midpoint of the estimated initial public offering price range set forth on the front cover of this prospectus), after deduction of the underwriting discounts and commissions payable by us, and the use of proceeds therefrom.

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        You should read this table together with our consolidated financial statements and the related notes included elsewhere in this prospectus and the information under "Management's Discussion and Analysis of Financial Condition and Results of Operations."

 
  As of March 31, 2021  
 
  Actual   Actual   Pro Forma   Pro Forma
as Adjusted
 
 
  RMB
  US$
  RMB
  US$
  RMB
  US$
 
 
  (in thousands)
 

Long-term borrowings, non-current portion

    42,045     6,417     42,045     6,417              

Mezzanine equity

                                     

Redeemable Series B shares (USD0.0001 par value, 48,394,000 shares authorized, issued and outstanding; Redemption value of RMB303,416 as of March 31, 2021; Liquidation preference of RMB230,147 as of March 31, 2021; and none outstanding on a pro forma and pro forma as adjusted basis as of March 31, 2021)

    167,500     25,565                      

Redeemable Series C shares (USD0.0001 par value, 104,896,800 shares authorized, issued and outstanding; Redemption value of RMB727,761 as of March 31, 2021; Liquidation preference of RMB727,761 as of March 31, 2021; and none outstanding on a pro forma and pro forma as adjusted basis as of March 31, 2021)

    727,761     111,078                      

Total mezzanine equity

    895,261     136,643                      

Deficit

                                     

Series A shares (USD0.0001 par value; 60,912,400 shares authorized, issued and outstanding; Liquidation preference of RMB73,336 as of March 31, 2021; and none outstanding on a pro forma and pro forma as adjusted basis as of March 31, 2021)

    43     7                      

Ordinary shares (USD0.0001 par value; 2,785,796,800 shares authorized as of March 31, 2021; 171,589,918 shares issued and outstanding; and 376,970,453 shares issued and outstanding on a pro forma basis as of March 31, 2021 and        shares issued and outstanding on a pro forma as adjusted basis as of March 31, 2021)

    130     20     274     42              

Additional paid-in capital

            763,255     116,495              

Accumulated deficit

    (307,969 )   (47,005 )   (307,969 )   (47,005 )            

Accumulated other comprehensive income

    426     65     426     65              

Total (deficit) equity attributable to shareholders of the Company

    (307,370 )   (46,913 )   455,986     69,597              

Non-controlling interests

    (10,199 )   (1,557 )   (10,199 )   (1,557 )            

Total capitalization

    619,737     94,590     487,832     74,457              

Notes:

(1)
The pro forma as adjusted information discussed above is illustrative only. Our additional paid-in capital, total (deficit) equity attributable to shareholders of the Company and total capitalization following the completion of this offering are subject to adjustment based on the actual initial public offering price and other terms of this offering determined at pricing.

(2)
A US$1.00 increase (decrease) in the assumed initial public offering price of US$            per ADS, which is the midpoint of the estimated range of the initial public offering price shown on the cover page of this prospectus, would increase (decrease) each of additional paid-in capital, total (deficit) equity attributable to shareholders of the Company and total capitalization by US$            million.

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DILUTION

        If you invest in the ADSs, your interest will be diluted to the extent of the difference between the initial public offering price per ADS and our net tangible book value per ADS after this offering. Dilution results from the fact that the initial public offering price per Class A ordinary share is substantially in excess of the book value per ordinary share attributable to the existing shareholders for our presently outstanding ordinary shares.

        Our net tangible book value as of March 31, 2021 was approximately US$85.0 million, or US$0.22 per ordinary share as of that date. Net tangible book value represents the amount of our consolidated assets, less intangible assets, goodwill and the amount of our total consolidated liabilities. Dilution is determined by subtracting net tangible book value per ordinary share as adjusted from the initial public offering price per ordinary shares. Because the Class A ordinary shares and Class B ordinary shares have the same dividend and other rights, except for voting and conversion rights, the dilution is presented based on all issued and outstanding ordinary shares, including Class A ordinary shares and Class B ordinary shares.

        Without taking into account any other changes in such net tangible book value after March 31, 2021, other than to give effect to our issuance and sale of              ADSs offered in this offering at an assumed initial public offering price of US$            per ADS, the midpoint of the estimated initial public offering price range set forth on the front cover of this prospectus, after deduction of the underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of March 31, 2021 would have been approximately US$             million, or US$            per ordinary share and US$            per ADS, to existing shareholders and an immediate dilution in net tangible book value of US$            per Class A ordinary share, or US$            per ADS, to purchasers of ADSs in this offering.

        The following table illustrates the dilution at an assumed initial public offering price of US$            per ADS, the midpoint of the estimated initial public offering price range set forth on the front cover of this prospectus and all ADSs are exchanged for Class A ordinary shares:

Initial public offering price per Class A ordinary share

  US$           

Net tangible book value per ordinary share as of March 31, 2021

  US$           

Pro forma net tangible book value per ordinary share as adjusted to give effect to this offering

  US$           

Amount of dilution in net tangible book value per ordinary share to new investors in this offering

       

Amount of dilution in net tangible book value per ADS to new investors in this offering

  US$           

        The pro forma information discussed above is illustrative only.

        The following table summarizes, on a pro forma basis as of March 31, 2021, the differences between the existing shareholders and the new investors with respect to the number of Class A ordinary shares purchased from us in this offering, the total consideration paid and the average price per ordinary share paid at the initial public offering price of US$             per ADS, the midpoint of the estimated initial public offering price range set forth on the front cover of this prospectus, before deducting underwriting discounts and commissions and estimated offering expenses. The total number of Class A ordinary shares does not include            Class A ordinary shares underlying the ADSs

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issuable upon the exercise of the over-allotment option to purchase additional ADSs granted to the underwriters.

 
   
   
   
   
  Average
Price Per
Class A
Ordinary
Share
   
 
  Class A
Ordinary shares
Purchased
  Total Consideration   Average
Price Per
ADS
 
  Amount
(in thousands
of US$)
   
 
  Number   Percent   Percent   US$   US$

Existing shareholders

                       

New investors

                       

Total

                       

        The discussion and tables above also assume no exercise of any share options outstanding under our Public Company Plan as of the date of this prospectus. As of the completion of this offering, we have granted          share options corresponding to          Class A ordinary shares under our Public Company Plan, including 14,196,882 share options granted or to be granted to participants in our 2017 PRC Plan in exchange for cancellation of their outstanding awards previously granted under the 2017 PRC Plan. 17,923,060 of share options remain outstanding as of the date of this prospectus. To the extent that any of these share options become exercised, there will be further dilution to new investors in our company.

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ENFORCEABILITY OF CIVIL LIABILITIES

Cayman Islands

        We were incorporated in the Cayman Islands in order to enjoy the following benefits:

    political and economic stability;

    an effective judicial system;

    a favorable tax system;

    the absence of exchange control or currency restrictions; and

    the availability of professional and support services.

        However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include, but are not limited to, the following:

    the Cayman Islands has a less developed body of securities laws as compared to the United States and these securities laws provide significantly less protection to investors; and

    Cayman Islands companies may not have standing to sue before the federal courts of the United States.

