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After Crisis – China’s Travel and Consumption Rebounds

After Crisis – China’s Travel and Consumption Rebounds

by admin
March 26, 2020

China is gradually recovering from the coronavirus. In recent weeks, the infections have been decreasing and people start to go back to work. Analysts say that although the life of Chinese is getting back to normal, the pace of economic recovery may be held back due to the outbreak in Europe and the U.S. (CNBC). However, Chinese consumers have shown strong faith in their economy, particularly in the travel industry.

Chinese consumers and retailers have strong faith for economy recovery

A recent survey interviewing 900 consumers from Beijing, Shanghai, and Guangzhou in China reveals that most consumers think the economy is going to bounce back. 60% of them plan to consume more from March to May this year compared with the same period last year. This indicates that the restrained needs in first-tier cities are going to be released and accelerate economic recovery. And among the different kinds of consumer goods, travel products are within the first ones to rebound after the outbreak. Chinese consumers say that they are willing to travel more than last year after the crisis. (Cankaoxiaoxi)

During the outbreak, Nielson conducted a survey involving the main retailers in China. Justin Sargent, President of Nielsen China, said: “The sudden emergence of the coronavirus has brought a huge test to China’s retail industry, but retailers still show great flexibility and resilience in a shifted environment. Many retailers re-organize quickly, respond actively to the changing situations and adjust their business strategies. They said that they saw new opportunities in the crisis and the outbreak will accelerate the development of the future retail industry.” 44% of surveyed business states that their sales have actually increased compared to last year while 42% say that sales have declined. For the second half-year of 2020, 46% of retailers are positive, they see the coronavirus as a challenge as well as an opportunity. Taking the SARS outbreak as a reference, Nielson estimates that it’s highly possible that consumption will rebound after the crisis (Financialnews.com.cn).

Compensatory consumption – Travel industry estimates to bounce back firstly

As both consumers and retailers are positive about the economic recovery, which industries will bounce back first? Travel is among the top priorities.

A consumer research by Kantar China reveals that the most influenced industries happen to have the greatest potential of rebound. During the outbreak in China, travel, dining, and outing entertainment are among the most influenced sectors – nearly 75% of consumers canceled related consumption and 17% of consumers decreased their spending. However, these three industries have equally giant potential to rebound after the outbreak. 82% of consumers will go eat in restaurants, 78% of consumers will travel, and 77% seek entertainment outside of the home (Beijing Daily).

Jiangsu Provence in China has released a report on March 10th, stating that near 90% of being surveyed plan to have Compensatory Consumption and travel is one of the top priorities. Compensatory Consumption refers to the consumption deferred by the coronavirus and consumers plan to compensate or increase the related consumption after the outbreak. Seeing from the survey data, the majority of consumers hold a positive attitude towards consumption. After restraining for two months, they plan to free up their consumption desire as much as they can when the epidemic is over (Sina Finance).

Consumers desire to travel after the outbreak

China Renaissance has surveyed 1000 consumers and it shows that 50% of interviewees have decreased consumption mainly because their needs are kept down due to in-home quarantine. As a result, this group of people will easily resume purchasing after the outbreak. Meanwhile, 55% estimates that they will consume retaliatorily after this time and this anticipation is shared by all surveyed consumers regardless of age and sex.

In particular, those with higher income and stronger purchase power will simply purchase more. And those who have gotten negative emotions during the outbreak may buy more even without considering their actual purchase capability. Interestingly, “travel” is ranked top 4 by these consumers among the activities that they want to do most after the outbreak (China Renaissance).

Signs of travel bouncing back

In fact, as the outbreak has been eased to a certain extent in China, people are releasing their consumption desire now. Many tourist attractions in China have been full of people right after the reopening and these scenic spots have to limit the amount of entrance and shut down the ticket sales office. In Hangzhou city, a shopping mall reopened and created 11 million sales in only 5 hours. Business owners said that they were so surprised by people’s enthusiasm to buy.

According to the report, these are the signals hinting that offline consumption hasn’t disappeared. Instead, consumption was temporarily constrained by the outbreak and there will be a retaliatory rebound afterward. The society is confident that the economy will recover soon (Sina Finance).

According to the data from Fliggy, one of the largest online travel booking platforms in China, in the week of February 28, there was a 40% week-on-week increase in searching flights and train tickets, and a 35% increase in searching hotels for the Labor Day holiday. Fliggy also published a survey, in which 56% of users want to travel in three months after the outbreak. Europe ranks second place among the aimed destinations. What’s more, 55% of surveyed consumers who have canceled their trips due to the outbreak state that they plan to resume the travel plan after the coronavirus (qq.com).

Hotel bookings have witnessed a 40% week-on-week increase on March 1. The overall hotel operating rate in major cities across the country is projected to reach 90% by the end of March, according to the data from Beijing Zhuzher Information Technology. The peak daily bookings for domestic flights soared 230% from the lowest level recorded in February. Bookings for domestic flights in June jumped 250% in the last week of February from the previous week, indicating an improvement in consumer confidence (Bloomberg). 

As China has almost gone through the situation that Europe, U.S., and other parts of the world is undergoing currently, these facts and data of economic rebound place a positive sign to the market. The sun will shine and let’s just stick together in the storm.

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