In recent years, China’s biggest food delivery platform has witnessed a notable trend – an increase in spending on experiences. Meituan’s CEO, Wang Xing, highlighted during a first-quarter earnings call that consumers are now more inclined to allocate a larger portion of their budget towards travel experiences. This shift in consumer behavior reflects a growing demand for diverse experiences, presenting significant opportunities for companies like Meituan to capitalize on this trend.
Expanding Horizons in Travel Industry
Meituan, primarily known for its food delivery services, has recently ventured into hotel bookings and travel-related businesses, albeit on a smaller scale. HSBC analysts have expressed optimism by raising their price target on Meituan’s stock, emphasizing an improved earnings outlook across all segments. The surge in interest in the tourism sector in China mirrors the growth seen in the U.S. post-pandemic, where consumers continue to invest in experiences such as concerts and cruises.
Bank of America Securities analysts have identified H World as a prime player in the China hotel industry, touting the company’s ability to capture long-term growth based on its exceptional execution. Despite short-term challenges with revenue per available room (RevPAR) due to slower business travel recovery, H World’s prospects for long-term unit growth remain strong. Analysts from both BofA and Goldman Sachs have rated H World as a buy, with optimistic price targets reflecting the company’s growth potential.
Inbound Tourism Potential
In addition to domestic travelers, mainland China is also attracting tourists from neighboring regions and the rest of the world. Morgan Stanley anticipates significant growth in inbound tourism revenue, projected to increase by approximately 11% annually through 2033. This influx of travelers contributes to the growth of China’s retail sector and boosts the tourism-related businesses of companies like Meituan.
While China’s retail sales have shown fluctuations over the years, there has been a steady increase in the gross transaction value for Meituan’s in-store, hotel, and travel operations. Despite a decline in average order value in various categories, there is a notable shift among consumers, particularly the younger demographic, towards prioritizing experiences in their travel expenditure. This change in consumer behavior has prompted companies to adapt their strategies to cater to evolving preferences.
Apart from Meituan’s foray into the travel sector, other companies like BTG Hotels Group have also been making strategic expansions in the market. With a focus on mid-to-upscale hotel developments, BTG Hotels has seen growth in its portfolio and market positioning. Analysts are bullish on the company’s prospects, forecasting substantial upside potential based on its performance and expansion plans.
As China’s consumer market continues to evolve, driven by changing preferences and growing demand for experiences, companies in the travel and hospitality sectors are presented with unprecedented opportunities for growth. Understanding the shifting dynamics of consumer behavior and leveraging these trends to offer innovative services will be crucial for businesses looking to thrive in this rapidly evolving landscape. Embracing the wave of experiential spending and investing in customer-centric strategies will be key to unlocking success in China’s vibrant consumer market.