Successful May Day another sign of China’s hotel performance recovery

Analysis by Kelsey Fenerty
 

With long-held COVID restrictions in the rearview, China’s hospitality industry has embarked on a rapid journey to normalcy, which has been fairly successful thus far.

Business demand, especially in Tier 1 cities, is hugely important and launched its comeback following the Lunar New Year holiday. Leisure travel, while prevalent on weekends, typically stands out during a select set of longer holidays, including Lunar New Year in the first quarter of the year, May Day in the second quarter, school holidays in the third quarter, and Mid-Autumn Festival and National Day in the fourth quarter.

In 2023, the May Day holiday ran one day longer than usual, with offices closed from 29 April through 3 May, and travelers took full advantage of the long weekend.

Mainland China performance peaked on 30 April, with hotels reporting 90.9% occupancy and CNY865 average daily rate (ADR). For reference, occupancy the prior Sunday was 63.7% and ADR CNY503.

After peaking on the final day of April, occupancy declined to as low as 36.2% on Wednesday, 3 May, the final day of the break. The weaker occupancy during the weekdays was caused by nearly non-existent business travel, and corporate demand is so important to Mainland China that even strong leisure travel cannot completely offset the loss.

Compared to the 2019 May Day holiday, which ran from 1-4 May, Mainland China occupancy indexed at 97%, or about 2.2 points below pre-pandemic May Day. Select-service hotels proved popular with Labor Day travelers, indexing at or above 2019 occupancy levels, while economy hotels reported the highest absolute occupancy at 78.7%.

From an ADR perspective, all classes walked away winners, with Mainland China rates running 33% ahead of May Day 2019 levels.

Domestic demand strong across major markets

Performance among some of China’s largest and most popular markets did not disappoint over May Day either.

Four markets, including three Tier 1 cities, reported 2023 holiday occupancy equal to or ahead of 2019 May Day.

Perhaps more impressive, the so-called up and coming “Tier 1.5” markets, many of which are more popular with younger generations, outperformed the larger and more traditional Tier 1 cities.

Markets like Xian and Chengdu, with a stronger leisure presence than capital Beijing or financial hub Shanghai, were able to drive more rate growth over the holiday period.

Tier 2 markets proved so popular over the long weekend that actual ADR came in line with the more expensive Tier 1 markets during the holiday.

Outbound demand present but muted

While domestic demand boomed, some May Day travelers did celebrate outside the Mainland. Nearby Macau and Hong Kong benefited the most, but other countries likely welcomed their share of travelers from China.

It is important to note that Labor Day, or International Workers’ Day, is celebrated on the first Monday in May across a large number of countries globally, although most nations only celebrate for one day rather than China’s five.

Viral sensation Zibo celebrates successful May Day

One city in China stands out for exceptionally strong May Day demand. Viral sensation Zibo, which first made headlines for its affordable BBQ skewers a few months back, became so popular over the holidays that officials urged travelers to consider visiting other parts of the Shandong region instead.

Zibo occupancy, which averaged 85% over the first 28 days of April, peaked at 98.8% on 30 April and averaged 94.6% over the May Day holiday period. While neighboring Tai’an and nearby markets Jinan, Shandong East Coast Regional, and Qingdao reported spikes in demand on the 30th, Zibo stands out for its sustained high occupancy.

However, aligned with its affordable BBQ and status as a hotspot for students, rates in Zibo remained extremely affordable over the holiday period, with no real May Day markup in ADR. That was a result of the government’s compulsory regulation on room rate. After Zibo went viral on social media, local hotels received “pricing optimization advice” from local government before the Labor Day holiday, an attempt to control the rocketing room rates.

Conclusion

All eyes remain on China, with much of the rest of the world anxiously awaiting a surge in international outbound travel. Within its borders, however, Mainland China hotel performance is well on its way to full recovery, driven in part by the impressive leisure demand reported over holiday periods.