Sanya, on Hainan’s southern coast, was the top destination for couples flying from China’s three biggest cities last week for China’s version of Valentine’s Day, according to booking site Trip. .com.
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BEIJING – China’s tourist-rich Hainan province is falling further behind the lofty growth targets it set in January.
At that time the island said to grow GDP by 9% this year. But like the Chinese economy as a whole, growth is falling far short of its original target – in large part due to the outbreak of a much more contagious variant of Covid.
A surge in Covid infections this month has forced Hainan’s coastal resort city of Sanya to order tens of thousands of tourists to stay at their hotels and local residents to stay home. Haikou, the provincial capital, also issued a stay order.
Airlines have canceled flights, leaving tourists stranded on Hainan island Since Saturday. In recent days, some people have been able to return to the mainland on chartered flights organized by the government.
But questions remain – about the uniform implementation of subsidies for hotel stays, food costs and how long it will be before most tourists can return to their homes.
“Hainan’s public image and reputation are damaged in the short term,” said Jacques Penhirin, a partner at Oliver Wyman’s Greater China office. “When I talk to customers, they’re all looking at bookings [the upcoming fall holiday] but still pretty resilient. People haven’t canceled yet, but it doesn’t seem right. Probably down from last year. “
“It won’t be good for luxury brands and hospitality at least until next year’s Lunar New Year,” he said, referring to the Lunar New Year holiday at the end of January 2023.
Hainan Economy
At the end of July, China’s top leaders point out that the country can miss A GDP target of around 5.5% was set in March. Beijing has not signaled any large-scale stimulus, or any changes to its “No Covid Dynamic” policy.
According to official data, the national economy grew only 2.5% in the first half of the year. Hainan’s economy is even worse off than that, growing just 1.6% in the first half of 2022.
That’s a significant slowdown from the island’s 11.2% GDP growth for all of 2021.
In fact, Hainan’s growth last year was second only to Hubei province, pointed out Ying Zhang, a research analyst at the Economist Intelligence Unit.
“Due to restrictions on international travel, Hainan has benefited from tourism revenue, which increased by nearly 60 percent last year,” she said. Zhang estimates tourism accounts for more than 80% of Hainan’s economy.
Sanya, on the southern coast of Hainan, was the top destination for couples flying from China’s three biggest cities last week for China’s version of Valentine’s Day, according to the booking site Trip.com.
The island boasts one of the few beachfront locations for international luxury hotels such as the Mandarin Oriental and Hyatt in mainland China.
Hainan is also building duty-free shopping malls as part of the central government’s efforts to turn the island into a free trade hub and international shopping area.
Sales at duty-free shops on the island jumped 84 percent last year to 60.17 billion yuan ($8.93 billion), according to official figures.
During a consumer goods exhibition in Hainan at the end of July, sales at four duty-free stores up 27% year-on-year to 330 million yuan, customs authorities said.
Another shot to confidence
Cosmetic brands rely on Hainan for sales more so far than affordable luxury brands – potentially accounting for up to a third of their China business, Oliver Wyman’s Penhirin said. He said Hainan typically accounts for less than 5% of sales of low-end luxury brands in China, while luxury brands have yet to enter that market.
A survey by Oliver Wyman in May found that after about two months of lockdown in the capital Shanghai, respondents from high-end and luxury consumer brands cut China’s growth expectations for the year by 15 percentage points.
Tens of thousands of tourists have been stranded in the resort city of Sanya, Hainan, this week as the local coronavirus outbreak prompted airlines to cancel flights.
Str | Afp | beautiful pictures
“The obvious question is when will consumers regain confidence and peace of mind when traveling and shopping, which has been further delayed by this incident in Hainan,” Penhirin said. and noted that he expects this monthly lockdown to be forgotten in the next year or two.
“It’s more about confidence than income, especially for luxury items,” he said.
In the meantime, he said brands should do more to monitor their inventory in China, to make sure products don’t sell at levels that could trigger a price war.
