According to Zhito Finance APP, with the increased convenience of the visa-free entry policy, entering China for the New Year has become a choice for many foreign tourists. Data from TONGCHENGTRAVEL shows that from December 31 to January 1, the overall inbound travel order volume doubled year-on-year. Among them, the inbound travel order volume from South Korea and Japan increased by 215% and 145% year on year, respectively. Popular inbound destinations include: Shanghai, Shenzhen, Peking, Guangzhou, Harbin, Chengdu, Chongqing, Zhuhai, Hangzhou, and Xi'an. Soochow Securities believes that in the first three quarters of 2024, domestic travel will reach 4.237 billion trips, +15% year on year, indicating a high prosperity in the tourism market, and it is expected that future tourism trips will steadily increase at a high level. Cultural and tourism consumption is an important means to stimulate improved consumption, and central and local governments have successively introduced related consumption stimulus policies.

According to related personnel from Spring and Autumn Travel, the visa-free policy for coming to China has attracted more Japanese tourists to travel to China. February is not typically a peak season for tourism in the CNI Yangtze Index region, but many tourists are already inquiring and signing up.

In addition, the New Year's holiday was shortened, and tourists are independently "splicing" their days off to extend their holidays. Spring and Autumn Travel stated that it was initially thought that the New Year's holiday would only be one day, putting great sales pressure on travel agencies, but it was unexpected that young people initiated a ‘splicing holidays’ trend, causing the number of bookings for trips from December 28, 2024, to January 1, 2025, to exceed the same period last year, with a nearly 30% year-on-year increase in domestic travel.

Data provided by TONGCHENGTRAVEL shows that on its platform, the search popularity for "New Year’s Eve hotels" for January 1, 2025, increased by over 70% year on year, and the booking popularity for hotels surrounding cities (including booking volume) increased by nearly 20% year on year.

Currently, domestic travel has returned to a normalized track, and outbound travel is expected to break through in 2025.

Specifically, in terms of domestic travel, it has returned to a normalized track, and there is still ample room for future growth. As of the first three quarters of 2024, domestic tourism numbers/revenue have recovered to 92%/100% of the same period in 2019, corresponding per capita tourism spending recovered to 108% of 2019 levels. From an industry structure perspective, there is still room for recovery in the tourism industry's income share of GDP. Looking ahead to 2025, with the increase in statutory public holidays and the optimization of the adjustment system, residents' willingness to travel is expected to be further released, and it is anticipated that domestic tourism revenue will exceed 10 trillion yuan by 2028, corresponding to a CAGR of about 13% from 2024 to 2028.

In terms of outbound travel, it is gradually recovering from close to far, and a breakthrough is expected in 2025. In the first three quarters of 2024, nearly 95 million outbound trips were made by Chinese tourists, an increase of 52% year on year, recovering to 82% of 2019 levels; the number of international flights in civil aviation has restored to approximately 80% of 2019 levels. The overall recovery of outbound travel is slower than that of domestic travel, affected by both supply constraints such as previous capacity and dual constraints of supply and demand, but with the progress of related enterprises' overseas supply chain layouts and product optimizations, it is expected to break through the phase platform and return to 2019 levels in 2025. In the future, while OTA platforms cater to domestic tourists' outbound needs, overseas operations will also develop and grow simultaneously.

Looking ahead, there is still room for user acquisition in the OTA platform market, and the bargaining power within the Industry Chain is solid.

The integration of resources in the OTA platform is a key link in the transaction facilitation, playing a significant role, and it is the sector that benefits most reliably from the growth of the Travel and Tourism Large Cap. For the related companies, the performance of the tourism industry's Large Cap serves as the foundation for their results, while the integration of supply chain resources and user education releases bilateral scale effects, which in turn brings bargaining power as a core barrier.

In terms of demand, there is ample potential for tapping into the needs of customers, and there is still room for user acquisition in the market. The leading domestic OTA's pathway to go overseas involves four steps: "catering to domestic outbound demand → mergers and acquisitions to solidify the supply chain → expanding users through price promotions → enhancing retention and tapping deeper into demand", focusing on users and the supply chain. The leading OTA's proactive layout overseas, alongside a relative absence of international giants in the Asia-Pacific market, clearly shows a trend of high business growth. Additionally, the sinking market is still in a stage of increasing penetration rates, with TONGCHENGTRAVEL's recent addition of paid users on WeChat from non-first-tier cities maintaining a high level of 70%, with significant increases in customer repurchase rates and per capita consumption, indicating there is still space for demand extraction.

In terms of the landscape, external competition is easing, and the bargaining power within the Industry Chain is stable. Recently, competition in the industry has shown signs of moderation, and the future differentiation among platforms will be a reflection of the consumer scenarios and mindsets. Ctrip is deeply cultivating high-star hotels and business travel groups, while TONGCHENGTRAVEL has also initially completed user acquisition and education in the sinking market, possessing a clear first-mover advantage. Furthermore, the supply-side hotel capacity is still awaiting digestion, with the overall ADR level under pressure. The hotel industry is shifting towards refined operations and has strong demands for occupancy rates, while the leading OTAs invest in hotel chains + incubate their own brands + empower individual hotels, thereby solidifying their position within the Industry Chain.

Zheshang Securities points out that the growth of the tourism industry is highly certain, and the OTA occupies the midstream of the industry, benefiting most definitively from the growth of the Travel and Tourism Large Cap. The increase in online travel penetration rates domestically and the expansion of leading companies overseas will also contribute to incremental growth. In terms of the external environment, the industry competition that the market previously worried about has recently eased somewhat, and hotel supply still awaits digestion, while the bargaining power within the OTA Industry Chain has been enhanced, highlighting long-term investment value.

Related concept stocks:

Ctrip Group (09961): A global leading one-stop OTA platform, with a solid leading position in vertical traffic for domestic high-end markets and high-star hotel supply chain, rapidly expanding globally. Looking ahead, the increase in online reservation rates for domestic tourism and the structural growth of outbound tourism will contribute to momentum, while the overseas platform Trip is in a period of rapid growth. The domestic landscape is stable, with high-margin outbound business increasing in proportion, coupled with improvements in the company's operational efficiency, suggesting profits are likely to continue growing.

TONGCHENGTRAVEL (00780): In Q3 2024, the company's revenue was 4.991 billion yuan, a year-on-year increase of 51%; the adjusted net income was 0.91 billion yuan, a year-on-year increase of 46.6%; both revenue and adjusted net income exceeded previous company guidance. Core OTA revenue reached 4.013 billion yuan, a year-on-year increase of 22%; revenue from vacation business reached 0.979 billion yuan, a quarter-on-quarter increase of 36%, also exceeding previous company guidance. The adjusted net profit margin for Q3 2024 grew by 2.7 percentage points to 18.2%; the core OTA profit margin reached 31.3%, year-on-year increase of 5.9 percentage points, quarter-on-quarter increase of 6.8 percentage points.

China Tourism Group Duty Free Corporation (01880): The company is a leading domestic duty-free retailer and has established a mature layout for offshore duty-free, port duty-free, and in-city duty-free operations. On December 17, the National Immigration Administration fully relaxed and optimized the transit visa-free policy, extending the stay period for transit visa-free foreigners from the original 72 hours and 144 hours to 240 hours. Following the release of the visa-free policy, the popularity of related destinations in China surged, positively impacting the growth of the in-city duty-free business, with China Tourism Group Duty Free Corporation's in-city duty-free shops being the most widely distributed and benefiting the most.