24Q4 social service industry performance outlook: stable total quantity, bottom structure, and accelerating innovation.

Zheshang released a research report stating that the offline peak cycle is approaching, with macroeconomic stability, price support, and consumption policies driving the innovation in the social services industry. Upgrading experiences drive higher efficiency and profits exceeding expectations; leisure prosperity continues, traffic converges towards platforms, OTA landscape stabilizes, growth and profitability continue to be realized; by 2025, attention should be given to project expansion and traffic growth brought by transportation improvements in scenic areas; hotels have reached the bottom of the cycle, and strategic adjustments and changes in existing stocks are expected to enhance efficiency; multiple players are entering the local life sector at an accelerated pace, but still find it challenging to shake the core advantages of Meituan in the short term, with local online demand gradually increasing and the instant retail race intensifying. Comprehensive e-commerce subsidies in 24Q4 have brought a mild recovery, focusing on the quality of supply-side goods and the development of the merchant ecosystem. Zheshang's main points are as follows: Travel sector: Q4 enters the off-peak travel season, with full-year travel numbers fully recovering According to the Ministry of Culture and Tourism, the total number of national tourism trips in 24Q1-Q3 was 4.237 billion, a year-on-year increase of 15.3%, with a total expenditure of 435 billion, a year-on-year increase of 17.9%. Compared to 2019, except for the first quarter with lower recovery rates, the number of trips in Q2/Q3 had already recovered to 100.5%/99.2% of 2019 levels, with travel income recovering to 114.4%/103.9% of 2019 levels. The 2024 National Day period saw a recovery rate of 110.2%/97.9% in terms of number of trips and income, and we expect travel numbers and income in 24Q4 to also recover to the levels of the same period in 2019. Diversified and decentralized domestic population contributes to incremental growth, with outbound travel growing beyond expectations. The demand for travel among young people is increasing, travel distances are shortening, and the growth of travel in lower-tier markets is impressive, with county-levelthird-fourth tierfirst-second tier, diversified scenic spots, and continued popularity of snow and ice tourism. Cross-border travel is rapidly recovering, with 160 million people entering and leaving the country in 2024Q3, a year-on-year increase of 30.1%, including 79 million mainland residents, a year-on-year increase of 27.6%, and the overall cross-border traffic has already recovered to 95% of 2019 levels, with double-digit growth expected to continue in inbound and outbound travel in Q4 as capacity supply resumes. Core scenic areas outlook: Differentiated customer flows in Q4, high prosperity in snow and ice tourism, traditional scenic spots enter the off-peak season Snow and ice tourism enters its peak season, with the opening of the Harbin Ice and Snow World attracting young visitors from the south, benefiting snow and ice tourism areas. TONGCHENGTRAVEL platform's snow and ice tourism-related search volume has grown more than three times compared to the previous period, with Changbai Mountain Tourism seeing a 26.5% year-on-year increase in Q4 customer flow. Traditional scenic spots are expected to remain stable, with slight increases in customer flow expected for Huangshan, Jiuhua, and other spots, while Jiangsu Tianmu Lake Tourism and other areas are under pressure due to high-end consumption. Offline retail: The offline peak cycle has arrived, with Q4 same-store performance expected to recover, weaker offline traffic compared to online, revenue under pressure in the first three quarters From January to November 2024, the cumulative year-on-year growth of social retail reached 3.5%, weaker than in 2023. At the same time, physical online retail sales grew by 6.8% year-on-year, with Wuxi Online Offline Communication Information Technology Co., Ltd. seeing an expanding gap in scissor models. Among various retail formats, the cumulative growth rates have all declined, with department stores maintaining negative growth in 24. Leading companies are affected by industry betas, with declining revenue and profits in Q3 24 for leading retail companies placing them in a downward trajectory. The most pessimistic moment may have passed, with marginal improvement expected in same-store performance. Compared to 2023, the CPI decline in 2024 has narrowed, with CPI determining retail prices, thus affecting same-store sales. Increased consumption voucher efforts in various regions have released multiplier effects, potentially boosting average spending per customer. As CPI enters an upward trend, same-store performance is expected to see marginal improvement. Transformation of new offline formats, upgrading products and experiences. Offline retail is shifting from focusing on traffic to existing stocks, and innovation is a necessary condition in this cycle of offline retail. Dating app Tantan's support for Yonghui and Bubugao has significantly improved the quality-price ratio and service quality, doubling