There was surprise around the globe when China announced the easing of most of its COVID restrictions in December 2022. That meant the end of a zero-COVID policy which had suppressed China hotel industry performance for almost three years.
That also meant that January 2023 would feature China’s first Lunar New Year holiday without a lockdown since 2019, and as expected, positive performance developed for this important holiday period in the region.
During the seven-day holiday period, starting from Lunar New Year’s Eve on 21 January, China’s hotel average daily rate (ADR) surpassed 2019 levels. Occupancy edged closer to the comparable before eventually surpassing it on day seven, which shows that many decided to take extra time to celebrate the holiday this year. Also different from “normal year,” many opted for trips to their hometowns as opposed to international travel.
Overall, 36 of 43 markets in China saw growth in revenue per available room (RevPAR) when comparing the seven days to the holiday period in 2019.
Among all markets that performed well during the Lunar New Year period, Hainan and Sanya shined with RevPAR indexes to 2019 reaching 176 and 177, respectively. The beach side resort destinations, which were one of the few markets in China to outperform 2019 in the summer of 2022, benefited greatly from domestic leisure demand.
Traditionally, tier 1 cities (Beijing, Shanghai, Shenzhen, Guangzhou) are not hot destinations for Chinese New Year. Rather, these are the flow-out cities, especially Shenzhen, which is still a young city with most of its citizens hailing from other provinces. Interesting enough, however, Beijing becomes busy after the holiday week, as restaurants, subways, and malls started showing crowds on 6 February as many parents and children started their tour after family activities. School holidays ran through the weekend and to 12 February.
In addition to the Sanya and Hainan markets, other hot destinations included Xian, Quanzhou, and two cities in the Yunnan province: Lijiang and Xishuangbanna.
Yunnan is typically a hot destination but suffered the past three years because it is a fly-to destination far between cities.
While many of China’s markets saw exceptional growth, Hong Kong did not. The market’s RevPAR during Lunar New Year was still well below 2019 levels, indexing at 52, despite a reopening of the border with Mainland China on 8 January. The city has long benefited from its proximity with Mainland China, but the expectation of Chinese tourists flocking into the city did not happen during the holiday.
The beginning of the end
China ended most of its COVID restrictions in December, but hotel recovery has yet to move in a straightforward line. Most major gateway cities have seen their occupancy stuck at pre-release levels with only small improvement. This is partly due to the surge of infection following the initial stage of restrictions being lifted but also a result of the lack of overseas inbound travelers. Domestically-driven destinations like Sanya and Hainan, on the other hand, have defied that trend with occupancy trending upward since the beginning of December 2022.
The bigger picture
The Lunar New Year period is one of the longest holidays in China, but travel-thirsty citizens in China were still facing difficulty visiting neighboring countries because of restrictions imposed by destinations in response to the surge of infections in January. Yet, another Lunar New Year holiday without Chinese tourists did not stop Japan and South Korea from surpassing 2019 RevPAR levels. Further, five of Japan’s 12 STR-defined markets saw RevPAR grow up to 32%. On the contrary, popular outbound destinations in Southeast Asia were still behind 2019. Chiang Mai and Hanoi saw their RevPAR lower than 2019 by 42% and 29%, respectively.
Looking ahead to the rest of 2023, assuming borders remain open and flight capacity improves, the return of Chinese tourists is inevitable, which will provide an upside for markets relying on that demographic. The question remains on the scale of that return, which will be decided by a multitude of shifting economic and geopolitical factors. Still, it is certain that the Asia Pacific hotel industry will be better off compared to the last three years as travel restriction across the world have been removed and pent-up demand is coming.
