Over the course of less than two decades, China has gone from being a minor player to being the world’s largest and most lucrative source of outbound tourists. In 2017 alone Chinese nationals made more than 131m trips outside of their national borders, spending approximately $300bn in the process. The growing volume and financial clout of Chinese tourists presents considerable opportunities – while simultaneously posing new challenges – for hoteliers, tour group operators, retailers and national governments. While swelling numbers of Chinese visitors have already acted as a major growth engine in Asia Pacific, less than 10% of the population currently holds a passport, meaning the rise of the Chinese tourist is still in its relative infancy. With the China Outbound Tourism Research Institute projecting upwards of 400m overseas trips by 2030, China’s booming outbound sector will continue to dynamically reshape the industry in the years ahead.
The Chinese Tourist
Chinese nationals are the dominant outbound demographic in both eastern and southern Asia. With two-thirds of overseas trips concentrated in the region, Chinese tourists play a major role in sustaining the sector. Leisure activities represent the overarching priority for Chinese abroad. According to survey data compiled by Nielsen, Chinese tourists prioritise “experience” over “cost” and exhibit substantially higher levels of purchasing power than non-Chinese travellers. The rising financial clout of the Chinese consumer is on full display in the retail sector, where they spend 37% more on shopping abroad than other nationalities. In 2018 it is estimated that Chinese outbound tourists averaged $5715 in overall travel expenditure. In terms of on-location expenditure, Chinese travellers spent the most in long-haul destinations such as the US ($4462) and Australia ($3541). By contrast, the average on-location spend by Chinese travellers to Thailand was $2026.
Chinese tourists also differ in terms of their preferred method of travel; when going abroad, the majority opt for organised group tours over family and individual travel. While group packages remain the norm, interest in customised travel options and personalised guided tours has grown in recent years. Outbound travel is also a disproportionately young and female phenomenon; data from tour operator Ctrip indicates that in 2019, 59% of all outbound Chinese travellers will be female, with those born in the 1970s and 1980s making up the dominant age demographic.
Unlike their non-Chinese contemporaries, Chinese tourists are less price-sensitive when planning trips overseas. However, one major point of concern for Chinese travellers concerns the relative weakness of the Chinese passport; according to rankings from Passport Index, China scores poorly in comparison to many regional counterparts on its total visa-free score, in 75th position. This added layer of complication makes the ease of the visa application process a potentially significant factor when planning overseas travel.
Embracing China Outbound
With President Xi Jinping more assertively pushing China’s global outreach, national and regional governments that bring their development strategies into alignment with China’s broader economic and geopolitical ambitions will be well placed to attract a greater share of the growing outbound market. This is particularly the case in lesser-known or underdeveloped tourism markets, where Chinese-backed infrastructure projects, frequently carried out under the umbrella of the Belt and Road Initiative (BRI), have brought with them an uptick in Chinese arrivals, particularly business travel.
China’s increasingly vibrant and sophisticated consumer culture is being moulded by information and communications technologies that are fundamentally reshaping how consumers work, live, socialise and travel. Given the ubiquity of mobile payment platforms within Chinese society, tourists naturally gravitate towards these options when overseas. In recent years mobile payment has rapidly converged with cash as the preferred medium of exchange, particularly for shopping, dining and sightseeing. According to Nielsen, 65% of Chinese tourists currently use mobile payment when travelling abroad, where, in contrast to their non-Chinese peers, the method of payment factors heavily into spending decisions.
ASEAN Imprint
Around South-east Asia, China’s growing presence is arguably being felt more acutely than any other region in the world. Cultural and linguistic familiarity, lower travel costs and geographic proximity help explain the popularity of the region among Chinese travellers. In Thailand, where the tourism industry accounts for over 20% of GDP, Chinese tourists have rapidly supplanted other nationalities as the largest group of foreign visitors. In 2017 roughly 9.8m Chinese – representing 25% of overseas visitors – entered Thailand, up from 2.7m in 2012.
The number of Chinese visitors heading for the Indonesian archipelago has also grown exponentially in recent years, multiplying 16-fold over the past decade to overtake Singapore as the largest source of foreign travellers in 2017. With plans for Indonesia’s tourism sector to comprise 20% of the economy and draw in over 20m visitors by 2020, attracting a greater share of China’s rapidly growing middle class is vital to Indonesia’s ambitions for further development.
