Preface

The recent Golden Week holiday in China has highlighted the intense competition within the tourist sector, reflecting broader economic challenges. Despite a record number of domestic trips generating significant revenue, the overall economic picture reveals a complex, hyper-competitive market. This article explores the economic dynamics at play during this peak travel period, providing insights into consumer behavior and industry trends.

Lazy bag

The Golden Week saw a record travel boom in China, yet the industry faces a bruising price competition, squeezing profits amid deflationary pressures.

Main Body

China's Golden Week, a significant national holiday from October 1 to 8, represents one of the busiest times for the country's tourism industry. According to official data, the period saw 888 million domestic trips, generating revenue of 809.01 billion yuan, marking increases compared to last year. However, compared to the May 1–5 holidays earlier this year, increases in trips and revenue were modest.

This muted growth contrasts with the lowered average spending per trip remain concerning. Prior to the pandemic in 2019, spending more per domestic tourist was higher—an indicator pointed out by Goldman Sachs, showing economic strain. Many local operators, like Mix Shi from PoshPacker Hostels Chengdu Group, attest to the challenges with Shi noting a need to slash rates amidst fierce competition.

The influx of investment in the hotel sector has saturated the market, offering travelers numerous options, but simultaneously pressuring prices. This effect was pronounced in cities like Chengdu, which ranked second in tourism spending over the holiday. Despite soaring traveler numbers, average hostel bed prices dropped significantly in major cities.

The juxtaposition of a longer holiday period due to the Mid-Autumn Festival brought more travel yet failed to rectify the pressure on pricing. Businesses reported needing to lower prices post-October 6 due to a drop in demand. This situation underscores sustained deflationary trends—a broader concern for the Chinese economy.

Despite a rise in domestic tourism revenue by 15.4% from 2024, concerns loom as per capita spending remains low. In major urban centers, even local business owners like Sasa Yau from Guangzhou's hostel and restaurant industry shared mixed experiences; significant revenue leaps during the peak times contrast with sustained fiscal pressures.

China's extensive travel infrastructure, including high-speed trains and air routes, conveniently supports spontaneous travel. This flexibility led to travelers leveraging booking strategies to capitalize on lower prices, especially outside central holiday days, further exacerbating the volatility in accommodation and travel rates.

Platforms such as Trip.com reported strategic traveler shifts, with bookings peaking just before or after the official Golden Week, which reduced accommodation and mid-holiday airfare costs considerably. Additionally, flight price fluctuations highlight specific consumer price sensitivity amid economic instability.

Challenges persist within the tourism sector, characterized by a revived interest in smaller cities offering affordably priced options. This trend is juxtaposed against China's inflation challenges, showing potential in smaller urban developments while major cities continue to experience volatile demand.

In reflection, while the Golden Week presented substantial movement in domestic tourism, the underlying economic dynamics suggest a sector grappling with maintaining profitability against a shifting economic backdrop. As inflation data looms, tourism continues to play a critical role in gauging the economic recovery pace in China.

Key Insights Table