Chinese travelers dominate global tourism
China’s outbound travelers have been the biggest contributor to global tourism before the pandemic. Before the pandemic, Chinese travelers made 155 million trips abroad in 2019 and spent almost $255 billion, amounting to 14% of global tourism revenue. After three years of pandemic restrictions, China has relaxed its Covid contained measures in a quicker-than-expected manner since November. We have been of the view that the biggest pivot for 2023 has been the faster-than-expected China reopening, and that will continue to be the key theme for traders and investors this and next year as the Chinese demand comes back online to drive local, regional and global markets. China Outbound Tourism Research Institute (Cotri) expects Chinese travelers to take 110 million international trips this year, which is about two-thirds of the 2019 level. This could mean an estimated spend of about $180 billion globally, which could be a source of revival for the hospitality industry that has seen a big void from the absence of Chinese tourists in the last three years.
Since the reopening of China and easing of border restrictions in January, travel pickup has been restrained with concerns around spread of the virus and risks of new variants. However, there has been no sharp rise in cases reported even after the Lunar New Year celebration at the end of January, and China saw an average of 410,000 exits and entries per day, up 120% over the Lunar New Year holiday last year, as per the National Immigration Administration. Further recovery should start to pick up now into the second quarter as the May 1 Labor Day holiday approaches and gather further pace in the second half of the year and into the national holidays in September and October. China has a five-day holiday for Labor Day and a week off in early October for National Day, and both these are considered to be the golden periods for travel.
Asia tourism growth to lead the global recovery
While it is prudent to expect that full Chinese travel demand recovery will take a few years, there is no doubt that the floodgates are about to be open. The big and early winners of that will likely be some of the Asian travel operators as regional destinations remain the top choice for most Chinese travellers. These will include Hong Kong, Macau and Thailand, followed by Japan, South Korea, Australia and other Southeast Asian countries. Hong Kong received only 370,000 visitors from the mainland in 2022, down from around 50 million pre-pandemic. Expectations are for this to be revived to 60-70% this year, suggesting about 30-35 million tourists from China. Thailand expects to host 7-8 million Chinese tourists in 2023, also a 60-70% recovery from 2019 levels.
Travel to further destinations in Europe and North America could take about an year or more to recover as the limited number of commercial flights and visa backlogs restrain a pickup. A lack of flights keeps the prices higher, although that may be offset slightly by higher budgets driven by accumulated savings over the pandemic years. Chinese travellers are also likely to chose safer destinations as travel resumes, given the surge in anti-Asian sentiment globally since the emergence of the pandemic.