China’s Golden Week: Who Stands to Gain as Chinese Tourists Fan the Globe

With the number of mainland Chinese tourists traveling abroad continuing its fast-paced rise in 2015, brands, retailers, and tourist destinations the world over are expecting a bump in arrivals during Golden Week, which kicks off on October 1. With Chinese outbound tourists on track to surpass 200 million trips this year—234 million in total, according to a recent report by the Fung Business Intelligence Centre and China Luxury Advisors—all eyes are fixed on whether these burgeoning world travelers will continue opening their wallets, or if spending will be more muted than recent years owing to China’s recent yuan depreciation and economic turmoil. Despite the concern, there are indications that spending should remain strong among those traveling for Golden Week, particularly in nearby locales like South Korea. According to the recent report, Chinese travelers to South Korea in the year up to May 21, 2015 spent an average of $1,922 each on retail purchases, more than they did in Taiwan ($1,696), Thailand ($1,290), or Hong Kong ($1,256), and second in Asia only to Japan ($2,270). Among the products targeted by Chinese tourist-shoppers in South Korea, clothing and beauty were far ahead of other segments like electronics (which they preferred to buy in Hong Kong or Japan) or watches (which they bought in Europe). During Golden Week, expect beauty and apparel retailers in South Korea to actively court the Chinese tourist-shopper, as they look to recover from the damage done to the Korean travel industry this summer due to the MERS epidemic. In August, foreign visitation dropped for the third month in a row to 1 million, a staggering 26 percent decrease from the same time period in 2014. The drop in Chinese visitors was particularly tough for business, with Chinese arrivals plunging 32 percent in August from one year prior. However, South Korea is expected to bounce back, and has already seen promising signs. In the first two weeks of September, more than 300,000 Chinese tourists visited South Korea, according to Korea Economic Daily, a nearly 5 percent rise year-on-year. And the country’s products remain in strong demand among Chinese consumers, an indication that the MERS crisis did little to push Chinese consumers to drop Korean brands for Japanese ones. According to the Korea International Trade Association, Korean cosmetics imports in China rose a jaw-dropping 251 percent to $378 million in the year up to July. However, with competition from local Chinese companies and high-end Japanese brands reaching fever pitch, Korean beauty conglomerates like AmorePacific and LG are feeling the squeeze and pushing their premium imprints like AmorePacific’s Sulwhasoo and LG’s WHOO. But South Korea won’t be the only beneficiary of Golden Week this year—which, coming just a few days after the Mid-Autumn Festival—is seeing some travelers extend their holidays to nearly two weeks. According to China Tourism Academy director Jiang Yiyi, the length of this year’s Golden Week means more Chinese travelers will be able to “go further, or deeper, when traveling abroad than simply traipsing around the tourist sites.” This bodes well for the United States—which saw mainland Chinese tourist arrivals increase 19 percent year-on-year in the first quarter to 561,916—and Europe. Chinese online tourism powerhouse Ctrip said that it expects outbound bookings to double this Golden Week, with long-haul trips set to increase by 50 percent. Among the destinations proving particularly popular with its customers this year, Ctrip singled out Hong Kong, Tokyo, and Bangkok, but noted that it has seen strong interest in Rome, Washington DC, Paris, Sydney, and New York. But the continued draw of Paris and London can’t be overstated, as these two cities have seen bookings triple compared to last year—presumably helped by a weak euro in the former and easier visas in the latter. The impact of China’s recent yuan devaluation—which some market observers feared would crimp outbound travel—has yet to make a major impact on bookings, according to Ctrip. This is partly due to the fact that many travelers booked their Golden Week holidays months ago. As Yan Xin, public affairs manager at Ctrip, told South China Morning Post, even despite the devaluation, overseas shopping remains a “good deal,” as the yuan remains strong against other global currencies. According to Yan, “Even if the value of yuan decreased by 3 percent, it would only add 300 yuan to the price of a 10,000-yuan deal, which, to most tourists, is no barrier at all.” While Europe will remain particularly strong this Golden Week, the quickly rising draw of the United States—and the greater ease with which Chinese travelers can take multiple visits—is an area to watch. This will become particularly important in the medium-term, as some Chinese tourism professionals have noted that new rules in the Schengen zone are areas of concern. As Chen Jie of CYTS told the SCMP, the EU’s new requirement to have Chinese visa applicants for Schengen visas provide biometric data starting on October 12 may dissuade some travelers. This rule will require first-time visa applicants to personally apply at consulates or external service providers to submit fingerprints and a digital photo. While less a barrier than an annoyance, the new requirement has the potential to drive some Chinese travelers to head elsewhere—as it has in South Africa, which saw Chinese arrivals decline 46 percent in the fourth quarter of 2014 after putting in effect similar visa requirements. While it’s unlikely that Europe—given the draw of Paris, Rome, and other popular destinations—will see the same precipitous decline, the new biometric requirements threaten to drive more travelers toward 10-year U.S. visas (and American cash registers).

China’s Golden Week: Who Stands to Gain as Chinese Tourists Fan the Globe

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Published September 28, 2015

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China’s Golden Week: Who Stands to Gain as Chinese Tourists Fan the Globe