Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Thematic (Sector/Industry)

Updated with air departure and hotel information on October 30, our Chinese travel tracker dashboard shows a couple of interesting data points this week:<ol>
<li>The pace of flight departure growth slowed at the four Mainland Chinese airports we track, while airports outside Mainland China showed solid improvement. This is the opposite of what we've seen in most periods since we launched this product in April 2020.</li>
<li>Average hotel room rates quoted by <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> firmed dramatically, but we worry about a single data point that had an outsized impact on weighted average rates. Even putting this odd figure aside, however, hotel rates improved slightly versus a month ago.</li>
</ol>

Updated with air departure and hotel information on October 30, our Chinese travel tracker dashboard shows a couple of interesting data points this week:
The pace of flight departure growth slowed at the four Mainland Chinese airports we track, while airports outside Mainland China showed solid improvement. This is the opposite of what we've seen in most periods since we launched this product in April 2020.
Average hotel room rates quoted by Trip.com (TCOM US) firmed dramatically, but we worry about a single data point that had an outsized impact on weighted average rates. Even putting this odd figure aside, however, hotel rates improved slightly versus a month ago.


TRACKING TRAFFIC's Travel Tracker Dashboard (October 30): Air Traffic Ex-Mainland China Firms

Before Covid19 shut down outbound Chinese tourism in 2020, there were the mass protests in Hong Kong, which sharply reduced Mainland visits to its largest outbound destination in 2019.Before the Hong Kong protests, there was a drowning incident in Thailand in 2018 that killed dozens of Chinese visitors and sharply reduced travel to another top outbound destination. And before the Phuket accident came political disputes with Taiwan, Korea, and Japan, all of which temporarily reduced Chinese tourist visits to these important regional destinations. Taken together, these disruptions have undermined outbound Chinese travel demand and added to volatility.And what about Chinese domestic travel demand?Pre-Covid19, domestic tourism growth was flagging, and though it's been less volatile than outbound demand, Chinese domestic travel certainly has not been immune to demand shocks either (viruses, the partial displacement of air travel by high speed rail, etc.).We simply don't think investing in the growth of Chinese tourism is the "no-brainer" that many market participants seem to think it is. Between moderating growth rates and a series of external demand shocks, there have been few periods of sustained strong (10%+) demand growth in recent years. In our view, Chinese tourism can no longer be viewed as a growth industry.

Before Covid19 shut down outbound Chinese tourism in 2020, there were the mass protests in Hong Kong, which sharply reduced Mainland visits to its largest outbound destination in 2019.Before the Hong Kong protests, there was a drowning incident in Thailand in 2018 that killed dozens of Chinese visitors and sharply reduced travel to another top outbound destination. And before the Phuket accident came political disputes with Taiwan, Korea, and Japan, all of which temporarily reduced Chinese tourist visits to these important regional destinations. Taken together, these disruptions have undermined outbound Chinese travel demand and added to volatility.And what about Chinese domestic travel demand?Pre-Covid19, domestic tourism growth was flagging, and though it's been less volatile than outbound demand, Chinese domestic travel certainly has not been immune to demand shocks either (viruses, the partial displacement of air travel by high speed rail, etc.).We simply don't think investing in the growth of Chinese tourism is the "no-brainer" that many market participants seem to think it is. Between moderating growth rates and a series of external demand shocks, there have been few periods of sustained strong (10%+) demand growth in recent years. In our view, Chinese tourism can no longer be viewed as a growth industry.  

Is Chinese Tourism Really a 'Growth' Industry?

Air activity around the region appeared to improve on Friday, October 2nd, with departures from the nine airports we track rising to their highest level since we began monitoring data for this report (early April). As has been the case for the past six months, Mainland Chinese airports continue to lead the recovery, with other origins reporting only modest improvement, if any. 
Weighted average room rates in the cities we track remained well above Spring and Summer lows, but fell by 3% compared to a month ago. This is not surprising; despite the improvement in travel activity over the past few months, we doubt many hotels have regained substantial pricing power. 
Overall, the data we collected this week appears to confirm existing trends: Chinese domestic travel activity continues to improve, but regional activity remains far below year-ago levels. Pure Chinese domestic plays, whether transport or hotels, should continue to recover ahead of names exposed to cross-border travel, which still faces a multitude of Covid19-related restrictions.

