China travel boom may be more of a minibreak

Tongcheng Travel Holdings

06/02/2025 03:28

(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.)
    By Katrina Hamlin
       HONG KONG, Feb 6 (Reuters Breakingviews) - Chinese
tourists will deliver mixed blessing in the Year of the Snake.
Travel at home and abroad is growing, despite consumers’
reluctance to spend on many other goods and services. But it’s
not clear how long the good times will last.
    Authorities tallied almost 5 billion trips in the first half
of the Lunar New Year festivities, which run from January 14 to
February 22 and include an eight-day public holiday. That was
about a fifth higher than 2019, per Citi research. The number of
trips abroad for the full year could rise by 18% to around 150
million, Bernstein analysts reckon, close to the 155 million
clocked in 2019. The same research suggests the average outlay
per person will reach roughly 12,000 yuan or $1,650, just off
2019 levels.
    China’s online travel agencies are making the most of it.
Trip.com's  9961.HK  revenue is likely to grow 19% to around 14
billion yuan in the first three months of 2025, compared with a
year ago, according to analysts polled by LSEG. The group has
overtaken its pre-Covid benchmarks for international tourism:
outbound hotel and air reservations reached 120% of pre-pandemic
levels in the quarter to the end of September. Smaller rival
TongCheng's  0780.HK  total sales have also been increasing by
double-digit figures.
    The question is how long they’ll ride the boom. Itchy feet
are not the only variable. Both companies benefitted from
consolidation during the pandemic, when smaller, offline rivals
lost ground. Trip.com has slashed costs, one reason why its net
profit margin roughly doubled to 34% between 2019 and 2024, per
Visible Alpha data. It is also finding ways to use artificial
intelligence to help hone marketing, as well as cutting coding
time as much as 30%, according to CEO Jane Sun. On top of that,
the travel agency is winning customers in new markets like
Southeast Asia, which currently account for up to 10% of the top
line, up from around 5% a year earlier, Morningstar reckons.
    There are headwinds too. Revenge spending - splurging
savings accumulated during the pandemic - has turbocharged
recent growth; that will wear off. A weak economy weighs, as
evidenced by a slower recovery in long-haul travel and duty-free
spending. Meanwhile, Beijing introduced fresh measures to slow a
sliding yuan last month, raising the prospect of fresh capital
controls, which could complicate overseas jaunts. Bernstein's
modeling suggests the number of outbound trips will increase
much more slowly from 2026 onwards.
    China’s travel industry offers investors a welcome break,
but it could be short-lived.
    Follow @KatrinaHamlin on X
     
     
    Context news
    Travellers made an estimated 4.8 billion trips across China
between January 14 and February 2, the first half of the festive
season around the Lunar New Year, according to the country’s
Xinhua news agency. The Lunar New Year public holiday fell
between January 28 and February 4.

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Graphic: Trip.com's shares have defied China's economic gloom   
https://reut.rs/4hoQIsY
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 (Editing by Antony Currie and Ujjaini Dutta)
 ((For previous columns by the author, Reuters customers can
click on  HAMLIN/ katrina.hamlin@thomsonreuters.com; Reuters
Messaging: katrina.hamlin.thomsonreuters.com@reuters.net))