Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Thematic (Sector/Industry)

Air activity around the region appeared to improve on Friday, October 2nd, with departures from the nine airports we track rising to their highest level since we began monitoring data for this report (early April). As has been the case for the past six months, Mainland Chinese airports continue to lead the recovery, with other origins reporting only modest improvement, if any. 
Weighted average room rates in the cities we track remained well above Spring and Summer lows, but fell by 3% compared to a month ago. This is not surprising; despite the improvement in travel activity over the past few months, we doubt many hotels have regained substantial pricing power. 
Overall, the data we collected this week appears to confirm existing trends: Chinese domestic travel activity continues to improve, but regional activity remains far below year-ago levels. Pure Chinese domestic plays, whether transport or hotels, should continue to recover ahead of names exposed to cross-border travel, which still faces a multitude of Covid19-related restrictions.

Air activity around the region appeared to improve on Friday, October 2nd, with departures from the nine airports we track rising to their highest level since we began monitoring data for this report (early April). As has been the case for the past six months, Mainland Chinese airports continue to lead the recovery, with other origins reporting only modest improvement, if any. 
Weighted average room rates in the cities we track remained well above Spring and Summer lows, but fell by 3% compared to a month ago. This is not surprising; despite the improvement in travel activity over the past few months, we doubt many hotels have regained substantial pricing power. 
Overall, the data we collected this week appears to confirm existing trends: Chinese domestic travel activity continues to improve, but regional activity remains far below year-ago levels. Pure Chinese domestic plays, whether transport or hotels, should continue to recover ahead of names exposed to cross-border travel, which still faces a multitude of Covid19-related restrictions.

TRACKING TRAFFIC's Travel Tracker Dashboard (October 2): Air Activity Improves | Room Rates Stagnate

Equity Bottom-Up

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/162/827/original/BANNER-TOURISM.png?1601474994" class="editor-image img-responsive" data-smartkarma-image-id="162827"></figure>
Outbound green shoots? In August, Chinese arrivals to Macau tripled MoM, but they remain far below year-ago levels. A potential re-opening to certain types of international tourism in Thailand is positive, but investors still have to look hard to see signs of a recovery in outbound travel.
Domestic activity getting closer to normal(-ish): Domestic travel activity continued to improve gradually in August, as shown in traffic figures reported by the large state-owned airlines and two prominent Low Cost Carriers (LCCs). We believe domestic traffic could return to growth in Q420.
Recent results &amp; guidance still discouraging: Q220 earnings results and Q320 revenue guidance from OTAs Trip.com and Tongcheng-ELong were unimpressive, in our view. Trip.com's downbeat guidance partly reflects that company's relatively high exposure to moribund outbound travel.
Conclusions: We believe domestic-focused companies will continue to outperform those with high exposure to outbound travel. While eventual easing of restrictions on cross-border travel will give stocks like Trip.com and Air China a chance to shine, we don't believe that time is now.


Outbound green shoots? In August, Chinese arrivals to Macau tripled MoM, but they remain far below year-ago levels. A potential re-opening to certain types of international tourism in Thailand is positive, but investors still have to look hard to see signs of a recovery in outbound travel.
Domestic activity getting closer to normal(-ish): Domestic travel activity continued to improve gradually in August, as shown in traffic figures reported by the large state-owned airlines and two prominent Low Cost Carriers (LCCs). We believe domestic traffic could return to growth in Q420.
Recent results &amp; guidance still discouraging: Q220 earnings results and Q320 revenue guidance from OTAs Trip.com and Tongcheng-ELong were unimpressive, in our view. Trip.com's downbeat guidance partly reflects that company's relatively high exposure to moribund outbound travel.
Conclusions: We believe domestic-focused companies will continue to outperform those with high exposure to outbound travel. While eventual easing of restrictions on cross-border travel will give stocks like Trip.com and Air China a chance to shine, we don't believe that time is now. 

TRACKING TRAFFIC/Chinese Tourism: Outbound 'Green Shoots'? | Domestic Gets Closer to Normal

Leading Chinese online travel agency <a href="https://www.smartkarma.com/entities/trip-com-group-ltd" target="_blank" data-smartkarma-citation="entities:180:1" rel="noopener">Trip.com (TCOM US)</a> will report Q220 (June) results after the US markets close this Thursday, September 24th (Friday morning Hong Kong time).
In this note we talk about what to expect in the Q2 numbers and ask whether Trip.com can match or beat its own downbeat guidance, which the company issued in late May. 
To answer that question, we look at what other companies and organizations in the Chinese travel sector have already reported about Q2 demand. For now we retain our Hold rating on Trip.com.

