Guosen Securities Co.,Ltd. released a research report stating that the travel chain showed overall stability in Q2 2025, with platform companies displaying differentiated performance among sub-sectors. OTA and ride-hailing companies demonstrated outstanding overall performance under stable competitive landscapes, while hotel, scenic area, and A-share catering sectors improved quarter-over-quarter compared to Q1 as base effects eased. Performance entertainment, duty-free, and travel agency sectors faced pressure compared to Q1. Overall, the travel chain exhibits structural highlights, with companies possessing strong channels and brands particularly standing out with their own alpha. The upcoming National Day and Mid-Autumn Festival holidays combined with enhanced policy support are expected to boost sector expectations. Given the current economic environment and market style, the firm recommends allocating to TRIP.COM-S (09961), Atour (ATAT.US), TONGCHENGTRAVEL (00780), and others.

**Industry Review and Outlook: Coexistence of Experience Economy and Value-for-Money Structural Prosperity, with Service Consumption Policy Enhancement, AI Iteration, Overseas Expansion and Market Penetration Creating Incremental Growth**

The travel chain demonstrates four major characteristics: 1) Overall stable consumption with structural prosperity, continuous increase in residents' service consumption ratio, continuation of rational consumption trends, with experience economy and value-for-money consumption being favored. 2) Strong brand and channel companies gaining market share, with OTAs benefiting from online penetration achieving hotel room-night growth rates higher than industry average, while leading hotels leverage product + supply chain + membership triple advantages to achieve store expansion faster than industry rates. 3) Significant platform differentiation, with leading companies focusing on building traffic ecosystem loops and improving overall monetization. Ride-hailing and OTA sectors maintain stable competitive landscapes with continuously optimizing domestic profit margins, while food delivery and instant retail face short-term pressure from competitive disruptions. 4) Both OTA and leading hotel companies emphasize increasing cash dividends.

Looking ahead: 1) Policy enhancement will help unleash service consumption potential, with significant room for improvement in China's service consumption ratio compared to overseas benchmarks. 2) Generation Z and silver economy demographics deserve attention, with the former showing outstanding performance in emotional value and self-gratification consumption, while the latter's high-tier population pursues quality lifestyle. 3) Overseas expansion and lower-tier market penetration provide incremental growth, with TONGCHENGTRAVEL and Huazhu deeply penetrating lower-tier markets, while Trip.com's international platform rapidly gains market share. 4) AI technological transformation will help enterprises improve efficiency, with application potential in OTA, ride-hailing, hotel sectors, optimizing costs and enhancing ROI.

**Sector Summary: Q2 2025 Travel Chain Overall Stable, Strong Channels and Brands Show Structural Highlights**

From financial results perspective, Q2 2025 travel chain overall revenue grew 9% year-over-year, with net profit attributable to shareholders/adjusted net profit declining 65%/43% year-over-year, weakening quarter-over-quarter due to intensified local lifestyle competition. A-share travel chain overall revenue declined 3%, with net profit attributable to shareholders/adjusted net profit declining 25%/18% year-over-year but improving quarter-over-quarter.

Among sub-sectors, platform companies showed differentiated performance, with OTA and ride-hailing sectors demonstrating outstanding overall performance under stable competitive landscapes. Hotel, scenic area, and A-share catering sectors improved quarter-over-quarter compared to Q1 as base effects eased, while performance entertainment, duty-free, and travel agency sectors faced pressure compared to Q1.

From market performance perspective, the travel chain showed overall modest performance, with A-share consumer services sector underperforming benchmarks by 2.72 percentage points year-to-date. Fund holdings in consumer services sector declined 0.07 percentage points quarter-over-quarter at Q2 end, down 0.07 percentage points from Q1 2025. However, structural highlights were prominent, with ride-hailing, some scenic areas, and some hotels achieving excess returns. OTAs, after significant gains last year, mainly traded sideways this year but gradually approached historical highs after interim reports.

