Beijing, Shanghai Are Done! 1 Million Eateries & Hotels Close, Signaling China’s Economic Collapse
Summary
TLDRThe video script details the decline of China's restaurant and hotel industries amid economic challenges. High-profile brands face financial troubles, and both high-end and small-scale establishments struggle with reduced demand, excessive rents, and overexpansion. The situation mirrors a broader economic downturn, with consumers cutting back on spending and businesses grappling with closures and bankruptcy. The report paints a bleak picture of the current state of the hospitality sector, with a significant number of closures and a grim outlook for future sustainability.
Takeaways
- 🏬 The mall industry is facing challenges with reduced foot traffic and closures, as observed at Beijing Longo Plaza.
- 🍽️ Restaurants, especially high-end ones, are struggling with closures due to reduced demand and high rental costs.
- 📉 Iconic brands like Kujū and Tianjin Goubuli are experiencing financial difficulties, reflecting broader industry struggles.
- 💸 Consumers are cutting back on spending, opting for more affordable dining options instead of high-end establishments.
- 📈 In 2023, there was a significant surge in restaurant openings, leading to overexpansion and subsequent closures.
- 📉 The restaurant industry in Beijing saw a significant drop in profits, with large-scale restaurants particularly affected.
- 🏙️ The economic downturn has led to a decrease in spending across various sectors, not just in dining out.
- 📊 High rental costs are a major factor contributing to the struggles of restaurant owners, even in the face of lower property prices.
- 📉 The profit margins in the restaurant industry have become extremely thin, with some operating at near break-even levels.
- 🏨 The hotel industry is also facing a wave of closures, with many owners unable to sustain operations due to the economic climate.
Q & A
What is the current state of the retail and restaurant industry in Beijing as described in the transcript?
-The retail and restaurant industry in Beijing is facing significant challenges, with many businesses closing down and high vacancy rates in malls. Even popular and once bustling areas are now struggling with reduced customer traffic and increased closures.
What is the impact of economic downturn on high-end restaurants in Beijing?
-The economic downturn has led to a significant decline in revenue and profits for high-end restaurants in Beijing, with some iconic brands reporting substantial losses and others closing down completely.
What role do rental costs play in the struggles faced by the restaurant industry in China?
-High rental costs are a major factor contributing to the struggles of the restaurant industry in China. Many restaurants are operating on thin profit margins and are unable to cover their high rents, leading to closures.
How has the overexpansion of the restaurant industry in China contributed to its current crisis?
-Overexpansion has led to an oversaturated market, with more restaurants opening than there is demand to support them. This has resulted in intense competition, price wars, and ultimately, many restaurants failing to sustain operations.
What is the effect of reduced consumer spending on the restaurant industry in China?
-Reduced consumer spending has forced the restaurant industry to adapt by offering more affordable options and discount deals. However, this has led to a race to the bottom in terms of pricing, with many businesses struggling to maintain profitability.
What is the current profit margin for the restaurant industry in Beijing, as mentioned in the transcript?
-The current profit margin for the restaurant industry in Beijing is as low as 0.37%, indicating a very challenging business environment where operating costs are high and revenue is low.
How are small and medium-sized restaurants faring in the current competitive landscape in China?
-Small and medium-sized restaurants are finding it extremely difficult to compete due to high rents, intense competition, and the need to lower prices to attract customers. Many are struggling to stay afloat and some are closing down.
What is the impact of the economic situation on consumer behavior in terms of dining out in China?
-Consumers are becoming more price-conscious and are opting for more affordable dining options. There is a shift away from high-end dining and towards budget-friendly alternatives.
What are some of the strategies that restaurants in China are employing to stay competitive in the current market?
-Restaurants are employing strategies such as offering discounted meals, introducing lower-priced menu items, and participating in group buying deals to attract customers and stay competitive.
How is the hotel industry in China being affected by the economic downturn and changing consumer behavior?
-The hotel industry is experiencing a significant downturn with many hotels facing closures, particularly in major cities like Beijing and Shanghai. High operating costs and reduced demand are contributing to the struggles.
