Encouraging Spring Festival consumption
- The 2024 Spring Festival holiday (10-17 Feb 2024) saw strong consumption momentum in terms of traffic volume and overall spending.
- We expect service consumption to continue to lead overall consumption in China in 2024F, mainly driven by tourism and catering sectors.
- Reiterate Overweight on China’s consumer sector. Our top picks are Trip.com, Anta, Moutai, Proya, Haidilao, PDD, Tencent and New Oriental.
Strong domestic tourism demand during the Spring Festival
According to the Ministry of Culture and Tourism, during the 2024 Spring Festival, domestic travel volume reached 474m people, up 34.3% yoy and 19% vs. the Spring Festival in 2019, while domestic travel spending hit Rmb632.7bn, up 47.3% yoy and 7.7% vs. 2019’s Spring Festival. The domestic market hit a new high for both airfare prices and ticketing volumes compared to 2023’s Spring Festival and key holidays (i.e. Labour Day and National Day holidays), with average airfare price reaching Rmb1,064 during the 2024 Spring Festival, up 62% yoy and 19% vs. 2019. According to Trip.com, flight ticket orders
saw a sharp increase during the Spring Festival 2024. Trip.com data also showed rising tourism demand in lower tier cities. According to Mafengwo, long-distance travel accounted for more than 65% of its bookings, with over 70% of tourists staying for more than 4 days. Mafengwo also showed that “family groups” were the main Spring Festival travellers, accounting for 45%.
Increased visits to Southeast Asia, driven by visa-free policy
Based on Ministry of Culture and Tourism data, outbound travel volume reached 3.6m people while inbound travel volume was 3.23m people. According to Variflight, outbound travel airfare prices rose 7% vs. 2019 (down 49% yoy due to increase in routes), and the overall outbound flight capacity was still below 2019’s level at c.70%. Southeast Asia countries were still the top outbound travel locations. China Eastern Airline added 15 new international routes for the 2024 Spring Festival, focused on Southeast Asia destinations. Thanks to favourable visa-free policies, Singapore, Malaysia and Thailand saw an increase in travellers from China during the Spring Festival. Other Asian countries, like Japan, South Korea and Macau/HK, also registered a solid rebound in tourism during the Spring Festival, according to Variflight. HK’s Immigration Office recorded 1.3m people travelled to HK over 10-16 Feb, almost back to 2019’s level, of which 87.7% were from mainland China.
China box office soared during Spring Festival
China’s box office revenue during the Spring Festival holiday in 2024 totalled Rmb8.01bn from 10 to 17 Feb (vs Rmb7.84bn in 2021), setting a new record, up 18.5% yoy, according to China Film Administration. Number of theatre-goers reached 163m (vs 160m in 2021), up 26.4% yoy during the 2024 Spring Festival. According to box office tracker Dengta Data, the top three movies over the Spring Festival in terms of revenue were all domestic productions: “YOLO” recorded more than Rmb2.7bn revenue as of 17 Feb, with “Pegasus 2” in second, and “Boonie Bears: Time Twist” in third. About 51% of the box office revenue was from the third and lower tier cities during the 2024 Spring Festival.
China duty-free sales picking up, driven by rising traffic
Duty-free sales surged in Hainan this Spring Festival holiday to total Rmb2.2bn, up 42% yoy, according to data from Haikou Customs. The number of duty-free shoppers in Hainan was up 71% yoy, with average spending of Rmb8,235 per person, higher than that during Labour Day and National Day holidays in 2023. We expect this to benefit China Duty Free (601888 CH, Add, TP: Rmb120, CP: Rmb84.5) given its new cosmetics shopping centre in Haitangwan and duty-free store in Sanya Phoenix Airport opened in 2H23.
Reiterate Overweight on China’s consumer sector
We believe tourism and catering will continue to lead overall consumption recovery in 2024F. We also believe pent-up demand for outbound travel remains strong and reiterate Overweight on China consumer sector. A positive catalyst is stronger-than-expected consumption spending in 1Q24F. Downside risks include 1) weak macroeconomic factors, impacting consumption, and 2) rising distribution expenses ratio.
