The S&P/ASX 200 Index (ASX: XJO) travel share sector has seen plenty of bumps over the past three years. Demand is steadily recovering as the pandemic's impact wears off. But, a change in China's COVID-19 settings could be a particularly helpful boost to the industry.
There are a number of different travel names on the ASX including Corporate Travel Management Ltd (ASX: CTD), Qantas Airways Limited (ASX: QAN), Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB).
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Chinese travellers to drive ASX travel shares higher?
According to reporting by CNBC, Australia could be about to benefit from Chinese travellers returning to the country,
JPMorgan's chief investment strategist Tom Kenney said:
China's shift toward an earlier reopening raises the question of potential implications for the Australian economy.
The largest potential upside from reopening itself sits within the services sector given China is the largest consumer of Australian tourism and education exports.
Our expectation is for the tourism-related consumption impulse to be spread over 2023 and 2024.
While the duration adjusted spending numbers are less striking, real GDP is an aggregate concept and so the absence of Chinese tourism has been a notable headwind
A full recovery of Australian tourism could add 0.5 percentage points to the GDP, while the return of international students from China could add another 0.4 percentage points. In total this might add around 1% to Australian GDP. This could be a nice boost for ASX 200 travel shares.
CNBC noted that in 2019, Chinese arrivals accounted for 15.3% of Australia's inbound tourism – it was the largest source of short-term visitors.
But, Australian Bureau of Statistics (ABS) data showed that a total of 430,470 short-term trips were made to Australia in October – this data was released in December. This total number of trips was 44% lower than the same level in 2019, according to CNBC.
Could this be a benefit?
It certainly could. Different ASX 200 travel shares have varying levels of exposure to Chinese travellers.
But, the more mobile Chinese tourists and business people become, the more likely they are to use a Qantas plane, an ASX-owned travel agent or use ASX-listed corporate travel services.
In the Qantas market update during mid-October 2022, the company said that group domestic capacity will be 94% of pre-COVID levels in the FY23 first half, growing to around 100% for the second half. International capacity is expected to increase from 61% of pre-COVID levels in the FY23 first half to 77% in the second half.
In other words, Qantas' international capacity is still materially below pre-COVID times with some of those travel routes not seeing the same demand as before. A return of Chinese visitors could go some way to closing that gap.
