CITIC SEC's research report indicates that the 2025 annual reports and 2026 Q1 quarterly reports show the service consumption sector exhibits characteristics of "supply-demand improvement and leader outperformance." Both supply and demand sides of the hotel industry have improved since Q4 2025, with leading companies' RevPAR returning to positive growth. Macau's gaming GGR in Q1 2026 increased by 14% year-on-year, maintaining high prosperity. Market share concentration in the freshly-made beverage industry is accelerating among leading players, with pricing power shifting upward. The chainization rate in the food service supply side is increasing, with leaders realizing advantages through expansion and efficiency improvements. Duty-free sales in Hainan's offshore island in Q1 2026 grew by 25.7% year-on-year, with initial validation of profit recovery for leading companies. Scenic area revenue growth is generally stable, benefiting from holiday policy elasticity. Human resources outsourcing drives growth but remains highly dependent on macroeconomic prosperity. The OTA sector faces short-term antitrust policy disturbances, but long-term alpha is strengthening, suggesting opportunistic allocation.
For 2026, industry growth drivers will focus on operational efficiency improvements, brand iteration, and overseas expansion. Leading companies are expected to outperform the industry due to their alpha attributes. Three main investment themes are recommended: 1) High-quality hotel and scenic area targets within leisure travel scenarios; 2) Stable and growth-oriented catering and duty-free leaders in the pro-cyclical leisure sector; 3) Gaming companies and top freshly-made beverage brands with high demand elasticity slopes during prosperity improvements. Attention should also be paid to the OTA, human resources, and exhibition sectors. CITIC SEC's main views are as follows:
OTA: The overall tourism market maintains high prosperity, with leading market shares stable or increasing. Data from the Ministry of Culture and Tourism shows that in 2025, domestic tourism spending reached 6.3 trillion yuan (up 9.5% year-on-year) and tourist trips reached 6.522 billion (up 16.2% year-on-year), both setting new records, with growth rates 2.6 times that of total retail sales. Inbound tourism benefited from visa exemption expansions, leading global growth rates, and the business travel market began gradual recovery from September. Against the backdrop of slowing industry growth in Q4 2025 (domestic tourism revenue up 3.3% year-on-year), OTA leaders continued to deliver excess alpha. In terms of AI and entry points, Ctrip has explored collaborations with Tencent Yuanbao, Doubao, and Google Gemini, while Tongcheng's DeepTrip has served approximately 6.8 million users and integrated with Tencent Yuanbao. Supply-side barriers (inventory, fulfillment, data) constitute OTA's core moat. Regarding regulation, Ctrip has already removed the "Special/Gold" badges and the AI pricing assistant. Referring to antitrust penalty cases involving Alibaba and Meituan, implementation is expected within 4-6 months. It is estimated that a 1 percentage point decrease in Ctrip's domestic hotel commission rate would impact its 2026 adjusted net profit by approximately 10%. Looking ahead to 2026, the industry is expected to maintain high prosperity but with marginally slowing growth, shifting gradually from market share gains towards take rate optimization and non-transactional revenue expansion.
Hotels: Leading hotel groups have seen profit improvements against the trend due to product upgrades and efficiency gains. Both supply and demand sides of the hotel industry have improved: data shows demand-side national RevPAR increased by 3.1% year-on-year in Q4 2025 (the first positive growth since 2024), accelerating further to 6.7% in Q1 2026 (ADR +5.4%, Occ +0.6 ppts), with monthly figures of +4.8%/+11.9%/+2.8%/+8.1% for January/April. On the supply side, the national room growth rate declined from +8.7% in December 2025 to +6.8% in April 2026, driven by weaker returns on new store investments, reduced availability of prime properties, and more rational decision-making by franchisees. Structurally, leisure travel and lower-tier markets show stronger resilience than business travel and higher-tier cities. Leading groups faced short-term pressure due to higher proportions of business guests, but business travel flow stabilized marginally from Q1 2026, coupled with spring break/peak season catalysts, strengthening the certainty of a quarterly inflection point. Leading hotel groups showed comprehensive financial improvement in Q4 2025 and Q1 2026.
Macau: Stable demand at the beginning of the year, with improved reinvestment efficiency. According to the Macau Gaming Inspection and Coordination Bureau (DICJ), Macau's gaming industry maintained high prosperity in Q1 2026, with industry GGR growing 14% year-on-year. VIP business GGR grew 35% year-on-year, while mass market business increased 6%. Since the second half of 2025, the proportion of VIP business has continued to rise, driven by increased betting volumes from core clientele, higher win rates due to side bets and luck factors, and the continuous ramp-up of new high-end property capacity, leading industry growth. However, this has also intensified market concerns about industry profitability. It is believed that the incremental core of market reinvestment since 2025 stems from the catch-up and alignment of reinvestment rates from ordinary properties to high-end mass market properties. Current industry reinvestment continues to optimize, and competition is expected to stabilize. The overall EV/EBITDA valuation of Macau's gaming sector has fallen to below 9x, and the industry's 5-6% dividend yield should provide good downside support for stock prices. It is anticipated that against the backdrop of continued high industry prosperity and increased dividend payout ratios by leading operators, overseas long-term funds will re-enter, driving sector revaluation.
