China’s tourism is booming
China (FXI) is driving the global tourism industry with the country’s tourists spending more on international travel than the United States, Britain and Germany combined. China was the world’s largest outbound tourism market for the 5th year in a row in 2016 and has recorded double-digit growth in overseas tourism expenditure for the 13 consecutive years. In 2017, the China Tourism Academy expects the country’s tourism industry to earn nearly 6 trillion yuan ($ 0.88 trillion) and estimates 7 trillion yuan ($1.03 trillion) to be earned in tourism revenues by 2020.
Data by iResearch, a China-based research provider, suggests that China’s online travel grew 52% in Q1 2017 to 210 billion yuan ($30.97 billion). Online transportation booking forms 71.9% of the online travel market while online accommodation and holiday bookings account for the remaining 29%.
The top players in China’s online travel market are Ctrip (CTRP), Qunar and Alitrip with market shares of 35.2%, 17.3% and 13.6% respectively.
Year to date, the best performing tourism based stocks in China are China International Travel, Ctrip (CTRP) and Huangshan Tourism. Shares of these companies have surged 38%, 37% and 23% YTD. Valuations in the Chinese tourism sector look compelling with average price to earnings multiple of 36.9x. Chinese tourism based companies Bright Real Estate Group, Car Inc, Nanjing Public Utilities and Huangshan Tourism are the most attractive stocks based on their inexpensive valuations. These stocks have one year forward PEs of 5.9x, 15.1x, 16.2x and 17.9x and are trading at the steepest discount to their peers. Meanwhile, Xi’an Tourism, China United Travel and Wuhan Sante Cableways are the most expensive tourism stocks in China with PEs of 196x, 134x and 87x respectively.