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Credit Lyonnais Securities Asia (CLSA) is maintaining its long-standing forecast of 200m Chinese overseas trips by 2020. However, it warns that mainland Chinese travel to Hong Kong and Macau is likely to average only 3% growth in future, while Chinese trips to other locations will grow much more strongly by an estimated 16%.
CLSA’s latest report says Hong Kong simply has too few new attractions, increased competition, capacity constraints, a strengthening HK$, tension against mainlanders and it also faces a reduction in import tariffs in China.
This unpalatable cocktail resulted in inbound Chinese tourist numbers to Hong Kong declining by -2% between January and November 2015, compared to the much healthier 16% to 26% annual growth rates experienced in better years between 2010-2014.
CLSA’s highly-anticipated report – ‘2016 Chinese Tourists: Expanding Cultural Horizons’– is the independent brokerage and investment group’s third annual appraisal of the key growth drivers to Chinese outbound travel, as well as the destinations, sectors and stocks set to benefit the most.
As part of its central Chinese tourist theme it remains bullish on its long-standing forecast of 200m Chinese overseas trips by 2020, despite its prediction that Chinese outbound tourist growth will slow to 9% over the next five years from 17% over the past five.
Of this 9%, the authors say that travel to Hong Kong and Macau will average 3% growth, whereas trips to other locations will grow on average by 16%. Improved affordability, easing travel restrictions and the increasing desire to travel remain the key drivers underpinning Chinese outbound tourism growth, says CLSA.
Within its proprietary survey of more than 400 outbound Chinese travellers it found that experiencing foreign cultures, enjoying nice environments, relaxing, and broadening horizons are increasingly more important goals for Chinese tourists compared to shopping. This also supports CLSA’s general structural negative on the future for Hong Kong’s tourism and retail sectors.
“…IF MONEY WAS NO OBJECT, THE MOST HIGHLY DESIRED DESTINATIONS FOR CHINESE TOURISTS ARE ACTUALLY THE USA, FRANCE, MALDIVES AND AUSTRALIA – IN THAT ORDER.”–CLSA REPORT.
Chinese travellers looking for ‘unique cultural experiences’ are most likely to head to South Korea, Japan, Thailand, or the USA in the next three years, says CLSA. South Korea is attractive for its relatively cheap luxury goods and cosmetics, whereas Thailand offers beaches and other cultural destinations.
CLSA also reveals that if money was no object, the most highly desired destinations for Chinese tourists are actually the USA, France, Maldives and Australia – in that order.
The report adds that ‘the key risks to growth of outbound Chinese travel figures’ are safety, lower income growth and a weaker Yuan. Within its survey, CLSA said that 75% of survey participants confirmed that safety was the clear number one factor influencing their choice of destination in 2015 – up from 63% in 2014 and 41% in 2013.
By contrast, mainland Chinese respondents said that lower income growth in China this year could also impact upon their travel plans. Some 60% admitted that they would reduce their outbound trips and 68% adding that they will cut back their travel-related shopping if family income drops.
“…A WEAKER YUAN WILL ALSO AFFECT TRAVEL PLANS, WITH 43% INDICATING THEY MAY REDUCE THE NUMBER OF TRIPS THEY TAKE IF THE YUAN DEPRECIATES BY 10% IN THE NEXT YEAR. MEANWHILE, 35% SAID THEY WOULD CUT SHOPPING SPENDING…” CLSA REPORT.
The research also confirmed that a weaker Yuan will also affect travel plans, with 43% indicating they may reduce the number of trips they take if the Yuan depreciates by 10% in the next year. While 35% said they would cut shopping spending. Only 14% said there would be no impact to their travel plans.
More positively, the report adds that China is the number one contributor to global outbound travel with a worldwide share of 10% and CLSA predicts that this share will reach 14% by 2020. In the current report, it also expects this tidal wave of Chinese tourists to drive major structural growth in the airline, gaming, luggage, retail and internet industries over the next few decades.
THE OUTLOOK FOR TOP FOUR CHINESE/ASIAN DESTINATIONS:
AUSTRALIA: In Australia, mainland Chinese visitor numbers are soaring, with this nationality of tourists now accounting for the second-largest source of inbound arrivals to Australia. There were more than one million Chinese tourists visiting Australia between Jan-Nov 2015, surpassing the one million mark for the first time – an increase of 21.6% over the same 12-month period in 2014.
This has been aided by the removal of constraints to airline-seat capacity growth and the easing of visa requirements (‘albeit on a regional basis that they still appear relatively strict’, says CLSA).
Chinese tourists spent A$7.7bn ($5.4bn) in Australia over the 12 months to September 2015, more than double the A$3.5bn ($2.4bn) level two years ago, according to Tourism Australia’s estimation. China is Australia’s biggest spending inbound nationality, with expenditure more than double that of the UK – the next most important country.
Interestingly, the CLSA survey found that Australia ranks as a ‘top-four destination’ for Chinese tourists ‘if money was no object’.
JAPAN: Chinese visitors to Japan doubled in 2015. Inbound arrivals soared from 2.4m in 2014 to 5m and CLSA is predicting this number will more than double again by 2020 to 11.4m Chinese became the biggest contributor of all foreign tourists in Japan last year, aided by the fact that three out of five of the world’s most popular theme parks are located in Japan.
Average spending per tourist in 2015 was JPY187,165 ($1,583) but Chinese were the biggest spenders, with an average of more than JPY280,000 ($2,368).
SOUTH KOREA: According to the research, South Korea is still regarded by Chinese as both a shopping and cultural heaven and CLSA now expects Chinese inbound traffic growth to rise by 28% year-on-year in 2016 due to natural organic growth following the eradication of the Mers virus.
South Korea is one of the top three destinations for Chinese tourists for the next three years according to CLSA since it meets one of Chinese tourists’ major interests – shopping. CLSA also adds that its appeal to Chinese tourists is considerable, since it is safe, with moderate travel costs and rich in culture and sightseeing.
THAILAND: One in four tourists visiting Thailand is Chinese, as inbound tourist numbers continue to grow, with visitors from China having grown at an annualised rate of 47.7% over the past five years, outpacing the non-Chinese tourist annualised growth of 7.6%.
Bangkok continues to be the most popular destination, followed by Phuket, Chonburi, Chiang Mai and Krabi. Thailand is also one of the top three destinations for future outbound trips, according to CLSA’s survey.
