The national day golden week is not over yet, and the hong kong stock tourism sector has already started in advance, with an increase of over 30% in the past 6 trading days, with strong performance in the leading sub-sectors.$TONGCHENGTRAVEL (00780.HK)$,$FOSUN TOURISM (01992.HK)$and $HWORLD-S (01179.HK)$ The increase has all reached 40%, leading the tourism sector.

In fact, it was also announced recently that there will be reserve requirement ratio and interest rate cuts to drive incremental funds into the market. Under policy drive, a bull market is expected in a-shares in hk, and the tourism sector also benefits significantly from the general market's profitability effect. It is worth noting that in addition to the impact of the overall market, the tourism industry's fundamentals have also been continuously positive recently.

According to the Securities Times app, the National Day holiday travel bookings are booming, with the international flight bookings during the National Day period doubling. Some popular attractions are already fully booked, and Ctrip Group has released the '2024 National Day Travel Forecast Report,' predicting that domestic travel during this year's National Day period is expected to reach record highs in terms of the number of trips and tourism spending. Fliggy data shows that on the first day of the National Day holiday, the proportion of passengers traveling by plane has increased by over 50% compared to the same period last year, while the number of domestic car rental orders has increased by over 40% year-on-year.

Driven by favorable policies and industry fundamentals, is the rebound in the tourism sector sustainable, and which target can attract capital favor?

Industry-wide recovery, National Day holiday may reach record high.

As the National Day holiday approaches, local governments have begun to implement relevant support measures. For example, on September 24, Beijing held a news conference for the National Day holiday cultural and tourism activities, and the next day, Fujian's Nanping City held a deployment meeting for the National Day golden week tourism work. Sanya, Hainan continued to launch a series of exciting cultural and tourism activities. According to data from tourism platforms, flight tickets, hotel bookings, and attraction reservations during the National Day holiday are unprecedentedly popular.

Among different types of tourism, parent-child trips and sightseeing tours are popular. For instance, Douyin Life Services released a forward-looking data for the National Day consumer trends. From September 17 to 26, the platform saw a surge in parent-child trip consumption, with Douyin group-buying related order volumes increasing by 310% year-on-year. In addition, the group-buying order volume for tours to ancient towns and cities in many places exceeded three times that of last year. Chartering destinations has also become a mainstream demand, with Didi Chuxing estimating a 244% increase in orders during the National Day holiday.

In fact, China's tourism industry has fully recovered this year, setting record highs in terms of the number of trips during the Spring Festival, Qingming Festival, Labor Day, Dragon Boat Festival, and Mid-Autumn Festival holidays, far surpassing the same period in 2019. The number of trips during the Labor Day holiday reached 295 million, a 51.3% increase compared to the same period in 2019. Data for the National Day holiday is not available yet, but based on the high level of bookings and travel activities, it is expected that the number of trips will also maintain a high growth rate.

From a global perspective, the recovery of the tourism industry varies. Data shows that from January to July, major tourism markets in Europe and the Americas have all recovered by over 95%. The Middle East and Africa regions have shown strong growth, with international tourist numbers increasing by 26% and 7% compared to the same period in 2019, respectively. On the other hand, the Asia-Pacific region is recovering more slowly, with arrival numbers at 82% of the same period in 2019. China's accelerated recovery in 2024 sees the number of trips during major holidays far surpassing overseas levels. The Ministry of Culture and Tourism predicts that domestic tourism visits in the first three quarters of the year will reach 4.29 billion, close to the peak in 2019.

The outlook for the fourth quarter is very optimistic, with the important Mid-Autumn Festival and National Day holidays falling within the period. The performance of these holidays in terms of travel is better than previous holidays, and overall, it is expected that the number of trips throughout the year will surpass the same period in 2019. The strong performance of the domestic tourism industry provides investment opportunities for the sector. Coupled with the release of massive liquidity due to loose monetary policy, undervalued quality stocks in the industry will be sought after by investors, leading to a revaluation of their worth.

In the expectation of a bull market, focus on the leading companies in segmented tracks.

The tourism industry covers many segmented industries, including tourism platforms, hotels, resorts, dining, and attraction operations in various segmented industry sectors. Leading companies in the industry recovery cycle are the most beneficial targets.

Fosun Tourism is the global leader in resorts, with revenue maintaining double-digit growth since 2020, surpassing the first half of 2019 in 2024, and maintaining strong profitability. The company owns the global brand Club Med, and domestic brands Sanya Atlantis and Fuyou City Resort Brand. Among them, Club Med has 67 resorts worldwide across 26 countries on six continents. Under multiple expansion strategies such as globalization, high-end positioning, and localization, Club Med's performance has shown steady growth, contributing core operational performance.

All brands of the company adopt a light-asset development strategy. This year, domestic brands are gradually selling real estate businesses, focusing on tourism operations, and focusing on urban and snow and ice vacation segments. For example, in June of this year, the Phase II project of the Alps International Resort in Taicang, funded by the Taicang municipal government platform and operated by the company, under the light-asset model will significantly enhance the company's expansion and profitability. During last year's National Day holiday, the turnover of the company's Club Med and Atlantis far exceeded the same period in 2019, and this year's National Day is expected to set a new record.

Tongcheng Travel is the leading smart travel platform, with performance recovery leading the industry level, far surpassing the same period in 2019 as of 2023, and continuing to maintain high growth in 2024. The company has built a multi-scene customer acquisition model, continuously increasing the number and quality of users through market expansion, effective customer acquisition strategies, and efficient user interaction projects. In the first half of 2024, there were 0.23 billion paid users, setting a historical record.

The company explores various business models, leverages the value of OTA businesses, explores business industry chains, achieves scaled growth, actively expands into overseas markets, and the continued popularity of outbound tourism opens up future growth opportunities. The company's valuation is undervalued with significant upside potential. Compared to Ctrip, its revenue is 32% of Ctrip's, while its market cap is only 14%, reasonably placing Tongcheng's market cap at 110 billion Hong Kong dollars, a 128% increase.

Furthermore, other leading companies in segmented industries will have the opportunity for valuation adjustments. For example, H World Group is a leading hotel management company, with revenue from self-owned and leased hotel operations as well as franchise hotel operations mainly in the Chinese and German markets. With strong product capabilities and scale advantages, the performance has strong resilience and recovery ability. The company's performance surpassed the same period in 2019 in 2022, and maintained double-digit growth in 2023 and 2024.

Overall, against the backdrop of the central bank's reserve requirement and interest rate cuts, the sharp rise in the stock market has boosted the profitability of the capital markets, guiding bullish market expectations, leading to an unprecedented post-holiday surge in industry assets, especially in the securities and real estate industries. Tourism assets have fundamental support, re-entering the growth trajectory after a full recovery, and strong data during the National Day holiday further boosts industry enthusiasm. Leading companies in segmented tracks like Fosun Tourism and Tongcheng Travel are worth considering.

Editor/Lambor