Boutique hotels win big in China’s travel surge

As China’s domestic travel market surges, a pressing question arises: Can domestic tourists trading up to high-end accommodations boost homegrown luxury hotel chains? According to Fliggy’s 2024 Mid-Autumn Festival Travel Forecast, the answer may be “yes.” Hotel bookings are up 60% compared to the same period in 2019, signaling a significant shift in travel behavior. Notably, four- and five-star hotels now account for more than half of all bookings, suggesting that Chinese travelers are increasingly opting for premium, culturally immersive experiences. Ahead of this year’s Mid-Autumn Festival (September 17), a key travel period, the trends extended beyond accommodations: car rentals have doubled compared to pre-pandemic levels, and interest in traditional festival activities, such as moon and temple fair appreciation, has also risen 60% YoY. Top destinations like Shanghai, Beijing, and Xi’an are thriving, while emerging spots like Jingdezhen, eastern Jiangxi province, are growing fast. This surge creates ample opportunities for both boutique and chain luxury hotels to capitalize on rising demand for high-end domestic travel. Quality and exclusivity China’s luxury travel boom gained momentum during the pandemic, with the curtailing of international travel redirecting affluent Chinese consumers toward upscale experiences within the country. Even as outbound travel returns, high-end domestic options are becoming the preferred choice for those used to global luxury standards. According to Trip.com, “Chinese tourists today are willing to spend more to enhance their travel experience,” prioritizing exclusive, quality-driven experiences. Independent boutique hotels are leading this shift by offering culturally immersive and design-centric stays. For instance, the Yangshuo Sugar House exemplifies how repurposed industrial spaces can deliver both luxury and cultural authenticity. Once a sugar mill, it is now a premium resort, combining historical architecture with modern amenities to connect travelers with local heritage. “One attractive element of Chinese boutique hotels is how they bring the traveler closer to local culture,” says Allison Malmsten, China Strategy Consultant at Daxue Consulting. In contrast to large chains, boutique properties offer localized, unique experiences. Other standout properties include Ahn Luh Zhujiajiao, which offers Tai Chi classes and Traditional Chinese Medicine consultations, and the Lost Villa in Ningxia, noted for its revival of historical architecture. These hotels appeal to travelers seeking both luxury and authenticity, qualities that resonate with younger travelers on platforms like Xiaohongshu. Destinations such as Ngawa Tibetan and Qiang Autonomous Prefecture, Jingdezhen, and Diqing have seen tourism more than double in recent years, as travelers seek to explore less commercialized regions offering cultural richness and natural beauty. Chains face challenges While boutique hotels thrive, large luxury chains such as Wanda Hotels & Resorts and Nuo Hotels face growing pressure to differentiate themselves in a market that increasingly values uniqueness. Despite efforts to expand internationally, these brands struggle to compete with the personalized experiences boutique hotels offer. The rapid increase in new hotel developments has led to oversupply, adding to the challenges. As Zhao Huanyan, a senior economist, told the SCMP, “The capacity of the hotel industry has expanded ... to the point where supply exceeds demand.” During 2024’s May Day holiday period, the Revenue per Available Room (RevPAR) index for mainland China reached 108% of its 2019 levels, signaling a partial recovery. However, the industry still lags behind 2023’s figures due to increased market supply and the resumption of outbound travel. Luxury hotels fared better than budget and mid-range properties, with room rates for high-end and ultra-luxury hotels rising approximately 15% compared to 2019. Despite the strong performance of luxury properties in cities like Chengdu, Xi’an, and Chongqing, many key cities struggled to match last year’s room rates. The 33% rise in Average Daily Rate for mid-range and budget hotels compared to 2019 illustrates the uneven recovery across different market segments, as lower-tier cities outperformed larger metropolises during peak travel periods. This divergence reflects not only the spending habits of affluent versus middle-income travelers, but also the broader challenges of balancing supply and demand in China.

Boutique hotels win big in China’s travel surge

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Published September 19, 2024

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Boutique hotels win big in China’s travel surge