The Chinese consumer market is witnessing a notable shift in spending patterns, with an increasing number of consumers allocating a larger portion of their budget towards experiences such as travel. Meituan, China’s largest food delivery platform, highlighted this trend during their first-quarter earnings call. CEO Wang Xing noted that the demand for travel experiences is not only growing but also becoming more diverse, presenting substantial opportunities for the company. This change in consumer behavior reflects a broader trend of Chinese consumers mirroring their American counterparts by prioritizing experiences over material goods.
Meituan’s foray into the hotel bookings and travel-related business, though smaller compared to its food delivery segment, is indicative of the growing interest in travel among Chinese consumers. HSBC analysts recently raised their price target for Meituan, citing an improved earnings outlook across all segments. This positive outlook aligns with the overall growth in the tourism industry in China, despite a somewhat sluggish macroeconomic environment. Similar to the post-pandemic trend in the U.S., Chinese consumers are showing a continued willingness to spend on experiences like concerts and cruises.
Recognizing the potential for growth in China’s hotel industry, Bank of America Securities identified H World as a top pick. The analysts believe that H World is well-positioned to capitalize on the long-term expansion of the Chinese hotel market due to its best-in-class execution. While short-term challenges such as slower business travel recovery may impact revenue per available room (RevPAR) growth, the analysts remain optimistic about the company’s long-term growth trajectory. H World’s diverse portfolio of hotel brands, along with its strategic franchise and co-development rights, are key factors contributing to its growth potential.
Goldman Sachs, in its latest Asia Pacific conviction list, also endorsed H World as a promising investment opportunity with a substantial price target projection. The analysts expect H World to benefit from value-focused consumption trends and industry consolidation, which are likely to drive the company’s growth in the coming years. Additionally, inbound tourism to China is forecasted to contribute significantly to the country’s tourism revenue, with a projected growth rate of around 11% annually through 2033.
Despite fluctuations in China’s retail sales growth, there has been a notable increase in spending on in-store, hotel, and travel services. Meituan reported a significant year-on-year growth in gross transaction value, indicating a rise in consumer spending on experiences. While average order values have slightly declined due to increased price sensitivity among consumers, there is a notable segment of young consumers who are willing to allocate more of their budget towards travel experiences. Domestic hotel bookings have shown positive growth signs, surpassing pre-pandemic levels and demonstrating a resilient demand for travel experiences.
With notable figures like Neil Shen, a prominent Chinese investor, serving on Meituan’s board and other travel-related companies, there is a growing interest in the potential of the Chinese consumer market. Companies like Trip.com and BTG Hotels Group are actively expanding their operations and investments in response to the evolving consumer preferences. Analysts have provided optimistic forecasts for these companies, citing their strategic positioning and growth potential in the competitive market landscape.
China’s consumer market is undergoing a transformation marked by a shift towards experience-based consumption, particularly in the travel sector. As Chinese consumers embrace a more diversified and experiential approach to spending, companies operating in the hospitality and travel industries stand to benefit from this evolving trend. By recognizing and capitalizing on the changing consumer preferences, businesses can position themselves for long-term growth and success in the dynamic Chinese market.