IPO Analysis | GBA Tourism: A Veteran Greater Bay Area Travel Service Provider, What Is the Growth Potential of Cross-Border Travel?

Title context: IPO Analysis | GBA Tourism: A Veteran Greater Bay Area Travel Service Provider, What Is the Growth Potential of Cross-Border Travel? Text: China Travel Hong Kong Macau Cultural Tourism Holdings Co., Ltd. (referred to as "GBA Tourism"), a travel service provider with a history of more than 70 years, is about to list on the Hong Kong stock market. According to the disclosure by the Hong Kong Stock Exchange on October 26, GBA Tourism has passed the listing hearing of the Main Board of the Hong Kong Stock Exchange and intends to list on the Main Board of The Stock Exchange of Hong Kong Limited by way of introduction, with China Galaxy International as its sole sponsor. According to the prospectus, as of October 20, GBA Tourism is a direct wholly-owned subsidiary of CHINA TRAVEL HK. As the distribution will be effected by distributing all of the company's issued share capital to qualifying CHINA TRAVEL HK shareholders in proportion to their shareholdings in CHINA TRAVEL HK on the record date, immediately following the distribution, the company will cease to be a subsidiary of CHINA TRAVEL HK, and the company's controlling shareholders will include China Tourism Group, CTS (Group), CTS Asset Management and Hong Kong New Travel. The introduction listing does not involve any public offering of shares of the company or any other securities for purchase or subscription. A "Veteran" Travel Service Provider in the Greater Bay Area According to the prospectus, the subsidiaries of GBA Tourism can trace their service history back to 1954, and the company has become a travel service provider focused on the Greater Bay Area. The company operates a cross-border passenger transport platform covering sea and land networks in the Greater Bay Area. The company's two major cross-border passenger transport brands provide cross-border transportation services: "TurboJET" and "CTS Bus." As of April 30, 2026, GBA Tourism's TurboJET operates Hong Kong-Macau ferry routes with 22 government-licensed vessels; CTS Bus mainly operates cross-border road passenger transport services, and the company's fleet has 221 coaches and 44 business vehicles, with routes covering Hong Kong, Macau and the other nine cities of the Greater Bay Area. In addition, GBA Tourism operates a portfolio of three distinctive hotel brands (Metropark, Regal and Parkview). As of October 20, GBA Tourism operates six hotels under the Metropark brand, one hotel under the Regal brand and one serviced apartment under the Parkview brand. The hotels are located in prime locations, situated in key commercial districts and tourist hotspots in Hong Kong, Macau and Beijing. These hotels operate in business and chain formats, targeting the mid-to-high-end market. GBA Tourism has also been appointed by CTS (Group) to provide entrusted travel document processing services in Hong Kong, with the aim of providing greater convenience to the public. GBA Tourism provides a wide range of travel-related services and operates through three business segments: passenger transport, hotel business, and travel documents and related services. In 2025, passenger transport and hotel business accounted for 86.2% of revenue. Specifically, in terms of passenger transport, GBA Tourism provides cross-border ferry transportation services under the "TurboJET" brand. Through scheduled high-speed ferry services operating on fixed routes and timetables, GBA Tourism connects the major ports of Hong Kong, Macau and Shenzhen. GBA Tourism's ferry transportation services are supported by service products, including ticketing, reservations and supporting customer services provided through multiple sales channels. GBA Tourism also operates cross-border bus services connecting Hong Kong and Macau with mainland Chinese cities in the Greater Bay Area, supplemented by local passenger transport services in Hong Kong, Zhuhai and Shenzhen. In terms of the hotel business, GBA Tourism operates a total of eight accommodation properties in Hong Kong, Macau and Beijing, including seven hotels and one serviced apartment. Through its three brands, it provides accommodation options ranging from high-end to affordable for its customer base, primarily targeting the mid-to-high-end market. GBA Tourism's properties are all located in core locations in major city centers, serving business travelers and sightseers seeking convenient access to major commercial, leisure and transportation hubs. In terms of travel documents and related services, the company's entrusted travel document processing services mainly involve assisting individual applicants in processing cross-border travel documents, including receiving travel permit applications and related data, conducting preliminary checks on whether the required data has been provided completely, and submitting such information for further processing. GBA Tourism provides the above services under an arrangement with CTS (Group), pursuant to which GBA Tourism has been appointed as the exclusive agent of CTS (Group) for providing entrusted travel document processing services in Hong Kong until June 30, 2047. Business Scale Stable, Rising Costs Constrain Profit Growth In terms of performance, for the years 2023, 2024 and 2025 and the first four months of 2026, GBA Tourism achieved revenue of approximately RMB2.191 billion (HK$, same below), RMB2.242 billion, RMB2.198 billion and RMB721 million, respectively. During the same periods, the company achieved annual/period profit of approximately RMB479 million, RMB194 million, RMB117 million and RMB23 million, respectively. Since 2023, GBA Tourism's