While westerners count down to Christmas, China’s non-Christian masses are slowly slogging toward their next big work break — the annual Spring Festival holidays that begin in mid-February with Chinese New Year.
That means right now is a good time to buy China travel stocks and tourism sector stocks such as Ctrip.com International, Ltd. (ADR) (CTRP) and China Eastern Airlines Corp. Ltd. (ADR) (CEA), before hundreds of millions of Chinese turn to these companies to plan vacations, buy tickets and book rooms.
Plenty of American travel and tourism companies also stand to profit from family holidays in China during Spring Festival, such as Walt Disney Co (DIS), which runs a theme park in Hong Kong, and Hilton Worldwide Holdings Inc (HLT), which operates more than 50 hotels on the mainland, Hong Kong and Macau. The travel website Expedia Inc (EXPE) also has a foothold in China through an affiliate called eLong.
Traditional family reunions are the most common reason for the more than 3.5 billion passenger trips reported annually during the 40-day period before and after the official, one-week Spring Festival. But increasing numbers of ever-wealthier Chinese are also trekking to mountain resorts, southern beaches, Taiwan and Hong Kong shopping districts.
Thus, the entire travel and tourism sector is poised to perform especially well in China over the next three months. Here are four reasons why China travel stocks should perform well:
- Workers from assembly line grunts to white collar bureaucrats are likely to spend more than ever to celebrate Spring Festival, especially on travel. Spending has been inching higher annually for years: China’s National Tourism Administration said during the 2014 holidays about 231 million vacationers altogether spent nearly $21 billion, up 14% and 16%, respectively, from the previous year.
- Because it’s timed according to the Chinese lunar calendar, Spring Festival 2015 will start more than two weeks later than the 2014 holiday. So anticipation will be running high among Chinese workers in January and early February, spurring them to visit online travel agencies and other websites to plan and buy. They’ll also be able to spend two weeks of earnings beyond what was in their pockets the previous year.
- Industry analysts expect online travel service websites such as Ctrip, eLong and TravelSky (TSYHF) to see tremendous growth in coming years as more Chinese shop on the Internet. Sales for Spring Festival 2015 will likely fit that prediction. A recent study found online services were used for less than 9% of China’s $470 million in ticket sales and bookings in 2013. That compares with more than 50% in the United States and 20% in India. Analysts think China has the potential to reach the U.S. penetration level.
- More than ever, China’s rising urban, middles and upper-middle classes will be able to afford international travel over the coming holiday period. Increasingly popular destinations include Southeast Asian resorts and cities served by Malaysian budget airline AirAsia BHD (AIABF). But flights to Chinese vacation spots on Hainan Island and Yunnan Province are likely to be lucrative for domestic air carriers China Eastern, China Southern Airlines Co Ldt (ZNH) and Air China Ltd (AIRYY) .
Unlike the pre-Christmas period, the run-up to Spring Festival does not send Chinese consumers scurrying to shopping malls to buy gifts. A factory worker traveling to see relatives for the holiday might bring a fruit basket or an envelope with cash. Money is also spent on holiday fireworks.
So by far the bulk of Spring Festival spending is tied to traveling, whether by train, car or plane. Some will use their holidays to visit elderly parents in villages, others will relax at exotic resorts in Thailand.
But in the weeks leading up to the 2015 travel fest, hundreds of millions of workers across the country will be dreaming of their breaks while buying goods and services from holiday-ready travel and tourism companies.
As of this writing, Eric Johnson did not hold a position in any of the aforementioned stocks.