        Our constitutional documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders, be arbitrated.

        All of our operations are conducted in China, and substantially all of our assets are located in China. All of our directors and executive officers are nationals or residents of jurisdictions other than the United States and a substantial portion of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.

        We have appointed as our agent upon whom process may be served in any action brought against us under the securities laws of the United States.

        Maples and Calder (Hong Kong) LLP, our counsel as to Cayman Islands law, and JunHe LLP, our counsel as to PRC law, have advised us, respectively, that there is uncertainty as to whether the courts of the Cayman Islands and China, respectively, would:

    recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or

    entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.

        Maples and Calder (Hong Kong) LLP has informed us that there is uncertainty with regard to Cayman Islands law related to whether a judgment obtained from the U.S. courts under civil liability provisions of U.S. securities laws will be determined by the courts of the Cayman Islands as penal or punitive in nature. If such a determination is made, the courts of the Cayman Islands will not recognize or enforce the judgment against a Cayman Islands company, such as our company. As the courts of the Cayman Islands have yet to rule on making such a determination in relation to judgments obtained from U.S. courts under civil liability provisions of U.S. securities laws, it is uncertain whether such

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judgments would be enforceable in the Cayman Islands. Maples and Calder (Hong Kong) LLP has informed us that although there is no statutory enforcement in the Cayman Islands of judgments obtained in the federal or state courts of the United States (and the Cayman Islands is not a party to any treaties for the reciprocal enforcement or recognition of such judgments), a judgment obtained in such jurisdiction will be recognized and enforced in the courts of the Cayman Islands at common law, without any re-examination of the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the Grand Court of the Cayman Islands, provided such judgment (a) is given by a foreign court of competent jurisdiction, (b) imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given, (c) is final, (d) is not in respect of taxes, a fine or a penalty, and (e) was not obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands.

PRC

        We have been advised by JunHe LLP, our PRC legal counsel, that there is uncertainty as to whether the courts of the PRC would enforce judgments of United States courts or Cayman Islands courts obtained against us or these persons predicated upon the civil liability provisions of the United States federal and state securities laws. JunHe LLP has further advised us that the recognition and enforcement of foreign judgments are provided for under PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on reciprocity between jurisdictions. China does not have any treaties or other form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States or in the Cayman Islands. Under the PRC Civil Procedures Law, foreign shareholders may originate actions based on PRC law against a company for disputes relating to contracts or other property interests in the PRC, if they can establish sufficient nexus to the PRC for a PRC court to have jurisdiction, and meet other procedural requirements, including, among others, the plaintiff must have a direct interest in the case, and there must be a concrete claim, a factual basis and a cause for the suit.

        However, it would be difficult for foreign shareholders to establish sufficient nexus to the PRC for a PRC court to have jurisdiction pursuant to the PRC Civil Procedures Law by virtue only of holding the ADSs or Class A ordinary shares.

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CORPORATE HISTORY AND STRUCTURE

    Our Corporate History

        Atour Shanghai was established in 2013. We currently conduct all of our businesses in China through Atour Shanghai and its subsidiaries.

        We established Atour Lifestyle Holdings Limited as our holding company in the Cayman Islands on April 10, 2012 in anticipation of future capital raising from international investors. Atour Hong Kong was incorporated on March 5, 2021 in Hong Kong.

        Atour Lifestyle Holdings Limited owns 100% of the equity interest in Atour Hong Kong, and Atour Hong Kong recently acquired 100% of the equity interest in Atour Shanghai, which controls all of our business operations within the PRC.

    Restructuring

        We completed the Restructuring in May 2021. Upon the consummation of the Restructuring, (i) we have issued new Class A ordinary shares to the affiliates of certain Existing Equityholders of Atour Shanghai such that the shareholding structure of our company at the Cayman Islands level is substantially similar to the equity ownership structure of Atour Shanghai prior to the Restructuring, and (ii) the affiliates of such Existing Equityholders have become parties to and are bound by the terms of our shareholders agreement dated March 3, 2021.

        The following table summarizes certain shareholding information of Atour Shanghai and our company before and after the completion of the Restructuring.

No.
  Equityholders of Atour Shanghai   Equity Interests Percentages Pre-
Restructuring
  Amount of Equity Interests Beneficially Owned in Atour Shanghai   Relationships with Existing Shareholders of Atour Lifestyle   Shareholders of Atour Lifestyle Post-Restructuring   Shareholding Percentages   Number of Ordinary Shares held in Atour Lifestyle  
1.    Shanghai Lieduo Business Service LLP ("Management SPV 1")(1)(4)     15.10 %   60,399,600       Sea Pearl Worldwide Holding Limited ("Founder SPV")(1)     20.06 %   75,616,580  
                        Engine Holdings Limited ("Engine")(1)(10)     9.47 %   35,691,412  

2.

 

Shanghai Haoduo Business Service LLP ("Management SPV 2")(1)(2)(5)

 

 

13.68

%

 

54,710,800

 

 

 

Li Real Limited ("Li Real")(1)(10)

 

 

3.96

%

 

14,926,416

 

3.

 

Shanghai Gongduo Business Service LLP ("Management SPV 3")(1)(3)(6)

 

 

6.40

%

 

25,600,000

 

Affiliates

 

Xing Duo Technology Investment Limited, Vsixty Limited, Every

 

 

4.21

%

 

15,859,032

 
4.   Shanghai Zhaoduo Business Service LLP ("Management SPV 4")(1)(3)(7)     6.40 %   25,600,000       Fair Limited, Rui Duo Investment Limited, and Fortune River Limited(1)(8)              

 

 

Sub-total

 

 

41.58

%

 

166,310,400

 

 

 

Sub-total

 

 

37.70

%

 

142,093,440

 

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No.
  Equityholders of Atour Shanghai   Equity Interests Percentages Pre-
Restructuring
  Amount of Equity Interests Beneficially Owned in Atour Shanghai   Relationships with Existing Shareholders of Atour Lifestyle   Shareholders of Atour Lifestyle Post-Restructuring   Shareholding Percentages   Number of Ordinary Shares held in Atour Lifestyle  

5.

 

Shanghai Youshanfeng Enterprise Management Center LLP ("External Investor 1")(9)

 

 

4.87

%

 

19,486,400

 

Affiliate

 

GLV Holding Limited(9)

 

 

5.48

%

 

20,673,814

 

6.

 

Shanghai Dehui Duoyuan Enterprise Management Consultation Center LLP ("External Investor 2")

 

 

15.23

%

 

60,912,400

 

Affiliate

 

Diviner Limited

 

 

16.16

%

 

60,912,400

 

7.

 

Khorgos Junlian Chengyu Venture Cpital Investment Co., Ltd. ("External Investor 3")

 

 

2.24

%

 

8,968,800

 

Affiliates

 

Shanghai Yinan Enterprise

 

 

26.26

%

 

98,973,600

 
8.   Zhuhai Junlian Lingheng Equity Investment LLP ("External Investor 3")     22.50 %   90,004,800       Management Partnership LLP              

9.

