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It has been a very difficult year for the Chinese.
China had to endure its worst snowstorms in 50 years, then the tragedy of the Sichuan earthquake, global scrutiny of the Tibet protest, and the new tainted milk disaster that has sickened 50,000 infants.
And don’t forget the 60% decline in the Shanghai Composite Index, either.
Yup, that’s what I’d call a very tough year but the Chinese have a fabulous ability to focus on the good and look forward to a bright future.
That was especially true last week when the entire country celebrated National Day and a national seven-day holiday that surrounds it called Golden Week.
Golden Week Stimulates Spending
National Day was begun on October 1, 1949 when Chairman Mao declared the founding of the People’s Republic of China in Tiananmen Square.
National Day was originally celebrated with speeches by government leaders and military parades, but has since morphed into a seven-day paid holiday for Chinese workers to travel and visit their families.
The idea of expanding National Day into the Golden Week holiday was to stimulate spending and, boy, did it work. On that first Golden Week in 1999, millions of Chinese used the time off to travel and spent $1.62 billion in the process.
So many Chinese hit the road now that Golden Week has become a travel nightmare. Trains and busses are packed as tight as sardine cans, flights are overbooked, and the highways are clogged to a standstill.
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| During Golden Week, millions of Chinese spend their time traveling and spend their money shopping, gambling and enjoying their newfound leisure time. |
I made the mistake once of traveling to China during Golden Week, and I’ll never do that again. The shoppers flock to the malls in Hong Kong, and the gamblers pack the Macau casinos; the sun worshippers crowd the beaches on Hainan Island, and what seems like all 1.3 billion Chinese swarm Beijing to see the Forbidden City and the Great Wall. Most, however, simply return to their hometowns to see family members who they only get to see once or twice a year.
It wasn’t that long ago that Chinese citizens were prohibited from freely traveling around their country by the Communist Party, so they are embracing their new travel freedom with enthusiasm.
Of course, traveling isn’t free, so some companies are going to make a bundle of money off those hundreds of millions of Chinese travelers. Here are six stocks that are traded in the U.S. that should be some of the biggest winners from the travel boom:
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| Clean and affordable, Home Inns caters to the needs of many Chinese travelers. |
Home Inns (Nasdaq:HMIN) — If it would take a lifetime to visit the U.S.’s most popular tourist sites, it would take two lifetimes to see everything that China had to offer. While most Chinese can’t afford to stay at a Hyatt, Marriott, or Ritz Carlton, they can afford to stay at a Home Inn, the Howard Johnson of China. Home Inns are clean, convenient, safe, and CHEAP!
China Eastern Airlines (NYSE:CEA) — China Eastern is one of the largest airlines in China, offers both international and domestic flights, and is 61% owned by the Chinese government. I’m not a big fan of airlines, but China Eastern has a big head start (as well as the government’s cooperation) on the lucrative Chinese travel market.
CTrip.com (Nasdaq:CTRP) — Ctrip is China’s largest travel agency and odds are good that it will be handling the hotel and airline reservations for many Chinese travelers. Plus, American investors still don’t get the idea that Ctrip has a unique and proprietary payment system in a country where credit cards are close to nonexistent.
eLong (Nasdaq:LONG) — eLong is another online travel agency and sells hotel reservations, air tickets, and vacation packages. The company also offers non-travel services including advertising and non-travel wireless messaging services. eLong is partially owned by Expedia.
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| Guangshen Railway is the largest railroad in Southern China — and one of several winning companies as a result of the Chinese travel boom. |
Guangshen Railway (NYSE: GSH) — Guangshenis the largest railroad company in Southern China and provides passenger/freight transportation services between Ghangzhou, Shenzhen, and Hong Kong. If you want to get around or ship anything by rail in southern China, you will do so on a Guangshen Railway train.
Yum Brands (NYSE: YUM) — All those travelers need to eat and the odds are good that many of them will find themselves at one of Yum Brands’ 2,500 KFC and Pizza Huts in China. The Chinese love everything western, but they especially love eating out at a Pizza Hut or KFC because for many, it’s as close as they’ll ever get to the U.S.
Have Yuan, Will Travel
The Chinese tourism industry is expected to generate $78 billion of revenue this year and is forecast to reach $277 billion by 2017. The World Tourism Organization expects China to eclipse France and become the #1 travel destination in the world by 2014.
The Golden Week may be the busiest travel time of the year in China and the worst time of year you could visit China as a tourist, but a few carefully select Chinese travel companies in your portfolio could deliver enough profits to pay for a trip (or two or three) to China.
Best wishes,
Tony
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