Chinese tourists - a sustainable engine of growth
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NOWADAYS, YOU see plenty of Chinese tourists wherever you go.
Up to the end of September, some 6 million Chinese travellers had come to Thailand, double the number in the same period last year.
In fact, it is not only Thailand that has been facing an invasion of Chinese travellers, as the number of visitors from mainland Chinese has grown by an average of 37 per cent, 21 per cent and 19 per cent annually in Hong Kong, South Korea and Japan respectively over the past five years.
It seems to me that China tourism is a rare sector that can expand and play a major role in the global context, even though mainland China’s own economic growth is slowing down.
So I started to ask myself a number of questions: Why does this particular sector grow, contrary to the economic downtrend? What makes them travel? How many Chinese tourists are expected to come? And how can we benefit from this situation?
There are a number of reasons, in my view, that have made them want to travel outside of their mainland, and I believe that a lot more Chinese tourists are going to float around the world in the near future.
But to understand the Chinese tourism sector, there are three main facts that are important to know before starting to make guesses.
Firstly, travelling abroad is no longer a ‘luxury’ thing to do.
The World Economic Forum has proposed that travelling has shifted from the ‘luxury’ to the ‘necessary’ category globally.
Now, all of us, including Chinese people, love to travel because it is a relaxing way to see different things and study different cultures.
Based on data from the China Outbound Tourism Research Institute, 116 million mainland Chinese travelled outside the country last year, with two-thirds of them young learners aged 15 to 34, and teachers.
Just looking at this pattern, and coupling it with the fact that half of 1.4 billion-strong Chinese population is aged below 34, the current number of outbound tourists is just 2.5 per cent of the potential total.
In the other words, we can simply assume that China has more than enough travellers in the pipeline for the next three decades.
Secondly, the Chinese government is supporting the tourism sector, with the two key drivers that promote the leisure industry being the paid-leave policy and the change in national holidays.
Regarding paid leave, since the policy was implemented in 2008, young Chinese now have about five to 10 days’ annual leave.
While this not an extremely long vacation, Ctrip – one of the most popular travel-review websites in China – indicates that 80 per cent of paid leave is utilised for travel, compared to only 40 per for regular holidays.
Meanwhile, in October 2007, the Chinese government increased the number of official holidays from 24 days to 27 and reformed the holiday pattern from the previous three ‘golden weeks’ plus one short holiday, into two golden weeks plus five short holidays.
The adjustment has brought about a significant promotion in not only short-distance inbound journeys, but travel to nearby international destinations, as well.
Last but not least, currency appreciation has accelerated Chinese people’s willingness to travel.
In general terms, the yuan has appreciated by around 10 per cent against the US dollar over the past five years, meaning that some overseas trips are cheaper for them when compared to travelling inside China.
For the baht, the current exchange rate of 5.6 per yuan versus 4.5 in 2010 is almost a 25-per-cent appreciation of yuan against the Thai unit in five years.
Around the end of this year, should the yuan be accepted into the International Monetary Fund’s elite-currency basket, like some market participants expect, an even stronger yuan would be a major trend that we would have to face.
To me, China tourism is a global driver that could be a sustainable engine of growth during the remainder of this decade.
Where does the money go?
We might also want to know, therefore, exactly where does their money go when the Chinese travel abroad.
According to Ctrip, the top three factors influencing travel willingness are time, cost and security, respectively.
As to their spending, eight out of 10 say that shopping is a vital part of their plans, and the average Chinese spends about 45 per cent of their travel budget on shopping.
Accommodation and transportation together account for another 30 per cent of the budget, according to the World Tourism Cities Federation.
The Tourism Authority of Thailand, meanwhile, has reported that Chinese tourists spent an average of around Bt40,000 per person per trip last year.
If you do the maths, I think you can surely shape your business to cater to and match their budgets.
Thanks to our location and cost of living, Thailand remains mainland China’s top destination in Asean and ranks third globally, after Hong Kong and Macau.
TMB Analytics estimates that 30 million to 31 million international tourists will visit Thailand next year. Fortunately, about one-third of them, or 10 million, will be from mainland China.
You have to love them – and be sure not to miss out on the business opportunity that they present.
Jitipol Puksamatanan, global economist and currency strategist at TMB Analytics, the economic analysis unit at TMB Bank, can be reached at [email protected] [email protected]
