Chinese tourists have become an economic force to be reckoned with in recent years, injecting billions of dollars into the global economy as they jet to Japan, the U.S., New Zealand and beyond to sunbathe, shop, dine and visit historic sites.
But with Chinese stock markets in steady decline since June and the Shanghai Composite Index dropping sharply this week, all that could change. The question is not whether it will, but how, as the turmoil reshapes the way Chinese citizens travel internationally. The slowdown will hit some places and sectors harder than others, analysts said.
“Chinese tourism will change,” Jeffrey Towson, a professor of investment at Peking University in Beijing, said. “I think you will see a shift in travel destinations. After the stock crash, going to Thailand will look a lot cheaper than going to Paris.”
Luxury purchases, half of which Chinese make overseas, were likely to drop, too, he said.
In the first half of this year, the Chinese made 61.9 million trips out of the country, a growth rate of 13 percent over the previous year. When these tourists travel, they have typically spent more prolifically than other populations. In 2014, Chinese tourists shelled out $164.8 billion overseas, Bloomberg reported. The top 10 destinations for affluent Chinese in 2014 were Japan, the U.S., Taiwan, New Zealand, Thailand, the Maldives, Australia, Italy, Switzerland and Greece, according to the travel website Travelzoo, the Wall Street Journal has reported.
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Overall, Chinese contribute the most of any nationality to tourism worldwide, and it is middle-class Chinese who are often seen as driving the increase in travel. With the market downturn, however, once lavish spending might diminish.
“We expect the Chinese middle class will continue to travel,” said Annebeth Wijtenburg, public relations manager for the World Travel & Tourism Council. She added, “If the market situation leads to lower disposable income for Chinese travelers, it will have a slight impact on the destinations that have been receiving these tourists.”
Set To Jet?
What that impact could look like depends on several factors. If members of China’s middle class did not invest heavily in the stock market, opting instead to keep their assets in real estate, as cash, or elsewhere, their finances may suffer less than others’ in the recent downturn. As of Wednesday, the value of Chinese stocks had diminished by 43 percent since June, and the country’s economic growth has been sluggish.
“We don't really know what people's individual balance sheets look like,” Towson said in an email. “Certainly some people are in trouble, but we don't know how many.”
In a book on Chinese consumers co-authored with Jonathan Woetzel, also a professor at Peking University, Towson has argued that a better indicator of where Chinese consumption and spending are headed is actually household income, which currently hovers over $5 trillion.
A 2013 report published by the consulting firm McKinsey found that in 2012, China’s upper-middle class, defined as having annual incomes ranging from 106,000 to 229,000 yuan (roughly $16,500 to $35,700), constituted a mere 14 percent of urban households. By 2022, the report predicted, China’s upper-middle class would occupy 54 percent of urban households.
For tourism sectors around the world, this means a growing sector of the Chinese population can fund their increasingly global interests and tastes. The government has also made it easier for Chinese to explore internationally, by easing foreign travel restrictions in 2002. Recently, Asian destinations like Hong Kong and Macau seem to have lost their appeal, with growth in those trips either diminished or with the number of overall trips declining, Forbes reported.
Traveling internationally also appeals because of the bragging rights accrued after people visit exotic destinations. “It’ll enrich them more personally,” Jacopo Sertoli, president of Welcome Chinese, a Shanghai hospitality firm, said. “They can say to their peers, 'I have been to Europe, the Middle East, United States.'”
Whether Chinese travelers will opt for destinations closer to home or simply travel to Europe on tighter budgets amid the slowdown remains to be seen.
“Instead of 4-star hotels, [they’ll stay at] 3-star hotels,” Sertoli said of Chinese tourists in Europe.
Or, they might curb spending in other ways. “I don't think you will see fewer Chinese tourists on getting airplanes overall. Just fewer at the Louvre and in the Seoul airport duty-free shops,” Towson said.
They could also opt to forgo Europe entirely. An increasingly popular destination for China’s expanding and increasingly curious middle class is the Middle East.
In 2015, hotels in Abu Dhabi, United Arab Emirates, recorded a 74 percent rise in Chinese guests, Welcome Chinese says. The 241,000 Chinese guests who visited Dubai, United Arab Emirates, during the first half of 2015 represented a 25 percent increase over the previous year, according to HotelierMiddleEast.com.
Regardless of the recent downturn, China’s 1.2 billion people remain an untapped market. By one estimate, just 3 percent carry passports. For those working in tourism, that represents a potential for growth that in the long run can hardly be hampered by financial uncertainty.
Chinese tourism overall, Sertoli said, has nowhere to go but up.