China's largest food delivery platform is seeing a trend: more spending on experiences. “More and more consumers are willing to spend a larger portion of their budget on travel,” Wang Xing, CEO of Hong Kong-listed Meituan, said Thursday during a first-quarter conference call, in accordance with a transcript from FactSet. “Not only is their demand growing, it is also likely to become more diverse, which brings significant opportunities for us,” he said. Meituan operates a hotel booking and travel-related business, albeit much smaller than its food delivery business. HSBC analysts raised their price goal on the stock by HK$5 (64 cents) to HK$170 on Friday after improving earnings outlooks across all of Meituan's segments. Imitating the U.S. Growth within the tourism industry is analogous to what happened within the U.S. after the pandemic, despite a sluggish macroeconomic backdrop in China. American consumers have continued to spend money on experiences, including live shows and cruises. In a report on the potential of China's consumer market, analysts at Bank of America Securities last week selected hotel operator H World as one in every of their top picks. “We believe H World is best positioned to deliver long-term growth in China's hotel industry given its best-in-class execution,” the analysts said. “Although RevPAR (revenue per available room) growth may remain under pressure in the near term due to a slower recovery in the business travel industry and a high leisure travel base, we believe the company's long-term growth story remains intact.” BofA rates H World a buy and expects its U.S.-listed shares to succeed in $47, up 30% from H World's closing price on Thursday. The company's brands include hotels with sleek, modern style at a comparatively reasonably priced price. In China, H World also holds master franchise rights for Mercure, Ibis and Ibis Styles, and co-development rights for Grand Mercure and Novotel. Goldman Sachs' latest Asia Pacific Conviction List, released last week, lists H World because the only travel stock pick with a good higher price goal of $52 per share. The analysts rate the stock a buy and expect it to learn from “value-oriented consumption trends” and industry consolidation. Inbound visitors also come to mainland China from Hong Kong, Macau, Taiwan and the remaining of the world. Morgan Stanley expects inbound tourism revenues to have “significant upside potential” and may grow about 11% annually through 2033, in accordance with a half-year outlook last week. China's retail sales rose 7.2% in 2023, slowing to 2.3% year-on-year in April 2024. Gross transaction value for Meituan's store, hotel and travel businesses rose greater than 60% year-on-year in the primary quarter. Average order value in each category declined as consumers have change into more price-conscious, CEO Wang said. However, he noted that “some young people are willing to allocate more budget for travel experiences.” Despite a high base, domestic hotel room nights booked rose year-on-year, surpassing pre-pandemic levels, the corporate said. Meituan counts famous Chinese early-stage investor Neil Shen amongst its non-executive directors. According to the corporate's 2023 annual report, Shen can also be an independent non-executive director of China-based travel website Trip.com and a non-executive director of BTG Hotels Group. Shanghai-listed BTG Hotels closed at 14.10 yuan ($1.95) on Friday, giving it nearly 35% upside from the 19 yuan price goal set by Jefferies in late April. The report followed BTG's first-quarter results, which showed the corporate opened 205 hotels — including 66 mid- to high-end properties — and closed 173. At the tip of the quarter, BTG had greater than 1,700 mid- to upscale hotels and operated about 40% of the corporate's total variety of rooms. “The company is investing in developing the mid- and upscale segments while maintaining its market position in the economy hotel segment,” Jefferies analysts said. They rate the stock a buy. Stock exchanges in mainland China and Hong Kong are closed on Monday for the mainland's final holiday until September. However, public schools typically close at the tip of the month for summer vacation. The annual multi-day college entrance exam began Friday for prime school students. As of June 6, Trip.com reported that bookings for domestic summer vacations have increased significantly year-on-year up to now. There were nearly 1.84 billion domestic trips in summer 2023, greater than the identical period in 2019. — CNBC's Michael Bloom contributed to this report.
image credit : www.cnbc.com