Outlines
📉 Economic Downturn Impacts Beijing's Retail and Restaurant Sectors
The video script discusses the challenges faced by businesses, particularly in the retail and restaurant sectors, in Beijing. It highlights the emptiness of a once bustling mall, Longo Plaza, and the closure of numerous restaurants and stores. The script mentions the difficulty of finding new tenants for vacant spaces and the struggle of existing businesses to survive. It attributes these issues to reduced consumer demand and an economic downturn. The script also points out the financial struggles of well-known restaurant brands, the impact of high rental costs, and the overexpansion of the restaurant industry. It concludes by suggesting that consumers are now more price-conscious, leading to a shift towards more affordable dining options.
📊 Deep Dive into the Plunging Profits of Beijing's Restaurant Industry
This paragraph delves into the financial data of Beijing's restaurant industry, showing a significant decline in revenue and profits. It details the year-on-year decrease in revenue and the drastic drop in profit margins. The script discusses the struggles of full-service restaurants, fast food services, and other dining sectors, with many establishments facing collective losses. The video also touches on the competitive landscape, with large chains like Nang Shang driving smaller businesses to close. It paints a picture of an industry in crisis, with high-profile restaurants shutting down and a general sense of financial strain across the sector.
🏨 The Bleak Reality of China's Restaurant and Hotel Industries
The script shifts focus to the broader implications of the economic downturn on China's restaurant and hotel industries. It discusses the high rate of new restaurant openings and closures, indicating a tough business environment. The video mentions the fierce competition leading to price wars and the struggle of small businesses to survive. It also includes interviews with restaurant owners who are operating at a loss and the challenges they face with delivery platforms and group buying promotions. The script concludes with predictions of an upcoming wave of hotel closures and the impact of these economic changes on workers in the industry.
🌐 Widespread Economic Effects and Consumer Behavior in China
The final paragraph expands on the nationwide impact of the economic downturn, including in tourist destinations. It describes the decline in home stay prices and the emptiness of accommodations, reflecting reduced tourism. Personal accounts from business owners and residents highlight the lack of customers and the daily financial losses. The script also touches on the broader economic environment, with high unemployment and businesses closing down. It includes perspectives from wealthier individuals who are also cutting back on spending due to economic uncertainty. The video ends on a somber note, reflecting the widespread economic challenges and their effects on consumer behavior and business viability.
Mindmap
Keywords
💡Economic Downturn
💡Reduced Demand
💡Brand Name Premiums
💡Occupancy Rate
💡Rental Costs
💡Profit Margin
💡Market Saturation
💡Consumer Spending
💡Lease Agreements
💡Price Wars
💡Vicious Cycle
Highlights
Beijing Longo Plaza, once ranked seventh in annual revenue among malls in Beijing, now sees a significant decrease in foot traffic and business.
More than half of the restaurants at the plaza have changed, with many closing down and no new tenants to replace them.
Popular restaurants that once had long waiting lines are now closed, reflecting a broader decline in the dining scene.
The fundamental reason for the business struggle is identified as reduced demand and an overall economic downturn.
Famous Chinese restaurant brands like Kujū and 238 R&B are reporting significant financial losses.
High prices and poor taste have led to the decline of brands like Tianjin Goubuli, causing store closures.
Dong Shun, known for its lamb hot pot, now operates with an occupancy rate of less than 70% at most locations.
Consumers are opting for more affordable dining options, leading to a decline in high-end restaurants.
In 2023, there was a surge in restaurant openings across China, with 3.18 million new registrations and 1.4 million closures.
The economic downturn has led to business closures, layoffs, and unemployment, affecting the restaurant industry.
High rent costs are a significant burden for restaurant owners, with many working just to cover their leases.
Landlords prefer to keep stores closed rather than lower rents, as it would be difficult to recoup their high property investments.
People are cutting back on spending in all areas except food, leading to a shift in the types of restaurants occupying mall spaces.
Statistics from the Beijing Bureau show a significant year-on-year decrease in revenue and profits for large-scale restaurants.
Full Service restaurants and Beijing saw a 10% drop in revenue, with collective losses reaching 76.5 million R&B.
