(Bloomberg) -- Chinese business travel is recovering slower than the leisure sector and is likely to enter a longer-term downturn, according to hotel operator H World Group Ltd.
Despite a pick up in late-March, business travel demand in China has remained below pre-pandemic levels through the first quarter as geopolitical tensions flare and small- and mid-sized domestic companies struggle with the revenue hit of Covid, Chief Executive Officer Jin Hui said in an interview with Bloomberg News Friday.
Even though the company, which has more more than 8,000 hotels across the world, is cautiously optimistic about the leisure sector, the decades-long upward cycle for business travel is fading.
It’ll be important “to learn how to survive the down cycle, especially for China’s local companies as many haven’t experienced it before,” Chief Financial Officer He Jihong said in the same interview. “To get through the cycle, that’s our key motto now.”
The contrasting outlook underscores the uncertain pace of recovery across key sectors in China. Brewers to luggage makers say demand has boomed as the dismantling of Covid Zero late last year allows residents to venture out again to wine, dine and travel. But a sense of caution still lingers, with many consumers wary about spending big until they’re sure the economic rebound has gained traction.
Read more: China’s Top Brands Stay Cautious on Post-Covid Consumer Recovery
Leisure travel had a good recovery in the last three months, helping drive H World’s revenue increase, said Jin, who expects sustainable demand growth for the sector as consumers are willing to spend more on experiences following Covid Zero lockdowns.
Revenue may increase about 61% to 65% in the first quarter, driven by the rising hotel rates with leisure travel recovery, and full-year sales could climb more than 40%, He said. Its China business is forecast to grow 46% to 50%.
The company, which operates brands including domestic budget hotel chain Hanting, will push forward with expansion plans in the year ahead.
After adding more than 1,200 new hotels last year, H World plans to open 1,400 in 2023, many of which will be in lower-tier Chinese cities where the company sees growth potential from younger consumers with strong leisure travel demand.
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