Skift Take

An unfortunate first-mover in the pandemic, China, in turn, got an early start on its travel recovery. But officials at major travel companies there view a robust bounce back as taking a year or longer — and much of that pace depends on how quickly coronavirus gets neutralized in the rest of the world.

By all accounts, China is coming back from the coronavirus pandemic earlier than almost anywhere else. In the intensely interconnected world of travel, where destinations crave the return of Chinese travelers, and China pins some hope on a rebound of inbound tourism, perhaps it is instructive to see how major Chinese platforms view the hoped-for travel recovery so far.

After all, the Chinese government has removed the requirement that people wear masks in restaurants and other establishments in big cities such as Shanghai, according to the online travel company, Group. And, for the week of April 13, Airbnb saw its bookings in 10 major Chinese cities climb nearly 80 percent compared to a month earlier, although that level was still only half the number of bookings of early January, Reuters reported citing AirDNA data.

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Jerry Tang, editor of China Travel News who’s based in Guangzhou, China, told Skift China is ahead of the curve in that many people have returned to work. He said it’s alright to have some cautious optimism, but “no one really knows for sure that Covid-19 won’t rebound before tourism will.”

“Many companies in China are tapping live-streaming and advance purchase offerings for hotels and tours, but that seems more like a cheer-up effort than a really strong performance drive,” Tang said.

Indeed, Meituan, which does food delivery, in-store dining, and probably has the number-two hotel booking service in China, saw food delivery begin to recover in March, but thinks the hotel industry’s path to recovery is unclear.

Shaohui Chen, Meituan’s chief financial officer, said during an earnings call March 30 that China’s hotel industry won’t necessarily bounce back in the second quarter “because now this is really a global situation, and the people, travel still really bring lots of uncertainties. So we think hotels could have a very challenging year.”

Is Coronavirus a ‘One-Off’ Event?

Top officials at both Alibaba, the Amazon of China which operates travel service Fliggy, and full-service Chinese online travel agency Group, see the pandemic as a one-time event — a premise that is certainly debatable.

“Overall, we remain optimistic about consumption growth in China and continue to be confident about our long-term growth prospects,” Wei Wu, Alibaba’s chief financial officer, told analysts in a mid-February earnings call. “So whatever we’ve seen right now, we believe this is a one-off occurrence.”

Fliggy, unsurprisingly, experienced a material amount of cancellations for flights, hotel reservations and vacation packages. But unlike in the West, where booking sites and suppliers had a variety of cancellation policies, Alibaba CEO Yong Zhang told analysts that “in accordance with government regulations, Fliggy provided unconditional and penalty-free cancellations to our customers.”

Officials from Group, which experienced millions of cancellations, told analysts in mid-March they expected domestic travel to recover first while outbound travel remained weak, but the overall impact could last for a year.

“If the outbreak is vastly contained by the summer for most regions in the world, we can be cautiously optimistic about the recovery in the second half across all our business lines,” Group co-founder and executive chairman Jianzhang Liang said on an earnings call in mid-March. “But if the outbreak expands into autumn and winter, we may be looking at a full-year impact given the seasonality.”

When it comes to pricing, Group CEO Jane Jie Sun said airfares were cheap when domestic routes started coming back; in mid-March about 50 percent were restored. “Now the prices are climbing up,” she said. “Not to the full price yet, but it’s on a good trend, climbing up.”

Increased Digitization

Both Group and Alibaba see their companies making gains in lower-tier cities during the recovery, and Meituan and Alibaba see an uptake of digital use taking hold in various aspects of Chinese life during the coronavirus recovery.

“The pandemic further cultivates the habits of consumers to use online platforms to satisfy their daily needs and makes local merchants realize the value of digital operation,” Meituan co-founder and CEO Xing Wang told analysts March 30. “We believe the digitization for both the demand side and supply side will be accelerated in the longer term.”

In the West, whether it is increased use of Zoom video meetings while working from home, Amazon package delivery, or GrubHub leaving meals at your doorstep, that increased used of digital services is getting prolific, as well.

In fact, as one of its many steps to help businesses, Meituan began supplying free hotel management systems to some of its hotel partners.

While seeing an acceleration of users in lower-tier cities and other less-developed areas of China go online in recent months, Alibaba CEO Zhang said, “So I think after all is done, I would expect that this is an inevitable trend that more and more businesses and more and more customers will have a digital life or digital working style. So this obviously, in the long term, will be good for the digital pace of the whole society.”

So it’s clear that even officials of big platform companies in China, which began a recovery earlier than almost anywhere else, see the much-hoped for travel and general business recovery as a protracted process because their bounce back depends to some degree on how the pandemic trends in other parts of the world.

Said Alibaba’s Zhang: “[Whether it] will be a U correction or a V-shaped correction is highly dependent on how long it will take to finish this outbreak. The longer time it takes, I think it will take even longer time to recover because I think many service sectors are disrupted.”

Global tourism has historically been dependent on outbound travel and international arrivals, but the pandemic could drive countries and tourism to turn inward, nurturing domestic travel in many countries, as is happening in China’s nascent recovery, and closing the doors on visitors who may want to travel from countries considered still tinged by coronavirus.

Those kinds of built-in restrictions will shape potential travel recoveries, as well.


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Tags: airbnb, airlines, alibaba, china, hotels, meituan, prices, travel recovery,

Photo credit: Guests enjoy taking photos to capture the lifelong memories they will have after visitng Shanghai Disneyland in 2018. Chinese travel and other business officials expect that the recovery there in the hotel and tourism sectors will be a prolonged affair. Matt Stroshane / Jing Travel

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