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Anamika Dey. editor
Key points–
- China consumers are spending more on travel, resulting in a Meituan share boost from 5 Hong Kong dollars (64 cents) to 170 Hong Kong dollars.
- H World to capture long-term growth in the China hotel business. BofA recommends H World and anticipates its U.S.-listed shares to reach $47that is 30% higher.
- Shanghai-listed BTG Hotels ended the week at 14.10 yuan ($1.95), a boost of 35% according to Jefferies’ price target of 19 yuan set in late April.
Spending on experiences, or, to be precise, on travel, is rising at China’s largest food delivery platform.
According to a FactSet transcript, Hong Kong-listed Meituan CEO Wang Xing said Thursday during a first-quarter results call that
More and more consumers are willing to allocate a larger portion of their budget to travel.”
Their demand is not only growing but probably more diverse, which brings substantial opportunity for us.”
Hotel bookings and travel are Meituan’s smaller businesses than food delivery.
HSBC analysts boosted their price objective on Meituan shares by 5 Hong Kong dollars (64 cents) to 170 Hong Kong dollars on Friday after an improved earnings outlook across all sectors.
Imitating U.S.
Despite a slower economic backdrop in China, the tourism industry grew like the U.S. following the pandemic. American shoppers continue to buy concerts and cruises.
Hotel operator H World was one of Bank of America Securities’ top recommendations for China’s consumer sector last week.
Analysts say H World is best positioned to capture long-term growth in the China hotel business due to its best-in-class execution. “While RevPAR (revenue per available room) growth may remain under pressure in the near-term due to slower business travel recovery and high leisure travel, we believe its long-term unit growth story remains intact.”
BofA recommends H World and anticipates its U.S.-listed shares to reach $47. This is 30% higher than H World shares closed Thursday.
Contemporary, economical hotels are among the company’s brands. H World owns master franchisee rights for Mercure, Ibis, and Ibis Styles in China and co-development rights for Grand Mercure and Novotel.
Last week, Goldman Sachs’ Asia Pacific conviction list included H World as its single travel stock recommendation with a $52 price target.
The analysts recommend buying the stock due to “value-focused consumption trends” and industry consolidation.
Inbound traffic
Mainland China attracts tourists from Hong Kong, Macau, Taiwan, and others. Last week, Morgan Stanley predicted “meaningful upside potential” for inbound tourism revenue to grow 11% a year until 2033.
In April 2024, China’s retail sales climbed 2.3%, up from 7.2% in 2023.
In the first quarter, Meituan’s in-store, hotel, and travel gross transaction value increased by over 60%.
CEO Wang said price-sensitive buyers have lowered the average order value in each category. He said, “Some young people are willing to allocate more budget for experience in travel.”
The company claimed domestic hotel room nights booked increased year-over-year and exceeded pre-pandemic levels, despite a high base.
Meituan has famous Chinese early-stage investor Neil Shen as a non-executive director. Shen serves as an independent, non-executive director of Trip.com and BTG Hotels Group, according to the company’s 2023 annual report.
Shanghai-listed BTG Hotels ended the week at 14.10 yuan ($1.95), with a potential increase of approximately 35% according to Jefferies’ price target of 19 yuan established in late April.
Source : CNBC News
