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Watch Travel Stocks as Chinese Consumers Shift Focus to Experiences

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China’s biggest food delivery platform, Meituan, is witnessing a shift in consumer spending towards experiences such as travel. CEO Wang Xing highlighted during a recent earnings call that more consumers are willing to allocate a larger portion of their budget towards travel, presenting substantial opportunities for the company. This trend mirrors the growth in the tourism industry in the U.S. post-pandemic, where consumers continued to spend on experiences like concerts and cruises.

HSBC analysts have raised their price target on Meituan after an improved earnings outlook across all segments of the company. In a recent report, Bank of America Securities analysts identified hotel operator H World as a top pick for capturing long-term growth in the China hotel industry. H World, which offers modern and affordable hotel options, has been rated as a buy by BofA and Goldman Sachs, with price targets of $47 and $52 per share respectively.

The inbound tourism industry in China is also showing signs of growth, with travelers coming from Hong Kong, Macau, Taiwan, and around the world. Morgan Stanley expects inbound tourism revenue to grow by around 11% annually through 2033. While China’s retail sales slowed in April, Meituan’s in-store, hotel, and travel businesses saw significant year-on-year growth in the first quarter. Despite a decline in average order value as consumers become more price sensitive, there is a noticeable increase in budget allocation for travel experiences among young people.

Notable figures in the Chinese travel industry include Neil Shen, a non-executive director of Meituan and Trip.com, as well as a non-executive director of BTG Hotels Group. Shanghai-listed BTG Hotels has shown promising growth, with Jefferies analysts rating the stock a buy and setting a price target of 19 yuan. The company’s focus on developing mid-to-upscale hotel segments while maintaining its market position in the economy hotel segment has been praised by analysts.

As mainland China and Hong Kong stock markets are closed for a public holiday, the focus remains on the upcoming summer holidays and the increase in domestic summer vacation bookings. Trip.com has reported a significant rise in domestic tourist trips for the summer of 2023 compared to the same period in 2019. With schools closing for summer holidays, the tourism industry is expected to see a surge in activity, presenting further growth opportunities for companies in the travel sector.

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