What China’s hottest travel destination Zibo tells about divergent paths towards consumption recovery - Charts of Week

The China Labor Day Holiday drives up tourism, but the recoveries show divergent patterns

Week of May.8, 2023

Datapoints covered in this issue:

• Domestic and outbound travel during Labor Day Holiday

• Consumer sentiments and confidence

• Offline consumption and breakdown by city tier

• Online consumption and breakdown by discretionary vs staples

• Real estate

• Automotive

• China’s Q1 GDP growth by cities

• Job posting: average salary by industry (%YoY)

China saw a surge in tourism and travel spending during the Labor Day Holiday

The annual Labor Day holiday in 2023 was from April.29 to May.3. Domestic and international travel have both rebounded strongly.

Domestic Travel: According to data from the Ministry of Culture and Tourism, there were 274 million domestic trips taken during this period, which is a 19.1% increase from 2019 and a 70.8% increase from 2022. Domestic tourism revenue reached CNY 148.1 billion, which is a 0.7% increase from 2019 and a 128.9% increase from 2022.

Outbound travel: Ctrip (NASDAQ: TCOM), the largest OTA platform in China, reported a significant increase in outbound international travel orders during the Labor Day holiday. Compared to last year, there was an almost 700% increase in total orders, with outbound flight and hotel orders increasing by almost 900% and 450%, respectively, compared to the same period in 2020.

International flights during the Labor Day holiday have recovered to around 40% of the same period in 2019.

Domestic flight prices have significantly increased, indicating strong demand and a recovering economy

Source: FlightAI; Chart prepared by CICC Research Department. Note: Due to the fact that the 2019 Labor Day Holiday was only 4 days long, while the 2023 Holiday was 5 days long, there may be a possible underestimation of the increase on the fourth day.

* If you're wondering, railway ticket prices in China are determined by the government and have not been raised broadly over the past decade.

Concerns about "Consumption Downgrade”

Despite the overall rebound, there are concerns about whether the recovery is sustainable and truly reflects restored consumer confidence. The main debate is that, although the number of trips has increased significantly, Chinese people are spending less on average and choosing cheaper vacation options compared to the pre-Covid period.

Expenditure per person: 540 RMB (~78 USD), which remains lower than the pre-Covid level

The number of trips has rebounded to pre-COVID levels in 2019, but expenditure per person remains 90% lower than in the same period.

淄博(Zibo) was the hottest domestic travel destination, and this has deeper implications

淄博 (Zibo), a prefecture-level city in central Shandong province, undoubtedly became the hottest travel destination during the Labor Day holiday. Zibo, known for its delicious yet inexpensive barbecue, has become so popular among tourists that the local government had to advise people to go elsewhere.

During the Labor Day holiday, social media mentions of Zibo went viral and peaked at six times their pre-holiday levels, creating a huge sensation on the Chinese internet.

Tourists flood into Zibo for barbecue. Photo credit: Weibo

Consumer sentiments towards the Labor Day Holiday

Some independently operated social media in China (including overseas) have taken Zibo, among many other lower-tier cities, as an example of “consumption downgrade”. They reference the lower per-person spending compared to pre-Covid period and argue that the popularity of cities like Zibo is actually a sign that consumers prefer cheaper vacation options in lower-tier cities over traveling overseas or to expensive resorts and metropolitan cities.

Posts and articles mentioning “Consumption Downgrade” ticked up after the Labor day holiday.

Our take: How to understand discrepant data points

1. “Consumption Downgrade” is overly pessimistic and simplistic. The Zibo case demonstrates that the consumption scene is becoming more diversified, rather than downgraded, as consumer demographics shift towards younger generations.

   According to BigOne Lab's data, there is a continuing, nationwide momentum of offline consumption recovery leading into the Labor Holiday. The rebound is being led by first-tier and second-tier cities, which are metropolitan areas where per-person spending is generally higher.

   

   *Quick anecdote on how Zibo became viral: Zibo City first became popular among college students in April this year. Last May, nearly 10,000 students from Shandong University were quarantined in Zibo due to the pandemic. During the quarantine, Zibo locals not only took care of the students, but also invited them to eat barbecue. When students were leaving at the end of their quarantine, Zibo locals sincerely invited the students to come back and visit in the spring of the following year. The popularity spread to broader citizens as the Labor Day holiday began.

2. We do see divergent paths towards consumption recovery

   Real estate: After an upbeat rebound in March, the real estate market cooled down in April. Weekly data published by China Real Estate Information Website shows that the floor space sold for residential housing (including houses developed, constructed, and sold or leased by real estate development enterprises) tapered off in April in 12 major metropolitan cities.