revenue scale has remained stable, but its net profit margin has declined from 21.9% in 2023 to 3.2% in the first four months of 2026. One of the main reasons for the decline in profit margin is the rise in cost of sales, which caused the gross profit margin to decline from 36.8% in 2023 to 23.2% in the first four months of 2026. According to the prospectus, GBA Tourism's cost of sales includes employee costs, fuel costs, depreciation expenses, supplies and consumables, maintenance and repair costs and other direct costs. The company noted in the prospectus that when the growth rate of the above costs outpaces price adjustments, utilization or product mix optimization, gross profit and gross profit margin will decline. It is worth noting that GBA Tourism's business depends on a stable supply of fuel, electricity and other energy resources at commercially reasonable prices. The company's passenger transport business requires substantial fuel and energy to operate ferries, buses and related transportation facilities, while the hotel business consumes electricity, gas and other energy resources for guest rooms, catering services, air-conditioning systems, lighting and other hotel facilities. In 2023, 2024 and 2025 and the first four months of 2026, the company's fuel costs accounted for 18.1%, 17.3%, 15% and 19.1% of cost of sales in the same periods, respectively. Affected by rising fuel costs, the gross profit margin of the company's passenger transport business fell to -4.2% in the first four months of 2026. GBA Tourism noted that looking ahead, the company's performance will depend on changes in cost of sales relative to revenue. The company aims to limit cost pressure through productivity enhancement measures, the use of technology to optimize operations, strategic procurement, proactive lease and contract management, and rigorous capital and maintenance planning. However, if costs grow faster than revenue, margins may continue to contract. Greater Bay Area Passenger Flow Expansion, Scale Effects Expected to Restore Profitability It is noted that, supported by the continued implementation of interconnection policies in the Guangdong-Hong Kong-Macao Greater Bay Area, cross-border business travel and "multi-stop" tourism demand are steadily recovering, which will open up long-term growth space for GBA Tourism's passenger transport and hotel businesses. Frost & Sullivan data shows that from 2026 to 2030, the market size of cross-border passenger transport services in the Greater Bay Area will maintain a compound growth rate of 11%, and the market size is expected to reach RMB47.1 billion in 2030. The most direct benefit of increased passenger flow is the dilution of fixed costs in the passenger transport business. At present, the company has sufficient vehicle and vessel capacity, but passenger load utilization is insufficient, and rigid expenses such as fuel, vessel depreciation and fleet maintenance cannot be fully apportioned, which is also the core reason for the decline in passenger transport gross profit margin in recent years. As customs clearance efficiency in the Bay Area continues to improve and travel by Hong Kong residents to the mainland and by mainland residents to Hong Kong and Macau becomes normalized, the passenger load of TurboJET ferries and CTS Bus schedules is expected to rise steadily, and fuel and depreciation costs per unit of capacity will continue to decline, with marginal costs gradually decreasing, driving a recovery in gross profit of the passenger transport segment. At the same time, cross-border passenger flow will also continue to benefit GBA Tourism's hotel segment. The company's Metropark, Regal and Parkview series hotel properties are located in core business districts of Hong Kong, Macau and Beijing, focusing on mid-to-high-end business and tourism customers, and are able to capture cross-border travelers brought in by passenger transport. During an upward cycle in industry demand, hotel occupancy rates and average room rates are expected to improve; combined with the company's plans to upgrade existing properties and explore asset-light management output, the hotel business is expected to continue its growth trend and hedge against profit volatility in the passenger transport segment. The business synergy of passenger transport traffic generation + hotel accommodation will further amplify the Greater Bay Area tourism dividend. Frost & Sullivan data shows that, driven by the recovery in inbound traveler flows, improved cross-border connectivity in the Greater Bay Area and the gradual recovery of convention, exhibition and business activities, the market size of Hong Kong hotel services is expected to grow steadily, with a compound annual growth rate of 6.1% from 2026 to 2030, growing to RMB36.6 billion; during the same period, the market size of Macau hotel services is expected to grow at a compound annual growth rate of 12.9% to RMB68.8 billion. In the long term, cross-border tourism and business travel demand in the Greater Bay Area has ample growth potential. With its sea and land passenger transport network, core-location hotel assets and the support of China Tourism Group resources, GBA Tourism is expected to continue to benefit from passenger flow dividends, dilute rigid costs through scale effects, and promote a gradual recovery in profitability. However, opportunities coexist with challenges. Factors such as fuel price fluctuations, diversion by other modes of transportation, and intensifying competition in the hotel market will still constrain the pace of profitability improvement, and subsequent performance still requires continuous observation of passenger flow recovery and cost control effectiveness.