Chinese Consumers Tighten Budgets, Hotel Industry Struggles

As China’s economy flounders, Chinese consumers are saving money, leading to a struggling hotel industry, even during the busy holiday season, including October’s National Day week and November’s “Double 11” holiday—also known as Singles Day.

Hotels engaged in a fierce price war after the National Day holiday from October 1 to October 7, deemed “the worst golden week” by some industry professionals. On October 15, travel website C-trip launched a “stock up now, pay later” promotion for Double 11, offering a “Zero Yuan Order” and major discounts on hotel packages.

Fliggy, a Chinese online travel agency, sold 100,000 three-night hotel packages at 999 yuan ($140) within 10 minutes of its “Double 11 sale” on October 21.

The aggressive price war ahead of the holiday season is raising concerns. Ji Qi, founder of H World Group, which runs 10,000 hotels worldwide, warned that excessive discounts could hurt competitiveness.

A Shanghai hotel employee noted, citing Hotel Tech Report, that this year’s market is weaker than last year’s due to the economic situation.

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He mentioned that hotel rates have dropped, with rooms that used to cost 500 yuan ($70) per night now going for 300 yuan ($42) per night.

However, he also noted a decline in quality, as four-star and five-star hotels are cutting corners on amenities.

During the National Day holiday week, while the number of tourists rose, the financial performance was disappointing due to a widespread consumption downgrade in China.

Some tourism industry professionals described it as the “worst National Golden Week” in history, as reported by the Chinese language newspaper World Journal.

Official data from China’s Ministry of Culture and Tourism showed that 765 million people travelled domestically during the holiday, marking a 10.2 percent increase from the same period in 2019, just before the COVID-19 pandemic. However, spending only rose by 7.9 percent.

Based on data from Fliggy, upscale hotel bookings in China during this year’s National Day holiday surged by nearly 40 percent compared to the same period last year.

However, the average price for hotel bookings dropped by around 6 percent year over year.

In late September, a hotel owner in Changsha took to social media to voice their struggles, stating, “At this price, even in a prime location, we can’t cover basic rent. After accounting for labour, utilities, and platform commissions, I’m facing a significant deficit. I don’t know how we can sustain this.”

Despite a fierce price war among Chinese hotels, the industry is rapidly expanding nationwide.

As of March 31, Huazhu China, a subsidiary of H Group, operated 9,684 hotels across 1,290 cities, marking an increase of 158 cities from the same period last year, according to Sohu Travel.

Wang He, a U.S.-based China affairs observer, told The Epoch Times that with tourists traveling on tight budgets, hotel prices are unlikely to rise. He criticized the large-scale hotel construction and expansion under these circumstances as being impractical.

Davy J. Wong, a Chinese American economist, explained to The Epoch Times that the Chinese hotel industry is suffering from over-expansion and capital-driven growth, causing hotels to cluster in certain areas and compete excessively.

Wong highlighted serious issues beyond the imbalance between supply and demand.

He noted that consumption has significantly downgraded, with a rise in short-term rentals, homestays, and budget accommodations.

This shift has made it difficult for capital-investment-dependent hotels to compete with lower-end options, resulting in intensified competition within the industry.

Wong forecasted a significant shake-up in the hotel industry, anticipating that many hotels in China could face bankruptcy within the next three to five years.

Tian informed The Epoch Times that domestic hotels are laying off staff to survive.

“With no government or corporate conferences, the related liaison and sales departments in hotels will be disbanded, catering will be outsourced, and hotels will focus solely on providing guest rooms,” he explained.

Since the onset of the China-U.S. trade war in 2018, the decline in foreign tourists has posed significant challenges to China’s hotel industry.

Tian highlighted that increasing tensions between China and the U.S., as well as China and Europe, coupled with the Chinese government’s support for Russia in the Russian-Ukrainian war, have contributed to negative perceptions of China in the West.

The strict three-year zero-COVID policy further exacerbated the issue, resulting in a sharp drop in foreign tourists, visitors, students, and investments.

Despite implementing unilateral visa-free entry policies to attract tourists, the expected boost to the industry has not materialized.

“It’s ineffective,” Wong stated. He added that the Chinese government’s anti-Japanese and anti-American propaganda and education, along with incidents of violence against foreigners, have also had negative impacts.

Wang highlighted that foreigners are no longer coming to China. “The issue isn’t about visas.

The three-year COVID-19 lockdown imposed by the Chinese Communist Party has frightened Westerners away.

They’ve mentally distanced themselves from the regime. Many Westerners in China feel the need to leave the country. This has resulted in a significant decline in the number of Westerners traveling to China, and it hasn’t recovered,” he explained.
(Source: KHABARHUB)