Huachuang Securities: Service consumption enters the fast lane of development, policy support helps the industry rise.

Huachuang Securities released a strategy research report stating that service consumption is ushering in a historic opportunity, and it is recommended to focus on four main themes: 1) Turning Point in Operations: Hotels, duty-free, and casinos benefiting from demand recovery; 2) New Supply: Tourist attractions with state-owned background and asset injections expected; 3) Value Reassessment: OTA with superior business models, expected to benefit from a booming market; 4) Pattern Optimization: Chain expansion and restaurant recovery in a thriving environment. At the same time, attention is also given to the incremental opportunities brought by the recovery of inbound tourism. The main points of Huachuang Securities are as follows: The total retail sales of social consumer goods exceed 50 trillion yuan, and service consumption has become the core engine driving domestic demand. After per capita GDP approaches $13,000, residents' consumption preferences begin to shift from goods to services, propelling the industry into a fast lane of development. By 2025, the growth rate of total retail sales of social services (5.5%) is faster than the growth rate of total retail sales of social consumer goods (3.7%). Although the proportion of service consumption in residents' consumption expenditure has reached 46.10% structurally, there is still significant room for improvement compared to the US (69.06%) and Japan (57.19%), with ample long-term growth potential. Taking the tourism industry as an example, by 2025, the domestic tourism trips will reach 6.522 billion, with tourism expenditure amounting to 6.3 trillion yuan, already surpassing the pre-epidemic levels in 2019 across the board, indicating that the industry's prosperity is on an upward trend. In summary, the driving factors behind service consumption come from the increase in per capita income levels and urbanization rates reaching a certain threshold, leading to generational change: the post-90s/post-00s "second generation of urbanization" is becoming the main driving force of consumption. Their consumption concept is shifting from "ownership" to "experience", from "survival" to "life," making experience-based consumption the mainstream and providing solid support for the long-term growth of service consumption. Policies have become an important DRIVING FORCE for the current development of service consumption. Since 2025, the central and local governments have issued a series of documents to support the development of service consumption. This is not just a short-term stimulus but a systematic resource allocation adjustment under the "combination of investment in things and investment in people" in the 14th Five-Year Plan. On the demand side, the spring and autumn vacations for primary and secondary schools have been implemented in many provinces such as Jiangsu, Sichuan, and Zhejiang, effectively smoothing out the peak and off-peak seasons for tourism and helping release the accumulated demand for family travel. At the same time, the distribution of consumer vouchers in various regions is also increasing, with the "Caiyun Series" consumer vouchers in Yunnan leveraging 700 million yuan in fiscal funds to drive over 145 billion yuan in consumption, showing a significant leverage effect. On the supply side, the central government encourages local state-owned enterprises to use listed company platforms to integrate high-quality cultural and tourism assets, with provinces like Sichuan and Hubei setting trillion-yuan targets for the development of cultural and tourism industries, driving the iteration of cultural and tourism supply. Looking ahead, three advantageous formats "super chains" (hotels/restaurants), "super entities" (tourist attractions/theme parks), and "super platforms" (OTAs) are expected to produce long-term bullish stocks. The hotel/OTA/beverage industries already have leading companies, but there is still significant room for growth in the chain fast-food and individual cultural tourism sectors. In the future, new leaders are expected to emerge in the chain industry through vertical integration, deepening content IP operations of cultural and tourism projects, and driving asset integration by local state-owned tourism companies. Risk Warning: Macroeconomic fluctuations; policy implementation falling short of expectations; intensified industry competition; geopolitical and external environmental risks.