Duty-Free: Strong recovery in Hainan business, with initial validation of profit recovery. According to Haikou Customs data, since October 2025, Hainan's offshore duty-free sales have maintained strong growth, with year-on-year growth rates of 18.6% and 25.7% for Q4 2025 and Q1 2026, respectively. The profitability of leading duty-free companies recovered in 2025 and Q1 2026, with improved operational efficiency. The performance recovery is mainly attributed to the impressive growth of offshore duty-free business. Although airport business volatility led to lower revenue growth, the impact on profits is limited. The optimization of downtown store policies is expected to recapture major demand from Beijing and Shanghai. Meanwhile, the acquisition of DFS's Greater China retail business has been completed, further enhancing international competitiveness. In the medium to long term, the island-wide customs closure in Hainan will create considerable incremental space for the local business environment and travel retail. The company's leading position is solid, and long-term profit release under high operating leverage is promising. Recent stock price corrections to low levels, coupled with the continuous realization of industry prosperity recovery, are expected to bring back market attention, suggesting allocation at low levels.
Scenic Areas: Q1 sector revenue growth rebounded; focus on holiday policy elasticity. The median revenue growth rate for 17 A-share scenic area companies was about 2% in 2025 and about 7% in Q1 2026, with profit performance weaker than revenue. The rebound in Q1 revenue growth, coupled with the gradual arrival of the peak season in Q2 and Q3, is expected to boost industry performance expectations. Furthermore, the scope of the autumn holiday this year is expected to expand, increasing tourism market heat in the traditionally low season of Q4. Although the macro consumption environment may face pressure, scenic areas, as important venues for experiential consumption demand, possess strong demand resilience. The market still relatively underestimates the elasticity of holiday policies, suggesting attention to allocation opportunities in the scenic area sector. Fundamentals often diverge among specific scenic areas. It is recommended to focus on companies with significant marginal changes (e.g., new business expansion, new project construction, corporate governance optimization), as such companies are likely to exhibit superior growth.
Freshly-Made Beverages: Prefer companies with strong alpha and consider allocation opportunities in undervalued leaders. In 2026, against the backdrop of reduced food delivery subsidies, the industry is likely to face negative beta in consumer demand, and market share is expected to accelerate concentration among leading brands. In terms of business operations, leading brands are also actively expanding product categories and seeking growth. From an investment perspective, two main themes are suggested: 1) Companies with strong alpha; 2) Leaders under pressure within the year but with low valuations, yet possessing deep operational moats and broad long-term potential, offering allocation value at current low valuation levels.
Food Service: Demand for quality-price experience becomes prominent; expand scale externally and improve efficiency internally. Looking back at 2025, under the influence of the macro consumption environment, average spending per customer in food service faced pressure. Consumers increasingly focus on quality-price ratio, demanding higher standards for ingredient quality and freshness. On the other hand, food service demand is gradually shifting from mere satiation to being driven by emotion and experience, prompting continuous upgrades in product innovation, store ambiance, and service models. For 2026, it is recommended to focus on the growth logic of food service companies expanding scale externally (lower-tier markets, overseas expansion, multi-branding) and improving efficiency internally (supply chain construction, operational management efficiency, single-store model optimization). Priority should be given to leading companies in growth segments with strong store expansion momentum and solid same-store support, as well as industry leaders with stable and progressing main businesses providing high shareholder returns.
Human Resources: Outsourcing drives growth, government subsidies increase. The human resources sector is closely related to the macroeconomic cycle. In the current environment, recruitment prosperity still lags behind historical peaks. However, segments like business process outsourcing and online recruitment are in a growth phase. Simultaneously, a recovery in mid-to-high-end recruitment business is observed, and government subsidies for the industry are sustainable. In the medium to long term, the human resources industry will develop in a more standardized manner, benefiting leading companies' market share gains. Against the backdrop of rapid AI development, the human resources industry is expected to continuously improve efficiency and has potential in commercialized products. However, while AI creates some positions, it may also replace others. It is advised to monitor changes in recruitment industry prosperity and the impact of AI on the sector. Current valuations for companies within the sector are at historical lows.
Risk Factors: Economic growth slowing more than expected; consumption downgrade trend exceeding expectations; unexpected changes in domestic and international travel policies; unexpected changes in outbound visa processing policies; cross-border aviation capacity recovery falling short of expectations; intensifying market competition; significant exchange rate fluctuations.
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