From 2012 to 2019, Chinese travellers were multiplied by 10. Chinese tourism is growing very fast and becomes more and more lucrative. If a Chinese tourist spent in average $1834 in each outbound journey in 2019, international expenditures of chinese tourists are booming. They were estimated at $43,7 billion US Dollars in 2009 and reached $277 billion in 2018.
The Chinese New Year (CNY) is one of the most important periods for the tourism industry. In 2019, it represented 10% of the total tourism year spending. Each year, the travel market during CNY is growing both in spending and number of people.
But in 2020, the coronavirus disturbed these trends. The coronavirus appeared just before the CNY and made thousands of people change their travel plan. This change was voluntary for the majority, who decided to follow the government recommendations and stayed at home. But other had also to cancel their trip due to travel bans.
British Airways, Air France… several companies started to cancel flights from China. Then, countries such as The Philippines, Vietnam or India banned entry on residents of China and foreign nationals who have visited China.
The week following these restrictions, Chinese arrivals in Asia Pacific Countries (APAC) dropped by 15% and by 22,5% in Americas.
In mainland China, hotel rooms occupancy decreased by 75% over two weeks. If this drop can be explained by travellers who cancelled their trip, it is also due to hotels themselves who decided to close their doors.
Currently, 150 Hilton hotels, for a total of 33000 rooms, are closed in mainland China.
In addition, hotels outside China started to refuse Chinese nationals forcing the travellers to find another accommodation.
But Chinese tourists are not only restricted by the choice of their accommodation in these times. Abroad, announces indicating that Chinese are not welcomed appeared at the entrance of markets, shops and restaurants.
In this tense context, finding hotels and activities as a Chinese without being linked to the virus is complicated. If Chinese people want to fully enjoy their holidays, they should probably plan to postpone them.
Outbound tourism revenue drop
Thailand is the first destination for Chinese outbound tourism. The country stands to lose $3.4 billion in tourism revenue this year, if the virus outbreak lasts to summer.
The Maldives, one of the favourite destinations for chinese luxury tourism, expect a drop of 30% in tourists arrival. It may lead to a $540 million of loss in revenue for hotels.
In the US, experts plan a drop of 4.6 million hotel rooms nights.
What can we expect in the following months?
A report published last week by Re-Hub & Zectr divided Tier 1 cities consumers into four categories and asked them their future intention to buy with the virus context.
The four categories are the following:
- Silver foxes: retired males, well-educated but with low income
- Tasteful cosmopolitans: Skew older with highest income than other segments
- Fashion- forward moms : fit in with popular trends
- Young professionals: well-educated and mobile young white collars
Moreover, the report imagines three different scenarios in the future: the Optimistic one with a reduction of the number of cases at the end of February, the Base one with a recovery in may and the Pessimistic case with an increasing growth of cases.
For Silver foxes in a pessimistic scenario, the travel budget for the next 3 months is cut by 46% comparing to last year.
Young professionals, who are the most likely to travel, will increase their travel budget by 4% in the Optimistic scenario. However, the travel budget decreases in the Base scenario (by 13%) and the Pessimistic one (by 17%).
To sum up the travel industry will be strongly hit by the coronavirus in the short term and it has already started. But Chinese travellers may save their current travel budget, and plan to travel later with a higher one. In the long term, this hypothesis may reduces the impacts of the coronavirus on tourism.
McKinsey & Company, Coronavirus COVID-19 Crisis Response, February 14th2020
McKinsey, Travel and Tourism Market in China, November 2019
Re-Hub & Zectr, Consumers in Crisis, Understanding the Effect of the Coronavirus on Chinese Consumers, Insights from Machine Learning, February 2020.