Investment Role
During a May 2018 meeting with Chinese counterpart Li Keqiang, Jusuf Kalla, the vice-president of Indonesia, expressed his goal of attracting over 5m Chinese tourists by the end of the decade. Indonesia is currently seeking $20bn in foreign investment, with a substantial portion expected to come from China’s BRI, to aid in the development of 10 tourist sites that can serve as popular alternatives to the saturated Bali market. Increasing airline connectivity between China and Indonesia, coupled with efforts to improve Mandarin training for local tour guides, will play a key role in attracting Chinese visitors.
Warming government-to-government relations between Beijing and Manila under the administration of the Philippines’ President Rodrigo Duterte have also redounded to the benefit of the country’s tourism and hospitality sector, which, over the past decade, has become increasingly dependent on Chinese visitors as a major industry driver. In 2017 China overtook the US to become the second-largest source market for the Philippines’ tourist industry, with Chinese arrivals multiplying 43% year-on-year to reach 968,000.
Chinese tourism is playing an increasingly vital role in Myanmar, where, on October 1, 2018, the Central Committee for the Development of the National Tourism Industry implemented visas upon arrival for Chinese visitors alongside travellers from other key Asian source markets such as Japan and South Korea. While the sector grew substantially following a series of political and economic reforms in 2011, Myanmar currently faces international criticism over ongoing unrest in Rakhine State and has seen a significant reduction in the volume of Western visitors over the past year. The drop-off in interest from North American and European tourists is fuelling a heavier reliance on Chinese and other visitors from Asia to compensate for the shortfall, with Thailand, China and Japan the top-three source markets in 2017.
Further Afield
In the South-Pacific region, Papua New Guinea has seen an uptick in Chinese visitors coinciding with a period of sustained commercial and diplomatic engagement between the two countries. In 2017 Chinese investment in PNG, calibrated towards the latter’s substantial energy and mineral resources, totalled approximately $2bn, and the island nation signed onto the BRI in June 2018.
Against this backdrop, Chinese tourists are following the flow of investment in PNG’s infrastructure and natural resources. While the Chinese source market plays a limited role in PNG’s broader tourism industry – as it remains a destination primarily for business executives and government officials – the government has taken a number of steps to capture Chinese leisure travellers. In recent years the PNG authorities have ramped up tourism-promotion efforts at trade and tourism events around China, and developed relationships with Chinese tour group operators. Like Myanmar, PNG recently pared back entry restrictions on Chinese nationals by offering visas upon arrival.
In Sri Lanka, another strategically located island nation, tourism is an increasingly integral component of the overall economy, and China is playing a central role in driving growth there as well. From 2010 to 2016 the number of Chinese visiting Sri Lanka grew by 72.5%, significantly outpacing all other countries to surpass the UK as the second-largest source for foreign visitors behind India. The rapid increase in Chinese visitors coincided with Sri Lanka’s efforts to capitalise on the end of its decades-long civil war by accelerating infrastructure development and improving its image as a destination for investment, business and tourism.
This effort resulted in the development of a number of China-backed infrastructure projects, including the controversial Hambantota Port and nearby Mattala Rajapaksa International Airport, which have both operated below capacity since opening. In 2017 the Sri Lankan government agreed for a debt-for-equity swap that saw Chinese interests acquire an 85% stake in the port on a 99-year lease. Although some see Hambantota Port as a symbol of the dangers of over-reliance on China for finance and investment, the influx of Chinese business and leisure travellers creates new opportunities in the tourism and hospitality sector.
“The emergence of Chinese tourism comes with both positive aspects and some challenges. On the one hand, Chinese tour operators are monopolising certain aspects of the value chain by buying their own buses, bringing in their own guides, and opening their own shops and restaurants. This allows them to create packages they can ultimately sell for below-market rates in China,” Hiran Cooray, chairman of Jetwing Hotels, told OBG. “This does not give local players a chance to compete and creates few trickle-down effects within our local communities. On the other hand, if we can tap in to the higher-end segment, the potential is there to drive growth across the industry.”
