A Bumpy Ride: China’s Travel Industry Recovery

Everybody is already used to China always being ready to surprise the world. This was not always the case. Before the country embarked on the journey of unprecedented economic upheaval thanks to its political course on greater openness and commercial liberalization in the 1980s, people’s attention was concentrated elsewhere. However, over the past 40 years, the roles in the global geopolitical and economic theater have changed. Tourism has historically been a powerful contributor to this process, becoming a key driver of China’s domestic economy with the peaking performance of USD 1.6 trillion infused into the country’s GDP in 2019 – an impressive 11% of the total.

Understandably, things have once again changed since those times. The coronavirus pandemic has introduced its correctives, and businesses found themselves struggling not only with attracting foreigners – a task made almost impossible due to the state and border restrictions – but also with mobilizing locals. During and after the Lunar New Year 2020, the spread of the coronavirus, which had its epicenter in the central Chinese city of Wuhan, was curbed via the suspension of all tour groups.

Once the pandemic was brought under relative control in May last year, China’s package holidays started to gradually recover, growing from 4.98 million in the first quarter at the height of the pandemic, to 7.79 million in the second quarter and 19.71 million in the third quarter, according to the Ministry of Culture and Tourism. Furthermore, the total number of domestic tourists in 2020 was 2.879 billion, a decrease of over 50% over the corresponding period in 2019. Domestic tourism revenue took even a greater hit standing at 2.23 trillion yuan, a year-on-year fall of 61%.

This year, amid the increasing difficulty of dealing with the Delta variant, and China’s zero-tolerance approach to the virus, the tourism industry once again finds itself putting out fires. According to the Ministry of Culture and Tourism data, the number of domestic trips plummeted by 40% to 1.871 billion with similar results for the total domestic tourism spending: 40% fall to 1.63 trillion yuan.

Unsurprisingly, travel and tourism have not recovered to pre-pandemic levels. A slump in China’s aviation sector is further mudding the waters. Since the outbreak in Nanjing on July 20th, the number of seats offered by carriers in China decreased, as rising Delta cases provoked fresh restrictions on movement. According to Bloomberg, seat capacity plunged 32% in one week in early August, worsening the downward trend that began at the end of the previous month.

Experts predict the fall in consumption to be reversed once the virus is brought under control and restrictions are lifted. While this may not be the reality in the nearest future, some signs of optimism are already around the corner: on August 5th, travel companies in provinces and regions with no medium and high-risk areas were allowed to resume cross-provincial group tours and travel package business. Hopefully, this is just the beginning of an upward trend.