Dongwu Securities released a research report saying that since 2024, the hotel group's RevPAR performance has been significantly differentiated. At the same time, the overall supply of hotels has been compensated, and the hotel industry has moved from supply logic to a “structural upgrade” logic.
The Zhitong Finance App learned that Dongwu Securities released a research report saying that since 2024, the hotel group's RevPAR performance has been significantly differentiated. At the same time, the overall supply of hotels has been compensated, and the hotel industry has moved from supply logic to a “structural upgrade” logic. The bank believes that the operating needs of hotel groups are in the process of transition from scale to quality, and the scarcity and value of hotel groups with strong ability to build middle and high-end quality are highlighted. We recommend Junting Hotel (301073.SZ), the leading high-end hotel chain group ATAT.US (ATAT.US), which is accelerating its expansion, as well as leading domestic hotel companies Huazhu Group-S (01179), Jinjiang Hotel (600754.SH), and First Travel Hotel (600258.SH).
The main views of Dongwu Securities are as follows:
Since 2023, the industry's RevPAR has been reviewed: the operating data of leading hotel groups Jinjiang, Huazhu and First Travel for fiscal year 2023 and Q1 Hotel STR data for 2024 have been reviewed to summarize the situation in the hotel industry since 2023.
2023 leading hotel group operating data review: price-driven RevPAR surpassed pre-pandemic levels. Brand bargaining power and structural optimization together led to a rise in RevPAR beyond expectations. The comprehensive RevPAR for Jinjiang/Huazhu/First Travel was 167/242/154 yuan for the full year of 2023, recovering to 106%/123%/97% of the same period in 2019, respectively; occupancy rates were significantly repaired, and the annual average OCC for Jinjiang/Huazhu/First Travel recovered to 89%/96%/83% in the same period in 2019, respectively; the ADR of each company surpassed the pre-pandemic period, reflecting an increase in overall bargaining power after the industry's production capacity was cleared during the pandemic. The 2023 hotel industry's RevPAR exceeded expectations and was driven by prices, and occupancy rates still have a lot of room for repair.
RevPAR situation in the Q1 hotel industry in 2024: The year-on-year decline in RevPAR gradually narrowed after the Spring Festival, and the luxury model was the first to correct. ADR's year-on-year growth performance is still superior to OCC, and brand group volume changed ahead of price. In the last week of March (March 24-30), luxury, high-end, economic/brand group OCC was +1.4%/-0.1%/-1.6%/+0.5% year over year, and ADR was +0.0%/-1.0%/-1.3%/-1.6% year over year, respectively. The Q1 industry's RevPAR increased by 3% to 5% year over year, and ADR is still the main driving factor. 2024Q1 Luxury/Mid-High/Economic/Brand Group RevPAR was 449/249/139/200 yuan respectively, +4.5%/4.9%/3.7%/3.4% YoY.
Review of the supply and demand relationship in China's hotel industry: 1) Characteristics of supply expansion: The pre-pandemic supply growth rate is basically in line with the growth rate of new housing space. After nearly two years of supply clearance and recovery, the current supply in the hotel industry has gone from “quantitative increase” to “structural upgrade”. The share of middle and high-end housing has increased, highlighting the scarcity of hotel groups with the ability to build high-quality mid-range and high-end hotels.
2) How to observe demand: The demand in the hotel industry is related to residents' desire to travel, and is generally divided into B-side and C-side customer groups. Business travel demand is strongly correlated with macroeconomics, and PMI is used to portray B-side demand boom. Tourism demand is related to residents' spending capacity and desire, and is observed using the growth rate of the number of domestic tourists and the number of long-distance travelers. The overall structure of 2023 was characterized by weak business travel and strong leisure.
3) How to interpret hotel industry data under the relationship between supply and demand: A mismatch between the social investment cycle and the growth pace of travel consumer demand led to an industry supply and demand cycle that ranged from 3 to 6 years, causing the industry to alternate periods of prosperity and downturn.
2024 RevPAR performance estimates: quarterly year-on-year growth rates are high to medium and low. Follow up to see a further improvement in business travel demand.
1) The relationship between supply and demand in the hotel industry in 2024 is still in a dynamic balance compared to 2023: the bank believes that the hotel industry's room volume growth rate is expected to fall to the 6-10% range in 2024. The growth rate of travelers in 2024 was high and low, and the annual demand side growth rate of the hotel industry is estimated to be in the 5-10% range. Based on the above judgment, the overall supply and demand relationship of the industry in 2024 is not expected to deteriorate significantly compared to 2023. The industry's overall RevPAR is expected to fluctuate within a range around 0% as the center.
2) The year-on-year growth rate of hotel group RevPAR is estimated to be in the range of -5 to 2% in 2024. Based on Q1 data and the average seasonal situation from 2016 to 2019, the bank estimates that the year-on-year RevPAR growth rate for Huazhu, Jinjiang, and First Travel 2024 may be at the level of 2.2%/-4.5%/-3.9%. Among them, looking at the year-on-year basis for a single quarter, since the 2023Q1 base is relatively low and the 2023Q3 base is relatively high, the year-on-year growth rate shows a trend of high and medium lows on both sides. The quarter with the greatest year-on-year growth pressure will be in 2024Q3.
Risk warning: Residents' demand for travel consumption is weakening, industry competition is intensifying, and store growth falls short of expectations.