China’s travellers are coming back in good news for Trip.com
CHINESE travel stocks have rallied as more tourists hit the road, and may get a further boost after bookings giant Trip.com Group reports earnings on Tuesday (May 21).
Trip.com shares hit a record in Hong Kong on Friday, rising for a fifth day, and are up 58 per cent this year. The company is uniquely positioned as both an “enabler and beneficiary” of inbound travel, according to Morgan Stanley analyst Alex Poon. Travel agent Tongcheng Travel Holdings reached a new high a week ago.
“People’s overall spend has been relatively cautious because of the property sector, job losses and wage cuts,” said James Kenney, senior investment manager at Pictet Asset Management based in Hong Kong. Moving forward, “we will see a two-pronged improvement – numbers in terms of the volume will increase, but also people will spend more as they travel.”
Even as the country struggled and retail spending remained sluggish, travel picked up and is one of the stronger consumption categories, according to Morgan Stanley. Travellers made 28.2 per cent more trips during the Labour Day holiday versus the pre-pandemic level in 2019, according to Bloomberg calculations from Ministry of Culture and Tourism data.
The trend looks set to continue. Stronger outbound and inbound international travel is expected after Beijing in January said it has eased visa requirements for 11 countries since July 2023, and as foreign tourists once again warm up to the idea of China as a destination.
“As people want to go back to China again, we think that will be a driver for travel,” Pictet’s Kenney said. Obvious beneficiaries are players such as Trip.com’s Ctrip, “but it should help the hotel industry, restaurants and the services”.
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The profitability of bookings overseas is about double domestic ones. Outbound travel numbers are back to 80 per cent of the 2019 level during the Labour Day holiday and continuing to improve, said Kenney.
Trip.com itself is expected to report a 26 per cent increase in revenue for the first quarter, according to data compiled by Bloomberg. Citigroup analyst Brian Gong expects the company to potentially beat market consensus as investors might have underestimated “decent outbound and international as well as margin improvement”.
Hotel groups including H World Group will continue to rally too, said May Zhao, Hong Kong-based managing director at Zhongtai International Securities’ research department.
Some categories still appear to be in trouble. Air carriers may struggle as the travel pickup is “partially being driven by declines in pricing as airlines add back capacity on major routes”, said Eric Zhu, Bloomberg Intelligence’s aviation analyst. Air China and China Eastern Airlines in Hong Kong have both underperformed their benchmark year-to-date.
Stocks catering to high-end customers may also take longer to recover. Per-capita travel spending is still down 12 per cent from 2019, according to the Ministry of Culture and Tourism data.
But the catalysts are there, especially with school holidays scheduled for July and August.
According to a Bloomberg Intelligence survey conducted last month, the number of people indicating they intended to spend more on domestic trips in the next three months climbed nine percentage points to 59 per cent from January, and surged 12 percentage points to 73 per cent for international trips, analysts Angela HanLee and Rebecca Wang wrote. BLOOMBERG
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