Mainland Chinese hotels’ hopes of Lunar New Year boom dashed by rising omicron cases

• Bookings for hotel rooms during the holiday ‘a far cry’ from business during Lunar New Year in 2019, Trip.com says
• Remains to be seen whether hotels will report a year-on-year rise during holiday, JLL analyst says

Mainland Chinese hotels, which are among the industries worst affected by the outbreak of the Covid-19 pandemic since early 2020, have had hopes of a boom during the Lunar New Year holiday dashed by the emergence of the omicron variant.

Just three months ago, nearly 10,000 star-rated hotels across the country were expecting a jackpot during the week-long holiday when demand for travel peaks – hotel room prices can surge by more than tenfold as millions of tourists flock to scenic spots and places of interest.

But a recent report by Trip.com, China’s largest online travel agency, said that bookings for hotel rooms for the seven-day period that started on Monday remained “a far cry” from business during Lunar New Year in 2019.

“Given the recent disease outbreak in several regions, cancellations of bookings were expected to have jumped this year,” Trip.com said. “It is an irreversible trend that more cancellations will take place due to rising infections.”

China’s tourism sector, with a market size of about US$1 trillion, was once an important driver of economic growth. The industry also employs at least 30 million people.

In 2019, about 415 million Chinese people took trips during the holiday. Their number trickled to near zero in 2020, when the coronavirus outbreak resulted in strict lockdowns nationwide. Last year, the domestic travel industry served 256 million tourists during the holiday.

Most properties were not able to raise prices from rates seen in low seasons, but they were banking on a relatively higher occupancy rate. Some also offered discounts to attract local customers, since lockdown restrictions meant that they could not travel elsewhere in the country.

Zhou Tao, head of hotels and hospitality at property services firm JLL, said it remained to be seen whether hotels would report a year-on-year rise during Lunar New Year. “It is certain that occupancy will be much higher than normal days,” he said. “After all, [Lunar New Year] is one of the high seasons, when people are willing to spend.”

Outbreaks of the omicron variant since December have prompted the central and local governments in cities like Beijing, Hangzhou, Xian and Tianjin to enforce strict lockdown and containment measures. On Monday, the National Health Commission reported 27 local cases, bringing the total number of infections to 1,884 since the latest round of Covid-19 outbreaks began late last year. Most infections are being caused by the more transmissible variant.

“That is really bad news for hotel operators,” said Yin Ran, a property and angel investor based in Shanghai. “Cancellations will foil attempts to offset losses made in low seasons.”

China’s large-scale hotels posted a record loss of 41.4 billion yuan (US$6.5 billion) in 2020, according to data by Shenzhen Huamei Restaurant Management Consulting. And the country’s zero-tolerance policy towards Covid-19 continued to wreak havoc on the hospitality sector last year.

Hotels and resorts located in major cities, or in regions within a two-hour drive of these cities, could still attract customers for family outings during the week-long holiday, said JLL’s Zhou. “I reckon these hotels could report at least 90 per cent occupancy,” he added.

Author: Daniel Ren, SCMP