Morgan Stanley: The recovery of the mainland tourism industry is strong, optimistic about Air China, HWORLD-S, and Atour, etc

Morgan Stanley published a research report indicating that the tourism industry is becoming a strong answer to China's pursuit of people's well-being and happiness, echoing policymakers' efforts to promote service consumption, improve employment, and further open China to the world. The tailwind of demand strengthens the bank's confidence in Chinese airlines and the hotel industry.

Morgan Stanley expects domestic tourism consumption to account for 18% of per capita consumption by 2030, compared to 13% in 2023. An 11% compound annual growth rate will drive industry revenue to reach 12 trillion RMB by 2030, with its contribution to GDP increasing from 4.8% in 2024 to 6.7%. Domestic tourism remains a pillar industry: the bank predicts a 9.7% compound annual growth rate over the next five years. Inbound and outbound tourism will become two engines of synchronized growth. Specifically, inbound tourism is expected to contribute 16% of China's tourism revenue by 2030, up from about 12% in 2025. Cumulative revenue over the next five years will reach 50 trillion RMB.

It is recommended to seize the five key stocks benefiting from the booming tourism demand: Air China (00753.HK), Spring Airlines (601021.SH), Huazhu Group (01179.HK), Atour Group (ATAT.US), and Trip.com Group (09961.HK).

In the airline sector, the bank stated that passenger load has reached a historic high, but since the second half of 2024, ticket prices have remained 1 standard deviation below the average. The market is expected to begin recognizing airlines' stronger pricing power, which will support an upward adjustment in airline valuations.

In the hotel industry, revenue per available room has ended a two-year decline and turned positive. The bank believes this trend will remain positive in the coming quarters, driving hotel companies' profits to grow by 10% to 25% annually and prompting re-ratings.

Online travel platforms will also benefit from this rising tide, but it is recommended to reconsider after the conclusion of antitrust investigations for better risk-reward outcomes