What happened to all those Chinese tourists?

Is there a possibility that tourists will come back to Southeast Asia? It seems that the region might have to wait for an extended period.

Prior to the Covid-19 outbreak, Malaysia's high-end shopping mall situated below the renowned Petronas Towers was filled with the chatter of Chinese tourists and their varied languages. However, during a bustling mealtime recently, they were noticeably absent. The popular Malaysian outlet of the renowned Taiwanese chain Din Tai Fung, which was often frequented by Chinese tourists, was only half-occupied by local Malaysians and customers from the Middle East. When I inquired about the number of Chinese customers they had served lately, the cashier responded with a solemn shake of her head and a faint smile.

This issue poses a challenge.

China used to be the leading supplier of global tourists, and Southeast Asia was a favorite spot for them to visit. This trend happened rapidly. In the 2000s, as prosperity soared, people had more free time, and the government eased travel regulations, tourism became accessible to the burgeoning middle class in China. The number of travelers surged from 47.7 million in 2009 to a staggering 154.63 million in 2019.

These fresh travelers splurged a substantial amount of money. Last year, Chinese visitors contributed one-fifth, or a staggering US$255 billion, to the expenditure in international tourism. The impact on Southeast Asia was substantial. The money received from tourists made up 5.7% of Malaysia's total economic output in 2019, and the revenue from Chinese tourists accounted for 17.8% of that. Thailand also saw a considerable impact, with 11.4% of its GDP attributed to tourism, and a massive 28.1% of that was from Chinese spending.

The Covid pandemic caused a disruption in the usual pattern, but many governments and businesses initially believed it would only be a temporary setback. However, this turned out to be incorrect. In 2021, the number of Chinese tourists worldwide dropped significantly below the levels seen in 2000, totaling 8.5 million. The decrease in Southeast Asia was particularly dramatic, with arrivals reaching negligible levels. For instance, the number of Chinese visitors to Malaysia plummeted to a mere 7,701 for the entire year of 2021, compared to 3.1 million in 2019. Similarly, in Thailand, there were only 13,043 Chinese arrivals in 2021, a catastrophic decline from the 11 million who had visited in 2019. Unfortunately, the recovery has been far from satisfactory. Chinese bookings for summer tours this year in Malaysia are currently standing at only 30% of their pre-pandemic levels, and in Thailand, the figure is even more disheartening, at just 10%.

Do you think tourists will come back to Southeast Asia? It might take quite a while for that to happen.

There are numerous challenges ahead. The level of flights, especially between China and Southeast Asia, has not recovered to the same level as in 2019. Additionally, China's economic decline has caused its consumers to become more hesitant. Although these issues will eventually be resolved, the travel industry in Southeast Asia should not expect a return to the prosperous era of the 2010s.

There are underlying and enduring problems that need to be addressed. Initially, the newer generation of Chinese individuals no longer have a keen interest in group trips which used to be a common experience for their parents during holidays abroad. A recent study conducted among 2,000 potential Chinese tourists revealed that 76% of them desired to have fewer companions on their journeys and were less inclined towards following online-based travel plans. Instead, contemporary Chinese tourists are in pursuit of specialized encounters that offer them an opportunity to explore distinctive cultural landmarks. Popular and overcrowded beaches in Phuket, as well as establishments like Din Tai Fung, fail to meet this criteria.

Visitors hire customary attires in close proximity to the breathtaking Temple of Dawn (Wat Arun) in Bangkok. (Image: Apichart Jinakul)

Furthermore, there has been a significant increase in domestic expenditure among Chinese individuals, particularly on high-end products. Statistics indicate that Chinese consumers made up 35% of the worldwide luxury market in 2019. However, only a mere 11% of their purchases were made within China due to the hefty taxes imposed domestically. As a result, luxury boutiques and duty-free stores in popular destinations like Bangkok, Phuket, and Kuala Lumpur experienced a surge in sales. Nevertheless, the Chinese government has made noteworthy efforts to establish duty-free shops within the country, leading to a rapid expansion of luxury sales within China. It is projected that in a short span of time, approximately 90% of duty-free sales in the Asia-Pacific region will be derived from China.

Lastly, there is always the constant danger of disruptions driven by political motives. To illustrate, in 2017, China prohibited Chinese tourist groups from traveling to South Korea as a form of retribution for the installation of a missile defense system built by the United States. As a result, South Korean businesses suffered tremendous financial losses worth billions of dollars. Although Southeast Asia has not encountered any retaliatory actions affecting its tourism industry thus far, it must get ready to face such challenges as tensions escalate concerning the South China Sea. Thus, it is high time for Southeast Asia to enhance its hospitality and openness towards visitors.

Various places in the area promoted economic development by tailoring accommodations and other travel activities specifically for Chinese visitors. They also increased the number of available flights, simplified visa procedures, and forged strong marketing partnerships in China.

In the immediate future, it is not viable for Southeast Asian nations to compensate for the absence of Chinese tourists. Nonetheless, in the long run, countries should enhance their marketing strategies and reach out to other nations that have a rising middle class. To begin with, India is a promising option. Similar to China in the 1990s, India is experiencing a growing affluent population with a strong desire to travel, coupled with a flourishing airline industry. Earlier this year, the Asian Development Bank (ADB) suggested that India could potentially become "the next China" when it comes to outbound tourism. This assertion has its merits. In May, there were more Indian tourists than Chinese visitors in Singapore, and the numbers are steadily increasing in other parts of the region.

To tap into the potential of Indian tourists, it is important to adopt the strategies that Thailand, Malaysia, and other nations have successfully employed with China. This entails simplifying visa procedures, increasing flight connectivity, and aiding hotels, restaurants, and attractions to tailor their services to suit Indian visitors. While India may not immediately compensate for the decrease in Chinese tourists, by promoting a varied tourist market, Southeast Asia can establish a more resilient tourism industry. For a long time, the region focused primarily on attracting Chinese tourists, but it is now imperative to extend a warm welcome to India and other countries as well.

A group of Chinese holidaymakers have reached Ngurah Rai International Airport, Bali, Indonesia, on January 22, 2023, as the Chinese authorities have once again permitted their citizens to travel to the destination. (Image: Reuters)

Bloomberg View news outlet