 

Ctrip Computer Technology (Shanghai) Co., Ltd. ("External Investor 4")

 

 

12.10

%

 

48,394,000

 

Affiliate

 

TRIP.COM TRAVEL SINGAPORE PTE.LTD(10)

 

 

12.84

%

 

48,394,000

 

10.

 

Individual investor ("External Investor 5")

 

 

1.48

%

 

5,923,200

 

Affiliate

 

IKARIA HOTEL INVESTMENT HOLDING LIMITED(10)

 

 

1.57

%

 

5,923,200

 
    Sub-total     58.42 %   233,689,600       Sub-total     62.30 %   234,877,014  
    Total     100 %   400,000,000       Total     100 %   376,970,454  

Notes:

(1)
Subject to the adjustments discussed in Notes (2), (3) and (9) below, each beneficial owner who indirectly held equity interests in Atour Shanghai through Management SPV 1, Management SPV 2, Management SPV 3 and Management SPV 4 has received the same number of ordinary shares of Atour Lifestyle identical to its respective beneficial ownership in Atour Shanghai prior to the Restructuring.

(2)
A minority investor who beneficially held equity interests in Atour Shanghai through Management SPV 2 disposed of 8,822,664, or 2.21% equity interests, in Atour Shanghai to the Company during the Restructuring. As a result, the shareholding percentage of each of the other beneficial owners of Atour Shanghai who received ordinary shares of Atour Lifestyle upon the Restructuring increased proportionately.

(3)
A group of employees of the Company and other qualified individuals indirectly held a total of 14,206,882 (including 10,000 share options returned by an employee who resigned before the Restructuring), or 3.55% equity interests, issued by Atour Shanghai to Management SPV 3 and Management SPV 4 pursuant to the 2017 PRC Incentive Plan prior to the Restructuring. Such PRC equity awards were cancelled in exchange for 14,196,882 share options granted to such individuals under the Company's Public Company Plan. Such options have not yet been exercised as of the date of this prospectus.

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(4)
Prior to the Restructuring, Management SPV 1 was beneficially owned by the PRC affiliates of Founder SPV, Engine and Li Real.

(5)
Prior to the Restructuring, Management SPV 2 was beneficially owned by the PRC affiliates of Founder SPV, Engine, Li Real, as well as the minority investor who disposed of its equity interests as mentioned in Note (2) above.

(6)
Prior to the Restructuring, in addition to the equity interests attributable to the 2017 PRC Incentive Plan as mentioned in Note (3) above, Management SPV 3 was beneficially owned by the PRC affiliate of Founder SPV and a group of twelve natural person minority investors.

(7)
Prior to the Restructuring, in addition to the equity interests attributable to the 2017 PRC Incentive Plan as mentioned in Note (3) above, Management SPV 4 was beneficially owned by the PRC affiliate of Founder SPV and a group of five natural person minority investors.

(8)
Upon completion of the Restructuring, each of the natural person investors as mentioned in Note (6) and Note (7) above held ordinary shares of Atour Lifestyle through the entities listed, except for one natural person investor whose ordinary shares in Atour Lifestyle are held by the Founder SPV on his behalf.

(9)
A natural person investor beneficially owned 1,187,414 equity interests in Atour Shanghai through Management SPV 4 and beneficially owned 19,486,400 equity interests in Atour Shanghai through External Investor 1. Upon the completion of the Restructuring, the natural person investor holds a total of 20,673,814 Class A ordinary shares through GLV Holding Limited.

(10)
For purpose of the presentation of the Restructuring, this table does not take into account the transfer of certain ordinary shares among several shareholders of Atour Lifestyle as such transfer was effected independent of the Restructuring.

    Summary of the Restructuring Steps

        The Restructuring was effected in preparation of this offering such that each Existing Equityholder of Atour Shanghai prior to the Restructuring would receive the same number of ordinary shares of Atour Lifestyle identical to the amounts of their respective equity interests in Atour Shanghai on a one-to-one basis, subject to minor adjustments as a result of (i) the buyout of one minority investor of Atour Shanghai by the Company and (ii) the cancellation and replacement of the PRC share-based awards with Class A ordinary shares reserved under the Public Company Plan of Atour Lifestyle, as specified in the table above and further discussed below.

        In February 2021, in preparation for this offering, Atour Shanghai and its Existing Equityholders entered into a reorganization framework agreement governing certain matters relating to the Restructuring in accordance with PRC laws and regulations (the "Framework Agreement"). Pursuant to the Framework Agreement, we, Atour Shanghai, its Existing Shareholders and their respective affiliates have taken the steps below to effect the Restructuring, which was completed on May 17, 2021. The Restructuring mainly involved the following steps (as described in more details below):

    1)
    the existing Equityholders of Atour Shanghai prior to the Restructuring surrendered their respective equity interests in Atour Shanghai;

    2)
    with respect to those Equityholders of Atour Shanghai who were required to complete certain PRC foreign exchange regulatory procedures (which were administrative in nature) before their affiliates are permitted to acquire ordinary shares of Atour Lifestyle, Atour Lifestyle issued customary warrants to their affiliates concurrently with the surrender of their respective equity interests in Atour Shanghai for the purpose of ensuring they continued to retain the same shareholder rights during the interim period until the corresponding ordinary shares of the Company were issued to their affiliates. The warrants, in substance, served the purpose of allowing these shareholders to continue to retain their economic interests and shareholder's rights until the PRC administrative procedures were completed;

    3)
    with respect to those Equityholders of Atour Shanghai who are not required to complete such PRC foreign exchange regulatory procedures, Atour Lifestyle directly issued ordinary shares to such Equityholders; and

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    4)
    upon the successful completion of the required PRC foreign exchange regulatory procedures, the Equityholders described in step 2) above exercised their warrants to acquire ordinary shares of Atour Lifestyle.

    Transactions Undertaken by External Investors 1 - 5 to Exit Atour Shanghai and Acquire Ordinary Shares in Atour Lifestyle

        Surrender of equity interests in Atour Shanghai.    On February 8, 2021 and March 25, 2021, each of External Investors 2 - 5 surrendered their respective equity interests in Atour Shanghai in exchange of a total of RMB626.41 million, being the entire amount of their respective initial investment costs in Atour Shanghai. Each of External Investors 2 - 5 used the cash proceeds received from their exit from Atour Shanghai to pay the exercise prices of the warrants to acquire Class A ordinary shares issued by Atour Lifestyle as discussed below. On March 25, 2021, External investors 1 surrendered its equity interests in Atour Shanghai, in exchange for a total of 20,673,814 Class A ordinary shares of Atour Lifestyle issued to its affiliate at nominal price on February 3, 2021 as described below.

        Issuances of warrants by Atour Lifestyle.    Concurrently with and in consideration for the surrender of equity interests in Atour Shanghai by External Investors 2 - 5, Atour Lifestyle issued warrants to purchase a total of 214,203,200 Class A ordinary shares to the respective affiliates of such External Investors (as named in the table above). The warrant arrangements were contemplated to ensure they continued to retain the same shareholder rights during the interim until the corresponding ordinary shares of the Company were issued to their affiliates. The warrants, in substance, served the purpose of allowing these shareholders to continue to retain their economic interests and shareholder's rights until the administrative procedures were completed.

