Disappointing Labour Day 2022 Tourism Data
The five-day-long weekend in conjunction with the Labour Day holiday in China
delivered disappointing tourism data, with domestic tourists and tourism revenue
recovering to 66.8/42.9% (2021 recovery: 103.2/77%) of pre-pandemic levels. We remain
cautious on the domestic tourism recovery pace with the “Zero-COVID” policy
hindering consumer spending and activities. We prefer Trip.com as it benefits from the
recovery of international travel (from Europe and the US). Maintain OVERWEIGHT.
WHAT’S NEW
• Key statistics for Labour Day 2022. The Ministry of Cultural and Tourism (MCT) reported
160m domestic tourists in total during the five-day Labour Day holiday, down by 30.2% yoy
and recovering to 66.8% of pre-pandemic levels. Total domestic tourism revenue was
Rmb64.7b, declining by 42.9% yoy, and recovering to 44% of pre-pandemic levels.
According to the MCT, the provincial tourism department had jointly promoted local-tradition
thematic tourism activities including entrance ticket discounts in Chongqing and Guizhou.
Short-haul travel remained a popular choice among the tourists and this year, most of the
tourists preferred to go camping and sight-seeing as compared to visiting national
monuments and museums in conjunction with the 100th anniversary celebration for the
establishment of the CCP last year.
• Tongcheng-Travel’s Labour Day tourism data overview. According to TongchengTravel’s (TT) 2022 Labour Day tourism report, tourist hotspots this year were mainly located
within Chengdu, Chongqing, and Pearl River Delta as these places had relatively low risk of
COVID-19 infections. In conjunction with warmer weather, camping and sight-seeing were
among the popular choices by the tourists which drove up prices for homestay
accommodations. Overall, flight ticketing and hotel ASP (average selling price) saw 25% and
50% yoy decline as tourists opted for short-haul traveling with shorter staying periods.
• Trip.com’s Labour Day tourism data overview. According to Trip.com’s (TCOM) 2022
Labour Day tourism report, tourists still preferred short-haul traveling to low COVID-19 risk
areas such as Guangzhou, Chengdu, Shenzhen and Chongqing. The demand for camping
remains strong and accounted for 54% of the total tourism bookings which drove hotel and
homestay reservation volume up by 144% yoy. TCOM undertook online-offline initiatives by
introducing “treasure hunt” interactive activities on TCOM’s app to promote visitations to
various camp sites. Due to the absence of outbound traveling, domestic tourism bookings
accounted for 40% of TCOM’s total bookings, up 10ppt vs 2020 and 2021.
• Our take on the Labour Day performance. The domestic tourism performance remains
weak in our view. However, with the recent pandemic cases brought under control, we are
cautiously optimistic that domestic tourism in 2H22 should see a gradual improvement once
the lockdown measures are lifted. Meanwhile, for the international tourism segment, Booking
Holdings had recently announced a 129% yoy spike in total bookings in 1Q22 to US$27.3b,
7.5% above pre-pandemic levels. The company sees the easing of travel restrictions in Asia
and Europe as well as the upcoming Summer Holiday as key catalysts for 2Q22. As such,
we prefer TCOM at this juncture due to the lack of re-rating catalysts in the domestic tourism
sector.
STOCK IMPACT
• 1Q22 operating data and guidance for TT and TCOM. According to the Civil Aviation of
China, the total air passengers recorded a 25.3% yoy decline in 1Q22, down by 53% from
pre-COVID-19 levels as travel demand was dampened by the lockdown measures as well as
the tragedy in Mar 22. Meanwhile, for train passenger volume, 1Q22 reported a 13.5% yoy
decline, slightly better than the 20% decline in 4Q21 and recovering to 55.2% of prepandemic levels. In terms of company guidance:
i) TT has guided for its top-line to grow 0-5% in 1Q22, with its midpoint being 7% below
1Q19’s level. The company had previously mentioned an uneven recovery path in the
domestic tourism sector due to the disruption in mid-March with its transport business
seeing a yoy decline. TT expects 1Q22 adjusted net profit to reach Rmb200m-250m,
down 24% yoy with adjusted net margin of 13.6%. TT expects full-year 2022 revenue to
grow 15-20% yoy, with a net margin of 16-17%.
ii) TCOM expects 1Q22 revenue to decline by 52-53% vs 1Q19 to Rmb3.8b (-6% yoy vs
1Q21). The company’s international flight ticketing reservation saw a 200% yoy growth in
2M22, mainly attributed to rapid growth from the European region. Domestic air ticketing
also grew at high single digit yoy but was disrupted by the recent pandemic outbreak in
Mar 22. Meanwhile, domestic hotel reservations climbed 20% yoy in 2M22, close to full
recovery from 2M19. In terms of average daily rate (ADR), TCOM guided it had declined
mid-teens compared to pre-COVID-19 levels with high-star hotels facing more apparent
declines than low-star hotels. The overall hotel blended take rate continued to trend down
(vs pre-COVID-19 levels), as the company continues to penetrate into lower tier cities and
offer promotions for short-haul travelling. In terms of overseas business
(Trip.com+Skyscanner accounted for 12-13% of 2019 revenue), management guided that
it sees Skyscanner recovering to 40-50% of 2019 levels, mostly attributed to promising
progress from the European region.
EARNING REVISION/RISK
• Our forecasts for TCEL and Trip.com remain unchanged.
VALUATION/RECOMMENDATION
• Maintain BUY on Trip.com (9961 HK) with an unchanged target price of HK$271.00
(US$33.00) as we ascribe 2022E 22x PE and 22x EV/EBITA respectively to the company’s
accommodation+transportation ticketing and package tour+corporate travel segment
respectively. TCOM is our top pick in the OTA sector due to its higher exposure to
international business which saw positive recovery as compared with domestic travel. Our
target price implies 6x 2022F EV/sales, against the company’s historical average of 6.8x.
• Maintain BUY on Tongcheng-Travel (780 HK) with an unchanged target price of
HK$20.00, based on 35x 2022F PE, with 0.9x PEG on the back of 40% EPS CAGR from
2022-25. The company is the key proxy to the resilient domestic tourism performance in the
absence of overseas revenue. However, due to the recent spike in COVID-19 cases and
China’s “Zero-COVID” policy, we think the domestic tourism sector will continue to face an
uneven recovery path.
SECTOR CATALYST AND RISK
• Sector catalysts: Uplift of domestic travel restrictions, continued penetration of domestic
offline and lower-tier cities travel market.
• Risks: a) Movement restriction/cross border travelling remaining restricted in China and
Hong Kong, and b) another outbreak of a new COVID-19 variant.