The powerful influence of the Chinese tourist in Asia

With winter creeping into the northern hemisphere and many of our readers dreaming of taking a vacation in warmer climes, it is a good time to consider whether China’s holiday trends are powerful enough to affect international economies. Here in Asia, there is no doubt that China’s influence is being felt across the region in a variety of profound ways, from the development of critical infrastructure to the gradual militarisation of the South China Sea.

As countries across ASEAN and South Asia mull the potential risks and rewards of handing over control of key infrastructure assets to Chinese investors, there is at least one thing that all governments in the region seem to easily agree upon – the need to attract more Chinese tourists. 

World’s leading outbound market

The potential rewards of tapping the Chinese outbound tourism market are huge. According to figures from the UN World Tourism Organisation (UNWTO), China has remained the world’s largest source market since overtaking the US in 2012. In 2016 the number of outbound Chinese travellers rose by 6% to 135m, accompanied by a rise in overseas expenditure by Chinese tourists, which increased $11bn to reach $261bn.

Taleb Rifai, secretary-general of the UNTWO, expects the annual number of Chinese tourists travelling overseas to smash through the 200m barrier in the near future, as currently only 6% of Chinese citizens own passports. In recognition of this huge growth potential, 2017 was designated the China-ASEAN Year of Tourism Cooperation to boost two-way tourism traffic. The total number of tourist arrivals from China to ASEAN was 19.8m in 2016, an increase of 6.4% over the previous year. 

Tour group controversy in Thailand

China is the largest source market for Thailand by some distance, with 8.8m Chinese visitors making the trip to the “Land of Smiles” in 2016, equivalent to 27% of all arrivals. However, as discussed in The Report: Thailand 2017, the spike in Chinese visitors has also created tensions, with some locals claiming that popular tourist sites were becoming saturated with budget tour groups who added little value to the local economy.

As a result, Thai authorities implemented a ban on so-called “zero-dollar” tours late last year. Overhyped reports of badly behaved Chinese tourists also found fertile ground among some sections of Thai society who remain suspicious of China’s long-term ambitions and intentions towards the region.

However, Thai authorities would be wise to steer the discourse away from derogatory generalisations or they risk killing the goose that lays the golden egg as international competition to lure the tourist yuan heats up. This message appears to have seeped through, with Bangkok-based Kasikorn Research forecasting a 5-7.5% rise in Chinese tourist visits this year following a noticeable decline in arrivals towards the end of 2016. 

Indonesia opens its arms

Despite ongoing posturing towards China over disputed maritime territorial claims, Indonesia has set its sights on attracting more Chinese travellers as part of its broader efforts to welcome 20m annual tourists by 2019. I recently had the pleasure of joining OBG’s Indonesia field team in an official meeting with President Joko Widodo, in which he expressed confidence that the country would exceed this goal. Last year China overtook Singapore, Malaysia and Australia to become the biggest source market for Indonesia. However, the 1.43m Chinese arrivals was still some way short of the 1.7m targeted for the year.

Speaking to OBG for The Report: Indonesia 2017, Arief Yahya, the minister of tourism, said that the sector’s ambitions had historically been limited by a strict visa regime and lack of direct flight connections. However, the Widodo administration has tried to tackle these constraints head-on, with the result being that China is now one of 169 countries included in Indonesia’s visa waiver programme. In addition, airlines continue to add new direct flights between Indonesian and Chinese cities, with six new routes added by three different carriers in June 2017. 

Overexposure risks 

However, before regional tourism authorities rush to place all their eggs in one basket they should consider a cautionary tale from South Korea. Following the success of the “Korean Wave” of popular K-culture in China, South Korea saw an exponential rise in the arrival of Chinese tourists, to the point where they constituted 46.8% of all overseas visitors in 2016. However, in March China banned travel agencies from selling package tours to South Korea in protest against the deployment of the US-made THAAD missile defence system on the peninsula, which China believes upsets the delicate balance of power in the region and threatens its national interests.

The result is that formerly popular Korean destinations, such as Jeju, are practically empty this month, despite China’s Golden Week holiday falling in early October. So as tempting as it is to chase the tourism yuan and tap into the seemingly ever-growing demand from the world’s most populous country, pursuing a truly diversified tourism source market will provide scope to hedge against chilly geopolitical forces.