        Exercise of warrants and issuances of Class A ordinary shares.    On March 3 and April 23, 2021, affiliates of External Investor 2 - 5 exercised their warrants in full at an exercise price equal to the U.S. dollar equivalent of RMB626.41 million. Accordingly, Atour Lifestyle issued a total of 214,203,200 Class A ordinary shares to such affiliates of the External Investors on the date respectively. In addition, on February 3, 2021, Atour Lifestyle issued a total of 20,673,814 Class A ordinary shares to the affiliate of External Investor 1, at nominal price. For details of the issuances of such warrants and Class A ordinary shares, see "Description of Share Capital—History of Securities Issuances." Following such share issuances, the numbers of Class A ordinary shares of Atour Lifestyle held by the External Investors 1 - 5 were identical to the amounts of equity interests in Atour Shanghai previously held by their respective PRC affiliates.

        Termination of PRC preferential rights.    Pursuant to the Framework Agreement, all preferential rights (including redemption rights with respect to External Investors 3 - 5) previously held by External Investors 2 - 5 in Atour Shanghai terminated on April 8, 2021 upon our initial submission of the draft registration statement.

    Transactions Undertaken by Management SPVs 1 - 4 to Exit Atour Shanghai and Acquire Ordinary Shares in Atour Lifestyle

        Conversion of Atour Shanghai into a foreign invested company.    On March 8, 2021, IKARIA HOTEL INVESTMENT HOLDING LIMITED (which is the offshore affiliate of External Investor 5) subscribed for the capital increase for 1% equity interests of Atour Shanghai at the nominal price at that time, thus changing Atour Shanghai into a foreign invested company, which was for the purpose of facilitating the Restructuring.

        Acquisition of Atour Shanghai by Atour Hong Kong.    On March 25, 2021, after the exit of External Investors 1 - 5 from Atour Shanghai, Atour Hong Kong acquired the remaining equity interests in Atour Shanghai from each of Management SPVs 1 - 4 and the 1% equity interest held by IKARIA

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HOTEL INVESTMENT HOLDING LIMITED. After such acquisition, Atour Shanghai became a wholly-owned subsidiary of Atour Hong Kong, which is a wholly-owned subsidiary of Atour Lifestyle.

        Issuances of ordinary shares to Founder SPV, Engine and Li Real.    On February 3 and March 3, 2021, Atour Lifestyle issued a total of 73,680,917 Class B ordinary shares to Founder SPV and a total of 50,617,828 Class A ordinary shares to Engine and Li Real, respectively, at nominal price in exchange of the cancellation and forfeiture of the existing equity interests in Atour Shanghai previously held by their respective affiliates. For details of such issuances, see "Description of Share Capital—History of Securities Issuances." Following such issuances, the numbers of ordinary shares of Atour Lifestyle held by Founder SPV, Engine and Li Real were substantially identical to the amounts of equity interests in Atour Shanghai previously held by their respective PRC affiliates.

        Issuances of warrants by Atour Lifestyle to a group of other natural person investors who were beneficial owners of Management SPVs 3 - 4.    On March 29, 2021, Atour Lifestyle issued warrants to purchase a total of 15,859,032 Class A ordinary shares to affiliates of the natural person minority investors who previously beneficially owned equity interests in Atour Shanghai through Management SPVs 3 & 4 (as specified in the table above).

        Exercise of warrants by and issuances of Class A ordinary shares to such group of natural person investors.    On May 17, 2021, affiliates of the natural person investors who previously held interests through Management SPVs 3 & 4 exercised their warrants in full at a nominal exercise price. Accordingly, Atour Lifestyle issued a total of 15,859,032 Class A ordinary shares to such affiliates. For details of such issuances of warrants and Class A ordinary shares, see "Description of Share Capital—History of Securities Issuances." Following such issuances, the numbers of ordinary shares of Atour Lifestyle held by such group of natural person investors were substantially identical to the amounts of equity interests in Atour Shanghai previously held indirectly by their respective PRC affiliates.

        Cancellation and replacement of PRC share-based awards.    A group of employees and other qualified individuals indirectly beneficially held a total of 3.55% equity interests issued by Atour Shanghai to Management SPVs 3 & 4 pursuant to the 2017 PRC Incentive Plan prior to the Restructuring. Such equity awards were cancelled in exchange for share options granted to such individuals under the Company's Public Company Plan, with substantially identical commercial terms.

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    Our Corporate Structure

        The following diagram illustrates our corporate structure, including all of our significant subsidiaries within and outside of the PRC, immediately upon the completion of this offering.

GRAPHIC


    Note:

(1)
Immediately after the completion of this offering, assuming the underwriters do not exercise their option to purchase additional ADSs, (i) Mr. Haijun Wang, our founder, Chairman of Board of Directors and Chief Executive Officer, will beneficially own        % of our total issued and outstanding ordinary shares and        % of aggregate voting power; (ii) the other existing principal shareholder, in aggregate, will beneficially own        % of our total issued and outstanding ordinary shares and         % of the aggregate voting power; and (iii) public investors in this offering, in aggregate, will beneficially own        % of our total issued and outstanding ordinary shares and % of the aggregate voting power.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

        You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this prospectus. During the periods presented in this section, all of our business was conducted by Atour Shanghai and its subsidiaries in China. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" and elsewhere in this prospectus.

OVERVIEW

        We are the largest upper midscale hotel chain in China in terms of room number as of the end of 2020, according to Frost & Sullivan.

        Through our hotel network, loyalty program and data and technology capabilities, we have been tirelessly exploring new possible ways to set the new trends for China's hospitality industry and expand our offerings beyond our hotels. We distinguish ourselves from our peers in the following aspects:

    Hotel network with a distinct portfolio of lifestyle brands.  We offer our guests a diversified collection of lifestyle hotel brands, each created with a unique personality under the unified ethos of inclusivity and presence of humanness. As of March 31, 2021, our hotel network covered 608 hotels spanning 131 cities in China, with a total of 71,121 hotel rooms, including 575 manachised hotels with a total of 66,267 manachised hotel rooms, in addition to a pipeline of 299 hotels with a total of 32,825 rooms under development. Our guests can book a stay with us and access our rich product and service offerings through offline and online channels, including our mobile app and Weixin/WeChat mini program.

    "A-Card" loyalty program with strong customer stickiness.  We built our A-Card loyalty program to enhance our engagement with guests and provide them with a unique and personalized experience. As of March 31, 2021, our A-Card loyalty program had amassed more than 25 million registered individual members. In 2020, approximately 44.7% of our room-nights were sold to our A-Card members.

    Proprietary data and technology capabilities.  To provide our customers with personalized services and products, we have developed a comprehensive digital management system, which improves customer experience and operational efficiency in room reservation, room management, pricing and membership benefits. We use our data technology to identify market trends and inform our hotel management decisions, and make our hotel services and retail products more relatable to customers through seamless integration into our rooms and other consumption scenarios throughout our hotels.

