China's Post-Pandemic Pullback: A $129-Billion Blow To Global Tourism Sector
Portfolio Pulse from Neil Dennis
China's overseas travel has not fully recovered post-pandemic, with outbound airline capacity at 60% of 2019 levels. This has resulted in a $129 billion reduction in global tourism revenue. U.S. flights to Asia are also affected by the inability to fly over Russia. Bank of America analysts predict a strong recovery in 2024 for Chinese international travel. Delta Air Lines beat Q4 forecasts but trimmed its 2024 outlook, while American Airlines, United Airlines, and other airline stocks saw declines in January. Hotel groups like MGM Resorts, Marriott International, and Hilton Hotels have fared better, with some stocks hitting new highs. Luxury goods are impacted, with the Roundhill S&P Global Luxury ETF and companies like Estee Lauder and Lululemon experiencing declines.
January 19, 2024 | 8:26 pm
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POSITIVE IMPACT
Hilton Hotels Corporation's shares were up 2.6% in January, indicating resilience in the hotel sector despite reduced Chinese tourism.
Hilton's stock increase suggests a positive short-term impact, potentially due to a diversified customer base and strong brand presence.
CONFIDENCE 70
IMPORTANCE 60
RELEVANCE 70
POSITIVE IMPACT
Marriott International Inc's stock rose 3.3% this year, hitting a new all-time high, possibly benefiting from its expansion in China.
Marriott's stock increase and expansion in China suggest a positive short-term impact, as the company adapts to the loss of Chinese tourists abroad.
CONFIDENCE 70
IMPORTANCE 65
RELEVANCE 75
POSITIVE IMPACT
Wynn Resorts gained 2.6% in stock value, which may reflect optimism in the hotel and casino sector despite challenges in tourism.
Wynn Resorts' stock gain could indicate investor confidence in the company's ability to navigate the current tourism environment.
CONFIDENCE 70
IMPORTANCE 60
RELEVANCE 70
NEGATIVE IMPACT
American Airlines Group Inc saw a 1.3% stock decline in January amid the broader challenges in the airline industry.
The stock decline for American Airlines is part of a wider trend in the airline industry, likely due to reduced Chinese tourism and operational challenges.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 70
NEGATIVE IMPACT
Delta Air Lines beat Q4 forecasts with record full-year revenues but trimmed its 2024 outlook, causing an 8% stock decline in January.
Despite beating Q4 forecasts, Delta's reduced outlook for 2024 likely contributed to the stock's decline, indicating a negative short-term impact.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 80
NEGATIVE IMPACT
Estee Lauder Companies Inc's stock fell 14% in 2024, possibly affected by the downturn in luxury spending by Chinese consumers.
Estee Lauder's significant stock drop could be attributed to the reduced luxury expenditure by Chinese tourists, a key consumer group for the brand.
CONFIDENCE 80
IMPORTANCE 75
RELEVANCE 80
NEGATIVE IMPACT
Lululemon Athletica's stock decreased by 6.3%, which may be influenced by the overall decline in luxury spending.
Lululemon's stock decline could be part of the wider trend of reduced luxury purchases by Chinese consumers, affecting the luxury retail sector.
CONFIDENCE 75
IMPORTANCE 65
RELEVANCE 70
NEGATIVE IMPACT
The Roundhill S&P Global Luxury ETF, tracking luxury goods stocks, was down 6.5%, reflecting the impact of reduced Chinese spending on luxury.
The decline in the LUXX ETF is likely due to decreased spending by Chinese tourists on luxury goods, which has historically been significant.
CONFIDENCE 80
IMPORTANCE 75
RELEVANCE 80
NEGATIVE IMPACT
MGM Resorts International, popular with Chinese visitors, saw a 4.3% stock decline this year, potentially due to reduced Chinese tourism.
MGM Resorts' stock decline could be related to the decrease in Chinese tourists, who have historically been a significant customer base.
CONFIDENCE 70
IMPORTANCE 65
RELEVANCE 75
NEGATIVE IMPACT
United Airlines Holdings Inc's stock fell nearly 6%, affected by the grounding of its Boeing 737 MAX 9 fleet and broader industry issues.
United Airlines' stock decline is influenced by specific fleet issues and the general downturn in the airline sector due to decreased Chinese tourism.
CONFIDENCE 75
IMPORTANCE 70
RELEVANCE 80