News Alert: Golden Week performance broadly in line despite industry data missing expectations
- Trip.com’s domestic travel orders increased 2 times y-o-y during Golden Week, according to Trip.com’s report
- Outbound travel orders surged 8 times y-o-y, surpassing the y-o-y growth observed during Labor day holiday in May
- Trip.com’s performance seems broadly in line despite industry data missing expectations, driven by continuous online market share gains and wider product portfolio
Strong growth in long-haul travel and outbound travel during Golden Week. Trip.com’s domestic travel orders increased 2 times y-o-y, and was 10% higher compared with Labor Day Holiday in May 2023, according to the Golden Week report released by Trip.com on 7 Oct 2023. Among the domestic travel data, long-haul travel bookings surged 2 times compared to last year, accounting for 51% of the total. Tours lasting more than 3 days saw a 4-fold increase y-o-y, contributing 50% of total group tours. Tourists are adopting new travel formats, as orders for private group tours and self-driving tours increased 2 times y-o-y during the holiday season. Outbound travel orders surged eight-fold y-o-y, surpassing the seven-fold y-o-y growth observed during the Labor Day holiday in May. The accelerated growth was due to the increase in flight capacity and the relaxation of group travel restrictions in Aug. Among outbound travelers, the post-90s generation remains the dominant force, representing nearly 30% of the total. The post-00s generation is the fastest growing, accounting for 22% of the total. Popular destinations continue to be Hong Kong, Macao, and other Asian countries. Compared to the Labor Day holiday in May 2023, Switzerland, Spain, Turkey, Russia, the UK, and France are gaining popularity among Chinese tourists.
Trip.com continues to outperform the travel industry, with outbound travel as the key driver. Trip.com’s data seems broadly in line with market expectations despite a slight miss in travel industry growth. Ministry of Culture and Tourism’s Golden Week tourism data showed that the number of tourists and tourism revenue increased by 73% y-o-y to 826m and 129% y-o-y to Rmb753m respectively (vs estimate of the number of tourists of 896m and tourism revenue of Rmb783m). The weaker-than-expected industry growth is mainly due to the slowdown in travel activities in the last two days of the holiday. The outperformance of Trip.com is attributed to online market share gains driven by the increase in online travel penetration rate and enhanced travel product offerings (e.g. group travel products) to meet diverse travel demands. Furthermore, we expect outbound travel to sustain robust growth, as current outbound air capacity has only recovered to c.60% of the 2019 level. Trip.com is poised to benefit from rising travel demand and increased online travel penetration in the medium to long term. We expect Trip.com can achieve +98% y-o-y total revenue growth in 3Q23 and domestic revenue to surpass the 2019 level by 39% in FY23, while international revenue (outbound travel + overseas-to-overseas business) is expected to recover to 90% of the 2019 level. The company is currently trading at an undemanding 13x FY24 core PE, below its 5-year historical average. Maintain BUY with TP of HK$500 / US$67.