Leading Chinese online travel agency Trip.com (TCOM US) will report Q220 (June) results after the US markets close this Thursday, September 24th (Friday morning Hong Kong time).
In this note we talk about what to expect in the Q2 numbers and ask whether Trip.com can match or beat its own downbeat guidance, which the company issued in late May. 
To answer that question, we look at what other companies and organizations in the Chinese travel sector have already reported about Q2 demand. For now we retain our Hold rating on Trip.com.

Can Trip.com Meet (Or Beat) Its Own Downbeat Revenue Guidance? Q220 Earnings Preview

After a hiatus, we have updated our Travel Tracker to reflect activity through September 11th. While average hotel room rates in the region have continued to recover, airport departure activity seems to have stalled after a steady improvement over the Summer. This is true for most locations we track, including the four Mainland Chinese airports that have led the surge in activity since April. Stagnant traffic may simply reflect normal seasonal patterns, however.While Chinese domestic travel demand continues to recover, the data suggest that recovery may be taking a breather. And outside of China travel activity remains virtually non-existent.

After a hiatus, we have updated our Travel Tracker to reflect activity through September 11th. While average hotel room rates in the region have continued to recover, airport departure activity seems to have stalled after a steady improvement over the Summer. This is true for most locations we track, including the four Mainland Chinese airports that have led the surge in activity since April. Stagnant traffic may simply reflect normal seasonal patterns, however.While Chinese domestic travel demand continues to recover, the data suggest that recovery may be taking a breather. And outside of China travel activity remains virtually non-existent. 

TRACKING TRAFFIC's Travel Tracker Dashboard (September 11): Room Rates Up, But Air Activity Stalled

Tongcheng Travel Holdings  / Equity Bottom-Up

Not surprisingly, online travel agency (OTA) <a href="https://www.smartkarma.com/entities/tongcheng-elong-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng-Elong Holdings Ltd (780 HK)</a> reported substantial YoY declines in revenue and earnings in Q220, though market conditions and results were better than in Q120, when Covid19 and the government's response brought travel to a halt.
Tongcheng-ELong's revenue mix has changed as a result of the pandemic, in both positive and negative ways. While it's positive to see increased revenue from advertising and continued strength in its position in smaller cities, we believe the cessation of international travel hurts profitability. In addition, high fixed operating expenses also hit earnings in the second quarter.
As domestic travel normalized in the months following the peak of the pandemic in China, Tongcheng-ELong's shares have rallied by over 60%. Given the moderating pace of the recovery in Chinese travel demand, and stubbornly high operating expenses, we do not expect Tongcheng-ELong's earnings to suddenly 'snap back' in H220.

Not surprisingly, online travel agency (OTA) Tongcheng-Elong Holdings Ltd (780 HK) reported substantial YoY declines in revenue and earnings in Q220, though market conditions and results were better than in Q120, when Covid19 and the government's response brought travel to a halt.
Tongcheng-ELong's revenue mix has changed as a result of the pandemic, in both positive and negative ways. While it's positive to see increased revenue from advertising and continued strength in its position in smaller cities, we believe the cessation of international travel hurts profitability. In addition, high fixed operating expenses also hit earnings in the second quarter.
As domestic travel normalized in the months following the peak of the pandemic in China, Tongcheng-ELong's shares have rallied by over 60%. Given the moderating pace of the recovery in Chinese travel demand, and stubbornly high operating expenses, we do not expect Tongcheng-ELong's earnings to suddenly 'snap back' in H220.

Tongcheng-ELong (780 HK) Q2 Results Reflect Changing Travel Patterns, Stubbornly High OpEx

China

Tongcheng Travel Holdings Limited operates as an online travel agency. The Company provides transportation ticketing, accommodation reservation, value added travel products sales, and other services. Tongcheng Travel Holdings provides its services throughout China.

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Tongcheng Travel Holdings (780 HK)

TRACKING TRAFFIC's Travel Tracker Dashboard (October 2): Air Activity Improves | Room Rates Stagnate

what happened of note? air activity in china and elsewhere hotel room rates conclusions

Tracking Traffic

TRACKING TRAFFIC/Chinese Tourism: Outbound 'Green Shoots'? | Domestic Gets Closer to Normal

BANNER

Tracking Traffic

Can Trip.com Meet (Or Beat) Its Own Downbeat Revenue Guidance? Q220 Earnings Preview

Leading Chinese online travel agency Trip.com (TCOM US) will report Q2

Tracking Traffic

TRACKING TRAFFIC's Travel Tracker Dashboard (September 11): Room Rates Up, But Air Activity Stalled

After a hiatus, we have updated our Travel Tracker to reflect activity through September 11th.

Tracking Traffic

Tongcheng-ELong (780 HK) Q2 Results Reflect Changing Travel Patterns, Stubbornly High OpEx

point 1 point 2 point 3 conclusions

Tracking Traffic

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