The restaurant industry in Beijing is facing tough times with a profit margin as low as 0.37%.
The wave of closures in the restaurant industry is not limited to Beijing but is happening across China.
The restaurant business has become very straightforward: high prices mean no customers, affecting both high-end and low-end establishments.
Price wars in the industry are intensifying as establishments lower prices to attract customers, but this is not a sustainable strategy.
Many restaurant giants have lost everything and quietly exited the scene, with some reporting losses in the hundreds of millions of R&B.
The economic downturn is affecting not just restaurants but also hotels, with many facing closure or bankruptcy.
The wave of closures extends to popular tourist destinations, with homestay prices plummeting due to reduced tourist numbers.
Economic uncertainty is leading even the wealthy to cut back on spending, affecting the overall consumer market.
Transcripts
do you know why business is so hard
these
days just look at this a huge Mall Prime
floors a brand named clothing store with
thousands of square feet and I've only
seen two people inside both of them sta
right now I'm at Beijing Longo Plaza at
its peak it's ranked seventh in annual
revenue among malls in Beijing I used to
be a regular at the restaurants here
today when I came back I noticed that
more than half the restaurants have
changed see that boarded up section over
there it used to be jungu hot poot a
well-known chain back in the day you
absolutely had to wait in line during
meal times and it wasn't just this place
every restaurant I remember had long
waights but now they've all closed down
what's more there's no new tenant
advertised on that board which means the
space is still vacant in the past if a
place closed down another business would
move in almost
immediately the ones that haven closed
are barely holding on
probably because their leases haven't
expired yet things are tough last time I
was here there weren't as many
closures over by the street there's a
place that used to be really popular but
it's closed down now and likely pulling
out
completely this whole area used to be
filled with snack shops but they've all
shut
down it's really tough there are just so
few people here and this is the weekend
during meal time no less back in the day
even on weekdays it wasn't this empty I
remember coming here on a weekday and
struggling to find a parking spot like
it was a
pilgrimage now you come on the weekend
and you could practically Park sideways
even downstairs at he T there's no line
anymore I remember back then getting a
he te took at least 2 hours now you can
get one right
away the Blogger concluded that the
fundamental reason business is
struggling is due to reduced demand and
an overall economic downturn kuju a
famous Chinese restaurant brand reported
a loss of 260 million R&B last year even
the 238 R&B pecking duck isn't selling
anymore this 157 year-old iconic Chinese
brand is sinking deeper into financial
trouble another well-known brand tianin
GOI charged 120 R&B for a basket of buns
and 58 R&B for a plate of peanuts due to
these sky high prices and poor taste it
has gone from gboi meaning dogs don't
care to ruli meaning people don't care
its stores are closing down one after
the other as for dong shun famous for
its lamb hot pod most of its locations
now have an occupancy rate of less than
70% this is the current state of the
restaurant industry in Beijing people
don't have much money anymore so they've
downgraded their spending and are no
longer willing to pay for brand name
premiums some analysts suggest that the
wave of closures in the restaurant
industry especially among high-end
restaurants isn't just due to reduced
spending blind expansion and excessive
rental costs are also major factors in
2023 there was a surge in restaurant
openings across China that year 3.18
million new restaurants were registered
while 1.4 million shut down double the
number from 2022 many Chinese restaurant
Brands set ambitious 10,000 store goals
but behind this frenzy of expansion was
a misjudgment of the speed of economic
recovery after pandemic restrictions
were lifted as the real estate market
collapsed the stock market tumbled
businesses folded and waves of layoffs
and unemployment surged the Steep
economic downturn made it inevitable
that these newly opened restaurants
would face losses closures or vanish
entirely additionally high rent costs
have turned countless restaurant owners
into laborers working just to pay their
landlords for example in Shanghai a
noodle shop owner has to sell 100 bowls
of noodles a day just to cover the rent
and 150 bowls to start making a profit
after 6 months most of the income has
gone to the landlord this situation is a
snapshot of the struggle faced by
restaurant owners Nationwide although
property prices have dropped commercial
rents continue to rise in the first half
