Date of Report: October 28, 2024
Broker: UOB Kay Hian Private Limited

Trip.com’s Strategic Position in the Tourism and Travel Sector

Trip.com is positioned as a leading online travel agency (OTA) in China, capitalizing on the revival of outbound travel and rising demand for international and domestic tourism. The company’s significant market presence and diverse service offerings allow it to leverage strong consumer interest in travel, especially as the industry recovers post-pandemic.

Robust Recovery in Outbound and Domestic Travel

Trip.com has experienced a surge in outbound travel, with its growth rates outpacing the overall industry level by 20-30%. The company has fully recovered its hotel and air ticket bookings to 100% of 2019 levels, reflecting the resilient demand for travel services. During the 2024 Golden Week holiday, Trip.com benefited from a 5.9% year-on-year increase in domestic tourist numbers, reaching 765 million travelers, and a 6.3% increase in domestic tourism revenue, highlighting sustained travel enthusiasm across China.

Seasonal Demand and Government Policy Boost

Trip.com is positioned to benefit from government policies aimed at stimulating domestic spending on services, particularly during peak seasons. Recent holidays such as the Mid-Autumn Festival and Golden Week have shown robust booking volumes, suggesting that consumer confidence in travel is on the rise. Additionally, Trip.com stands to gain from supportive government actions, including the issuance of travel vouchers and initiatives aimed at encouraging domestic tourism, which have bolstered travel spending.

Earnings Growth and Forward-Looking Outlook

UOB Kay Hian has issued a “BUY” recommendation for Trip.com, setting a target price of HK$630.00. The target price reflects the company’s robust earnings potential, supported by an anticipated rise in tourism demand. Trip.com’s 2H24 prospects are bolstered by increased travel enthusiasm, particularly for international travel, and the company’s strategic positioning as a leader in the OTA market. The valuation is aligned with global peers, positioning Trip.com as a prime choice for investors interested in the travel and tourism sector.

Sector Catalysts and Long-Term Growth Drivers

Several sector-wide factors support Trip.com’s growth outlook. The increased interest in service-oriented consumption, alongside a steady return to pre-pandemic travel levels, provides a solid foundation for sustained revenue growth. Trip.com’s exposure to both domestic and international travel markets makes it well-suited to capture a broad spectrum of consumer demand, further boosted by favorable government policies and ongoing improvements in the travel infrastructure.