China’s recent Golden Week spending figures reveal the long and deep impact of COVID-19 on domestic travel and tourism – and new insight into the Chinese consumer.
And data from the week-long October holiday shows a rebound to pre-pandemic levels of activity is still some way in the future.
What is Golden Week, and why does it matter?
Golden Week is a unique barometer of Chinese consumer appetite. In fact, the holiday itself is a relatively recent phenomenon, an invention with the express purpose of encouraging domestic spending. The seven-day break was first implemented in 1999 in the wake of the Asian financial crisis, which shook China’s export-dominated economy. Concerns about lopsided growth led the government to implement new, week-long holidays in the hope that they would drive domestic consumption and promote more balanced economic growth.
Of these, the “Golden Week" kicking off on National Day on October 1 has come to hold a particular significance to economic commentators. It differs from China’s other week-long break, which falls around Lunar New Year in January or February, in two important respects: Firstly, it’s not associated with the same traditional duties as the New Year, when people travel to their hometowns to visit family. This lack of familial duty frees people to spend their time, and money, with greater discretion.
Secondly, the weather is better. The result is hundreds of millions of people taking advantage of the holiday to get out and about. Train tickets sell out, traffic snakes along the major highways, and venues hit capacity. It’s the second most important holiday in China, and one of the busiest periods of domestic tourism.
Some pundits were predicting a flurry of spending activity across the holiday this year, assuming pent-up demand due to international travel restrictions and intermittent shutdowns would result in a splurge on domestic travel. For a number of reasons, this boon to local tourism hasn't played out.
What has COVID-19 changed?
COVID-19 fears and controls curbed Golden Week consumption in 2021. Data shows travel spending across Golden Week 2021 was a third lower than pre-pandemic levels. The ministry reported 515 million domestic tourist trips taken over the seven days, just over 70% of the same period in 2019. Significantly, the figures also revealed a year-on-year decline of 1.5% from 2020. Travel spending in 2021 was also lower than in the previous year by 5%.
So why are people spending even less in 2021’s Golden Week than in 2020, when the threat of COVID-19 still loomed fresh?
In 2020, China had yet to roll out its massive vaccination program, and some restrictions were still in play. Popular tourist sites were limited to 75% capacity. There were temperature checks at key terminals and mandatory masks in venues. Still, the country had effectively managed to curb the worst of the virus outbreak and opened up much of its domestic travel with some controls. The government urged its citizens to “revenge travel”, encouraging spending to stimulate the economy. Many popular tourist sites offered discounted or free tickets to encourage visitors. Hundreds of millions took up the challenge and hit the roads. Despite this rebound, domestic tourism revenues still fell well short of the previous year at 466.56 billion yuan ($US68.7 billion), down from nearly 650 billion yuan in 2019.
The tourism industry was hoping 2021 would see improvements on these figures, but instead, spending has fallen again. In part, people are still concerned by the possibility of their plans being disrupted by COVID-19 controls. China has a “COVID Zero” strategy, acting quickly to enact localised lockdowns during outbreaks. The strategy comes at a significant economic cost. In the lead up to the 2021 holiday, controls measures were enacted to combat sporadic outbreaks of the Delta strain. The government advised against unnecessary movement between provinces. And while the outbreaks were contained, and the government again opened travel ahead of the holiday, it seems consumers were less inclined to risk travel far from home.
Commentators have also blamed this year’s subdued Golden Week spend on belt-tightening, slower than previously predicted economic growth, and more consumer anxiety. The holiday usually sees a flurry of activity in the property market, as people take the opportunity to buy homes, but recent moves by the government to curb price hikes, and more restricted lending, have cooled the market.
Spending closer to home
Reports suggest a pivot in Golden Week 2021 towards shorter, cheaper holidays closer to home and “staycations”. Most Golden Week trips were made within the holidaymakers’ home province, according to ministry figures. Food delivery giant Meituan reported that almost 80% of people consumed in their own homes. The company also reported a 30% year-on-year increase across its broader shopping platform and a 50% increase from 2019.
Cinema ticket sales were another exception to the 2021 Golden Week downward trend. This year's sales showed improvement on 2020 figures thanks to the popularity of the release of a film about the Korean war, “Battle at Lake Changjin”. The 4.25 billion yuan ($US659 million) spent across one week of the holiday still, however, fell short 5.1 billion yuan spent across the same period in 2019.
What it means going forward
Golden Week data reveals a more cautious Chinese consumer: one aware of the ongoing potential for disruption to travel plans. However, with new consumption patterns, new opportunities arise, in tourism and for those businesses aligned to the needs of the new staycationer.