Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Equity Bottom-Up

Chinese online travel agency (OTA) <a href="https://www.smartkarma.com/entities/tongcheng-elong-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng-Elong Holdings Ltd (780 HK)</a> released Q3 results on Monday evening in HK. Revenue and adjusted EBITDA were still below year-ago levels, but both metrics were significantly improved from Q2 levels. Notably, purchasing users in Q3 were flat YoY.
Market leading OTA <a href="https://www.smartkarma.com/entities/trip-com-group-ltd" target="_blank" data-smartkarma-citation="entities:180:1" rel="noopener">Trip.com (TCOM US)</a> will report its Q3 results on Tuesday, December 1st after the US close. We expect Trip.com to report a sequential improvement, but we believe Q3 results will show its recovery lags Tongcheng-ELong's, mainly due to Trip.com's international exposure.
The expected availability of Covid19 vaccines in 2021 should eventually open up cross-border travel for Chinese tourists next year, but Trip.com and other travel service providers may still be facing a difficult start to 2021, including the long Lunar New Year holiday in February.
As such, we retain a negative view of Chinese tourism demand in the medium-term, anticipating that even a return to the modest demand growth seen pre-Covid19 will require another few quarters, at least.

Chinese online travel agency (OTA) Tongcheng-Elong Holdings Ltd (780 HK) released Q3 results on Monday evening in HK. Revenue and adjusted EBITDA were still below year-ago levels, but both metrics were significantly improved from Q2 levels. Notably, purchasing users in Q3 were flat YoY.
Market leading OTA Trip.com (TCOM US) will report its Q3 results on Tuesday, December 1st after the US close. We expect Trip.com to report a sequential improvement, but we believe Q3 results will show its recovery lags Tongcheng-ELong's, mainly due to Trip.com's international exposure.
The expected availability of Covid19 vaccines in 2021 should eventually open up cross-border travel for Chinese tourists next year, but Trip.com and other travel service providers may still be facing a difficult start to 2021, including the long Lunar New Year holiday in February.
As such, we retain a negative view of Chinese tourism demand in the medium-term, anticipating that even a return to the modest demand growth seen pre-Covid19 will require another few quarters, at least. 

Tough Times (Still) In Chinese Tourism | Trip.com Q3 Preview | TongCheng-ELong Q3 Review

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Outbound Chinese travel demand remained weak in September, despite Macau doubling Chinese inbound traffic (again). Activity from China into most regional destinations remained comatose.
Domestic Chinese travel demand continued its recovery in September, and one metric even showed a modest YoY improvement. Other measures showed activity still far below year-ago levels. 
However, data also show that average domestic air segment length remains depressed, and this suggests consumers remain cautious regarding leisure travel.
We continue to expect only a gradual recovery in tourism and travel demand over the next few months.




Outbound Chinese travel demand remained weak in September, despite Macau doubling Chinese inbound traffic (again). Activity from China into most regional destinations remained comatose.
Domestic Chinese travel demand continued its recovery in September, and one metric even showed a modest YoY improvement. Other measures showed activity still far below year-ago levels. 
However, data also show that average domestic air segment length remains depressed, and this suggests consumers remain cautious regarding leisure travel.
We continue to expect only a gradual recovery in tourism and travel demand over the next few months.

TRACKING TRAFFIC/Chinese Tourism: Outbound: Comatose | Domestic: Fewer, Shorter Trips = New Normal?

Chinese media reports Chinese tourism activity during the long Golden Week + National Day holiday period declined by about 21% YoY to 637 mn person-visits. Spending on tourism during the period reportedly fell by 28% YoY to 466 bn RMB. 
Some observers are suggesting these numbers show a strong continued recovery in tourism demand since activity collapsed in Q1 this year due to the Covid19 pandemic.
But we disagree.
In our view, the headline 2020 Golden Week+ numbers we have seen so far are not as strong as we would have expected, given a number of factors that actually should have flattered this year's overall activity and spending numbers. 
A closer analysis of the numbers actually suggests tepid tourism demand, in our opinion, and we do not believe the recovery has gained momentum in October.

Chinese media reports Chinese tourism activity during the long Golden Week + National Day holiday period declined by about 21% YoY to 637 mn person-visits. Spending on tourism during the period reportedly fell by 28% YoY to 466 bn RMB. 
Some observers are suggesting these numbers show a strong continued recovery in tourism demand since activity collapsed in Q1 this year due to the Covid19 pandemic.
But we disagree.
In our view, the headline 2020 Golden Week+ numbers we have seen so far are not as strong as we would have expected, given a number of factors that actually should have flattered this year's overall activity and spending numbers. 
A closer analysis of the numbers actually suggests tepid tourism demand, in our opinion, and we do not believe the recovery has gained momentum in October.  