        In addition, we are the first hotel chain in China to develop a scenario-based retail business, according to Frost & Sullivan. We design our guest room amenities, work closely with manufacturers to deliver top-quality products, and carefully place the relevant products in guest rooms. Each of our guest rooms incorporates a fully immersive shopping destination, enabling us to further strengthen our brand elasticity with our guests. As of March 31, 2021, we had developed a total of 1,136 SKUs for scenario-based retail. The GMV generated from our retail business was RMB82.8 million and RMB107.2 million for 2019 and 2020, respectively, representing a year-over-year increase of 29.5%, and reached RMB32.6 million for the three months ended March 31, 2021. In 2020, the average transaction value per room reservation reached RMB517.5 for our scenario-based retail business.

        We mainly use the manachise model to expand our hotel network in a less capital-intensive manner. We also lease the properties of the hotels we operate. As of March 31, 2021, we had 33 leased

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hotels and 575 manachised hotels. The number of our manachised hotels grew at a CAGR of 86.2% between 2015 and 2020.

        We primarily derive our revenues from (i) franchise and management fees from our manachised hotels and sales of hotel supplies to manachised hotels, (ii) operations of our leased hotels, and (iii) sales of our retail products in connection with our scenario-based retail business. We generated net revenues of RMB1,567.1 million and RMB1,566.6 million for the years ended December 31, 2019 and 2020, respectively, and RMB202.2 million and RMB419.9 million (US$64.1 million) for the three months ended March 31, 2020 and 2021, respectively. We had net income of RMB60.8 million and RMB37.8 million for the years ended December 31, 2019 and 2020, respectively, and net loss of RMB76.1 million and net income of RMB11.5 million (US$1.8 million) for the three months ended March 31, 2020 and 2021, respectively. We had EBITDA (non-GAAP) of RMB182.5 million and RMB161.2 million for the years ended December 31, 2019 and 2020, respectively, and we had negative EBITDA of RMB70.7 million and EBITDA of RMB45.9 million (US$7.0 million) for the three months ended March 31, 2020 and 2021, respectively. For reconciliation of our net income to EBITDA (non-GAAP), see "—Non-GAAP Financial Measure."

FACTORS AFFECTING OUR RESULTS OF OPERATIONS

General Factors Affecting Our Results of Operations

        Our results of operations are subject to general economic conditions and conditions affecting the hospitality industry in general, which include, among others:

    Changes in the national, regional or local economic conditions in China.  Our financial performance, particularly our ability to drive growth, depends upon the demand for our hotel offerings, which is closely linked to the general economy and is sensitive to business and individual discretionary spending levels in China. While the hospitality industry in China has been benefitting from the significant growth experienced by the PRC economy in recent years, the recent COVID-19 outbreak has negatively affected our industry and led to slowdowns in growth. Despite the substantial improvements in social and economic conditions in China since the COVID-19 outbreak peaked in March 2020, there remain uncertainties regarding the general economic conditions and demand for our hotel offerings. Our costs and expenses may also be affected by China's inflation level. Other macro-economic factors beyond our control may also affect our results of operations. For example, any prolonged recurrence of other contagious diseases, social instability or significant natural disasters may have a negative impact on the demand for our hotel offerings.

    PRC government policies and regulations.  Our business is subject to various compliance and operational requirements under PRC laws. In particular, each of our hotels is required to comply with license requirements and laws and regulations with respect to hospitality industry, internet platform, construction, building, zoning, environmental protection, food safety, public safety, health and sanitary requirements. Any changes to the existing laws and regulations in the future may increase our compliance efforts at significant cost. See "Risk Factors—Risks Related to Our Business and Industry—We are subject to various hospitality industry, health and safety, construction, fire prevention and environmental laws and regulations that may subject us to liability."

    Industry competition.  The hospitality industry in China is highly competitive. We compete primarily with both domestic and international branded hotel chains and independent hotels. Competition in the hospitality industry is generally focused on hotel room rates, quality of accommodations, brand recognitions, convenience of locations, geographic coverages, quality and range of services, other lifestyle offerings and guest amenities.

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    Seasonality.  The hospitality industry is subject to fluctuations in revenues due to seasonality. The periods during which our properties experience higher revenues vary from property to property, depending principally upon their locations, types of property and competitive mix within the specific locations. Generally, the first quarter, in which both the New Year and Spring Festival holidays fall, accounts for a lower percentage of our annual revenues than the other quarters of the year. In addition, certain special events, such as large-scale exhibitions, concerts or sports events, may increase the demand for our hotels significantly as such special events may attract travelers into and within the regions in China where we operate hotels. Based on historical results, we generally expect our hotel revenues for each hotel to be higher in the second and third quarters of each year than in each of the first and fourth quarters due to general travel and consumption patterns in China.

    COVID-19 pandemic.  As a result of the COVID-19 outbreak, governmental authorities in China implemented a series of control measures, including lockdowns, closures, quarantines, and travel bans, which significantly affected the performance of the hospitality industry. In compliance with the government health emergency rules, approximately 1,777 thousand room-nights, representing 8.6% of the total available room-nights throughout 2020, became temporarily unavailable at various times throughout 2020, substantially all of which were from our manachised hotels. As of March 31, 2021, 14 of our hotels were still under government requisition for quarantine purpose. For our occupancy rate, RevPAR and ADR inclusive and exclusive of the requisitioned hotels, see "—Key Performance Indicators". Our occupancy rate, RevPAR and ADR were negatively affected, especially in the first half of 2020, but have substantially recovered since the third quarter of 2020. Despite the overall steady recovery, the rebound of COVID-19 in certain areas and the government's "stay-at-home" policy during the Spring Festival in China resulted in temporary downward pressure on our occupancy rate, RevPAR and ADR in the first quarter of 2021. For a detailed discussion of the risks associated with the COVID-19 outbreak and our recovery since the third quarter of 2020, see "—Key Performance Indicators" and "Risk Factors—Risks Related to Our Business and Industry—The COVID-19 outbreak has adversely affected, and may continue to adversely affect, our financial and operating performance."

Specific Factors Affecting Our Results of Operations

        While our business is affected by factors relating to general economic conditions and the hospitality industry in China, we believe that our results of operations are also affected by company-specific factors, including, among others:

    The total number of hotels and hotel rooms in our hotel network.  Our revenues largely depend on the size of our hotel network. Furthermore, we believe the expanded geographic coverage of our hotel network will enhance our brand recognition. We mainly adopt a "manachise" model to operate the vast majority of the hotels in our hotel network. As a result, whether we can successfully increase the number of hotels and hotel rooms in our hotel chain is largely affected by our ability to franchise additional hotel properties at desirable locations on commercially favorable terms and to maintain the quality of service at our hotels and the value of our brand.

    The fixed-cost nature of our business.  A significant portion of our operating costs and expenses, including rent and base salary, is relatively fixed. As a result, an increase in our revenues achieved through higher RevPAR generally will result in higher profitability. Vice versa, a decrease in our revenues could result in a disproportionately larger decrease in our profits because our operating costs and expenses are unlikely to decrease proportionately.