of this year rents increased on 69% of
shopping streets in first tier cities
and 58% in second tier cities most store
owners facing these high rents find it
hard to stay afloat even without rent
increases so why do so many landlords
prefer to see their stores Clos rather
than lower the rent the reason is simple
because they bought the properties at
high prices lowering rent would make it
nearly impossible to recoup their invest
m a blogger mentioned that when they
returned to Beijing earlier this year
the most striking change was how much
emptier the city felt almost all the
nearby malls were half empty half the
stores were vacant and the number of
shops selling clothes shoes and bags was
dwindling while restaurants were taking
over most of the mall spaces this
indicates that people are cutting back
on spending in all areas except food and
when they do eat out they're opting for
small affordable restaurants high-end
dining has already been pushed out of
the daily consumption habit of many
Chinese people this trend is now
reflected in the latest data from the
restaurant industry according to the
Beijing Bureau statistics in the first
half of 2024 the revenue of large scale
restaurants in Beijing reached 49.2
billion R&B a year-on-year decrease of
2.9% meanwhile total profits stood at
180 million R&B an 89% year-on-year drop
with a profit margin as low as
0.37% looking at restaurant categories
revenue from Full Service restaurants
and Beijing dropped by 10% year on-ear
in the first half of the Year among the
2,100 full service restaurants which are
the backbone of the industry Collective
losses reached 76.5 million R&B other
types of restaurants lost 23.2 million
R&B Fast Food Services posted a profit
of 240 million R&B down 50% year on-year
while profits from beverage and cold
drink Services drop even more
drastically down 86% year on-ear other
sectors including fast food food
beverage and cold drink Services food
delivery and catering services saw
Revenue growth however behind this
Revenue growth was a sharp decline in
profits the restaurant industry's
profits have plummeted by 88% this isn't
happening just anywhere it's in Beijing
the city where wealth and power are most
concentrated in China in a country like
China where social connections are
crucial almost every business deal
requires dining out sometimes even more
than one meal so if even the large
restaurants in Beijing are struggling to
make money you can imagine the state of
the restaurant industry in other cities
across the
country a profit margin as low as
0.37% isn't just a tough business it's
practically charity work a restaurant
owner in Beijing mentioned that while
this year's Revenue hasn't declined
profits have dropped by about half
compared to last year pushing them to
the brink of unsustainability Wang guu
the owner of nanang xang stated that in
2024 their store sales are lower than
last year and profits are also on the
decline n Chen xang a fast food chain in
Beijing had 129 stores as of October
2022 all directly operated within the
city in 2023 the chain added over 70
more locations in Beijing to cater to
the trend of downgraded consumption they
introduced highly affordable options
like a 3 R&B breakfast and a 1999 R&B
small hot pot there was once a media
report stating that in beijing's
restaurant scene people say every time
Nan Chang xang opens a new store five or
six nearby family-owned eateries close
down many restaurant owners near Nang
Shang admit opening near Nang Shang does
affect our business it's just a truth
wangu has faced pushback from beijing's
fast food industry in a Doan video he
revealed that many restaurants when
signing lease agreements include a
clause that says nanang xang is not
allowed to open here a Korean restaurant
owner remarked that regular eateries
cannot compete with nanang Shang whether
in terms of menu updates or pricing
however local businesses are still
trying to fight back many neighborhood
shops have had to lower their price to
compete with Nang Shang hoping that
discounts will help bring in more
customers unfortunately the results so
far have been limited compared to
high-end restaurants which have been
forced to introduce cheap meal deals
Nang xang seems determined to drive all
small and mediumsized eateries out of
business however this endless price
cutting strategy is not sustainable
recently wangu candidly stated in a Doan
video the money we made in the first
half of the Year might be completely
wiped out by winter so businesses need
to prepare in advance close what needs
to be closed if the restaurant industry
in Beijing is grim then Shanghai
situation can only be described as
catastrophic according to Shanghai
Bureau statistics in the first half of
2024 large scale hotels and restaurants
generated 75.3 billion R&B in Revenue a
year-on-year decrease of 2.6% while
operating profits plummeted to negative
770 million R&B this is a stark contrast
to the 1.7 billion R&B profit reported
