China’s biggest food delivery platform is seeing a trend: more spending on experiences. “Increasingly more consumers are willing to allocate a bigger portion of their budget to travel,” Wang Xing, CEO of Hong Kong-listed Meituan , said Thursday during a first-quarter earnings call, based on a FactSet transcript. “Their demand will not be only growing, also probably more diverse, which brings substantial opportunity for us,” he said. Meituan operates a hotel bookings and travel-related business, albeit far smaller than its food delivery operation. HSBC analysts on Friday raised their price goal on the stock by 5 Hong Kong dollars (64 cents) to 170 Hong Kong dollars after an improved earnings outlook across all of Meituan’s segments. Mimicking U.S. The tourism industry’s growth, despite a more sluggish macro backdrop in China, is analogous to what happened within the U.S. after the pandemic. American consumers have kept spending on experiences, including live shows and cruises . In a report last week about China’s consumer market potential, Bank of America Securities analysts selected hotel operator H World as one in all its top picks. “We consider H World is best positioned to capture long-term growth within the China hotel industry given best-in-class execution,” the analysts said. “While RevPAR (revenue per available room) growth could remain under pressure near-term as a consequence of slower business travel recovery and high base of leisure travel, we consider its long-term unit growth story stays intact.” BofA rates H World a buy, and expects its U.S.-listed shares can reach $47. That is 30% above where H World shares closed Thursday. The corporate’s brands include hotels with sleek, modern styles at a comparatively inexpensive price. In China, H World also owns master franchisee rights for Mercure, Ibis and Ibis Styles, and co-development rights for Grand Mercure and Novotel. Goldman Sachs’ latest Asia Pacific conviction list, published last week, lists H World as its only travel stock pick with a fair higher price goal of $52 a share. The analysts rate the stock a buy and expect it to profit from “value-focused consumption trends” and industry consolidation. Inbound visits Travelers are also coming to mainland China from Hong Kong, Macau, Taiwan and the remaining of the world. Morgan Stanley expects that inbound tourism revenue has “meaningful upside potential” and may grow by around 11% a 12 months through 2033, based on a mid-year outlook last week. China’s retail sales grew by 7.2% in 2023, and slowed to 2.3% growth in April 2024 from a 12 months ago. Gross transaction value for Meituan’s in-store, hotel and travel businesses grew by greater than 60% year-on-year in the primary quarter. Average order value in each category declined as consumers have change into more price sensitive, CEO Wang said. But he noted that “some young persons are willing to allocate more budget for experience in travel.” Despite a high base, domestic hotel room nights booked grew year-on-year and exceeded pre-pandemic levels, the corporate said. Meituan counts famed Chinese early-stage investor Neil Shen as a non-executive director. In keeping with the corporate’s 2023 annual report, Shen can also be an independent non-executive director of China-based travel site Trip.com and a non-executive director of BTG Hotels Group . Shanghai-listed BTG Hotels closed at 14.10 yuan ($1.95) on Friday, leaving upside of nearly 35% to Jefferies’ price goal of 19 yuan set in late April. The report followed BTG’s first-quarter results that showed the corporate opened 205 hotels — including 66 mid-to-upscale ones — and closed 173. As of the top of the quarter, BTG had greater than 1,700 mid-to-upscale hotels, operating about 40% of the corporate’s total variety of rooms. “The corporate is investing in mid-and-upscale segment development, while maintaining its market position within the economy hotel segment,” the Jefferies analysts said. They rate the stock a buy. Mainland China and Hong Kong stock markets are closed Monday for the last public holiday on the mainland until September. But public schools typically close for the summer holidays by the top of the month. Highschool students began the annual multiday college entrance exam on Friday. As of June 6, Trip.com said domestic summer vacation bookings to this point have increased significantly versus a 12 months ago. Summer 2023 had seen nearly 1.84 billion domestic tourist trips , greater than the identical period in 2019. — CNBC’s Michael Bloom contributed to this report.
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