Air activity around the region appeared to improve on Friday, October 2nd, with departures from the nine airports we track rising to their highest level since we began monitoring data for this report (early April). As has been the case for the past six months, Mainland Chinese airports continue to lead the recovery, with other origins reporting only modest improvement, if any. 
Weighted average room rates in the cities we track remained well above Spring and Summer lows, but fell by 3% compared to a month ago. This is not surprising; despite the improvement in travel activity over the past few months, we doubt many hotels have regained substantial pricing power. 
Overall, the data we collected this week appears to confirm existing trends: Chinese domestic travel activity continues to improve, but regional activity remains far below year-ago levels. Pure Chinese domestic plays, whether transport or hotels, should continue to recover ahead of names exposed to cross-border travel, which still faces a multitude of Covid19-related restrictions.

TRACKING TRAFFIC's Travel Tracker Dashboard (October 2): Air Activity Improves | Room Rates Stagnate

After a hiatus, we have updated our Travel Tracker to reflect activity through September 11th. While average hotel room rates in the region have continued to recover, airport departure activity seems to have stalled after a steady improvement over the Summer. This is true for most locations we track, including the four Mainland Chinese airports that have led the surge in activity since April. Stagnant traffic may simply reflect normal seasonal patterns, however.While Chinese domestic travel demand continues to recover, the data suggest that recovery may be taking a breather. And outside of China travel activity remains virtually non-existent.

After a hiatus, we have updated our Travel Tracker to reflect activity through September 11th. While average hotel room rates in the region have continued to recover, airport departure activity seems to have stalled after a steady improvement over the Summer. This is true for most locations we track, including the four Mainland Chinese airports that have led the surge in activity since April. Stagnant traffic may simply reflect normal seasonal patterns, however.While Chinese domestic travel demand continues to recover, the data suggest that recovery may be taking a breather. And outside of China travel activity remains virtually non-existent. 

TRACKING TRAFFIC's Travel Tracker Dashboard (September 11): Room Rates Up, But Air Activity Stalled

Managing Director, Zero One, Zero One

Vincent Fernando, CFA

Managing Director, Zero One

Zero One

Founded in 2015, Zero One produces independent investment research and provides corporate finance advisory services with a focus on both listed and private technology companies. Founder Vincent Fernando has over 20 years of experience in US and Asia capital markets.

Independent Investment Research

<div class="content-highlight"><h2>Huya Merger News Propels Stock Upwards; Tencent Gains Subdued from Rising US-China Tensions</h2></div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/153/594/original/China%20Portfolio%20Performance.png?1597832603" class="editor-image img-responsive" data-smartkarma-image-id="153594"></figure>The months of July and August saw a broad level rise in prices across our entire China tech portfolio. While companies like Huya and Niu outperformed the MSCI China and NASDAQ indices, companies like Tencent remained relatively subdued given rising US-China tensions on mobile app bans.We observe that China Tech companies appear to be looking inwards for growth - focusing more on domestic opportunities while the international regulatory outlook remains uncertain.We provide updated views on each of our portfolio companies below:

Huya Merger News Propels Stock Upwards; Tencent Gains Subdued from Rising US-China TensionsThe months of July and August saw a broad level rise in prices across our entire China tech portfolio. While companies like Huya and Niu outperformed the MSCI China and NASDAQ indices, companies like Tencent remained relatively subdued given rising US-China tensions on mobile app bans.We observe that China Tech companies appear to be looking inwards for growth - focusing more on domestic opportunities while the international regulatory outlook remains uncertain.We provide updated views on each of our portfolio companies below:

Our Tech Portfolio Update: Capitalizing on Domestic Opportunities Amidst Heightened US-China Tension

China

Trip.com Group Ltd. provides online travel agency services. The Company offers mobile applications, hotel reservations, flight ticketing, package tours, corporate travel management, and train ticketing services.

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Trip.com (TCOM US)

TRACKING TRAFFIC's Travel Tracker Dashboard (October 30): Air Traffic Ex-Mainland China Firms

Air traffic and hotel room rate data from October 30 show an improvement in activity outside Mainland China (albeit from a low base) and improved...

Tracking Traffic

Is Chinese Tourism Really a 'Growth' Industry?

The effects of the Covid19 pandemic aside, we believe strong (10%+) growth in underlying Chinese tourism demand is becoming more elusive.

Tracking Traffic

TRACKING TRAFFIC's Travel Tracker Dashboard (October 2): Air Activity Improves | Room Rates Stagnate

what happened of note? air activity in china and elsewhere hotel room rates conclusions

Tracking Traffic

TRACKING TRAFFIC's Travel Tracker Dashboard (September 11): Room Rates Up, But Air Activity Stalled

After a hiatus, we have updated our Travel Tracker to reflect activity through September 11th.

Tracking Traffic

Our Tech Portfolio Update: Capitalizing on Domestic Opportunities Amidst Heightened US-China Tension

Huya Merger News Propels Stock Upwards; Tencent Gains Subdued from Rising US-China TensionsThe months of July and August saw a broad level rise in...

Vincent Fernando, CFA

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