Guotai Haitong Securities has released a research report stating that the sector landscape is expected to remain stable following the standardization of platform behaviors, with international expansion serving as a key catalyst for long-term platform value reassessment.
With regulatory policies now in place and business adjustments aligning with expectations, the improved certainty provides a positive environment for long-term ecosystem stability, which is likely to drive valuation recovery. The OTA industry, characterized by low-frequency transactions, strong brand loyalty, and stable strategic partnerships between platforms and suppliers, is expected to maintain a stable competitive structure.
Global expansion opens up significant long-term repricing opportunities. Ctrip's platform currently holds a leading market share in international markets, including Southeast Asia, East Asia, and South America. The continued increase in the proportion of overseas revenue, along with profitability, will be the key catalysts for value reassessment and a long-term inflection point.
Main Insights from Guotai Haitong Securities:
Business adjustments will impact short-term profitability, but the move to standardize behaviors will optimize the ecosystem. Recently, OTA industry regulations have been introduced, targeting unfair competition, monopolistic practices, and disorderly value-added services. Policies have been enacted to comprehensively standardize platform traffic allocation and pricing mechanisms. Platforms are currently accelerating their rectification efforts, and the impact on performance and profitability is becoming increasingly clear.
Key characteristics of the OTA sector include: 1) Users have high decision-making costs for low-frequency purchases, and consumer travel booking habits are already established, making it difficult for subsidies to disrupt the market structure. 2) Service industry supply faces peak capacity constraints, leaving suppliers with little inclination to diversify across multiple platforms. 3) High-end chain hotels and major airlines are also resistant to prolonged low-price competition, with price wars remaining confined to the mid-to-low-end independent hotel segment.
Leading OTAs hold an absolute advantage in high-tier cities and high-end hotel room nights. Market share and the competitive landscape are expected to remain stable, with long-term, high-intensity price wars unlikely to be sustainable. However, commission rate reductions will have a phased impact on platform profits.
Industry bargaining power is reaching a new equilibrium, with platforms still holding a long-term advantage. Historically, hotels and tourism suppliers were fragmented and had weak bargaining power, allowing OTA channels to dominate industry profits. As hotel chain rates increase and major brands strengthen their own direct booking channels, and as airlines improve their membership direct booking systems, the bargaining power between suppliers and OTAs is gradually balancing. Commission rates are now in a reasonable and stable range.
To offset the profit pressure on traditional booking services, major OTAs are actively expanding into diverse value-added sectors. Mature membership subscription services provide stable cash flow and high margins. Premium customized tours, study tours, health and wellness tourism, and other cultural tourism derivative businesses are opening up new profit spaces. New services like merchant digital empowerment, AI smart services, and local lifestyle support are being implemented, driving a shift in the revenue structure from transaction-based commissions to monetizing a full ecosystem of services.
Oil price fluctuations will impact demand and travel habits, while international business will be a key inflection point for repricing. Rising oil prices have a greater negative impact on leisure travel demand than on business travel, and a more significant effect on outbound travel than domestic travel. Demand for low-cost Southeast Asian travel and mass-market self-driving short trips is under clear pressure, while high-end outbound travel and business travel demand show strong resilience.
Prolonged high oil prices will force a structural divergence in residents' travel spending. The proportion of rigid costs for transportation and accommodation will rise, crowding out flexible spending on high-end experiences, value-added services, and destination shopping. This will push OTAs to increase the supply of high-value short-haul products and off-peak packages.
As the domestic market enters a stable phase, leading OTAs are focusing their international expansion on three key regions: Southeast Asia, East Asia, and South America. Southeast Asia is a high-growth incremental market with significant room for online penetration improvement. East Asia is a mature stock market, with opportunities only in specific cross-border segments. South America, with low online penetration and a fragmented market landscape, represents a long-term blue ocean. Leveraging their integrated one-stop product matrix, lower commission rates, shared technology and R&D, and multilingual customer service advantages, domestic OTAs have significant differentiated competitiveness for global expansion, presenting a valuation reassessment opportunity.
Risk Factors: Macroeconomic fluctuations, a significant surge in oil prices, continued tightening of regulatory policies, volatility in overseas markets, and the risk of worsening industry competition.
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