Issue #78 - 8 Reasons Why 8 Years is a Long Time in Chinese Travel & Tourism
Preparing for the next Chinese Travel Revolution.
Welcome to issue 78 of Asia Travel Re:Set…
Covid Zero. Shanghai lockdowns. Mass testing.
The images from Pudong and Puxi are evocative of Wuhan in early 2020 as Covid-19 emerged.
Looking further back… eight years ago last week, I submitted the manuscript for The New Chinese Traveler: Business Opportunities from the Chinese Travel Revolution.
The book was the result of a decade of working with, learning from and listening to leading players in Chinese domestic, outbound and inbound travel and tourism.
Eight years is a long time, especially when a quarter of the period incorporates a pandemic.
So much had changed between 2014 and 2020. A great deal more has changed since.
Over recent weeks, I have again been speaking to players and analysts in Chinese travel, and joining 2021 earnings calls of the travel majors to gauge the current landscape for a new travel market report (more soon!)
China, the world and travel itself all look very different compared to April 2014.
So, today - eight years later - I’m revisiting and reframing 8 key tenets from the book.
Thanks for being onboard.
The Sunday Itinerary
- “IN THE NEWS”
- 8 Reasons Why 8 Years is a Long Time in Chinese Travel & Tourism
Preparing for the Next Chinese Travel Revolution
- Destination Myanmar: Assessing the Impacts of the Past Two Years
Could Myanmar conceivably reopen to business and leisure travel this month?
“IN THE NEWS”
Great to catch up once again with Sharon Singleton at Asia Gaming Brief for a mini podcast discussing the outlook for travel and tourism across Asia Pacific.
8 Reasons Why 8 Years is a Long Time in Chinese Travel & Tourism
8 selected statements from my book, The New Chinese Traveler, are brought up to date.
1) BIG Numbers: Annual vs Quarterly
“In 2013, 97 million* Chinese traveled beyond the Middle Kingdom, and the inevitable conclusion was that more than 100 million would do so in 2014.”
China’s 100 million outbound milestone highlighted the degree to which tourism has come to rely on annualised statistical benchmarks. And while it was a very good story, it masked more intriguing trends.
Prof. Wolfgang Georg Arlt, CEO of the China Outbound Tourism Research Institute (COTRI), has long argued that comparing Chinese tourism on a yearly basis is a mistake because (pre-Covid) each quarter delivers distinctive results.
Back in 2014, Prof. Arlt pointed out that although it was the first calendar year in which outbound trips (including to Hong Kong & Macau) from China surpassed 100 million - on a rolling 12-month basis, the 100 million total was actually achieved in Q1. In 2016, 100 million trips were recorded in the first three-quarters of the year.
Speaking to me this week, Prof. Arlt cited pandemic-era data. In Q1 of 2020, for example, 14.5 million Chinese outbound trips were recorded, out of 18 million in the full year. Yet if you compare 2020 (18 million) vs 2021 (8.85 million**), you miss the fact that Q1 of 2020 delivered more outbound trips than the next 7 quarters combined.
*This total was later officially revised to 98.2 million.
** 7.0 million of which were visits to Macau.
2) China’s Airlines Faces Tough Challenges
“The expansion of international routes and flight frequencies has afforded Chinese flyers similar options to passengers in established travel markets.”
China’s travel industry has been deeply impacted by Covid Zero isolation. Structural dislocations have opened up across the aviation, hotel, OTA, travel agent and tour operator sectors. These are important to observe and understand.
The airline sector is especially harmed.
Across the past decade, airports throughout Asia Pacific became accustomed to frequent take-offs and touchdowns by Chinese carriers.
And then it all stopped.
In 2021, domestic routes accounted for 95.37% of Air China’s flights.
With financial losses mounting, 2022 will be defined by strict cashflow management.
This week, the Big 3 airlines - Air China, China Southern & China Eastern - reported combined 2021 losses of over RMB40 billion. Regional carrier Shandong Airlines is technically insolvent. Smaller airlines have been taken over by local governments.
With no clear path towards reopening China’s international airports, further consolidation in China’s heavily consolidated airline sector appears likely.
3) WeChat is Now a Travel Distribution Tool
“WeChat (Weixin) has encouraged hoteliers and travel brands to deploy it as a mobile tool for customer service management and international market research.”
In 2013, WeChat counted 355 million users. Today, it is a multi-tiered SuperApp with 1.27 billion active monthly users. Its applications encompass almost very facet of daily life including its WeChat Pay cashless payment/transfer function.
For travel firms, the game-changing feature is Mini Programs, which it launched in 2017. This takes consumer engagement far beyond service delivery and research.
Mini Programs are branded apps wrapped in a giant app system. They enable travel companies to directly promote and sell travel products to users via their smartphones.
There are now around 450 million WeChat Mini Programs, with notably strong growth last year in tourism, retail and catering.
4) Asia Pacific’s ‘China-Shaped’ Tourism Hole
“More than 1.12 million Chinese visited Thailand in the first quarter of 2013, the first time any source market had exceeded 1 million visitors in a single quarter.”
