In January, the province of Hainan set ambitious growth goals.
The island said it would aim for 9% GDP growth. Growth is running far below initial targets due to an outbreak of a far more transmissible Covid variant.
Tens of thousands of tourists were ordered to stay at hotels in Sanya because of a surge in Covid infections. The capital of the province issued stay- home orders.
Tourists are stuck on the island since Saturday. Some people have been able to go back to the mainland on charter flights.
There are still questions about hotel stay subsidies, the cost of food, and when most tourists can return to their homes.
Jacques Penhirin is a partner in the Greater China office of Oliver Wyman. The clients are looking at the bookings for the fall holiday which are still quite resilient. It's not looking good, but people haven't canceled yet. I think it's probably down on last year.
He said that it will be bad for luxury brands and hotels until Chinese New Year next year.
In July, China's top leaders said the country might miss the GDP target. Beijing did not state any changes to its policy.
The economy grew 2.5% in the first half of the year. The economy grew by 1.6% in the first half of the year.
The island's GDP growth was 11.2% for the entire year.
According to the research analyst at the Economist Intelligence Unit, Hainan was the second fastest growing province last year.
She said that because of the international travel restriction, the tourism revenue in Hainan increased by over fifty percent. Tourism accounts for 80% of the economy.
Sanya, on the southern coast of Hainan, was the top destination for couples flying from three of China's largest cities last week.
One of the few beachfront locations for international hotels is the island.
The central government is pushing for the island to become a free trade hub and international shopping area.
The sales of duty-free stores on the island increased by 84% last year.
The customs agency said that sales at the four duty-free stores increased by 27% year-on-year.
According to Penhirin, cosmetics brands rely more on Hainan for sales than on cheaper brands in China. He said that Hainan accounts for less than 5% of China sales for luxury brands.
After a couple of months of being out of the city, luxury and premium brands cut their China growth expectations by 15 percentage points.
Tens of thousands of tourists were stranded in the resort city of Sanya, Hainan, this week as local Covid outbreaks prompted airlines to cancel flights.When will consumer regain confidence and peace of mind of travel and shopping which is further delayed by this Hainan incident, is the question, according to Penhirin.
He said that the income is more important than the confidence.
He said brands should put more effort to track their inventory in China to make sure they don't end up with a price war.
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