With the Return of Chinese Travellers, Online Travel Agencies Are Bound to Make a Comeback

December 29, 2022

By Published On: December 29, 2022Categories: Market UpdatesTags: , , Views: 91
Good news for Chinese travellers after an arduous three years! On 26 December, the Chinese State Council announced an easing of travel restrictions in the country, which will likely prompt a large number of Chinese travellers to head abroad. From January 8, mandatory quarantine for international arrivals to China will be discontinued – travellers will only need to present a negative PCR test result 48 hours before arrival. This is a significant move away from the country’s long-standing zero-Covid policy. Source : South China Morning Post The return of Chinese travellers will also provide some reprieve for retailers. According to Bain Capital, Chinese consumers generate over one-fifth of overall sales for luxury brands like LVMH, Kering, and Tapestry, with athletic brands like Nike and Adidas expected to benefit as well. More importantly, stocks in the tourism industry are likely to reap the greatest benefits given the sudden surge in demand for travel. After three years spent in lockdown, Chinese consumers are flocking to websites to book their next trip abroad. In 2019, China received more than 150 million tourists, bringing more than USD 40 billion worth of revenue to the country.
Total Numbers of Tourist visiting China in millions (Source: Worlddata.info)
Total Tourism Revenue in Billions (Source: Worlddata.info)

Online Travel Agencies bound to benefit

With the easing of entry restrictions, flights, transportation, and accommodation is expected to be in high demand, with online travel agencies bound to benefit greatly from the return of travellers. Below are the top 5 online booking apps – Booking.com, Expedia, Airbnb, Trip.com, and TripAdvisor, ranked according to their revenue.

Trip.com (Nasdaq:TCOM)

Trip.com is the largest online travel agency (OTA) in China and is expected to capitalise on the recovery of the Chinese travel Industry. It is positioned to benefit from higher-margin outbound travel since passport penetration rates in China are only at 12%. In 2020, the company earned 78% of its revenue from accommodation bookings and the sale of transportation tickets, with the rest of its earnings coming from package tours and corporate travel. Before the Covid-19 pandemic, about 25% of the company’s revenue came from international business, which helped to boost its profit margin. Competition is tight in the Chinese OTA industry, with key players like Meituan, Alibaba-backed Fliggy, Tongcheng, and Qunar vying for a slice of the pie. Trip.com was hard hit by Covid, with border restrictions hindering its pace of recovery while its peers were enjoying gradual growth in 2022. This latest news will definitely come as a relief for the company.
Source: VI.app

Booking.com (Nasdaq:BKNG)

Booking.com is the world’s largest online travel agency, providing services like accommodation booking, purchasing flight tickets, car rentals, and more. The company operates several travel booking websites, including Booking.com, Agoda, OpenTable, and Rentalcars.com. The majority of its revenue and profits come from transaction fees for online bookings. Booking.com’s profits were hit hardest in 2020. But with the gradual recovery of worldwide travel, the company is expected to bounce back from its previous low. The further easing of travel restrictions in China will help in the future growth of the company.
Source: Vi.app

Airbnb (Nasdaq:ABNB)

Airbnb is the largest online agency for alternative travel accommodation, offering booking services for boutique hotels and various experiences. As of 2021, the platform has 6 million active accommodation listings provided by 4 million hosts in over 220 countries and 100,000 cities and towns. In 2021, 54% of revenue was from the North American region, 32% from Europe, the Middle East, and Africa, 7% from the Asia-Pacific region, and 7% from Latin America. The company went public when the industry was badly hit by reduced travel trends stemming from the pandemic. Airbnb’s IPO share price was $68 and opened at $146 on its first day. However, its share price has been dropping since and is now trading at $82.49. With the recovery of travel, Airbnb would benefit from travellers seeking unique local experiences.
Source: VI.app
Although news of travel restrictions easing is encouraging, China is battling a new wave of Covid infections, including suspicions about the rise of new variants. As such, it is important to be mindful of possible volatilities in the market before the travel industry fully recovers. Interested in discovering more companies worth investing in? Get VI App tod