Guosen: The hotel industry enters a new cycle as leading players reshaping their growth value.

Guosen released a research report stating that the current fundamentals of the hotel industry are at a historical cyclical bottom, with stock prices leading the fundamentals and gradually initiating valuation recovery. With the new stage on the supply side and the stimulus of demand policies, leading companies are expected to show performance elasticity. Referring to the high points of historical cyclical performance elasticity, a double-click in valuation is expected to be achieved. The current allocation value remains outstanding. It is recommended to overweight leading hotel companies, combining short-term valuation, performance elasticity, and individual stock subjective momentum. In the medium term, refer to overseas hotel management leaders with stable growth brand realization and good cash flow support for shareholder returns. Leading companies with strong store networks and member networks are preferred. Guosen's main points are as follows: The market value of domestic leading hotels has shown non-linear growth from the hundred-billion level to the present, with the cyclical inflection point expectation and capital integration as the core driver for the leap, focusing on long-term scale and benefits. The review of hotel valuation follows a three-dimensional system of "cyclical anchor, growth as a booster, medium-term scale and benefits": macro supply-demand mismatch determines valuation inflection point (for example, from 2016-2018, valuation rose to 40-50x during the upswing phase, while from 2024-2025, valuation fell to 15-20x during the supply recovery phase), and structural upgrading and model upgrading amplify fluctuations in the medium term (such as Huazhu's valuation amplification during the middle-end upgrading phase from 2016-2018). The company's own operating cycle provides stock alpha demonstrated in counter-cyclical valuation increases (such as Vienna's valuation repair from 15x to 23x in 2024 with the retail business exceeding expectations during the industry downturn); a long-term perspective comparing various indicators of mature overseas leaders, the key difference lies in the continuous growth of leading companies, single hotel operating efficiency, and shareholder return composition in maintaining stable valuations. The current industry differentiation is growing at the bottom of the cycle, with the revPAR of leading companies expected to bottom out and rise during the supply-demand rebalancing phase. Supply side: The stable cash flow characteristic of the industry makes total supply affected by incremental disturbance of other properties entering, but the balance between store openings and investment returns is expected to enter a new normal growth stage, where leading companies are seen to have a decline in reserve stores from a high point; previous domestic hotel cycles of recovery and decline generally involve quantity ahead of price, this cycle turning point accompanies leading companies transitioning from "OCC first" to "optimal RevPAR" strategy adjustment, with prices leading characteristics in the industry, such as Huazhu's Q3 ADR has already turned positive; this underlying trend lies in the improvement of chainization rates and concentration in core cities, leading companies' ability to acquire core properties, upgrade revenue management systems, and deepen price-setting rights, thus demonstrating a stronger pricing power; the hotel REITs system breaks the ice, providing leading companies with capitalization ideas for operational efficiency advantages. Demand side: Leisure travel is prosperous, business travel demand base is decreasing, and the 15th Five-Year Plan's superposition of service consumption policies provides an optimistic outlook. The current market trend is in line with the evolution of the valuation system, and at this point, emphasis is placed on the third stage of leading companies' valuation recovery. Under the changes in the post-epidemic cycle, the pace and driving factors of the leading companies' market trends show significant differences: growth-oriented leading companies are the first to start crossing the cycle, Vienna enters the accelerated realization period with new retail business, maintaining the industry's fastest growth through light-asset franchise expansion, demonstrating growth alpha attributes, with the stock price already leading in the second half of 2024, subsequent key observations focus on the continued realization of high-end brand value and the second curve of light dwellings; leading companies with strong alpha lead the cyclical inflection point in valuation recovery, Huazhu maintains rapid expansion through the advantage of a large number of stores, highlighting product strength, pricing power, and shareholder return advantages, with the stock price leading the industry's inflection point release of valuation recovery in the second half of 2025, focusing on short-term performance elasticity in the upward phase of the cycle and long-term market share and profit margin expansion; a combination of A-share leading companies, BTG Hotels' store base after deep iterations enters a new opening cycle, with the target of ten thousand stores expected by the end of 2026, presenting valuation recovery potential; Shanghai Jinjiang International Hotels' organizational adjustments are coming to an end, with internal integration potential gradually released, aimed at improving governance dynamics by listing in Hong Kong; Junting, backed by Hubei state assets and REITs exploration, is expected to follow a differentiated growth path. Risk warning: 1. Policy risks; 2. Increased competition; 3. Integration below expectations; 4. Product aging.