Chinese travel surge bypasses hotel chains; thrifty tourists avoid beaten path

The world’s second-largest economy saw a surge in tourism during the Labour Day holiday period, but hotel chains across China continued to face economic headwinds as budget-conscious tourists turned towards lesser-known resorts to avoid crowds and escalating competition among hotel operators kept prices from rising.

Domestic travellers spent a total of 166.9 billion yuan (US$23.1 billion) during the first week of May, marking a 12.7 per cent increase from the same period last year, and a 13.5 per cent jump from pre-Covid levels, according to data published on May 6 by the Ministry of Culture and Tourism.

However, hotel chains continued to face downward pressure. Data tallied by Caitong Securities, a brokerage firm, shows that the nationwide revenue per available room (RevPAR) dropped 5.1 per cent on a weekly basis to 129.3 yuan in the last week of April, while the average occupancy rate also declined 4.3 percentage points to 58.8 per cent.

RevPAR measures a hotel’s ability to generate revenue from its complete inventory of rooms.

“Owing to increasing investment, the capacity of the hotel industry has expanded quite a bit, to the point where supply exceeds demand,” said Zhao Huanyan, a senior economist and former consultant at Huamei Consulting Group, a hospitality advisory firm. “Domestic travellers are also becoming more sophisticated. People now prefer to plan their own routes,” rather than following tour groups to popular destinations.

Lily Huo, a Beijing-based advertising industry professional, said that during the May holiday period, she went to see some ancient architecture at a village in North China’s Shanxi province. She stayed in a “bnb-like” hotel.

“I came here because I thought the popular attractions on the internet were not very fun, and they must be really crowded,” she said. The village did not have many hotel chains, and the place she chose was 389 yuan per night.

“It was really not worth the price,” Huo said. “In Beijing, you can stay in an All Seasons or Hanting for that money. The facilities in the village hotel also could not compare [with these chains], whether it’s sanitation, services or furnishings.”

Mavis Yang, a Beijing-based finance professional who did a road trip through several tea fields around the famous Mount Huangshan in eastern China, also chose to stay with an independent operator, because prices at the high-end chains she looked at had gone up “unnecessarily”.

“Rooms at Banyan Tree [a Singapore-based chain] went up to 8,000 yuan for two nights, much higher than its usual price,” she said. “I don’t mind spending money to stay in a nice hotel, but I also don’t want to pay a high premium for something that’s clearly not worth it.”

“Five-star hotels stayed relatively resilient in 2023, with RevPAR hitting 357.4, only 3 per cent lower than the level in 2019, said Renyuan Zhang, director of corporate ratings at S&P Global (China) Ratings. “Nonetheless, growth for hotels rated four-star and below remained lacklustre, as illustrated by a 12 to 20 per cent retreat in RevPAR compared to 2019.”

Zhang explained that the divergence was caused in part by the different per capita income across demographics, where high-income groups could enjoy faster earnings recovery, thereby prompting the recovery of higher-end hotels.

As of the end of 2023, China had more than 90,000 hotel chains, a 28 per cent increase compared to the previous year, according to a report published on April 24 by the China Hotel Association.

The report added that around 41 per cent of the country’s hotel rooms were run by branded chains, and that number could continue to grow, as hotel chains make up over 60 per cent of the market in developed economies.

“We expect continued recovery for China’s hotel sector in the second half of 2024, while the full-year performance may not resume to the level in 2019,” Zhang said.