**Sub-sector Analysis by Prosperity Level:**

**OTA Sector:** Tourism demand shows steady growth, with strong channel online penetration improvement and favorable competitive landscape leading to better-than-expected profit release. Trip.com and TONGCHENGTRAVEL represent tourism beta for high-tier and low-tier cities respectively. Trip.com's Q2 revenue exceeded expectations mainly from domestic hotel room-night growth, while international business drove revenue growth exceeding 16% for two consecutive quarters. TONGCHENGTRAVEL's domestic flight-hotel business expanded steadily with outbound tourism driving upward incremental growth, platform hotel prices turned positive ahead of industry, while actively developing hotel management and other new growth curves. Under favorable industry dynamics, leading companies continue optimizing marketing and subsidy efficiency with domestic profit margins continuously improving.

Looking forward, OTAs are expected to directly benefit from enhanced service consumption policies. Trip.com's international business market share expansion drives growth momentum, with further upward potential for profit margins if balancing scale and profitability. TONGCHENGTRAVEL strengthens product diversity and upstream supply chain positioning to capture lower-tier market travel dividends, with enhanced monetization supporting steady profit margin improvement.

**Ride-hailing Sector:** Industry overall profit margin improvement with active Robotaxi advancement. The ride-hailing industry is in a healthy profit development phase, supported by stable and improving competitive landscape. Backed by Geely automotive group, Caocao Mobility leverages proprietary customized vehicle fleet through asset-light city expansion model and aggregation platform strategy to achieve dual improvement in scale and efficiency. Short-term ride-hailing main business market share growth and loss reduction initiatives show initial effectiveness, positioning in key Geely Robotaxi segments enables medium-term growth.

**Hotel Sector:** Strong brand companies lead performance, sector expected to gradually enter supply-demand expectation stabilization phase. Q2 overall hotel profit release outperformed pessimistic expectations, with Atour hotels and retail momentum both in upward cycles showing most prominent performance. Industry supply growth at mid-high single digits year-to-date, with group store expansion exceeding industry levels. However, except for Atour, leading group store reserves have slowed from previous peaks. Considering unchanged business model attractiveness, industry supply expansion deceleration may be gradual. Operations gradually stabilize with industry and group RevPAR decline narrowing quarterly, but performance differentiation between new and existing stores intensifies under industry supply expansion backdrop. Leading companies improve profit margins through efficiency enhancement, closing loss-making directly-operated stores, and increasing asset-light ratios. Looking ahead, Q4 remains uncertain under business travel dominance, but positive National Day holiday demand may provide some support for continued stabilization trends.

**Scenic Areas and Entertainment:** Sector shows overall differentiated performance, focusing on holiday catalysts and asset expansion. Q2 mature natural scenic areas mostly showed single-digit revenue fluctuations, with Changbai Mountain pressured by weather disruptions, Jiuhua benefiting from transportation improvements, and Xiangyuan maintaining double-digit growth with asset integration support, while Songcheng Entertainment faced some pressure. Fixed leverage on profit side amplifies revenue changes, with some scenic areas advancing refined management and fee ratio optimization. Summer scenic area sector showed overall stable performance with Changbai Mountain showing prominent growth momentum. The combined National Day and Mid-Autumn Festival holidays may drive tourism demand insufficiently released during summer due to weather disruptions, with ultra-long holiday period and vacation planning expected to boost long-distance travel.

**Duty-free Sector:** Hainan duty-free decline narrows but online taxable competition creates disruptions, focusing on leading company operational inflection points and bonded zone policy advancement. Q2 China Duty Free revenue decline improved but net profit decline expanded quarter-over-quarter due to marginally weaker gross margins. Going forward, continue monitoring Hainan duty-free stabilization pace and bonded zone policy progress. Multiple city downtown stores gradually opening provide medium-term growth space, but current policies still have optimization room with limited short-term performance contribution expected.

**Investment Recommendations:** Overall, the travel chain exhibits structural highlights, with companies possessing strong channels and brands particularly standing out with their own alpha. The upcoming National Day and Mid-Autumn Festival holidays combined with enhanced policy support are expected to boost sector expectations. Given current economic environment and market style, recommend allocating to TRIP.COM-S, Atour, TONGCHENGTRAVEL, BOSS Zhipin, Xiaocaiyuan, Gumming, Mixue Group, Excellent Education Group, China East Education, Douben Education, Changbai Mountain, and others.

**Risk Warnings:** Systematic risks including macroeconomic and pandemic factors; policy risks; acquisitions below expectations, shareholder reduction risks, market funding style changes, etc.