Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Independent and original Asian investment research

Aletheia Capital

Aletheia Capital (HK) Ltd. (previously known as Asianomics) combines the extensive knowledge of its experienced team with technology and regulatory changes to disrupt Global Markets business in Asia. The firm is completely independent with no conflicts of interest either on Investment Banking advisory or Capital Markets execution.

Equity Bottom-Up

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/120/780/original/BANNER-TOURISM-FINAL.png?1582999142" class="editor-image img-responsive" data-smartkarma-image-id="120780"></figure>January travel numbers from China generally look weak, which shouldn't surprise anyone. Although the timing of the long Lunar New Year (LNY) holiday should have flattered January YoY comparisons, travel restrictions designed to limit the spread of COVID-19 were in place by the third week of the month, which clearly hurt demand.  Obviously, February activity will be much weaker than January activity, both due to travel restrictions and the impact of LNY timing.It's unclear when Chinese outbound and domestic travel activity will normalize, but we reject the idea of a rapid firming of demand - a 'snap-back' scenario - in the near-term. Even after we put aside the demand shocks caused by Hong Kong's protests in H219 and now the COVID-19 outbreak, all indications are that Chinese tourism demand has been moderating for several months. Given the timing of the COVID-19 outbreak, we don't think travel activity will rapidly improve once the virus is brought under control; many workers and families with school age children simply can't take long trips outside of the long public holidays around LNY and Golden Week in Fall. We retain our Hold rating on <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>, China's largest online travel agency (OTA). Besides the immediate challenges posed by Hong Kong (the top destination for Chinese outbound tourists) and the COVID-19 outbreak, Trip.com faces intense competition from other online travel platforms as well as travel service providers like airlines and hotel chains, who are expanding their own digital sales channels. Although Trip.com's shares have fallen below our US$33.10 target price, we see no reason to turn more positive on the company's fundamentals.

January travel numbers from China generally look weak, which shouldn't surprise anyone. Although the timing of the long Lunar New Year (LNY) holiday should have flattered January YoY comparisons, travel restrictions designed to limit the spread of COVID-19 were in place by the third week of the month, which clearly hurt demand.  Obviously, February activity will be much weaker than January activity, both due to travel restrictions and the impact of LNY timing.It's unclear when Chinese outbound and domestic travel activity will normalize, but we reject the idea of a rapid firming of demand - a 'snap-back' scenario - in the near-term. Even after we put aside the demand shocks caused by Hong Kong's protests in H219 and now the COVID-19 outbreak, all indications are that Chinese tourism demand has been moderating for several months. Given the timing of the COVID-19 outbreak, we don't think travel activity will rapidly improve once the virus is brought under control; many workers and families with school age children simply can't take long trips outside of the long public holidays around LNY and Golden Week in Fall. We retain our Hold rating on Trip.com (TCOM US), China's largest online travel agency (OTA). Besides the immediate challenges posed by Hong Kong (the top destination for Chinese outbound tourists) and the COVID-19 outbreak, Trip.com faces intense competition from other online travel platforms as well as travel service providers like airlines and hotel chains, who are expanding their own digital sales channels. Although Trip.com's shares have fallen below our US$33.10 target price, we see no reason to turn more positive on the company's fundamentals. 

TRACKING TRAFFIC/Chinese Tourism: Post-COVID-19, a 'Snap-Back' to What Level of Travel Demand?

There is growing evidence that Chinese tourism activity remains sluggish and that both outbound and domestic Chinese tourists are spending more cautiously on travel and related activities. Although much of the evidence is anecdotal, taken together it suggests overall tourism activity and spending will remain subdued in 2020. These trends are negative for most travel service providers, especially those selling high-end products. In addition, we believe travel intermediaries (such as OTAs) will continue to report weak growth in the near-term.In this piece we highlight six trends we believe illustrate sluggish Chinese travel demand and / or tourist spending. Although we understand some investors are excited about the possibility of a Hong Kong listing for leading online travel agency (OTA) <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>, we don’t believe such an event would alter fundamental conditions.We therefore retain our Hold rating on Trip.com and our US$33.10 target price, which is based on fifteen times forward EBITDA plus the market value of investments.

There is growing evidence that Chinese tourism activity remains sluggish and that both outbound and domestic Chinese tourists are spending more cautiously on travel and related activities. Although much of the evidence is anecdotal, taken together it suggests overall tourism activity and spending will remain subdued in 2020. These trends are negative for most travel service providers, especially those selling high-end products. In addition, we believe travel intermediaries (such as OTAs) will continue to report weak growth in the near-term.In this piece we highlight six trends we believe illustrate sluggish Chinese travel demand and / or tourist spending. Although we understand some investors are excited about the possibility of a Hong Kong listing for leading online travel agency (OTA) Trip.com (TCOM US), we don’t believe such an event would alter fundamental conditions.We therefore retain our Hold rating on Trip.com and our US$33.10 target price, which is based on fifteen times forward EBITDA plus the market value of investments.  

Six Signs Show Chinese Travel Activity & Tourist Spending Both Remain Sluggish

China

Juneyao Airlines Co. Ltd. supplies air transportation services. The Company provides domestic and international routes for passengers and cargoes. Juneyao Airlines also offers ticket home delivery and electronic ticketing services.

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Juneyao Airlines (603885 CH)

TRACKING TRAFFIC/Chinese Tourism: Post-COVID-19, a 'Snap-Back' to What Level of Travel Demand?

January travel numbers from China generally look weak, which shouldn't surprise anyone. Although the timing of the long Lunar New Year (LNY)...

Daniel Hellberg

Six Signs Show Chinese Travel Activity & Tourist Spending Both Remain Sluggish

There is growing evidence that Chinese tourism activity remains sluggish and that both outbound and domestic Chinese tourists are spending more...

Daniel Hellberg

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)