After years of pandemic-induced setbacks, the travel industry in China is witnessing a significant resurgence, and Huoli Group Holdings Ltd. is ready to seize this momentum. Known for its comprehensive transport booking apps, the mobility platform has filed for an IPO in Hong Kong, signaling its ambitions to extend beyond its core domestic market. Huoli’s decision could make it one of the few travel-related companies to go public in recent years, with the IPO expected to raise around $70 million.
Huoli’s story is set against the backdrop of a rapidly transforming Chinese travel landscape. Driven by pent-up demand for “revenge travel” following strict COVID-19 lockdowns, Chinese consumers have revitalized the domestic travel market. But with signs that the boom might be plateauing, the timing of Huoli’s IPO will be crucial.
A Revival in Travel, and a Bet on Sustained Demand
China’s domestic travel sector has experienced a wave of growth post-pandemic, which is reflected in Huoli’s performance. The company posted a revenue increase of 22.6% in the first half of 2024, driven by transportation bookings that make up about three-quarters of its revenue. Despite slowing growth rates and a slight dip in net profit to 31.7 million yuan in the latest period, the figures underscore Huoli’s ability to attract customers back to its platform.
Yet, Huoli isn’t immune to the same challenges its peers face. The recent National Day Golden Week holiday, a major travel period in China, showed a deceleration in growth, with domestic trips up by only 5.9% year-on-year. While these figures still indicate robust demand, there’s caution in the air as Chinese consumers become more conservative with discretionary spending.
The company’s gross margin improvement—from 49.8% in 2021 to 58.6% in the first half of this year—demonstrates an operational efficiency that could serve as a buffer against economic uncertainties. Huoli’s profitability is anchored in its transportation services, with 73.1% of its revenues originating from air and train ticket bookings. Corporate travel and online ride-hailing contribute to a smaller portion of its revenue stream, but they underscore the company’s commitment to diversifying its offerings.
A Third Player in a High-Stakes Industry
Huoli’s ranking in China’s travel market places it behind giants like Trip.com and Tongcheng, which command much larger market values. Trip.com’s valuation of $45 billion and Tongcheng’s $5.5 billion underline Huoli’s relative standing, with the latter’s current valuation estimated at $282 million. Nevertheless, Huoli’s position as the third-largest player allows it to carve out a distinct niche, particularly in train bookings, where it holds a 2.2% market share.
The company’s flagship products, the Flight Master and Train Master apps, have become household names among frequent travelers in China. With these apps covering extensive networks, including 5,000 airports globally, 3,000 Chinese rail stations, and nearly 400,000 hotels, Huoli offers an integrated travel experience that’s crucial in today’s mobile-first market.
Still, as it stands, Huoli’s current revenue sources are purely domestic. The decision to pursue a Hong Kong listing may be partly aimed at gaining foreign currency access to support regional growth plans. Zhou Menghao, Huoli’s director of marketing, has highlighted the company’s vision to turn Hong Kong into a hub for its planned expansion across Asia. Such a move would allow Huoli to tap into the international market, building on its domestic reputation to cater to a broader audience.
IPO Optimism Amid Economic Stimulus
Huoli’s IPO filing in Hong Kong aligns with a favorable moment in Chinese financial markets. In September, China announced a suite of economic stimulus measures aimed at reviving growth. Dubbed a “monetary bazooka,” the measures have injected optimism into the market, helping the Hang Seng Index recover and stabilize. This resurgence has positively impacted several recent listings in Hong Kong, a trend Huoli hopes to capitalize on.
The company’s previous listing attempts, including an NEEQ listing in 2017 and a preliminary filing on Shanghai’s STAR Market in 2019, were ultimately scrapped due to low trading volumes and strategic pivots. Now, Huoli sees Hong Kong’s market as the best fit for its goals, particularly as it looks to position itself as a regional player with significant influence in Asian travel.
Huoli’s IPO could also benefit from renewed investor interest in Chinese equities, as there’s a growing belief that the government’s economic policies will bear fruit. Despite the slowdown in broader consumer spending, the travel sector has remained resilient, showcasing the strength of pent-up demand.
Competition and the Road Ahead
Huoli’s IPO will place it alongside Trip.com and Tongcheng in the public markets, further highlighting the competitive dynamics of China’s travel industry. While Huoli’s competitors have already gained ground internationally—particularly Trip.com, which has established a significant footprint outside of China—Huoli’s focus has been more contained. The company’s future success will hinge on its ability to differentiate itself, potentially by leveraging its core competency in transportation services and tailoring its offerings to regional travelers in Asia.
The company’s roadmap, as it seeks to solidify its brand and expand across borders, will likely include more partnerships with local tourism boards, airlines, and other regional operators. This strategy will be essential as Huoli competes with industry veterans that have already amassed deep partnerships and brand recognition globally.
The Strategic Importance of Hong Kong
Choosing Hong Kong as its listing venue aligns with Huoli’s goal of attracting a diverse set of investors while also making it easier to raise foreign currency for overseas expansion. Positioned as a gateway to Asia, Hong Kong provides Huoli with a strategic platform for future growth. Additionally, a successful listing could increase brand visibility among international travelers who could become future users of the company’s services.
Hong Kong also serves as an appealing base for companies eyeing Southeast Asia, a burgeoning market where Huoli’s transportation services could find a strong foothold. With rising middle-class incomes and a growing appetite for travel in markets like Indonesia, Thailand, and the Philippines, Huoli’s Hong Kong listing could be a pivotal step toward building a pan-Asian travel brand.
As Huoli moves through the IPO process, its success will rest on the continued stability of China’s domestic travel market and its ability to deliver on regional ambitions. A successful IPO would not only mark a milestone for Huoli but could also serve as a bellwether for the future of Chinese travel IPOs in Hong Kong and beyond.