    The proportion of mature hotels in our hotel portfolio.  The operation of each hotel typically involves three stages: development, ramp-up and mature operations. We define mature hotels as those that have been in operation for more than six months. It typically takes six months for our

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      newly opened hotels to ramp up before such hotels can generate normal and stable revenues. During the ramp-up stage, when the occupancy rate is relatively low, revenues generated from these new hotels may be insufficient to cover their operating costs. The pre-opening expenses incurred during the development stage of our leased hotels, the lower franchise management fees generated by our manachised hotels during the ramp-up stage and the lower profitability during the ramp-up stage for our hotels may have a significant negative impact on our overall financial performance. The table below illustrates the number of our hotels in development stage, ramp-up stage and mature operation stage as of December 31, 2019 and 2020 and March 31, 2021.

 
  As of
December 31, 2019
  As of
December 31, 2020(1)
  As of
March 31, 2021(1)
 
 
  Number of
hotels
  Percentage of
total hotels in
the three stages
  Number of
hotels
  Percentage of
total hotels in
the three stages
  Number of
hotels
  Percentage of
total hotels in
the three stages
 

Development stage

    283     40.3 %   288     33.6 %   299     33.0 %

Ramp-up stage

    113     16.1 %   109     12.7 %   103     11.4 %

Mature stage

    307     43.7 %   461     53.7 %   505     55.7 %

Note:

(1)
Includes 19 and 14 manachised hotels being requisitioned by the government for quarantine needs in response to the COVID-19 outbreak, which were not in operation as of December 31, 2020 and as of March 31, 2021, respectively.
    The growth of our A-Card members and their levels of engagement.  Our tier-based A-Card loyalty program is a fully digitized membership program that unites all our hotel and lifestyle brands. We currently offer five tiers of membership from welcome level to infinite level, each corresponding to a different class of member benefits, privileges and rewards. Joining welcome level is completely free, and it takes six room-nights or 2,800 Jimu points to upgrade to the third tier—gold level. Alternatively, entry-level guests can also pay RMB199 to upgrade to gold level directly and enjoy the corresponding rewards. Our A-Card members contribute to a significant portion of our revenue. As of March 31, 2021, we had more than 25 million registered individual members. Our member base has been growing rapidly, with a CAGR of 79.6% between 2015 and 2020. In 2019 and 2020, our individual members contributed to 39.3% and 44.7% of total room-night reservations, respectively. If we are able to further grow the size of our member base and increase customer stickiness of our loyalty program, we will be able to further increase our revenue and reduce our customer acquisition expenses.

    The growth and profitability of our scenario-based retail business.  In addition to hotel service offerings, we also operate an innovative scenario-based retail business embedded in our hotel rooms as well as through our e-stores. The growth and profitability of this retail business depends on the variety, attractiveness and pricing of our lifestyle products, as well as the development, procurement, sales, transportation and storage expenses.

KEY PERFORMANCE INDICATORS

        We utilize a set of non-financial and financial key performance indicators which our senior management reviews frequently. The review of these indicators facilitates timely evaluation of the performance of our business and effective communication of results and key decisions, allowing our business to react promptly to changing customer demands and market conditions.

Non-Financial Key Performance Indicators

        Our non-financial key performance indicators consist of the increase in total number of hotels and hotel rooms in our hotel chain and RevPAR achieved by our hotels.

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        Increase in total hotels and hotel rooms.    As we continue to scale our presence by leveraging our strong brand reputation, the total number of our hotels increased from 420 as of December 31, 2019 to 570 as of December 31, 2020, and further increased to 608 as of March 31, 2021. Similarly, the total number of our hotel rooms increased from 49,087 as of December 31, 2019 to 66,618 as of December 31, 2020, and further increased to 71,121 as of March 31, 2021. We had net increase in the number of our hotels of 168 in 2019 and 150 in 2020. Due to the impacts of the COVID-19 outbreak which peaked in China in early 2020, we had a certain number of hotels temporarily closed or requisitioned by the government authorities for quarantine purpose at various times in 2020 and in the first quarter of 2021, substantially all of which were manachised hotels. As of March 31, 2021, we had a total of 299 hotels with a total of 32,825 rooms under development.

 
  As of
December 31,
2019
  As of
December 31,
2020
  As of
March 31,
2021
 

Total hotels(1)

                   

Manachised hotels

    391     537     575  

Leased hotels

    29     33     33  

All hotels

    420     570     608  

Hotel rooms(1)

   
 
   
 
   
 
 

Manachised hotels

    44,983     61,782     66,267  

Leased hotels

    4,104     4,836     4,854  

All hotels

    49,087     66,618     71,121  

    Note

(1)
Includes 19 and 14 manachised hotels being requisitioned by the government for quarantine needs in response to the COVID-19 outbreak, which were not in operation as of December 31, 2020 and March 31, 2021, respectively.


 
  Year Ended
December 31,
2019
  Year Ended
December 31,
2020
  Three Months
Ended
March 31, 2020
  Three Months
Ended
March 31, 2021
 
 
   
  Exclusive
of
requisitioned
hotels(2)
  Inclusive
of
requisitioned
hotels
  Exclusive
of
requisitioned
hotels(2)
  Inclusive
of
requisitioned
hotels
  Exclusive
of
requisitioned
hotels(2)
  Inclusive
of
requisitioned
hotels
 

Occupancy rate (in percentage)

                                           

Manachised hotels

    72.3%     66.9%     63.2%     37.5%     30.7%     59.6%     58.9%  

Leased hotels

    83.0%     68.6%     67.6%     34.6%     32.6%     66.1%     66.1%  

All hotels

    73.4%     67.1%     63.5%     37.2%     30.8%     60.0%     59.4%  

ADR (in RMB)

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Manachised hotels

    415.9     382.2     379.2     364.0     355.7     370.5     369.2  

Leased hotels

    530.1     467.7     467.4     444.3     443.8     458.6     458.6  

All hotels

    429.5     389.8     386.8     371.7     363.4     377.7     376.3  

RevPAR (in RMB)

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Manachised hotels

    313.7     268.9     251.6     143.6     114.3     231.5     228.1  

Leased hotels

    463.7     339.4     334.1     161.4     152.0     320.2     320.2  

All hotels

    329.5     275.1     258.3     145.4     117.4     238.1     234.7  

    Note

(2)
Excludes, for purposes of calculating these key operating metrics, approximately 1,777 thousand, 1,146 thousand and 256 thousand room-nights related to hotel rooms that were requisitioned by the government for quarantine needs in response to the COVID-19 outbreak or otherwise became unavailable due to temporary hotel closures in 2020 and in the

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    three months ended March 31, 2020 and 2021, respectively. The ADR and RevPAR are calculated based on the tax inclusive room rates.

