Middle East powder keg detonates, worries the tourism hotel industry, Deutsche Bank: Short-term pain is inevitable, no significant changes in the medium term.

The impact of the Middle East conflict on the tourism industry in the region, Deutsche Bank believes that there is uncertainty in the short term, but no significant changes in the medium term. The direct consequences of the attacks are extremely serious: i) Comprehensive shutdown of transportation: all airports in the region are currently closed, with some airports damaged in the attacks, and air travel has come to a standstill. ii) Targeted attacks on tourism infrastructure: Tourism facilities have also become targets of the attacks, including a Crown Plaza hotel in Qatar. iii) Humanitarian impact: Mecca has attracted a large number of pilgrims during the holy month of Ramadan, and these pilgrims are currently stranded due to the conflict. iv) Economic blockade: The Strait of Hormuz is a crucial chokepoint for global oil trade, with 20% of global oil transportation passing through the strait. The strait is currently closed, leading to a direct and significant impact on oil trade. In recent years, the Middle East has heavily invested in tourism infrastructure, aiming to become a key destination for leisure travel and business activities. However, the current situation has resulted in a complete halt in the region's tourism industry, with no tourists able to enter or leave the region. Business perspective analysis: a) Hotel industry exposure: The Middle East accounts for approximately 7% of Accor's revenue and less than 5% of InterContinental Hotels Group's revenue. Although Egypt is the largest business exposure for travel agencies in the region, it still accounts for a relatively small proportion of their overall business mix. b) Airline disruptions: Since the Ukraine conflict, a large number of Asia-Europe routes have been rerouted away from the Middle East, and these routes are now almost completely halted, effectively leading to a blockade in the region. President Donald Trump recently stated that the conflict could last for as long as a month, but the actual duration remains highly uncertain, possibly shorter or longer. Deutsche Bank believes that even if the conflict lasts only a short time, the financial impact on hotel groups and travel agencies will be limited. However, the market is expected to see widespread negative reactions, without significant differentiation between companies with exposure to the Middle East and those without. Although Accor, InterContinental Hotels Group, and some travel agencies have the largest exposure to the Middle East within the coverage, the scale of their exposure is relatively small, so the impact on their performance should be limited. At present, the bank sees no reason to adjust its medium-term investment recommendations. However, short-term financial markets may show negative performance, and the volatility of related stocks will also increase.