20180831-广发证券_香港_-A-Share_Hotel_Sector_2页_362kb

A-Share Hotel Sector Summary

Core Content

This report analyzes the performance and future outlook of the A-Share hotel sector, focusing on recent trends in revenue growth, supply-demand dynamics, and the shift from beta to alpha characteristics. The analysis is conducted by the GF Securities (Hong Kong) research team, with contributions from Ou Yafei and An Peng.

Main Points

Revenue Growth Trends

• The hotel sector's operating revenue growth has slowed since May, but the decline is not significant.
• According to STR data:
  • RevPAR in 2017 grew by 3.5% YoY.
  • In May/June/July 2018, RevPAR growth was 3.2% YoY, 3.5% YoY, and 2.0% YoY respectively.
  • Overall growth from 4Q17 to 1Q18 remained at 3-4% YoY.
• Top-tier hotels have seen a rebound to positive growth, while mid-end hotels (3-star) experienced 11.5% / 17.4% / 18.0% growth in May/June/July, slightly lower than the 15.7% growth in May 2017.
• The hotel leasing ratio increased by 0.9pp in 7M18, compared to a 3.6pp annual increase in 2017.
• Average property price growth was 3.2% in 2018, significantly higher than the -0.1% in 2017.

Reasons for Slower RevPAR Growth

1. High base effect from 2017: The hotel industry had reached a peak with 5–8% RevPAR growth in 2Q-3Q17, leading to a natural slowdown in 2018.
2. Decline in hotel spending: Spending on hotel stays dropped in May but rebounded in June and July.
3. Demand and supply dynamics: While demand growth has slowed, it has not worsened, and supply growth has continued to decline.

Sector Classification: Beta to Alpha

• The hotel sector is beta-driven, meaning it is sensitive to macroeconomic conditions.
• In the US, RevPAR growth has historically been 1.3× GDP growth.
• In 2017, the Chinese hotel sector was beta, with a recovery driven by an optimistic supply-demand situation.
• In 2018, the sector has shifted to alpha, indicating a move towards value creation through upgrades and concentration rather than pure macroeconomic exposure.

Key Information

Earnings and Valuations

• Earnings growth remains high for leading hotel companies.
• Current valuations are relatively cheap, suggesting potential for future profitability improvements.
• The report maintains a positive outlook on the sector and recommends monitoring the performance of leading players.

Investment Outlook

• The report suggests that the sector is relying on upgrades and franchise expansion to drive profitability.
• It recommends watching the growth of leading players in the market.

Risk Factors

• Macroeconomic changes can significantly impact the hotel sector, and an economic slowdown could hinder recovery.
• New-openings growth may be slower than expected, affecting the sector's expansion potential.

Sector and Company Ratings

Sector Rating Definitions

Company Rating Definitions

Disclaimer and Legal Information

• This report is not an offer to buy or sell securities.
• It is intended solely for GF Securities (Hong Kong) clients.
• No liability is accepted for any loss arising from the use of the materials unless excluded by law.
• The report may be subject to change without notice.
• Investments involve risks, and past performance does not guarantee future results.

Analyst Certification

• The views expressed in the report accurately reflect the personal views of the analysts.
• No part of the analyst's remuneration is directly or indirectly linked to specific recommendations.

Disclosure of Interests

• GF Securities (Hong Kong) and its affiliates do not hold any shares in the securities mentioned.
• No investment banking relationships exist with the companies mentioned in the past 12 months.
• Analysts and their associates do not serve as officers of the mentioned companies and have no financial interests in the securities.

Copyright

• This report is copyrighted by GF Securities (Hong Kong) Brokerage Limited.
• No part of the material may be copied or re-disseminated without prior written consent.