Pandemic experience shapes future travel
Pent-up demand focuses on domestic destinations
Travel ended abruptly during the COVID-19 lockdown period in January and February, returning only gradually, mostly to domestic destinations.
Travel services, among the categories hardest hit by the pandemic, declined 26 percent in value, with several brands dropping out of the ranking.
By early April, during the Qingming Festival honoring ancestors, the number of domestic tourists had reached around half of the total a year ago, according to the China Tourism Research Institute. Between the Qingming Festival and the celebration of Labor Day on May 1, the number of travelers increased by factor of about 2.6.
Kantar COVID-19 Barometer research, conducted late in May, discovered significant pent-up demand for domestic travel. When asked what activity they most looked forward to after the pandemic subsides, more than half of the
respondents answered local travel, making it the No. 1 anticipated activity by a wide margin. The same research found uncertainty about traveling abroad.
Lingering concern about the contagion will influence how increased travel impacts the travel services category. Kantar’s China MONITOR COVID-19 research, conducted in April, found this hierarchy of transportation preferences: driving, 60 percent; high-speed train, 53 percent; airplane, 38 percent.
Prior to the pandemic, Chinese continued to travel, despite the economic slowdown. Outbound tourism trips were up 3.3 percent and domestic trips by 8.4 percent for the 2019, according to China’s Ministry of Culture and Tourism.
These trends impacted all aspects of the travel industry— including airlines, hotels, and travel agents, which BrandZ™ combined for the first time this year into a single category called travel services. Of the five brands in the travel services category only one, Hanting, the hotel brand, increased in value.
Reflecting its determination to grow into a global business, China’s largest travel agency Ctrip.com International Ltd. renamed itself Trip.com Group Ltd., although it will still operate its Chinese-language site as Ctrip. The company will use the Trip.com name to build business outside of China, which it plans to cultivate with a new joint venture formed with TripAdvisor, a US travel rating site.
The joint venture follows Ctrip.com International Ltd.’s 2016 acquisition of the UK travel search site Skyscanner and its purchase of Qunar.com Inc. a year later. But the latest initiative was also a reaction to how the travel bookings business has intensified in China since Ctrip began almost 20 years ago. It now faces fierce competition from relatively new market entries, including Alibaba Group Holding Ltd.’s Fliggy and O2O services provider Meituan Dianping.
Sustained consumer interest in travel and improved airport infrastructure, including the opening of Beijing Daxing International Airport and airports in lower tier locations, drove airline business, despite mitigating factors, including China-US trade tensions, the devaluation of the yuan, and competition, which impacted results for China’s three state-owned airlines: China Southern Airlines, China Eastern Airlines, and Air China.
Hotels brands like Hanting experienced intense competition for budget and mid-level offerings, although potential was strong at the premium end of the market as Chinese consumers upgrade consumption across categories.
In addition, improved high speed rail structure now enables travel during short holidays. And lifestyle changes add reasons for hotel visits beyond overnight stays. To satisfy the needs of time-impoverished Chinese consumers, hotels developed family packages with special activities for children.
Hotels also created unique experiences for guests in response to the wider range of entertainment options available in major cities, which made the profitability of the usual hotel public spaces—restaurants, bars, fitness centers—more challenging. Alibaba Group Holding Ltd. has a smart hotel where the brand showcases its technology expertise, delivering a unique experience with artificial intelligence and robots.
Meanwhile, the Japanese brand Muji has opened hotels that feature the brand’s minimalist design. India’s budget Oyo hotels has expanded rapidly from a base in Shenzhen. And Airbnb is expanding, especially in lower tier cities.