According to a research report by Bank of China International, due to unfavorable weather and weak consumer confidence, China's tourism industry may perform flatly in the second quarter of this year, and the third quarter is expected to continue the weakness of the previous quarter, with leisure tourism weaker than earlier market predictions. Therefore, the bank expects that the industry's second-quarter profits may have the risk of being lower than expected, making the second half of the year's guidance more cautious. However, the bank believes that if there is a negative market reaction after the announcement of profits in August, the capital market measures launched by these companies may provide downside protection for their stock prices.

Bank of China International reiterates that the most bullish segments are OTA platforms, followed by hotels, and finally tourism retail. Due to the expected weak performance in the third quarter, the bank has become more cautious about these three sub-segments, but considering OTA's GMV growth, outbound tourism business, and ideal operating leverage, it still expects OTA's performance to be better than other sub-segments.

Bank of China International's top pick for the industry is Ctrip (09961.HK) (TCOM.US), expecting its outbound tourism and overseas platform business expansion to offset the domestic tourism weakness. The H-share and US stock ratings are both "buy", with an H-share target price of 497 yuan. In addition, the bank lowered its profit forecast for China Tourism Group Duty Free Corporation (01880.HK) for the fiscal years 2024 to 2026 by 21% to 23%, and lowered its H-share target price from 108 yuan to 68 yuan. Huazhu Group (01179.HK)'s EBITDA forecast for the fiscal years 2024 to 2026 was also lowered by 3% to 4%, and the H-share target price was lowered from 35.9 yuan to 34.7 yuan, believing that based on the continued deterioration of mainland hotel performance, Huazhu may make more cautious full-year guidance. The bank maintains its "buy" rating on China Tourism Group Duty Free Corporation and Huazhu H shares.