The Mighty Chinese Tourism Boom Slows

The Chinese outbound tourism bonanza that has gladdened the hearts and filled the pockets of merchants and hoteliers worldwide is beginning to flag, leaving in its wake a surfeit of hotels and other amenities in some destinations long accustomed to double digit growth in arrivals from the mainland.

Totals for 2019 are not yet available but data so far suggest that the total may be no greater than in 2018 and the amount spent by Chinese may even fall, at least in terms of the strong US dollar.

The plateauing may prove temporary. After, all, it seems reasonable to assume that as more Chinese have surplus income they will want to travel more, just like citizens of other upper middle-income countries. However, this year has shown how expectations can be impacted by the unexpected, or by factors peculiar to China.

The most obvious deterrent in 2019 has been the weak Chinese renminbi, raising the cost of travel to many – though far from all – destinations. Thailand in particular, with its strong baht, has suffered significantly with numbers down 5 percent – although it remains by far the leading Asian destination nation. A secondary factor may have been a July 2018, tragedy when two tourist boats capsized and sank near Phuket during a sudden storm. Forty-six people died all of them Chinese, raising questions over Thailand’s safety as a tourism destination.

The biggest single gainer this year has been the Philippines, with numbers up 25 percent. President Duterte’s love-in with Beijing has probably helped mainlander sentiment and official policy but the growth of the gambling industry is probably a bigger factor. That could be vulnerable to Beijing’s growing irritation over the amount of money being laundered overseas via gambling, onshore or offshore through the on-line centers which have mushroomed in Manila.

Korea and Japan have been showing increases of 10-15 percent but they are well aware from past experience that the numbers could quickly go into reverse if there are political tensions as have happened with Korea over its missile defense system or Japan over the Senkaku islands.

The biggest political hits have been taken by fellow ethnic Chinese economies Taiwan and Hong Kong as China has increasingly taken to weaponizing its outbound tourism as Asia Sentinel reported on December 2, punishing countries or economies that have angered Beijing. Taiwan is down about 50 percent as Beijing has put restrictions on non-group tourists and generally discouraged visitors to put economic pressure on the DPP government.

Visitors to Hong Kong have fallen similarly at least since the start of the mass protests in mid-2019. Some of this was caused by concern about violence seen in television reports but there was also official discouragement as Beijing sought to punish the territory for its “insolent” behavior to the national government.

The main beneficiary of the steep Taiwan and Hong Kong declines has been Singapore, profiting from its ethic connections, casinos and reputation for good order. Malaysia has been also benefitting from the connection to China of its large ethnic Chinese, Mandarin-speaking minority. However, Malaysia is another case where politics, or issues such as safety, can suddenly intrude as after the 2014 disappearance of MH 270 on a flight from Kuala Lumpur to Beijing. The craft, with 239 passengers and crew aboard – 127 of them Chinese nationals – has never been found.

Vietnam is another country which has seen drops caused by political issues. After a huge rise in Chinese arrival numbers is beginning to ask itself whether it should aim for quality rather than quantity. Chinese tourists, on average, send much less than other Asian visitors, let alone European, Australian and American ones.

The big non-Asian losers this year have been the US and Canada, with sharp falls related to the trade war with the US and in Canada the arrest of a top Huawei executive. Australia too has been affected by reactions by the mainland to growing Australian suspicion of China’s strategic goals and attempts to influence local politics. Numbers have been about static through the Australian dollar has fallen more than the Yuan.

Europe has benefited from the North American declines with a 7 percent increase so far. But even that has been mainly driven by a surge in visitors to eastern Europe which appears to have been partly politically motivated as Beijing has sought to pull the weaker states of eastern and southeastern Europe into its Belt and Road web.

There have also been huge percentage rises in Chinese tourists to less-familiar destinations such as Latin America and the Middle East, but from very low base. Such places are more expensive and unlikely to attract large scale tour operators, instead attracting small group or individuals.

Overall, a slowing, or more, in Chinese tourism growth is focusing some promoters to look more to India. Average incomes may be very much lower than China but there is now a large enough class with the money to travel overseas for holidays. Flights to east and Southeast Asian destinations have increased rapidly and with their knowledge of English, and being the product of unregimented environments Indians than Chinese are generally less reliant on joining large tour groups. Individual travellers are also mostly more profitable for recipient countries than big groups. Likewise, tourism within east and southeast Asia also tends to be less reliant on groups.

As environmental issues loom ever larger, the value of mass tourism may well become subject to greater scrutiny. Some leading destinations have already seen local reactions, for example, Venice and Barcelona in Europe, against too many visitors. Hong Kong has seen similar frustrations with large groups of mainlanders.

As for China as source, the days of a strong renminbi and almost limitless foreign exchange for travel may be over for more than one or two years. And unlike normal countries, where citizens have a right to a passport, China can and does limit the number it issues. The passport tap can be turned on or off as the government sees fit. Money to travel and freedom to travel do not necessarily go together.