Marriott: reopening in China
International Labour Day, on May 1, dates back to the 1880s, when workers around the world rallied for more rights, including an eight-hour limit on the working day.
But the holiday this year finds millions of workers already at home because of the coronavirus. The bigger concern is getting back to work – if their jobs still exist, that is.
China, which has been emerging tentatively from the worst of the virus, is focused on getting its economy firing again. So far it has shunned a bigger stimulus package and opted for more targeted measures to boost domestic consumption, such as issuing spending coupons or giving people more holiday (see WiC492).
The latest example is the holiday period in May, which is a day longer than last year’s. The hope is that the slightly longer break – a total of five days – will support travel and tourism after months of lockdown and restrictions on movement.
The good news for the Chinese tourism sector is that people will have to travel domestically – with overseas travel largely unavailable and strict quarantine rules being enforced for most international arrivals. Travellers in China are also expected to stay relatively local in their itineraries, given that there are various quarantine protocols in place for inter-provincial travel as well.
“Local tourism and travel in the surrounding area is the new mainstay,” predicts Ctrip, a leading travel firm, in an industry note. Three- to four-day trips not far from home are going to be the new normal, it added, with some people simply opting for a stay at a luxury hotel in the city where they live.
While the number of people choosing to travel is still likely to be just half of the holiday flow last May, Ctrip says that booking figures are still a sign of an initial recovery.
Compared to the three-day Qing Ming holiday at the start of April, there has also been a doubling in sales of package holidays and a 280% increase in the number of people planning to travel.
“Since the start of this year, tourist enthusiasm for travel has been suppressed due to the epidemic. Overseas travel is frozen, so many high-end tourists have turned to domestic options. In addition, for safety and anti-epidemic considerations… high-quality products are naturally popular,” Ctrip added.
One challenge for domestic tourism operators is that many sites have been ordered to cap visitor numbers as low as 30% of normal levels, limiting the sales potential. On March 11 the China Hotel Association also said its industry had been one of hardest hit by the Covid-19 crisis, losing Rmb67 billion ($9.48 billion) in January and February. It predicted it would take until September to get hotels back to more normal occupancy levels. Forecasts by the China Tourism Research Institute are also that revenues from domestic tourism this year will drop more than two-thirds – or Rmb1.18 trillion – on last year’s total.
The financial stress in the sector is already apparent. The formerly fast-growing hotel chain Oyo has shed some 9,000 staff in China, although failure to pay its franchisees as anticipated stirred protests outside its Shanghai offices last December – proof that its model was under strain before the outbreak.
In fact, many parts of the hotel industry were already suffering from oversupply and low occupancy. As China Economic Weekly points out, many operators were already saddled with significant debt and with cashflows cut so significantly there is a likelihood that many will fail.
Some analysts have predicted that the Covid-19 chaos will speed a consolidation in the hotel sector, with the strongest brands likely to be the main winners. This week InterContinental Hotel Group – owner of the Holiday Inn and Crowne Plaza brands – announced that almost all of its 470 properties in China had reopened and that bookings were steadily improving.
Last week Marriott reported that fewer than 20 of its (nearly 100) hotels in China were still closed and that occupancy rates in the first week of April had crept up to 20%.
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