        RevPAR.    RevPAR is calculated as the total revenue during a period divided by the number of available rooms of such hotel during the same period. As a commonly used operating measure in the hospitality industry, RevPAR is largely affected by occupancy rate and ADR, as discussed below. Occupancy rates of our hotels mainly depend on the locations of our hotels, product and service offerings, the effectiveness of our sales and brand promotion efforts, our ability to effectively manage hotel reservations, the performance of managerial and other employees of our hotels, as well as our ability to respond to competitive pressure. We set the room rates of our hotels primarily based on the location of a hotel, room rates charged by our competitors within the same locality, seasonality, and our relative brand and product strengths. To drive our occupancy rates and room rates, we focus on continuing to improve our guests' hotel and retail experiences and increasing the stickiness of our loyalty program members, through continuously improving our service quality, expanding our hotel brand portfolios, and integrating technologies into our customer service and hotel operations.

        The following table presents certain selected operating data of our company as of and for the dates and periods indicated, which are discussed in more detail in the following paragraphs. Our revenues have been and will continue to be significantly affected by these operating measures which are widely used in the hospitality industry.

 
  Three Months Ended  
 
  March 31,
2019
  June 30,
2019
  September 30,
2019
  December 31,
2019
  March 31,
2020(1)
  June 30,
2020(1)
  September 30,
2020(1)
  December 31,
2020(1)
  March 31,
2021(1)
 
 
   
   
   
   
  Exclusive of requisitioned hotels(1)   Inclusive of requisitioned hotels   Exclusive of requisitioned hotels(1)   Inclusive of requisitioned hotels   Exclusive of requisitioned hotels(1)   Inclusive of requisitioned hotels   Exclusive of requisitioned hotels(1)   Inclusive of requisitioned hotels   Exclusive of requisitioned hotels(1)   Inclusive of requisitioned hotels  

Occupancy rate (in percentage)

                                                                                     

Manachised hotels

    64.4%     73.2%     76.4%     73.1%     37.5%     30.7%     66.5%     65.2%     77.5%     76.8%     75.4%     74.8%     59.6%     58.9%  

Leased hotels

    78.6%     84.0%     85.8%     83.3%     34.6%     32.6%     73.4%     73.1%     81.7%     81.7%     79.1%     79.1%     66.1%     66.1%  

All hotels

    66.2%     74.4%     77.3%     74.0%     37.2%     30.8%     67.1%     65.8%     77.9%     77.2%     75.7%     75.1%     60.0%     59.4%  

ADR(2) (in RMB)

                                                                                     

Manachised hotels

    397.4     417.6     432.1     410.4     364.0     355.7     336.4     333.0     397.4     395.4     405.4     404.6     370.5     369.2  

Leased hotels

    499.4     534.0     550.5     532.8     444.3     443.8     391.9     391.3     494.0     494.0     511.3     511.3     458.6     458.6  

All hotels

    412.7     432.6     445.4     422.5     371.7     363.4     341.7     338.3     406.1     404.0     414.1     413.1     377.7     376.3  

RevPAR(2) (in RMB)

                                                                                     

Manachised hotels

    266.1     316.5     344.5     315.4     143.6     114.3     235.3     228.4     323.8     318.8     321.0     317.8     231.5     228.1  

Leased hotels

    412.8     471.0     497.5     471.3     161.4     152.0     305.1     303.0     427.5     427.5     428.0     428.0     320.2     320.2  

All hotels

    284.7     334.2     360.0     329.2     145.4     117.4     241.3     234.5     332.6     327.7     329.4     326.1     238.1     234.7  

    Notes:

(1)
Excludes, for purposes of calculating these key operating metrics, approximately 1,146 thousand, 287 thousand, 175 thousand, 169 thousand and 256 thousand room-nights related to hotel rooms that were requisitioned by the government for quarantine needs in response to the COVID-19 outbreak or otherwise became unavailable due to temporary hotel closures in each of the four quarters in 2020 and the first quarter in 2021, respectively.

(2)
The ADR and RevPAR are calculated based on the tax inclusive room rates.

        Explanatory note:    The occupancy rates, ADR and RevPAR presented below are exclusive of the hotels temporarily requisitioned by the government as a result of the COVID-19 pandemic. We did not generate any revenue relating to sales based on continuing franchise fees from such requisitioned hotels as the franchisees of such hotels were not required to pay us any continuing franchise fees during the quarantine periods. For occupancy rates, ADR and RevPAR inclusive of such requisitiond hotels, see the table above.

        Occupancy rates.    In 2019, the occupancy rates of our hotels experienced a steady quarter-to-quarter increase, subject to normal seasonal fluctuations. However, the occupancy rates of our hotels decreased from 74.0% during the fourth quarter of 2019 to 37.2% during the first quarter of 2020. This decrease was primarily due to the significant drops in levels of business and leisure travel during the COVID-19 outbreak in China. As a result of Chinese government's effective control of the pandemic and the recovery of the tourism industry and consumer confidence in general, the occupancy rates of our hotels steadily returned to 67.1%, 77.9% and 75.7% in the second, third and fourth quarters of 2020, respectively, indicating our strong recovery after the pandemic became largely contained within China. The occupancy rates of our hotels, however, decreased to 60.0% in the first

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quarter of 2021, primarily due to the rebound of COVID-19 in certain areas of and the government's "stay-at-home" policy during the Spring Festival in China. We expect that occupancy rates of our hotels will increase in the second and third quarters of 2021 as the impact of COVID-19 subsides. Our management is of the view that the steady recovery in occupancy rate lays a solid foundation for the recovery of our ADR in 2021.

        ADR.    In 2019, the ADR of our hotels experienced a steady quarter-to-quarter increase, subject to normal seasonal fluctuations. However, the ADR of our hotels decreased from RMB422.5 during the fourth quarter of 2019 to RMB371.7 during the first quarter of 2020. Such decrease was primarily due to the significant drops in levels of business and leisure travel during the COVID-19 outbreak in China. Because the recovery of ADR tended to be slower than the recovery of occupancy rate, our ADR further decreased to RMB341.7 during the second quarter of 2020. As a result of Chinese government's effective control of the pandemic and the recovery of the tourism industry, our ADR returned to RMB406.1 and RMB414.1 in the third and fourth quarters of 2020, respectively, indicating our strong recovery after the pandemic was largely contained within China. However, primarily due to the rebound of COVID-19 in certain areas of and the government's "stay-at-home" policy during the Spring Festival in China, the ADR of our hotels decreased to RMB377.7 in the first quarter of 2021. We expect that the ADR of our hotels will increase in the second and third quarters of 2021 as the impact of COVID-19 subsides.

        RevPAR.    Affected by the foregoing, our RevPAR decreased by 55.8% from RMB329.2 in the fourth quarter of 2019 to RMB145.4 in the first quarter of 2020. Our RevPAR rapidly improved after the pandemic was largely contained within China in the second half of 2020, returning to RMB332.6 and RMB329.4 in the third and fourth quarters of 2020, respectively. However, primarily due to the rebound of COVID-19 in certain areas of and the government's "stay-at-home" policy during the Spring Festival in China, our RevPAR decreased to RMB238.1 in the first quarter of 2021. We expect our RevPAR will increase in the second and third quarters of 2021 as our occupancy rates and ADR recover. For the month ended April 30 and May 31, 2021, RevPAR of our hotels recovered to RMB363.7 and RMB375.1 respectively, representing 108.0% and 109.2% of the RevPAR for the same periods in 2019. For RevPAR of our hotels inclusive of the requisitioned hotels for the month ended April 30 and May 31, 2021, see "Prospectus Summary—Our Summary Consolidated Financial Data and Operating Data—Key Operating Data".