customer flow, sales adjustments have continued to exceed expectations; Jiajiayue Group has also fully launched reforms, transitioning from KA to direct procurement, and adding baking categories; Heavy Hundred focuses on quality supermarkets and fresh discount dual adjustment strategies. Food and beverage hotels: Demand side affected, expecting policy support In 2024H2, restaurant demand weakened, with total social retail income from catering services showing a decline year-on-year. The expansion cycle of hotel supply has not yet ended; according to Hotel Home, as of November 2024, the number of hotel rooms nationwide has reached 112% of the 2019 levels. Under the pressure of supply expansion, while leisure demand remains strong in 24, hotel GMV has not seen a significant decline, but RevPAR is still in a monthly decline process. Local life: Multiple players intensify entry into the market in the short term, challenging Meituan's core advantages, and further intensifying competition in instant retail Consumer demand for services is continuously growing, with ample room for penetration in the local life industry. In the first three quarters of 2024, the average per capita expenditure on service consumption by the national residents was 9,694 yuan, a year-on-year increase of 7.6%, which is 2 percentage points higher than the growth rate of per capita consumption expenditure. From January to November 2024, the cumulative growth rate of retail sales of goods was 3.2%, and the cumulative growth rate of catering revenue of enterprises above the quota was 5.7%, with service consumption growth outperforming that of goods consumption. Multiple players entering the market to explore incremental growth, while Meituan maintains its dominant position. In September 2024, the cities where Xiaohongshu opened up group buying for catering services expanded from 5 to 49. During the Double 11 period in 2024 (November 7th to 11th), the GMV of local life on Kuaishou increased by 600% year-on-year, with daily average paying users growing by more than 50%. Starting in December 2024, Douyin's local life began testing integration with Amap for mutual traffic diversion. Looking at the long-term competitive landscape, Meituan will continue to maintain its position among small and medium-sized businesses, while Douyin focuses on large customers, with both sides expected to benefit from the expansion of the local industry. Instant retail becomes an added value to local online retail, with potential profitability in the pre-positioning warehouse model. Platform-type Meituan Flash Purchase has continued to strengthen its advantages, with the pre-positioning warehouse model surpassing the store model becoming the mainstream for expansion. The industry trend is shifting from doing "everything" to doing "better," with major brand retailers entering to enrich and improve the supply of goods. The profitable self-operated model is gradually proving to be successful, with potential profitability in the pre-positioning warehouse model.At the end of the fourth year, Hema announced a double-digit growth on the basis of overall profitability for nine consecutive months.Integrated e-commerce: 24Q4 national subsidy catalyzes mild recovery, focusing on quality main line of the supply side The total social retail sales in September and October 2024 picked up, mainly due to the national subsidy for cars, household appliances for trade-ins, and the distribution of consumer coupons. The year-on-year growth rates of total social retail sales in September and October 2024 were 3.2% and 4.8% respectively, with increases of 1.1 percentage points and 1.6 percentage points month-on-month. The national subsidy catalyzes a mild recovery during the Double 11 period, with household appliances contributing the highest proportion to GMV. JD and Alibaba benefit greatly, while Pinduoduo and Douyin benefit marginally. According to Xingtu data, the total online sales on Double 11 in 2024 reached 1.4418 trillion yuan, with the total sales of integrated e-commerce/live e-commerce reaching 1.1093 trillion yuan and 332.5 billion yuan, an increase of 20.1% and 54.6% respectively. In terms of product categories, the sales of household appliances contributed the most, reaching 16.3% and an increase of 26.5%. In the medium to long term, attention should be paid to the improvement of the quality of e-commerce supply side and the continuous prosperity of the merchant ecosystem. Recommended investment targets Offline retail: Yonghui Superstores (601933.SH), Chongqing Department Store (600729.SH), Jiajiayue Group (603708.SH), Suning.com (002024.SZ), Chengdu Hongqi Chain (002697.SZ); Local life: MEITUAN-W (03690); E-commerce: BABA-W (09988); Catering and hotels: Tongqinglou Catering Corporation (605108.SH), BTG Hotels (600258.SH), Shanghai Jin Jiang International Hotels (600754.SH), Huazhu Group (01179); OTA platform: TRIP.COM-S (09961), TONGCHENGTRAVEL (00780); Scenic spots: Western Regions Tourism Development (300859.SZ), Changbai Mountain Tourism (603099.SH); Performing arts: Songcheng Performance Development (300144.SZ). Risk reminder Consumption recovery falls short of expectations; intensified industry competition; exchange rate and interest rate risks; policy and regulatory risks.