Background
The aviation industry is breaking through the clouds with the revival of scheduled international flights. Asia, out of all regions, has been seeing soaring trends since 2021 which surpassed North America fuel demand in late 2022. It’s also catching up with Western Europe, which has been the overload in the sector for many years leading waves of travel demand on a yearly basis.
Apart from growth in departures, Asia is also gaining attention as one of the top destinations as short trips mushroomed during the pre-opening window. Following easing of China’s Covid Zero policy in 2023, the return of Chinese tourists could fuel a stronger travel rebound. This is also evident from analyzing trends across Online Travel Agency (OTA) industry peers. While the rebound in online travel revenue from 2021 start to see flatten trends for global competitors, as streets project YoY growth for upcoming 2023 quarters to be generally below 15% for TripAdvisor, Booking, Airbnb, Expedite Group and Trivago respectively. On the other hand, Trip.com, which serves predominantly Chinese tourists, continues to see upside potential with YoY growth ranging between 40 and 90% for the rest of 2023.
The issue
Alongside the revenge travel demand and consumer confidence rebound, one of the biggest benefactors during pandemic lockdown – the Online Food Delivery sector has been experiencing mixed downstream impact from consumer behavior change – the choice between staying in vs going out, amidst the marco backdrop of higher rate of inflation and rising interest rates.
Consumer confidence is recovering, while the economy requires more time to return to normal. Looking at Online Food Delivery dashboard using {KPIC<GO>} function, Gross Merchandise Value, which measures the total gross transaction value for platform companies, has been increasing since the start of Covid for Asia peer’s business lines – including Grab, Deliveroo and Foodpanda operated under Delivery Hero. When Asia economies start to open up in 2022, the segments lose momentum to grow.
The impact is especially strong for 2023 Q1, when Delivery Hero Asia segment and Deliveroo International segment have both seen significant decline of more than 7% YoY for their business lines involving Asia. Southeast Asia’s Grab just reported its 2023 Q1 result last week, with Deliveries GMV missed street expectation for 4.6%. Grab shares closed 15% lower post result, the biggest drop since March 2022 which was also fuelled by unsatisfactory earnings results.
It is a mixed impact from both consumer confidence recovery and options to dine out as travel resumes. While the food delivery industry is yet to recover to the pre-Covid level. Meituan, which serves predominantly the Chinese market, has stopped disclosing the equivalent metric Gross Transaction Value from 2022.
Top line pressure of revenue growth could continue to be challenged for consumer internet companies. The new normal reshaped by the pandemic has also forced the online food delivery companies to shift from growth strategy to profitability strategy. {GRAB US Equity MODL SOURCE <GO>} indicates that 2022 Q3 was the first quarter for Grab’s delivery business to turn profitable with positive segment adjusted EBITDA. As shared by Bloomberg Intelligence analyst Nathan Naidu, “further scaling back of incentive spending, or targeting them at active spenders, should increase revenue earned per dollar of GMV without compromising user retention, but that would likely come at the expense of GMV growth. An intensified focus on profitability means GMV growth in the next few years could be a fraction of the 41% yearly pace in 2018-21.”
Tracking
Use Bloomberg’s DSET FLY, ECST, KPIC and MODL functions to track the latest consumer trend and evaluate key player performance in Asia. On the Terminal, run NSUB FFMSTORY to subscribe to functions-based articles.
Bloomberg
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