Chinese passenger growth boosted by visa reforms in key markets
With newfound wealth and more confidence, today's Chinese tourist is also finding greater choice and opportunity in where they can travel. Relaxation of visa regulations for Chinese passport holders last year in several key markets has caused a surge in Chinese passengers to these locations.
November 2016 | by Simon Best, CiR Business Lounge Director
The latest data published by the World Tourism Organisation reports that total spend by Chinese tourists abroad reached $292 billion US dollars in 2015, an increase of +25% on 2014, making them the largest spending nation in the world. It is understandable then that more and more countries are beginning to employ various facilitative measures in a bid to attract more of this high-spending nationality, and one such method is the relaxation of visa regulations. The Chinese now enjoy visa-free entry (or visa on arrival) to 57 countries worldwide. In 2015 alone the Chinese Foreign Ministry made new visa arrangements with 18 countries. However, despite these efforts, the Chinese passport still ranks low: currently sitting in 69th place alongside Senegal and Ivory coast in terms of the number of countries they can enter visa-free.
As CiR reported earlier this month, the largest growth in global traffic over the next 10 years will come from the APAC region, which will grow in excess of +70% by 2025 versus 2015, boosted by an additional 74 million international Chinese passengers, making them the most significant passenger group within the region.
Although currently 94% of Chinese flights departing China fly domestically, and only 6% of the Chinese population own a passport (although in 2015 China issued 16 million new passports), we are seeing large increases in Chinese international passenger numbers, and though the majority of international traffic is presently intra-Asia, we are also seeing strong growths in the number of Chinese passengers travelling to far-off destinations.
While there are many contributing factors that affect the choice of holiday destination (favourable exchange rates, safety concerns/political tensions, travel preferences etc.), one method which governments can employ to profit from the ever-increasing population of international Chinese passengers is to relax their visa regulations on inbound tourists. The benefits or travel facilitation reforms (making the process of attaining a visa faster, cheaper and generally more efficient, or waiving the need entirely) can be clearly seen in historical passenger trends and are positively linked to the number of tourists.
One country to adopt this approach in recent years is Japan, which continues to rank highly in the most popular travel destinations for the Chinese. Although the country’s tourism industry has benefitted from an increased number of savvy Chinese shoppers seeking to take advantage of a weak Yen (which fell by over -25% versus from the beginning of 2013 to July 2015) the Japanese Ministry of Foreign Affairs has also taken measures to relax its visa requirements twice in the last two years, once in January 2015 and once more recently in October 2016.
In the twelve months leading up to January 2015, growth of Chinese passengers to Japan averaged +12.4% year on year, peaking at +24.7% in July 2014. However, over the 12 months following the Japanese government’s decision to relax their multi-entry visa policies for Chinese tourists (which targeted the wealthy in particular), growth in passenger numbers accelerated at an average rate of +32.0%, with growth peaking in November 2015 at +47.0% versus the same month in 2014.
Inbound tourism to Japan reached a record 19.7 million people in 2015, nearly twice what it was in 2013, with a quarter coming from mainland China, according to the Japan National Tourism Organization (JNTO). It initially set an annual visitor target of 20 million tourists which it hoped to achieve by the 2020 Tokyo Olympics, but has since revised this to 30 million, partly due to the influx of Chinese holiday-makers.
Another country that has seen a huge influx of Chinese arrivals in recent years is Thailand, which has gone from being ranked 6th most popular destination country for international Chinese passengers in 2014, to now occupying top spot in 2016 year to date. The impressive growth of Thailand as a tourist hotspot can partly be attributed to various measures employed by the Thai government to better facilitate Chinese tourists. Traffic from China to the country was growing significantly in 2014, at an average rate of +11.1% in the six months leading up to November 2014. However, during the three months prior to November, in order to boost their tourism industry, the Thai government waived all visa fees for Chinese tourists. Following these measures, growth for the 12 months from November 2014 accelerated to +60.0%, further bolstered by a new 6-month multiple entry visa being introduced from September 2015 onwards.
Growth to the country has recently slowed, following a spate of bombings and confirmed cases of microcephaly (linked to the Zika virus) in Southeast Asia, as more safety-conscious tourists avoid the area, however traffic from China is still up +37.1% year to date 2016.
It would be incorrect to say that the impressive growth of Thailand as a Chinese tourist hotspot is entirely down to visa regulations, however. It’s beaches, temples and culture appeal to the aforementioned emerging Chinese middle class and millennials seeking adventures and experiences, rather than the traditional shopping and gambling sprees.
Another South-East Asian country to take measures to attract Chinese tourists is Indonesia. From June 2015 onwards, Chinese nationals were officially granted visa free access to Indonesia. Since then the number of Chinese flying to Indonesia has sky-rocketed, growing +40.3% in the last twelve months thanks in no small part to the government’s efforts to attract more Chinese tourists through the relaxation of their visa laws.
The government aims to attract at least 1.7 million Chinese tourists this year, with arrivals expected to be boosted by the country’s largest low-cost carrier Lion Airlines offering routes from five Chinese airports to Indonesia from October 2016 onwards.
As stated, although we are seeing huge growths in Chinese tourists travelling to new Asian (particularly South-East Asian) destinations, their desire to travel further afield to previously “uncharted territories” is greater than ever before, and this wanderlust has, in more recent years, also led to growths in traffic to long-haul destinations such as the US. In November 2014, the US significantly improved the visa application process for Chinese tourists, and increased visa validity limits from one year to ten years in order to boost repeat arrivals. The reform was intended to boost Chinese tourism to the US in the coming years, so an immediate increase in Chinese arrivals was not to be expected.