China's 'Golden Week': Headline Tourism Numbers Hardly Shine

Asia gaming and consumer discretionary analyst

Michael Ting

<a href="https://www.smartkarma.com/entities/shangri-la-asia-ltd" target="_blank" data-smartkarma-citation="entities:19690:1" rel="noopener">Shangri La Asia (69 HK)</a>'s share price is near levels we haven't seen since 2003. We met with management recently to get an update on business fundamentals to see if the stock is worth buying at current levels especially with the return of domestic tourism in China.Our key takeaway is that headwinds remain for the stock to see sustainable upside in the near term. However, one key catalyst is the re-opening of the border between Mainland and Hong Kong which could result in increased business and higher end leisure travel to Hong Kong. Hong Kong is roughly 33% of the company's net profit within a normalized year. Any news on Mainland-Hong Kong border relaxation could result in short term share price appreciation in our view.

Shangri La Asia (69 HK)'s share price is near levels we haven't seen since 2003. We met with management recently to get an update on business fundamentals to see if the stock is worth buying at current levels especially with the return of domestic tourism in China.Our key takeaway is that headwinds remain for the stock to see sustainable upside in the near term. However, one key catalyst is the re-opening of the border between Mainland and Hong Kong which could result in increased business and higher end leisure travel to Hong Kong. Hong Kong is roughly 33% of the company's net profit within a normalized year. Any news on Mainland-Hong Kong border relaxation could result in short term share price appreciation in our view.

Shangri La Asia: Watch Out for This One Event

After the close of the US session on Tuesday June 30 <a href="https://www.smartkarma.com/entities/huazhu-group-ltd" target="_blank" data-smartkarma-citation="entities:17527:1" rel="noopener">Huazhu Group (HTHT US)</a> finally reported Q1 2020 earnings results, a full five weeks later than they reported last year. Profitability was hurt by Covid19 travel restrictions in the quarter, though this should not come as a surprise, as the company had provided some (weak) operating figures for the period in an update in late April. Coming out on the last day of the quarter, Huazhu's guidance for Q2 2020 should prove quite accurate -- but it's not exciting. For its Chinese hotels, the company expects a smaller YoY decline in Net Revenue in Q2 than it just reported in Q1 (down 35-37% Q2 vs -46% in Q1). The company hinted that a Covid19 flareup in Beijing hurt occupancy rates in the final weeks of Q2.Overall, the results and guidance are unexciting, but Huazhu still appears better-positioned to weather near-term challenges than other names in Chinese tourism. We expect the company's shares to continue to outperform airlines and intermediaries like <a href="https://www.smartkarma.com/entities/trip-com-group-ltd" target="_blank" data-smartkarma-citation="entities:180:1" rel="noopener">Trip.com (TCOM US)</a>.

After the close of the US session on Tuesday June 30 Huazhu Group (HTHT US) finally reported Q1 2020 earnings results, a full five weeks later than they reported last year. Profitability was hurt by Covid19 travel restrictions in the quarter, though this should not come as a surprise, as the company had provided some (weak) operating figures for the period in an update in late April. Coming out on the last day of the quarter, Huazhu's guidance for Q2 2020 should prove quite accurate -- but it's not exciting. For its Chinese hotels, the company expects a smaller YoY decline in Net Revenue in Q2 than it just reported in Q1 (down 35-37% Q2 vs -46% in Q1). The company hinted that a Covid19 flareup in Beijing hurt occupancy rates in the final weeks of Q2.Overall, the results and guidance are unexciting, but Huazhu still appears better-positioned to weather near-term challenges than other names in Chinese tourism. We expect the company's shares to continue to outperform airlines and intermediaries like Trip.com (TCOM US).

Huazhu Group Q1 2020 Results, Finally! No Surprises in Q1 but Q2 Looks Unexciting

Hong Kong

Shangri-La Asia Limited is an investment holding company primarily engaged in the ownership, development, operation, and management of hotels and associated properties, as well as investment properties and residential developments for sale. The company operates hotels under various brands including Shangri-La Hotels and Resorts, Kerry Hotels, JEN by Shangri-La, and Traders. Headquartered in Quarry Bay, Hong Kong, the group was founded in 1971.

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Shangri-La Asia (69 HK)

Tough Times (Still) In Chinese Tourism | Trip.com Q3 Preview | TongCheng-ELong Q3 Review

In Q3, TongCheng-ELong showed growth versus Q2, though revenue and earnings remain lower than a year ago. We expect Trip.com's Q3 results to be far...

Tracking Traffic

TRACKING TRAFFIC/Chinese Tourism: Outbound: Comatose | Domestic: Fewer, Shorter Trips = New Normal?

September numbers show almost non-existent outbound travel but a continued gradual recovery in domestic travel demand. Shorter average domestic air...

Tracking Traffic

China's 'Golden Week': Headline Tourism Numbers Hardly Shine

Contrary to some, we do not believe headline tourism numbers from the recent Golden Week suggest improving conditions in China's domestic travel...

Tracking Traffic

Shangri La Asia: Watch Out for This One Event

Shangri La Asia (69 HK)

Michael Ting

Huazhu Group Q1 2020 Results, Finally! No Surprises in Q1 but Q2 Looks Unexciting

After the close of the US session on Tuesday June 30 Huazhu Group (HTHT US) finally reported Q1 2020 earnings results, a full five weeks later than...

Tracking Traffic

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