Ed in the same period last year in May
of last year Shanghai had 2,700
restaurants where the average per person
spending was over 500 R&B but by July of
this year fewer than half remain in
business even more shocking many of
shanghai's top tier prestigious
restaurants have shut down some
landmarks of high-end dining in Shanghai
have all closed Bund 18 had an average
spending of 1,580 R&B per person the
topsan restaurant minglan had an average
of 2,300 R&B Sushi Shin at bn27 was
averaging 2,000 R&B Yuzu Lin averaged
1,900 R&B the Michelin two-star Nordic
restaurant reefer had 3,000 R&B average
also shuttered are the upscale bar core
aning West Road with its worldclass
bartenders and the Michelin three star
restaurant Opera typically restaurant
businesses need to maintain a profit
margin of 5 to 10% if it drops below
that they may face Financial strain and
in more severe cases cash flow problems
that could lead to bankruptcy industry
insiders in Beijing have told the media
that current profit margins are nowhere
near enough to support normal operations
many restaurant owners are now facing
critical decisions about weather to shut
down even chain restaurants must close
their unprofitable locations to stay
afloat the restaurant industry is
entering an era where big fish eat small
fish and single brand or smallscale
businesses will find it harder to
survive currently many small restaurant
owners are barely staying afloat even
while losing money in one video a
blogger visited a small eery that uses
the mwan delivery platform the Blogger
asked the owner for this 47.5 R&B order
how much do you actually make the owner
responded 31.9 R&B shock the Blogger
asked so the platform takes the rest and
you still have to pay the delivery fee
for the driver the owner replied of
course we lose two R&B on every order we
take the Blogger stunt asked
you're losing money why are you even on
M the owner answered they control the
mainstream market we don't have a choice
another food industry blogger noted that
the restaurant sector is highly
competitive right now if you do group
buying your store will be packed but you
lose money if you don't your store will
be empty and you'll still lose
money in this current environment
competition in the restaurant industry
is extremely Fierce if you don't engage
in promotions your business will
gradually dry up but once you're in it
becomes a vicious cycle that's hard to
escape a shop owner I spoke with told me
that they launched a group buying deal
and sold over 400 sets in a short time
working around the clock like it was a
war but after doing the math they found
that they had lost 16,000 R&B so they
had to take the deal down however
without the group buying promotion
business at their hotspot restaurant
went silent what could they do they had
no choice but to launch new group buying
deals and keep pushing forward so just
how tough is it for China's restaurant
industry right now according to tianyan
Cha data in the first half of this year
1.35 million new restaurants were
registered in China while 1.06 million
were deregistered or have their licenses
revoked this means that for every new
restaurant that open nearly one closed
down industry insiders say the
restaurant business has become very
straightforward if your prices are too
high no one will come regardless of
whether you're running a high-end or
low-end restaurant in an effort to get
people to dine out the industry's price
Wars are becoming increasingly Fierce
last month the average customer spending
at Tha 's pickled fish restaurant
dropped from 80 R&B to 69 R&B returning
to prices from 7 years ago Heidi Lao
wasn't far behind launching the Shia
High hot pot with Bas soup starting at
just 9.9 R&B in single person meals
priced at 49 R&B shun G went even
further offering four items at special
price
rolling back to 2008 pricing levels if
you don't cut prices your business will
collapse immediately but joining the
price War doesn't guarantee survival
either those with capital can grit their
teeth and stay in the fight those
without Capital often have no choice but
to close down in this Fierce competition
many restaurant Giants have lost
everything and quietly exited the scene
for instance the restaurant chain Shabu
Shabu reported a loss of 260 million R&B
with net profits plummeting nearly 133
times Nishu T is expected to report
losses of 420 to 490 million R&B
Shanghai entrepreneur juli Ren commented
restaurants are like the last hrah for
China's physical economy now that
restaurants are going under it seems
like the entire Chinese economy is
nearing its end for the over 20 million
workers in China's restaurant industry
tough times may still be ahead some
predict that a large wave of Hotel
closures will hit China in the second
half of this
year already we're seeing signs of this
even before the summer holidays have
ended many Hotel owners can no longer
hold on and have surrendered in just the
