Epidemic ‘changing customer perception’

(Club Med Alpe d'Huez)

The epidemic is “changing consumers’ perception on consumption profoundly”, according to Fosun Tourism chairman Qian Jiannong.

The company reported signs of recovery in its domestic market, which was supported by data showing growth in the Asia Pacific region.

Jiannong said that the outbreak meant that “consumers generally expect a higher quality and better service in tourism”. He said: “We believe that our upgraded products will better meet the market’s future demand. We proactively responded to the epidemic with reasonable cost control on operations and headquarters’ expenses and maintaining a stable financial position.”

The comments followed a statement earlier this month by China’s state planning commission, outlining 19 ways to help drive consumer sector and foster a robust domestic market. These included increasing residents' income and increasing the supply of high-quality goods in the domestic market.

Wang Yun, director of the consumption office of the economics institute at the China Academy of Macroeconomic Research, said: “Currently, Chinese people are ushering in an era of consumption upgrades that attached more importance to development and enjoyment, providing strong support to create a robust domestic market.

“The coronavirus epidemic will not change the trend of consumption upgrades and people's desire for a better life. The new document is sending a positive signal to boost consumption and implement a series of targeted measures, which will effectively bolster consumer confidence and boost their spending.”

The Fosun chairman said: “The current epidemic is an international public health crisis, yet our innovative business model helps the group to withstand the crisis, reap the rebound opportunities after the epidemic crisis and look for opportunity and driving force of sustainable growth amid the crisis.”

The company reported that, despite the outbreak of the COVID-19 since the end of January 2020, it had recorded a strong performance in the first two months of the year, with the resort operation increasing by approximately 8%, and Ebitda increasing over 20% on the year. The group said that 87% of its tourism revenue came from outside Greater China, as a result of its €939m purchase of Club Med in 2015. Fosun Tourism also acquired the Thomas Cook brand for £11m last November, with the deal including the Casa Cook and Cook’s Club hotel brands.

Although the business volume of tourism destinations operation was affected by the epidemic, Ebitda remained positive for the first two months of 2020, reaching about RMB50m (€6.5m). The company said: “It is expected that the COVID-19 will have negative short-term impacts on the group, but it will not affect the group’s development in the long-term.”

The latest results from STR showed occupancy in China on the way up, breaching 20% at the tail end of last week as new cases of the virus fell back.

The Fosun results came shortly before signs of a pickup in China began to be felt from the global operators. Last week saw IHG confirm that it now had 60 hotels closed in Greater China compared to 178 at the peak, with CEO Keith Barr commenting: “In recent days have begun to see improvements in occupancy, albeit at low levels”.

Marriott International president & CEO Arne Sorenson said that the company was starting to see “some green shoots” in China, where occupancy had bottomed out at around 2%. At Hilton, CEO Chris Nassetta told Donald Trump that China was “coming back”.


Insight: The ‘where are we going’ and ‘what will this all look like’ portion of this epidemic is still very much up for grabs, with speculation abounding. It is likely that airline capacity will be slashed from pre-virus levels, meaning that our every travel whim cannot be fed and this is likely to feed into a demand for higher quality products - as Fosun is gearing up to deliver.

There have been reports from all over the world of nature in its resurgence; dolphins in the lagoon in Venice, birdsong audible in locked-down India, average dog-walking folk in London not choking on car fumes. Humanity has been locked away for the good of the Earth. Call Greta.

Will this remain once something approaching normal service has resumed? Will we travel less, or in less harmful ways? We can’t possibly say. But it’s fun to look at a time after this and wonder what might be and how the sector might respond. In the meantime, there is hope to be had in China.