China’s largest food delivery platform is seeing a trend of increased spending on experiences. “More and more consumers are looking to allocate a larger portion of their budget to travel,” Wang Xing, CEO of Hong Kong-listed Meituan, said during a first-quarter earnings conference call on Thursday, according to a FactSet transcript. “Demand is not only expanding but also perhaps more diversified, which creates a big opportunity for us,” he said. Meituan also has hotel booking and travel-related businesses, but these are much smaller in scale than its food delivery business. Analysts at HSBC on Friday raised their target price for Meituan by HK$5 (64 cents) to HK$170 after seeing improved earnings outlooks across all of the company’s business units. Mimicking the U.S. Despite a weaker macro environment in China, tourism growth is similar to what’s happened in the U.S. since the pandemic. U.S. consumers continue to spend on experiences such as concerts and cruises. Analysts at Bank of America Securities last week named hotel operator H World one of their top picks in a report on the potential of China’s consumer market. “Given its best-in-class execution, we believe H World is best positioned to capture long-term growth in the China hotel industry,” the analyst said. “While RevPAR (revenue per room) growth may remain pressured in the near term due to a slower recovery in business travel and a higher base for leisure travel, we believe the long-term unit growth story remains strong.” Bank of America rates H World a “buy” and expects its U.S.-listed shares to reach $47, 30% higher than where H World’s shares closed on Thursday. The company’s brands include relatively affordable, sophisticated and modern-style hotels. H World also owns the master franchise rights for Mercure, Ibis and Ibis Style in China, as well as the co-development rights for Grand Mercure and Novotel. Goldman Sachs’ latest list of Asia-Pacific hot stocks, released last week, lists H World as the only travel stock, with an even higher target price of $52. The analysts recommend buying the stock, expecting it to benefit from “value-oriented consumption trends” and industry consolidation. Inbound visits Tourists are also visiting mainland China from Hong Kong, Macau, Taiwan and other regions. Inbound tourism revenue has “significant room for upside,” Morgan Stanley said in its interim forecast released last week, and is expected to grow about 11% annually through 2033. China’s retail sales are expected to grow 7.2% in 2023, slowing to a 2.3% year-over-year increase in April 2024. Total transaction volume for Meituan’s stores, hotels and travel businesses grew more than 60% year-over-year in the first quarter. Wang said average order value for each category declined as consumers became more price-sensitive. But he noted that “some young people are willing to allocate more of their budget to travel experiences.” The company said domestic hotel room bookings, while from a high base, increased year-over-year and exceeded pre-pandemic levels. Meituan has prominent Chinese early investor Neil Shen on its board. Shen also serves as an independent director of China-based travel site Trip.com and an independent director of BTG Hotels Group, according to the company’s 2023 annual report. Shanghai-listed BTG Hotels closed at 14.10 yuan ($1.95) on Friday, leaving room for nearly 35% upside on Jefferies’ price target of 19 yuan set in late April. The report follows BTG’s first-quarter results, which showed the company opened 205 hotels (66 of which were mid- to high-end) and closed 173. As of the end of the quarter, BTG owned more than 1,700 mid- to high-end hotels, operating about 40% of the company’s total rooms. “The company has maintained its market position in the economy hotel segment while investing in the development of the mid- to high-end segment,” Jefferies analysts said. They have a buy recommendation on the company’s shares. Mainland China and Hong Kong stock markets are closed on Monday for the mainland’s last public holiday until September. However, public schools typically begin their summer vacation by the end of this month. High school students began their annual multi-day college entrance exams on Friday.Trip.com said as of June 6 that domestic summer vacation bookings have increased significantly year-over-year so far. It expects about 1.84 billion domestic tourist trips in the summer of 2023, surpassing the same period in 2019. —CNBC’s Michael Bloom contributed to this report.
