China’s decimated US$1.5 trillion tourism industry buckles under coronavirus pressure with no end in sight

• Tourism in China recovered slightly last year, but was still only around 50 per cent of the levels seen in the pre-coronavirus era in 2019
• Travel agencies are closing and airlines are suffering huge losses as virus outbreaks and travel bans decimate the industry

Two years of being buffeted by the coronavirus has brought palpable hardships to tourism in China. Hardly anyone can see a glimmer of light at the end of the tunnel, and many are hanging by a thin thread of dogged determination.

When the coronavirus broke out early 2020 and brought tourism to a standstill, the historic Venice-like town of Wuzhen had to make the difficult decision to close its door just before the peak Lunar New Year season.

Since then, like many working in the tourism industry, Wuzhen Tourism president Chen Xianghong had hoped many times that the worst had passed.

But temporary closures kept coming, with visitor numbers falling due to cross-provincial travel restrictions, sending revenue plummeting and forcing people out of the industry.

Tourists in China took 3.25 billion trips last year, this was up 12.8 per cent from 2020, but only 54 per cent of the level seen in 2019, according to the Ministry of Culture and Tourism.

Total tourism spending also rose 31 per cent last year from 2020 to 2.92 trillion yuan (US$459 billion), but this was again only half of the level of expenditure seen in 2019, the government data showed.

In January last year, local authorities urged people to stay put during the Lunar New Year holiday when they would traditionally return home for family reunions, and peak daily travel fell by 76.2 per cent compared to 2020.

At least 38 interprovincial travel bans were imposed last year aimed at limiting the spread of the coronavirus, with sporadic outbreaks and severe weather hitting almost every following peak travel season.

“The spring will come, and this will be the last tough year,” Chen Xianghong kept telling himself and his employees.

But ahead of this year’s week-long Lunar New Year holiday, a wave of outbreaks sprang up across the country, prompting local authorities to again warn against cross-provincial travel and issue strict measures to discourage people from travelling.

“Tourism is an industry supported by cross-regional movement and spending, and if there is no movement from province to province, from city to city, there is no market,” Chen Xianghong added.

In 2019, Wuzhen attracted 9.6 million tourists, with seven out of 10 from outside Zhejiang province.

But as people are now taking shorter trips, traditional travel agencies in charge of booking trips and flights are becoming obsolete, with airlines also suffering financially.

China Airlines lost 10.3 billion yuan (US$1.6 billion) in the first three quarters of 2021, China Eastern Airlines 8.2 billion yuan and China Southern Airlines 6.1 billion yuan, with the Delta and Omicron variants only set to deepen those losses in the yet-to-be-released fourth quarter figures.

In 2019, tourism and related industries created 11.05 per cent of China’s gross domestic product as one of the major players in the service sector, and contributed to 79.87 million direct and indirect jobs, equivalent to 10.31 per cent of all employment.

In the industry seen to be most susceptible to coronavirus disruptions, some 11,000 travel agencies have closed since 2020, according to Wang Yu, vice-president of Spring Travel.

Spring Travel, which is one of the largest travel agencies in China, had to refund 4.13 billion yuan to customers over the last two years.

With the stringent quarantine requirements imposed on people entering China, international travel has become impractical, with outbound travel agencies bearing the brunt.

CAISSA Tourism Group, which was one of the biggest outbound travel agencies in China before the pandemic, reported 780 million yuan of revenue in the first three quarters of last year, down by 34.32 per cent compared to a year earlier, representing a net loss of 260 million yuan (US$40.8 million).

UTour Group, meanwhile, reported a net loss of 205 million yuan in the first three quarters of last year.

Before the pandemic, 95 per cent of Guan Wenlu’s business focused on outbound travel, and his Shenzhen-based tour agency had just posted an annual revenue of 100 million yuan for the first time in 2019.

But the international travel restrictions slashed that figure by more than 60 per cent, with net profits down even further.

He persevered through 2020, looking to develop domestic travel destinations and products, and things seemed to have taken a favourable turn when the first half of 2021 looked like smooth sailing without any large scale outbreaks.

Guan had been looking forward to the upcoming summer travel season and planned to gradually raise his employee’s salaries, which had been cut by more than half.

But the coronavirus outbreak in Nanjing in July, which spread to the well-known tourist site of Zhangjiajie and then later the whole country, scuppered those plans and any hopes of a return to normality.

“Everyone thought the industry was on the right track to recovery, and that even if we couldn’t make international travel happen, we could still make a living in the domestic travel market,” Guan said.

“Then we started to process all sorts of refund at the beginning of August. We probably paid 4-5 million yuan of refunds in just one week. There hasn’t been an uninterrupted market since then and there have been outbreaks pretty much every month that forced us to halt many trips.

“We became really depressed after a series of batterings, especially when you held high hopes that the whole year would be great, then you had to cancel the business you’d already achieved. It’s completely different from not being able to achieve anything from the start.”

Guan’s company is doing better than most of his peers, and he was not forced to let go any of his employees, although several decided to leave for pastures new.

In the border province of Yunnan, Cun Xiaoqin’s travel agency operated less than three months combined last year, as new infections kept occurring, leading to travel bans and cancellations.

“The scariest part is not handling Covid, but not knowing whether or not you can continue your business tomorrow,” Cun said, who was forced to let 80 per cent of her staff go.

“Like when you have a summer break or a winter break in school, you can plan your holiday because you know when it ends, but now we have no end in sight.”

China International Travel Service Corporation, one of Xiamen’s largest travel agencies, has placed around two thirds of the company, some 200 people, on long and unpaid leave since September, according to former travel agent Chen Muxiang.

This followed the city in southeastern China being locked down as it became the epicentre of the outbreak in Fujian province.

Bookings and tours in and out of Fujian province were cancelled until mid-October, perfectly missing the influx of travellers during the subsequent Mid-Autumn Festival and National Day holiday.

Tourism entrepreneur Xiao Yuanshan pressed ahead paying full salaries to his employees for five months while seeking opportunities in the domestic travel market, before losing nearly 1 millions yuan and before forced to disbanded his company in 2020.

“People were hopeful in 2020 and thought the pandemic would end soon, but the pessimism has been growing in 2021 after the repeated blows of the outbreaks,” said Xiao, who now creates industry related media content but still struggles with an unstable income.

China’s 14th five-year plan for 2021-25 includes plans for the industry, but some experts believe 2022 could be worse for travel companies, as coronavirus outbreaks could add more pressure to the economy, reduce a willingness to spend and force more hotels out of business.

The debt-to-assets ratio of hotels in China was 75 per cent in 2021, according to Chen Miaolin, vice-president of China Tourism Association.

Guan believes the industry must adapt to the changing climate and customers’ preferences, while hoping his perseverance will give him a head start when normal travel returns.

“The pessimists are always right, but the optimists have a future,” Guan said.

Chen Xianghong has been selling tea to make a living, but she is planning to return to the industry as soon as it recovers.

“Tourism is what I am familiar with, and it is where I want to stay,” Chen said.

Cun, meanwhile, is hoping for a better 2022.

“If 2022 is like 2021 all over again, I will be called back home to have a second child,” she joked.

Author: Luna Sun, SCMP