Industrial: It is suggested to pay attention to the year 2026 as the first year of service consumption, and to focus on the layout of inflation expectations repair and segmentation of the economy throughout the year.

Industrial released a research report stating that boosting domestic demand will be a top priority for economic development by 2026. In particular, compared to overseas, China's residential service consumption has great potential for improvement and is expected to become a new focus for the country after further optimizing consumer subsidies. Money, time, and supply-side constraints all provide good starting points for policy. Sector fund allocation is currently at historically low levels and overall valuations already reflect many pessimistic expectations. The bank suggests focusing on 2026 as the year of service consumption, along with gradually transmitting policies to residents' income expectations, and positioning for inflation expectations repair and subdivided prosperity throughout the year. 1) Expectations for the repair of the main cycle: high-end recovery and a new tax-free cycle gradually reinforced by policies, inflection point of hotel supply and demand rebalancing, and improvement in same-store performance of catering expected by CPI. 2) Directions for the subdivision of prosperity: public examinations and vocational education guided by stable employment, silver-haired tourism, tea drinks undergoing continuous innovative iterations, and the direction of new technology iterations and AI applications. In the short term, the New Year's Day and Spring Festival high prosperity are connected to set the tone for the rest of the year, and the leading service consumption is expected to resonate with policy expectations and fundamentals. Key observations from Industrial are as follows: Summary of holiday market trends The high prosperity data from the Spring Festival holiday boosted consumption and travel leaders in Hong Kong and American stocks, with overall stability and upward trends. Some undervalued education and other targets benefited from liquidity recovery and showed some rebound, while the tax-free sector with relatively high expectations before the holidays experienced a slight pullback. Spring Festival holiday summary: the longest historical Spring Festival holiday drove the high-speed growth of long-distance passenger flow, with good ticket price growth. 1) Quantity side: In terms of domestic travel, according to statistics from the Ministry of Transport, during the 2026 Spring Festival from New Year's Eve to the sixth day of the first lunar month, cross-regional population mobility nationwide increased by 9.6% compared to the same period last year, with railway and civil aviation passenger flows increasing by 11.3% and 7.7%, respectively. This record-breaking Spring Festival led to a return home and travel. Civil aviation and railway related to long-distance travel significantly improved; cruise and other water tourism products rebounded, and the closure of Hainan boosted the passenger volume of the Qiongzhou Strait, resulting in waterway passenger volume increasing by 29.8% year-on-year. On the price side, according to DAST statistics, ticket prices for flights increased by 3.6% in the first 21 days before the Spring Festival travel, and the predicted ticket price growth during the holidays is expected to be higher than before the holiday (6.3% year-on-year increase in prices before the holiday). Sub-industries: validation of the hotel price increase logic, double-digit growth in tax-free sales in Hainan, outstanding performance of prayer areas, accelerated growth of local retail and dining options. 1) Hotels: According to data from Hotel Home, during the Spring Festival week in 2026 (February 16-22, 2026), compared to the same week last year's Spring Festival, the hotel industry's REVPAR increased by 30.7%, OCC by 8.1%, and ADR by 13.5%. With strong demand growth combined with the top group's "anti-internal competition price stability" consensus gradually forming, it is expected that the leading holiday prices will be prominently realized, leading the downward market growth under the reverse New Year trend. 2) Tax-free: According to statistics from Haikou Customs, from February 15 to 19, the amount and number of people shopping tax-free on outlying islands in Hainan were 13.8 billion yuan and 177,000 respectively, representing a 19% and 24.6% increase compared to the first five days of the previous year's Spring Festival holiday. 3) Scenic areas: With the help of weather during the holiday season, most scenic areas showed good passenger flow, with outstanding performance in operations, prayer areas, ice and snow areas, and so on. 4) Local consumption: According to business big data, in the first four days before the holiday, the average daily sales of key retail and dining enterprises nationwide increased by 8.6% compared to the same period before the 2025 holiday, showing an accelerated growth. Risk warnings: systemic risks such as macroeconomic conditions and epidemics; policy risks; risks of acquisition below expectations, shareholder selling pressure, market fund style changes, etc.