The introduction of longer-term visas and these types of easing of visa restrictions are part of a long-term plan to attract Chinese tourists. It means that Chinese travellers are no longer faced with as many hurdles if they want to revisit the US in the future. This, coupled with airlines, both US & Chinese, investing heavily in the number of routes operated between the two countries (there have been 6 new routes launched between China and America on various airlines so far in 2016, with at least 1 more scheduled for early 2017) has led to a +27.1% increase in the number of Chinese departing China to the USA year to date 2016, and shows no sign of slowing in the coming years.
‘Golden Week’ – October 2016
Recent reports following this October’s ‘Golden Week’ national holiday in China (which ran from October 2nd this year) have confirmed that more than ever Chinese tourists are ditching the traditional destinations in favour of a more adventurous, long-haul holiday.
More people than ever chose to fly, indicative of China’s new middle class’ willingness and desire to travel abroad. Despite the Golden Week originally being introduced as a measure to boost domestic tourism, 9.96 million people took to the air, a +11.6% increase on last year, according to Civil Aviation Administration of China.
And according to the China National Tourism Administration, “more Chinese tourists were willing to head farther afield than the usual shopping, eating and gambling hot spots of Hong Kong, Taiwan and Macau.” Instead, the most popular destinations for Chinese tourists were Russia, the US, Morocco, Tunisia and Tonga. China’s biggest online travel agency, Ctrip, reported that “those [destinations] that recently relaxed visas, such as Morocco, Tunisia and Tonga, have seen the influx of Chinese visitors increase 300-600 percent.”
Following the Brexit vote and the sharp fall in the value of the pound, (capped off with a 31-year-low at the start of Golden Week), Britain is also likely to attract a flourish of bargain-hunting Chinese tourists seeking to take advantage of the exchange rate. Although Britain has also aimed to relax its visa regulations recently (From January 2016 the standard visitor visa was extended from 6 months to 2 years multiple entry, with calls to extend this to 10 years for the same price), an influx of Chinese tourists would be predominantly triggered by the fall in travel, shopping and consumption costs as a result of the depreciation of the pound: according to Ctrip, a trip to the UK is now about 20% cheaper than it was this time last year.
Where visa regulations have relaxed, it has allowed for low-cost carriers to enter and expand massively into these new markets, exacerbating the effects of such measures. Budget airline traffic in China has tripled since 2013, and far surpassed the growth rate of regular airlines as a whole.
This has impacted the travel behaviour of the Chinese middle-class by increasing the affordability of travel, as well as satisfying their changing preferences by offering flights to more adventurous, less traditional destinations. This is highlighted in the chart below, where we can see growth to Greater China, traditional destinations for Chinese shopping or gambling trips, has remained relatively flat in recent years, compared to the explosive levels of growth seen in traffic to the more adventurous “new horizons,” including Thai and Vietnamese airports.
The more mature, traditional international destinations for Chinese travellers (such as Japan, Thailand and Indonesia) appear to benefit considerably more from relaxed visa regulations than the long-haul markets such as the US, particularly in the short term.
However, as China’s GDP continues to grow, its middle class expand and the new generation of travellers emerge, the share of long-haul outbound traffic from China could potentially grow at a faster rate as these destination countries continue to relax their visa regulations for Chinese nationals, or employ measures to improve the processes involved in attaining a visa.
As CiR reported earlier this month, despite economic growth in China slowing as the economy moves away from heavy industry towards a more service and consumption-based economy, consumer spending is forecast to continue its strong growth trajectory, and China will remain the leading emerging market with substantial impacts on international tourism.
As the number of high-earning Chinese grows in the coming years, thousands more Chinese tourists will board their first international flights every day.
With ever-evolving preferences and broadening horizons, this new breed of international flyers is focussing more and more on new destinations. We can observe this in passenger numbers to Hong Kong, Taiwan and Macao, traditionally popular short-haul holiday destinations, which year to date have either stalled or fallen, where Thailand, the USA and Viet Nam have all recorded +25% year on year growth. It is imperative that governments facilitate travel for Chinese tourists in order to reap the rewards.
Although the relaxation of visa regulations and ease of travel are important factors in the growth of Chinese visitors to a country, they are only part of a complex set of driving factors; exchange rates, flight costs, conflict or political instability, and cultural interest/tourist attractions are also important.
However, we can see that the relaxing of visa laws does have a visible and lasting positive impact on inbound Chinese tourism. If Travel Retail brands and retailers can stay on top of visa reforms for Chinese travellers, it could aid in identifying the next big travel trends among Chinese millennials, giving them a distinct advantage in a rapidly expanding global market.
Sources/further reading: “The Chinese Tourist Boom: Where Now, Where Next?” Goldman Sachs. November 2015 “The Future of Chinese Travel. The Global Chinese Travel Market” Oxford Economics. March 2015 “The Impact of Visa Facilitation in ASEAN Member States” World Tourism Organization (UNWTO) / World Travel & Tourism Council (WTTC). January 2014
NB. PAX Source: CiR Business Lounge | Advanced Analytics Tool - Data based on Scheduled departing international passengers only. Data displayed for nationalities is based on residency through place of ticket purchase