For a decade, China's outbound market has been the driving force of an unflinchingly optimistic global travel industry. As a new decade starts — with much of that optimism extinguished — will China's growth remain as reliable?
In the last decade, a dominant narrative emerged about travel’s inexorable upward slope: It is, in great part, thanks to the growth of the Chinese outbound travel market.
As Wolfgang Georg Arlt, CEO of the Chinese Outbound Tourism Research Institute, put it, “you used to have an ice cube machine on every floor in a good hotel for the Americans. Now you have a hot water [kettle].”
Indeed that narrative has, for the most part, been true. The Chinese outbound market became the largest in the world in 2013, according to Skift research. In a pre-Covid-19 analysis, Skift research forecasted that China will send 286 million trips abroad by 2029. That a growing number of affluent and aspirational Chinese would continue to fuel travel’s upward trend seemed not just a safe bet, but obvious.
But as the travel industry stares down its new, unimaginable decade ahead, it faces a reality where nothing is certain and all bets are off. Despite some of the sunnier forecasts about how quickly and decisively travel will bounce back, the future and shape of recovery is gravely uncertain. The question is how the Chinese outbound market will fit into that new reality in one, five, and 10 years time. Will it be as important in the next decade as it has in the last? And how will the crisis shape the preferences of the Chinese market moving forward?
Tip of the Iceberg
All of the sources interviewed for this article were bullish on China’s continued role in a growing global tourism industry long term. The reason for that is a simple case of numbers.
“The growth in outbound travel from China is really just beginning,” Richard Tams, an independent consultant who worked as executive vice president of IAG’s China operations until 2018. “If you look at the amount of Chinese [there are roughly 1.3 billion] and you look at the tiny percentage of — around 10 percent — that have passports: We’re just seeing the real tip of the iceberg in terms of demand of outbound tourism from China.”
Tams describes the cultural appetite for international travel in China as “insatiable,” driven by social aspiration and the “WeChat-ability” of taking impressive trips you can broadcast to friends. He doesn’t see the virus changing that over the long term. Though a short term disruption — realistically speaking, for the remainder of this year — is inevitable, he expects demand to bounce back in China first once countries begin slowly opening up.
“I think there is an enormous amount of pent-up demand, and of course lots of new demand coming into the market as well,” Tams said. “I think restrictions are going to be lifted very gradually, and I think airlines are going to be very cautious about putting capacity back in that they don’t think is required. And so I think the curve will be gradual, but I think the demand out of China will be significant.”
Arlt agrees there will be a short term slowdown, not just due to restrictions, but also economics. “The speed of more people being upwardly mobile and joining this group of people who can easily spend a couple thousand of dollars on a trip — that might slow down a bit in the next one to two years,” said Arlt.
But he went on to echo Tams’ belief that the Chinese will be willing to get on a plane before travelers in other outbound markets are willing to. “Chinese are brave people, in a way. They will say it has to be safe, but I think it will take longer to get Germans or Swiss to travel to exotic places than the Chinese.”
One thing that might influence where Chinese travelers return to when restrictions are lifted is that oft-ignored force in tourism: geopolitics. While the coronavirus defied early travel restrictions to become a thoroughly global phenomenon, that doesn’t mean countries (namely, the U.S.) have not tried to blame the virus on its assumed origin.
“We can see that there are countries that are trying to paint China as some kind of villain, to blame it for the crisis, and there are countries that are staying in good relations, working together sharing information and intelligence,” said Roy Graff, the managing director for EMEA for Dragon Trail, the first dedicated digital agency for Chinese outbound tourism. “I think this will be reflected in the recovery phase of where Chinese are going to visit first.”
“Chinese are aware of what the media say in America or Europe,” Graff added. “They’re aware of any kind of racist incidents that are kind of related to the virus and the fear. That will affect their decision and the thinking of the image of a destination.”
In a sense, some of that anti-China sentiment may come home to roost for countries like the U.S when it comes to tourism arrivals.
“It might be the case that in some places like US there will be a racism in both directions,” Arlt said. “So that the Chinese will say ‘I don’t want anything to do with Americans anymore’ and the Americans will say ‘we don’t want to let any Chinese in any more — they brought us the ‘Wuhan virus,'” referring to the moniker that some U.S. republicans used to refer to the virus.
This calculation may also be influenced by what the Chinese state advises its travelers, Graff said. He foresees a scenario where the state may tell travelers where it is “safe” to go, noting that many Asian countries are perceived to have handled the crisis (so far) better than others. It’s worth noting that the Asia Pacific region is also the most dependent on Chinese arrivals.
“Chinese will feel more comfortable going to places where they see there are similar levels of monitoring and control over the virus so things like checking temperatures, reporting symptoms, active contact tracing, and robust testing regime,” Graff said. “For example if South Korea is declared virus free, and the Chinese government has an agreement that it’s okay, then Chinese can start traveling there provided they don’t go to any third destination afterward.”
How Will the Chinese Traveler Change?
If industry watchers are optimistic about the Chinese market’s staying power, that doesn’t mean travel companies and destinations needn’t be proactive in making sure they come back.
In the first instance, hotels and venues need to be thinking about basic measures like hygiene, flexible booking, and the “peace of mind” factor, as CEO of hospitality service provider Compass Edge Anita Chan recently outlined in a webinar on the return of Chinese travel after Covid-19. However, the changes necessary will go deeper than that in the medium to long term.
The crisis may “accelerate a lot of trends that we were already seeing in Chinese outbound tourism. Such as the trend away from very large group tours to more private family travel, customized tours,” said Sienna Parulis-Cook, the associate director of communications at the aforementioned agency Dragon Trail. “The trend away from large coach tours to self driving tours. People trying to get off the beaten track to smaller destinations.”
She added that these trends have hitherto been driven by the inevitable maturation of the Chinese market, but post-virus concerns about hygiene and safety are likely to give them “an extra push” going forward.
Chinese Outbound Tourism’s Arlt sees an opportunity for the tourism industry to gain a more sophisticated understanding of what a segment of the Chinese market wants, and move away from “a kind of addiction” to sheer volume of arrivals. This shift was already happening, he said; since 2018, the institute’s clients have been looking for ways to attract more affluent “FIT” (fully independent traveler) customers from the Chinese market, rather than group tours.
“What I see is that the Chinese have, in the past, increased their demand for quality and I think now after the virus, maybe [some Chinese] have thought a bit about how variable and fragile life is, and that you should do meaningful things with your time — not only bling bling consumerism” Arlt said. “So that these people will come up with even higher quality experiences or demand.”
Tams was more convinced by the idea of destinations becoming even more dependent on China, given his sense that China will bounce back “strongest and soonest.” That may not be a good thing.
“There’s an upside and a downside to Chinese outbound tourism as it was. The downside was that a number of destinations around the world were reaching peak tourism,” Tams said. “And if we think it’s busy now, we have no idea what it’s going to become in the future.”
Photo credit: Chinese travelers walking in the pedestrian zone of Ginza, Tokyo. Toshihiro Gamo / Flickr