The Wall Street Journal reported that China’s domestic tourism has been cooling down for much of this year while the nation’s outbound leisure tourism craze continues unabated. However, the slowing economy, devaluing yuan and plummeting stock market will likely dampen the outbound travel enthusiasm of Chinese tourists, and companies involved in Chinese outbound tourism should take heed.
Endless growth of high-rolling Chinese tourist numbers may not last for long
The report cited the latest figures that show a drop in Chinese tourist’s expenditure abroad, from US$25 billion in September to US$19 billion in October. While the expenditure in October is still higher than the US$16 billion in the same month last year, annual growth in expenditure has already dropped to around 20%, from over 60% in the first half of the year.
According to a study by UBS, as of October, mid- to high-income Chinese planned to take 2.1 overseas trips on average next year, lower than the average of 2.6 trips in last spring. UBS predicts that growth in outbound travel will slow down to around 15%, still a relatively high level albeit lower than the 18% average growth rate of the past few years.
The choice of destination is closely linked to buying power and luxury goods shopping. As the prices of luxury goods in China such as handbags, cosmetics and wristwatches remain high due to high import duties and other factors, destinations like Japan and Europe that have devalued currencies will fare better than the destinations whose currencies are pegged to the greenback, such as Hong Kong.
However, the yuan has also devalued and may go even lower if State economic stimulus measures fail to have significant effect. While the devaluation of the yuan is unlikely to stifle the urge among Chinese to travel abroad and public demand for travel is definitely not just a flash-in-the-pan, the runaway market growth of late is likely to run out of steam much like the macro economy.(Translation by David)