Key Components of Results of Operations

        Our financial key performance indicators consist of our net revenues, operating costs and expenses, and "EBITDA (non-GAAP)" which are discussed in more detail in the following paragraphs.

        Net revenues.    We primarily derive our revenues from (i) franchise and management fees from our manachised hotels and sales of hotel supplies and other products to our manachised hotels, (ii) operations of our leased hotels, and (iii) sales of our retail products in connection with our scenario-based retail business. The following table sets forth the revenues generated from our

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manachised and leased hotels, and retail business and others, both in absolute amount and as a percentage of net revenues for the periods indicated.

 
  Year Ended
December 31, 2019
  Year Ended
December 31, 2020
  Three Months
Ended March 31,
2020
  Three Months
Ended March 31,
2021
 
 
  RMB   %   RMB   %   RMB   %   RMB   US$   %  
 
  (in thousands except percentage)
 

Revenues:

                                                       

Manachised hotels

    840,400     53.6     926,307     59.1     130,613     64.6     254,066     38,778     60.5  

Leased hotels

    614,829     39.2     496,470     31.7     52,661     26.1     124,891     19,062     29.7  

Retail revenues and others

    111,862     7.1     143,775     9.2     18,876     9.3     40,901     6,243     9.7  

Net revenues

    1,567,091     100.0     1,566,552     100.0     202,150     100.0     419,858     64,083     100.0  
    Manachised hotels.  In the year ended December 31, 2019, we generated revenues of RMB840.4 million from our manachised hotels, which accounted for 53.6% of our net revenues for the period. In the year ended December 31, 2020, we generated revenues of RMB926.3 million from our manachised hotels, which accounted for 59.1% of our net revenues for the period. In the three months ended March 31, 2020 and 2021, we generated revenues of RMB130.6 million and RMB254.1 million from our manachised hotels, respectively, which accounted for 64.6% and 60.5% of our net revenues for the respective periods. We expect that the absolute amount and the weight of revenues from our manachised hotels will increase in the foreseeable future as we continuously scale up our manachised hotel network to further strengthen our market leadership in the hospitality industry. As of March 31, 2021, we had 298 manachised hotels under development.

      We select manachised hotels based on a variety of factors, including the attractiveness of the location, the quality of the franchised property and the background, and business ideology and value of the franchisee. We manage our manachised hotels and impose the same high service quality and operational standards on all manachised hotels as our leased hotels to ensure the quality and consistency of our service and product offerings across our hotel network. We authorize a manachised hotel to use our relevant hotel brand names, logos and relevant trademarks. The franchisee is responsible for the hotel's construction, renovation and maintenance. We provide guidance to the franchisee on the construction or renovation of the hotel and require the hotel to meet our standards before approving it to commence operations. We appoint and train hotel managers and on-site HR representatives who are responsible for hiring hotel staff and managing daily operations of our manachised hotels. We also provide our franchisees with comprehensive management services, including central reservation, revenue management, sales and marketing support, technology support, quality assurance inspections and other operational support and information.

      Our franchise and management agreements for our manachised hotels typically run for a fixed term of 8 to 15 years. We generally charge our franchisees an upfront franchise fee at a rate of RMB4,000 to RMB6,000 per room, depending on the brand of the manachised hotel, as well as fees related to pre-opening services, including information system installation service. After a manachised hotel opens, we generally charge the franchisee a monthly franchise and management fee of 5% to 6% of the gross revenues generated by each manachised hotel depending on the hotel brand. Furthermore, we charge our franchisees a fixed monthly hotel managers fee, fees for purchase of hotel supplies and other products, and other on-going service fees, such as system and accounting support fees. We do not expect any material franchise and management agreements to be terminated in the foreseeable future.

    Leased hotels.  In the year ended December 31, 2019, we generated revenues of RMB614.8 million from our leased hotels, which accounted for 39.2% of our net revenues for

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      the period. In the year ended December 31, 2020, we generated revenues of RMB496.5 million from our leased hotels, which accounted for 31.7% of our net revenues for the period. In the three months ended March 31, 2020 and 2021, we generated revenues of RMB52.7 million and RMB124.9 million from our leased hotels, respectively, which accounted for 26.1% and 29.7% of our net revenues for the periods, respectively. We expect that revenues from our leased hotels will remain relatively stable in the foreseeable future. As of March 31, 2021, we had one leased hotel under development.

      For our leased hotels, we lease properties from real estate owners or lessors and we are responsible for hotel development and customization to conform to our standards, as well as for repairs and maintenance and operating costs and expenses of properties over the term of the lease. We are also responsible for all aspects of hotel operations and management, including hiring, training and supervising the hotel managers and employees required to operate our hotels and purchasing supplies. Our typical lease term ranges from 10 to 20 years. We typically enjoy an initial three- to six-month rent-free period. After that, we generally pay fixed rent on a monthly or quarterly basis for the first two years of the lease term, after which we are generally subject to a modest increase every two to five years within the lease term. We do not expect any material lease agreements to be terminated in the foreseeable future.

      The rent is generally paid upfront at the beginning of each payment period and we recognize the total rental expense on a straight-line basis over the initial lease term.

    Retail revenues and others.  Besides the revenues discussed above, we also generate a growing portion of revenues from our other business as we continue to diversify our monetization methods and drive customer spending, primarily including our scenario-based retail business. In the year ended December 31, 2019, we generated revenues of RMB111.9 million from retail and other business, which accounted for 7.1% of our net revenues for the period. In the year ended December 31, 2020, we generated revenues of RMB143.8 million from retail and other business, which accounted for 9.2% of our net revenues for the period. In the three months ended March 31, 2020 and 2021, we generated revenues of RMB18.9 million and RMB40.9 million from retail and other business, respectively, which accounted for 9.3% and 9.7% of our net revenues for the periods, respectively. We expect that the absolute amount and the weight of revenues from our other business will steadily increase in the foreseeable future as we continue to expand our hotel network and our lifestyle product offerings and scenario-based retail operations.

        Operating Costs and Expenses.    Our operating costs and expenses consist of costs for hotel operation, other operating costs, selling and marketing expenses, general and administrative expenses, technology and development expesnes, and pre-opening expenses. The following table sets forth the components of our operating costs and expenses, both in absolute amount and as a percentage of net revenues for the periods indicated.

 
  Year Ended
December 31,
2019
  Year Ended December 31,
2020
  Three Months Ended March 31, 2020   Three Months Ended March 31, 2021  
 
  RMB   %   RMB   %   RMB   %   RMB   US$   %  
 
  (in thousands except percentage)
 

Net Revenue

    1,567,091     100.0     1,566,552     100.0     202,150     100.0     419,858     64,083     100.0