China’s Golden Week holiday signals continued consumer caution

BEIJING – China’s Golden Week holiday confirmed a trend in more cautious spending as consumers placed more emphasis on experiences.

The seven-day holiday that ended Monday recorded about 2% less spending per domestic trip than pre-pandemic levels, according to Goldman Sachs analysis published Tuesday.

“Low per capita tourism expenditure and subdued service prices highlight still weak domestic demand and the ongoing decline in consumption,” the analysts said.

The decline was an improvement from a more than 10% difference during spring holidays, the Goldman report said.

Golden Week in China commemorates the founding of the People’s Republic of China on October 1. It is the last official holiday of the year for the country.

Nearly a fifth of Trip.com’s holiday bookings came from users aged 20 to 25, making them the most important consumer group, the company said. It was noted that more than 90 concerts were held during the holidays, and the daily growth of orders for performances and exhibitions grew by an average of more than 80% during the period.

However, a lack of blockbusters resulted in a drop in box office revenue, to 2.1 billion yuan ($300 million) this year, compared with 2.7 billion yuan last year. state mediaciting the China Film Administration.

Consumers were also more spontaneous.

Trip.com said nearly 30% of travelers booked trips on the same day or one day in advance, an increase of 6 percentage points from last year. The average number of days booked in advance fell to 6 days this year, compared to 6.8 days last year, the company said.

This year’s holiday followed a flurry of policy announcements and promises, and a rise in the stock market. Consumer spending in China has been subdued since the pandemic due to uncertainty about future income and economic growth.

“People are becoming more careful with their spending. They are also opting for more affordable travel options and affordable locations,” Kenneth Chow, president of Oliver Wyman, told CNBC on Wednesday.

“People are much more interested in spending money on things they can talk about, things they can post [on social media] about, rather than just about the big items,” he said. Such shifts mean brands, including luxury brands, need to focus more on communicating the benefits to potential Chinese consumers.

“As people become much more sophisticated, the proposition has to change, and whoever can adapt to that new trend first will be able to win,” Chow said. “It’s not just about Chinese brands. It’s not just about foreign brands. It’s about who will respond first and who will catch the attention of Chinese consumers first.”

Christine Peng, head of Greater China consumer sector at UBS, pointed out on Wednesday that Golden Week figures suggested the recovery in spending was linked to device trade-in policies.

Retail sales rose 9% over the holidays, while home appliance sales rose 149.1%, according to state media. figures from the Tax Authorities. The amount spent was not stated.

“Golden Week consumption, in our view, could still suggest a modest recovery from August, due to trade-in subsidies (for appliances and cars) and consumption vouchers issued by local governments,” Peng said. “For example, retail sales in Shanghai rose 3%, a recovery from -3% year-on-year in August.”

According to the Ministry of Culture and Tourism, mainland China recorded 765 million domestic trips during Golden Week, an increase from both the previous year and before the pandemic.

However, through another calculation measure by the ministry, China had received 782 million domestic visits in 2019. It was not immediately clear whether the figures were comparable.

The average number of mainland Chinese residents crossing the border rose to 1.08 million per day during this year’s holiday, up from 1.01 million per day in 2019, according to CNBC calculations from official data.

Japan, Thailand and Britain were among the most popular destinations, according to the report booking site Trip.com.

According to the mobile payment operator, owned by Alibaba affiliate Ant Group, foreign transactions by Chinese Alipay users increased 60% during the first four days of the holidays compared to the same period last year.

Malaysia, Korea, Thailand, Hong Kong and Singapore were the top destinations for Chinese tourists in terms of transaction volume growth, Alipay said. It noted that instead of shopping, Chinese travelers also spent significantly on entertainment, food and beverages, services and transportation.

Foreign visitors from mainland China who used Alipay spent more than double what they did a year ago during the first four days of the holiday, the company said. China has introduced visa-free travel to more countries, while Alipay and WeChat Pay – the two dominant mobile payment apps in the country – have made it easier for foreigners to use the apps in the past two years.

Hong Kong said visitors from mainland China visitors an average of 170,000 per day during the holidays, 27% more than a year ago. On October 1, Hong Kong said it received 220,000 visitors from the mainland, the highest number since the end of Covid-19 border controls.

Oliver Wyman’s Chow noted how hotels, especially those in Hong Kong, adapted to lower nightly prices by selling more food or other experiences.