China's domestic tourism sector is weakening more rapidly than anticipated, with Hilton China revising its revenue per available room (RevPAR) forecast to a low single-digit decline for the year, down from earlier expectations of flat performance. The RevPAR for Hilton swung from a 1.3% increase in Q1 to a 2.2% decrease in Q2, reflecting broader economic struggles.
Christopher Nassetta, Hilton's CEO, noted that while the economy is growing, it is not at the rates seen previously. Data from Smith Travel Research, cited by Goldman Sachs, shows a 6% year-on-year drop in hotel RevPAR through late July, following a 1% decline in June. This downturn is attributed to a three percentage point drop in occupancy and a 1% decrease in average daily rates.
The decline in tourism spending is part of a larger trend of sluggish retail sales and subdued consumer prices in China. Gary Ng, a senior economist at Natixis, highlighted a sharp decline in per-capita spending on tourism since Q3 2025, indicating that while tourism remains a bright spot, it is affected by broader economic trends.
Price competition is evident in popular travel regions, with significant variations in hotel prices. Despite the domestic market's challenges, inbound tourism is showing promise, with Hyatt reporting an 18% increase in U.S. visitors and a 24% increase from Europe. The luxury segment is thriving, with Hyatt's Greater China RevPAR rising 7.2% year-on-year in Q2, driven by leisure luxury travelers.
Inbound visitors contribute modestly to the tourism market, accounting for 12% to 13% of total tourism spending, according to Natixis estimates