Why This Travel Company's Stock Just Keeps Going Up and Up
The travel market in China continues to be strong in spite of the country’s economic growth stalling around 7.4%. Spending has been triggered not only by personal travel, but the country is on the verge of surpassing the United States in the area of business travel
Just take a look at the industry metrics. In 2013, total travel business spending in China came in at $225 billion, based on research by the Global Business Travel Association.
In the country, you can witness the explosive growth in travel infrastructure, which includes airlines, high-speed rail transit, cars and car rentals, and hotels.
In fact, China is already the world’s largest market for airlines, cars, and rail. The country is spending hundreds of billions of dollars in these areas and it’s only going to get bigger. And with more than 1.3 billion people in China alone, you know the travel market within the country will also expand.
You can now travel from Shanghai to Beijing in a few hours by taking a high-speed train and based on the government’s ambitious plans, the high-speed rail network is only going to expand.
In the airline sector, just ask Boeing Company (NYSE/BA) about China and you’ll realize it’s becoming the most lucrative global market for airplanes.
The vehicle market is also continuing to be the largest in the world, only held back by quota restrictions placed on car sales by the government in an effort to limit pollution.
With all of this added travel in the skies, on the roads, across the water, and by rail, you know the demand for hotels is also surging. After all, people need a place to rest once they reach their destination.
In the Chinese hotel market, a good domestic value-oriented Chinese hotel chain is Shanghai-based China Lodging Group, Limited (NASDAQ/HTHT), which had more than 20 million members in its loyalty program at the end of June.
Initially built in 2005, the reasonably priced hotels, ranging from economy to mid-scale, comprise about 1,669 hotels and 179,186 rooms across 270 cities in China as of June 30. The company had a high occupancy rate of approximately 90% in the second quarter.
The chart below shows the stock currently in a sideways channel with a recent breakout, but the stock has retrenched to its old channel. The stock is holding just above its 50- and 200-day moving averages (MAs), based on my technical analysis. We could see another breakout on the horizon, but be careful, as the stock could also falter down to the $24.00 level in the short-term.
Chart courtesy of www.StockCharts.com
For this company, the growth has been consistent. China Lodging has reported six straight years of revenue growth, from $37.31 million in 2007 to $688.59 million in 2013. The growth is expected to continue this year at 20.1%, followed by 14.4% in 2015, according to Thomson Financial.
So considering the expanding numbers in the business travel area, investors may want to considering riding the travel wave in China with a company like China Lodging.
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.