The holiday, one of China's two annual "Golden Weeks" when much of the population gets time off, is still under way. Over the first five days, visits to officially designated "scenic areas" in China rose 3.2% from a year earlier, while ticket sales at tourist attractions were down nearly 1%, according to data from China's Tourism Administration. That is underwhelming compared with the strong growth seen in previous years. Over the same five days in 2013, visits to scenic areas were up 6.7% while ticket sales were up 8.5%.
This weakening could suggest that domestic consumption and services, two relative bright spots that have served as vital supports for employment, are finally succumbing to an economic slowdown. The pain so far has been focused on property and manufacturing. China's official data on retail sales are a flawed barometer, including some government spending and excluding services, so investors keep a close eye on alternative indicators of consumption activity.
But other data are less bleak. China Railway Corp. projects that total holiday rail traffic will rise 12.9% this year, a slight acceleration from 12.5% growth in 2013. And tourist arrivals in semiautonomous Chinese gambling mecca Macau are up 14.4% from a year earlier over the first five days of the holiday. Shares of Wynn Macau, Sands China, and Galaxy Entertainment rallied on the figures.
These data suggest an alternate explanation for underwhelming visits to tourist sites in mainland China. They are overcrowded during the holiday periods, and Chinese people are learning to avoid them. Only so many people can cram on the Great Wall at one time.
China needs to move to a system where workers get flexible time off, so they can take vacations when they please, rather than en masse. Last month, Beijing hinted at reform with an announcement that it would abolish the agency that coordinates vacation dates.
Two popular ways for investors to play the Chinese tourism theme, online booking sites Ctrip.com and Qunar, could continue to prosper even in a stagnating tourism market as they take share from offline booking. Ctrip hardly looks like a bargain at 50 times forward earnings, while Qunar is difficult to value as it isn't yet profitable. But both stocks and other China tourism plays from Macau casinos to state-owned airlines could still get a bump from some sensible changes to the dysfunctional holiday system.
China's leaders constantly promise changes to boost domestic consumption. Investors should hope they get on board for holiday reform.
Source: Wall Street Journal by Aaron Back
from China Travel & Tourism News http://ift.tt/1iB6EFm
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