This surge was inspired by a slapstick Chinese movie, Lost in Thailand, which was released in December 2012. Bookings for the 2013 Chinese New Year skyrocketed as tour agencies offered special packages incorporating some of the film locations.
Chinese tourists’ affection for Thailand, South East Asia’s most visited country, would continue up to 2019, when 10.99 million of the 39.8 million visitors were from China.
Thailand is far from the only country wishing China would restart outbound flights. Asia Pacific’s China-shaped tourism gap will be evident region-wide throughout 2022.
In Cambodia, for example, 36.3% of its 6.62 million visitors in 2019 were from China.
Japan, South Korea, Australia, New Zealand, Maldives and Sri Lanka will all hope that when Chinese travellers return, they will break existing quarterly and annual records.
5) The World of Wanda
“Wang Jianlin, China’s richest man, is determined to drive the 21st-century tourism train in China.”
Remember Dalian Wanda?
Founded in the northern city of Dalian, this acquisitive conglomerate launched a luxury hotel brand, a Movie Metropolis park and resort in Qingdao, and opened theme parks across China. Wanda built residential towers in global cities, acquired AMC Entertainment, Sunseeker yachts and a 20% stake in Atlético Madrid.
The ambitions seemed limitless.
China’s government sanctioned Wanda for its reckless borrowing and buying spree. It was forced to divest assets to pay huge debts.
Wanda still exists, and is restructuring, but it stands as reminder of when a few Chinese tycoons - think HNA and Ambang - tried to buy their way onto the global tourism podium.
6) Reopening the Mainland China-Hong Kong Border
“In 2013, Hong Kong welcomed 54.3 million visitors, of which 40.7 million arrived from mainland China.”
For several months, Hong Kong has repeatedly stated its objective to restore quarantine-free travel to and (primarily) from China’s mainland. Its administration outwardly remains hopeful this can occur in the second half of 2022.
Hong Kong’s destination appeal for mainlanders was waning even before the running street battles between police and protestors in 2019 - but reopening would likely stimulate cross-border travel, says Prof. Arlt of COTRI:
“Certainly, a lot of Chinese would travel to Hong Kong as tourists if it is the only option available, but people won’t just travel for fun. Many people have urgent business in Hong Kong, or haven’t seen their family living there for over two years, or want to start their studies. There will be various reasons to travel to Hong Kong.”
He adds, however: “I don’t think we will see the Chinese visitor numbers to Hong Kong ever come back again like we saw in the mid-2010s.”
7) (Re)Approving the World’s Travel Destinations
“China created the world’s fastest-growing tourism sector with assiduous care… It conceived the Approved Destination Status (ADS) process to approve destinations for Chinese travelers.”
The ADS verification process stretched from the 1980s through the 2000s. By 2014, around 150 nations had been approved by China’s government to market their destinations to Chinese tour groups. It set the wheels in motion for a more liberalised outbound tourism sector that would quickly evolve and thrive.
This raises questions as to how China might reopen its borders. Many analysts believe it will be phased and gradual, and could initially involve some form of selective destination approval process.
Recognition of Chinese vaccines would likely be non-negotiable.
Might other factors also be incorporated into bilateral or unilateral travel agreements?
8) Preparing for the Next Chinese Travel Revolution
“One simple dilemma pertains for destinations and travel providers: Are you ready to deal with the China tourism force heading your way?”
While China’s airport gates remain slammed shut, the tourism world is asking itself the BIG question: "When will Chinese tourists return?"
The answer appears to be: Not any time soon.
But deeper questions also need to be asked.
Chinese domestic travel is undergoing a major reordering, and this will continue throughout 2022.
When China does permit overseas travel again, its outbound market will be more diverse, more demanding and more difficult to predict than ever before. It will also be influenced by the tech-enabled service standards now routinely offered by Chinese hotels, airlines, train operators, OTAs, stores and restaurants.
The learning can start now.
This doesn’t mean relying on pre-pandemic experiences, or on travel sentiment surveys which will be far out of date by the time their respondents next take off.
Understanding fast-shifting patterns of consumer behaviour across this vast country, and all of its compelling markets, has never been so vital.
Destination Myanmar: Assessing the Impacts of the Past Two Years
How is Myanmar's economy faring 14 months after the coup? What is daily life like in Yangon? And is it conceivable that Myanmar might reopen for travel?
On this week’s The South East Asia Travel Show, we are joined by Yangon-based Argus Tuft (pseudonym), who is a long-time resident of Myanmar, and an experienced operator across the aviation, travel and marine sectors.
We discuss the impacts of Covid and the military coup on the economy in general and the travel industry, which was growing fast before the pandemic. Argus also addresses speculation that Myanmar is preparing to reopen to business travel. Plus, pearl farming, archipelago living, river cruising, ballooning and super-yachts.
Listen to Destination Myanmar: Assessing the Impacts of the Past Two Years:
Or search for The South East Asia Travel Show on any podcast platform.
And, that’s a wrap for Issue 78.
The newsletter takes a break (on Tioman Island) next Sunday, but will be back on 17 April.