past few days I've received messages
about more than a dozen hotels being up
for sale I'm on my way to check out one
of these hotels right now this year has
been incredibly tough in fact the wave
of hotel closures began some time ago a
hotel supply store owner
said so many hotels have gone out of
business this year that even though
selling Hotel supplies can't keep going
we just acquired the inventory of a
hotel that closed down thousands of
brand new plates and dishes we're
practically giving them away and this
rice cooker which you might think is
expensive because it's brand new I'm
selling for just 20
R&B the owner went on to list many Hotel
supplies all being sold at extremely low
prices for example a four-door
refrigerator with cooling on top and
freezing on the bottom used to sell for
1,80 R&B secondhand now a brand new one
is only 1,180 R&B there are also
cabinets trolleys wine glasses ashtrays
shelves vacuum cleaners stainless steel
sinks all brand new all being sold for
next to
nothing a seasoned Hotel industry
influencer recently said that in the
next 3 to 5 years up to 50% of Hotel
owners May face closure or bankruptcy I
don't think this is an exaggeration just
look at the hotel Market this year
especially from mid August until now and
you'll understand just how cold this
winter might be for the hotel
industry the wave of closures in the
restaurant and hotel Industries is not
limited to major cities like Beijing and
Shanghai it is happening across China
including in popular tourist
destinations
in the past places like do and ni Jang
were the go-to vacation spots for the
middle class during holidays these areas
were packed with visitors and the prices
of accommodations especially hom stays
would Skyrocket but now with the
economic downturn downgraded consumption
and reduced tourist numbers home state
prices are
plummeting I'm from chonging and I run a
guest house here by igh Lake in di right
now I've lowered the prices for all the
rooms in this building to the lowest
they've ever been do you see any cars on
the road no right occasionally one might
pass by but there are no people not a
soul in sight the rooms are empty and
the pressure of that is immense there
are no guests and the owner of a guest
house in Li Jang is worried about it
going out of
business hi I'm wo and I run a guest
house in Le Jang Oldtown currently I
have four guest houses in Le Jang the
off season has arrived
and now most of the rooms are empty this
year's peak season ended in the blink of
an eye for the next few months the rooms
will mostly be vacant if this continues
the guest house will go under even
though I only have 10 rooms the daily
cost is around 1,000 yen so right now
we're losing money every day a resident
of Beijing mentioned that the city's
economy is clearly declining after the
pandemic restrictions were lifted there
was a wave of closures especially this
year with many people losing their jobs
JS one video blogger Revisited the bong
World Trade Center in Beijing after 10
years and was struck by the difference
10 years ago it was bustling with people
but now it's eerily quiet a far cry from
its former glory this is a large
shopping mall in the suburbs of Beijing
despite its vast space it's early empty
with everything you could need except
people just a few years ago this place
was bustling with life but not anymore a
Beijing resident commented that big
malls are now mostly deserted with few
Shoppers around they share their
experience of visiting a large
Supermarket on New Year's Eve and seeing
only a handful of people a stark
contrast to the packed crowds of the
past a supermarket worker in Beijing
echoed these sentiments saying business
is tough with Fierce competition if
prices are high customers won't buy but
if prices are lowered there's no profit
many businesses are closing down under
this pressure Mr ch a Beijing resident
shared they has been unemployed for 2
years and has observed that there are
very few job openings now the overall
environment is poor with many commercial
spaces uper rent and businesses closing
down in some areas almost all the shops
have shut down their doors leaving only
a few still operating Mr chai estimates
that about half the people he knows are
unemployed and many are struggling so
why aren't even the wealthy spending
anymore when the economy enters a
downturn and uncertainty about the
future grows even the wealthy start to
cut back on spending a 40-year-old white
collar worker in Beijing explained that
despite having a stable job inside
businesses the uncertainties of Life
have led her to reduce her spending
every day something new happens one day
they adjust Social Security the next
there's talk of a new housing tax then
the stock market takes a hit my sense of
security has plummeted I don't know when
the next blow will come so I've had no
choice but to start spending less she
said
[Music]
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