China’s decision to lift a ban on group tours traveling to the U.S., Japan, South Korea and parts of Europe is great news for luxury stocks.
However, it’s unlikely to have much immediate impact on visitor numbers to the U.S., given bilateral restrictions on flights between the two countries. The Transportation Department allowed Chinese carriers to increase the number of weekly round trips to the U.S. to 12 in May, matching the flights by U.S. airlines in the opposite direction. Before the pandemic each side made more than 150 weekly round trips.
But the ban does pave the way for Chinese tourists to return to their prepandemic overseas spending habits across the world, eventually. That’s also a positive for the likes of
Visa
(V) and
Mastercard
(MA).
Chinese tourists were the world’s biggest travel spenders in 2019, spending $255 billion abroad, according to International Monetary Fund data. China’s Ministry of Culture and Tourism added more than 70 countries, including Germany and the U.K., to its list of approved destinations for group travel Thursday.
The luxury goods sector, in particular, benefited from Chinese consumers spending overseas, and the return of group tours should help boost the stocks.
LVMH Moët Hennessy Louis Vuitton’s
(ticker: LVMHF) Chief Financial Officer Jean-Jacques Guiony said the contribution to sales from Chinese nationals in Europe at the moment was “very small,” when asked on the company’s earnings call last month. “It used to be a large, a big chunk of the business up to 2019. It’s very, very small. I mean we have no group, we have only individual travelers and they are only a fraction of the total clients we used to have in Europe,” he said.
LMVH stock jumped 3.4% Thursday after the news, despite the emergence of a new competitor in the form of the proposed merger between Coach owner
Tapestry
(TPR) and Versace parent
Capri Holdings
(CPRI).
Gucci parent
Kering
(KER.France) also enjoyed a 2.2% boost, while Cartier owner
Richemont
(CFR.Switzerland) jumped 2.5%.
Mastercard
(MA) said the cross-border travel recovery was progressing well but that China represented an opportunity, when it reported earnings last month.
“We still think there are pockets of opportunity on a going-forward basis, in particular going into and coming out of China,” Chief Financial Officer Sachin Mehra said on the company’s second quarter earnings call.
Write to Callum Keown at [email protected]
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