Chinese tourists’ new mantra: Have yuan, will travel

Although LVMH’s latest results point to weakening demand in China — with Q3 sales down 3% YoY — a surge in outbound travel suggests that affluent Chinese consumers remain eager to spend, particularly when traveling abroad. This year’s National Day holiday (October 1 to 7), traditionally a peak period for domestic tourism, saw a striking increase in outbound travel. According to the National Immigration Administration, outbound trips by mainland Chinese residents reached 7.59 million, up 33.2% YoY, and the Civil Aviation Administration of China reported a 38.2% YoY rise in international passenger flights. Online travel agencies also saw a significant surge. Fliggy, Alibaba’s travel platform, reported that outbound bookings during the National Day period were up more than 50% compared to last year, with international hotel bookings even surpassing pre-pandemic levels by 20%. Popular destinations like Japan, Thailand, and Singapore have been key beneficiaries, thanks in part to easier visa policies and attractive travel packages. A closer look at the demographic driving this outbound travel surge reveals a familiar pattern. High-net-worth individuals (HNWIs) from China’s major cities, such as Beijing, Shanghai, and Guangzhou, lead the trend. However, this year, a notable increase in demand also came from smaller cities. According to Ctrip’s 2024 National Day Tourism Report, bookings from fourth- and fifth-tier cities grew significantly, with orders from these areas doubling compared to last year. Expanding horizons The motivations behind these changes are clear: many affluent Chinese travelers are pursuing experiences and shopping options abroad, often owing to prices that can be higher than nearby markets like Japan, where Chinese tourists are spending significantly. In the second quarter of this year, the average Chinese tourist spent 283,900 Japanese yen (around $1,900), making them the highest spenders among all foreign visitors. The outbound travel uptick has come at a cost to China’s domestic tourism market, particularly in the high-end segment. While domestic trips during the National Day holiday reached 7.65 billion — up 5.9% YoY — the average domestic traveler spent only 916 RMB ($129) per trip, far less than those traveling abroad. Trade trouble This development has had a tangible impact on regions that have traditionally relied on high-end domestic tourism. Hainan, for example, known for its duty-free shopping appeal, saw a significant decline in sales during this year’s National Day holidays. From October 1-7, offshore duty-free sales in Hainan province amounted to RMB 785 million ($111 million), down from RMB 1.33 billion ($182.4 million) during the same period last year, a 41% decline YoY. This decline highlights the challenge that local luxury retailers face in competing with the allure of shopping overseas. China’s travel industry has historically been a major player in global tourism trade, with travel services accounting for 26.7% of China’s overall service trade as of the first half of 2024. Yet, the sector faces a substantial trade deficit, exceeding RMB 1 trillion ($140.5 billion), driven largely by outbound travel expenditure. As affluent Chinese travelers continue to flock abroad, the question of how to attract more international visitors to China becomes increasingly pressing. The country has made strides in this area by introducing more favorable inbound travel policies, such as 144-hour visa-free transit for certain nationalities and unilateral visa waivers for European countries. During this year’s National Day holiday, China welcomed 1.01 million foreign visitors, a 37.2% YoY increase. These figures suggest potential for growth in inbound tourism, but they also highlight the considerable gap between China’s outbound and inbound tourism flows. For both Chinese and international tourism stakeholders, understanding this shift in travel behavior is essential. The reorientation of Chinese tourism spending toward overseas markets creates opportunities for popular destinations like Japan and Thailand but presents challenges for domestic attractions. At the same time, the ability to attract inbound travelers could help alleviate the trade imbalance in China’s tourism sector and support local economies.

Chinese tourists’ new mantra: Have yuan, will travel

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Published October 18, 2024

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Chinese tourists’ new mantra: Have yuan, will travel