While the Asia-Pacific tourism sector is still stuck in the Covid-19 pandemic-induced doldrums, the sector in China is starting to catch a bit of wind - tourist numbers are starting to increase - and this has attracted the attentions of investors, particularly towards online travel services in the country, which are expected to grow by 20%.

“The growing prevalence of online platforms and mobile apps have spurred the use of online travel agents, especially in recent years, with the total gross merchandise volume of China’s online travel expanding by about 2.3 times between 2015 and 2019 to around 1.1 trillion yuan,” says Dennis Lam, equity analyst at UBS Global Wealth Management CIO.

Worldwide, the pandemic and its chain reactions are expected to cut the output of travel industry by US$2.1 trillion in 2020, with 75 million industry workers at risk of becoming unemployed, according to a recent report by the World Travel & Tourism Council.

In the Asia-Pacific region, which is likely to be the most impacted, 45 million people are in danger of losing their jobs and the region’s tourism industry output has already decreased by US$800 billion.

But, in China – where the recovery from the pandemic is happening faster than expected and some experts are predicting the country will have the only major economy generating positive GDP growth in 2020 – it’s a different story.

The government has rolled out policies to encourage travel within the country to help consumers regain confidence in the tourism sector.

“Chinese online travel agents are well-positioned to benefit from the ongoing relaxation of travel restrictions in China,” notes Lam.  

In addition, the average cost of travel in the country is at a five-year low, boosting to higher-than-expected levels the number of people who would like to plan for a trip.

In July and August, some airlines have recorded double-digit growth in bookings compared to the same period last year, according to data from Qunar.com, a Chinese online travel service platform.

Earlier this month, Trip.com, China's major player in online travel service, signed a strategic co-operation agreement with JD.com, the country's e-commerce giant, seeking to expand collaboration within the two sectors. A collaboration such as this indicates that there is room for further growth in the online travel service sector.

“We expect the sector to deliver more than 20% of growth over the next several years as demand for travel-related consumption continues to increase,” Lam notes. “We recommend investing in China's digital economy via a barbell approach that consists of a diversified portfolio of large internet platforms and small pure plays in select verticals.”