Surge in domestic travel in China bypasses hotel chains as thrifty travellers avoid the beaten track

by Alice

During China’s Labour Day holiday period, the country witnessed a surge in tourism, yet hotel chains grappled with economic challenges as budget-conscious travelers sought out lesser-known destinations to evade crowds and escalating competition.

Domestic tourists collectively spent 166.9 billion yuan (US$23.1 billion) in the first week of May, reflecting a 12.7% increase from last year and a 13.5% rise from pre-pandemic levels, as reported by the Ministry of Culture and Tourism on May 6.


Despite this uptick in tourism, hotel chains faced downward pressure. Data compiled by Caitong Securities revealed a 5.1% weekly drop in nationwide Revenue Per Available Room (RevPAR) to 129.3 yuan in late April, accompanied by a 4.3 percentage point decline in average occupancy rates to 58.8%.


Zhao Huanyan, a senior economist, attributed these challenges to a surplus in hotel supply and evolving preferences among domestic travelers. She noted a growing trend of travelers planning their own itineraries rather than opting for conventional tour group packages.


Lily Huo, an advertising professional from Beijing, opted for independent accommodations during her holiday trip to North China’s Shanxi province, citing dissatisfaction with crowded tourist spots and overpriced hotel chains. Similarly, Mavis Yang, a finance professional, chose independent lodgings during her road trip near Mount Huangshan, due to inflated prices at upscale hotel chains.

While five-star hotels maintained resilience in 2023, with RevPAR only marginally lower than 2019 levels, lower-rated establishments experienced lackluster growth, according to Renyuan Zhang, director of corporate ratings at S&P Global (China) Ratings. Zhang attributed this divergence to varying income levels among demographics, with higher-income groups fueling the recovery of luxury hotels.

As of 2023, China boasted over 90,000 hotel chains, marking a 28% increase from the previous year, as per the China Hotel Association. While branded chains manage approximately 41% of the country’s hotel rooms, this figure is expected to rise further, mirroring trends observed in developed economies.

Looking ahead, Zhang predicts continued recovery in China’s hotel sector for the latter half of 2024, albeit with full-year performance unlikely to match pre-pandemic levels.



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