China’s Golden Week travel boom masks a painful price war

BEIJING – The latest sign of hyper-competition, or “inversion,” has emerged in China’s tourism industry, raising concerns about… Deflationary pressures increase In the broader economy.

During the public holiday from October 1 to 8 – called “Golden Week” – domestic tourist trips totaled 888 million and generated 809.01 billion yuan ($113.63 billion) In revenues, according to official data issued Thursday. That’s 1.8% and 7.6% higher than last year, respectively, according to CNBC’s calculations of the numbers.

However, gains slowed compared to the May 1-5 holiday earlier this year, with domestic flights and tourism revenues falling. It grew 6.4% and 8%, respectively. In fact, average spending per domestic tourist trip during Golden Week was also about 3% lower than in 2019 before the pandemic, Goldman Sachs noted Thursday.

“Golden Week was poor,” said Mix Shi, founder of PoshPacker Hostels Chengdu Group.

Although his three hostels in the city were fully booked, Shi said he had to cut his nightly rates by about 60% – because nearby hotels had dropped their prices even more.

“A lot of money has been pumped into the hotel industry recently,” Shi said, noting, “The competition is crazy, and some really nice places are going cheap. It’s great for travelers because they have more options, but it’s a real hit to hostels.”

The city of Chengdu, the capital of Sichuan Province in southwest China, ranked second after Nanjing, the capital of Jiangsu Province in the east of the country, in tourist spending for vacation in Meituan Online booking platform.

Among domestic and international visitors to hostels in mainland China, Chengdu’s popularity has doubled from last year’s Golden Week, coming in second only to Shanghai, according to HostelWorld. However, average bed prices fell by more than 20% in both cities – to 165.70 yuan ($23.27) in Shanghai and 80.99 yuan in Chengdu.

While most locals only get a few days of paid vacation each year, China has sought to encourage companies to give workers more days off and extend public holidays to boost consumption.

This year’s Golden Week was one day longer than usual because it coincided with the Mid-Autumn Festival, which follows the agricultural calendar. The festival fell on October 6 of this year, compared to September 17 of last year.

“The Mid-Autumn Festival is a family reunion festival,” said AJ Wang, owner of the X Hotel and Hill House Observatory venues in the northeastern coastal city of Qingdao.

He added, “The real golden week, in terms of revenue generation, actually ends on the sixth day,” noting that he had to reduce prices after that date by 60% due to decreased demand.

Official domestic tourism revenues for Golden Week alone increased by 15.4% from 2024but when including last year Mid-Autumn Festival Comparable revenue growth slowed to 7.6%, CNBC calculations showed.

“Everyone is working harder and spending more, but the profit gap remains small,” said Sasa Yao, who runs a hotel and restaurant in the southern city of Guangzhou.

Yao said his restaurant’s daily sales rose from a typical 3,000 yuan to as much as 10,000 yuan during Golden Week, with the average customer spending just 30 yuan.

“We were busier than ever and broke our revenue record,” Yao said. “There’s only four of us running the show, so by the end of the week we were so tired that when I said: ‘Let’s celebrate with a late-night meal!’ everyone just said: Can we celebrate by sleeping in instead?

Many tourists chose to travel a little before or after the Golden Week period this year, according to a Chinese travel booking website Trip.com. I noticed that Hotel prices In late September they were about 20% cheaper than they were during Golden Week, while airfares in the middle of the holiday were more than 30% cheaper than at the beginning of the holiday.

Alibaba-owned travel booking site Fliggy said average spending per travel booking was up 14.6% from a year earlier, and noted that much cheaper flights took off on the weekend after the holiday, such as a flight from Shanghai to Hong Kong for less than 400 yuan ($56).

Official figures also indicated a rise in road trips, with holidays on the rise An average of 304 million trips per daymostly by car.

“Golden Week unleashed a wave of energy across China: record-breaking travel, booming business activity, and new spending trends all gave a strong boost to domestic demand,” said Bruce Pang, associate professor at CUHK Business School.

“However, it may take some time before the CPI returns to positive growth on an annual basis, as food prices and oil prices remain weak compared to their peaks,” he added.

Official consumer prices in China It fell by 0.4% in August Compared to the previous year, it increased by 0.9% when excluding food and energy prices. The tourism sector saw prices rise by 0.7% year-on-year in August, but fell by 0.3% in the January-August period. comparison The same period in 2024.

Travel platforms have also reported increased demand in smaller cities, where prices can be much lower. Chinese booking site Tongcheng Hotel reservations mentioned in at least 30 of these cities and less developed areas More than double what it was a year ago.

China’s inflation data for September is due on October 15, and retail sales on October 20. Retail sales rose Only 3.4% in August compared to last year, which was below analysts’ expectations.