China Report
A breakthrough moment for Chinese travel and global travel retail
With this edition of The Moodie Davitt eZine published to coincide with Lunar New Year, we feature data and insights on the outlook for the vital China market as travel restrictions are eased from this month. We also bring you some of the most memorable campaigns to celebrate Lunar New Year from around the industry. We begin this section with commentary from Martin Moodie on the implications of the new travel rules for regional and global aviation, tourism and travel retail.
8 January was a momentous day for China’s travel industry and by extension for the global travel retail sector.
It marked the long hoped-for mass easing of Chinese travel restrictions – inbound and outbound – which have ranked among the world’s toughest and most sustained.
Simultaneously, the lifting of the quarantine requirement for travellers arriving in China has seen thousands of travellers cross the newly reopened border checkpoints between Hong Kong and the Mainland from that date.
Looking up: One of the busiest travel hubs in the world before the pandemic, Hong Kong International Airport has been devastated by the impact of border restrictions during the last three years. But the scrapping of quarantine requirements in the Special Administrative Region and Mainland China and the opening of the border between the two augurs well for 2023.
That spells good news for all Hong Kong travel retailers, including border and railway station duty free operators Free Duty (Sky Connection) at Lok Ma Chau Terminal Building and Dufry (the retailer reopened its key MTR West Kowloon High Speed Rail Station shops on 15 January).
On the other side of the border, powerful Shenzhen Duty Free Group recently won the rights to operate the departures duty free concession at Guangzhou East Railway Station, serving Hong Kong-bound travellers.
In more good news for travel retailers, Hong Kong’s neighbour and fellow Special Administrative Region Macau also opened its borders to all foreign nationalities on 8 January. Arriving visitors no longer require Health Bureau (SSM) approval and some will not need a pre-departure COVID-19 test.
Macau downtown and airport travel retailers such as China Duty Free Group, Dufry, Duty Free Americas, DFS Group, Heinemann, King Power Group (HK) and The Shilla Duty Free will be hoping for a steady return over time to the glory days of 2019. While DFS prospered through generating very high average spends from a much smaller footfall during protracted periods of the pandemic, for the other retailers 2020-2022 has generated very slim returns.
People entering Macau from Mainland China, Hong Kong or Taiwan are not subject to any form of pre-departure COVID-19 test since 8 January. Click on the image to read the Macau Daily Times report on this milestone moment.
From an international perspective, Chinese travellers were the engine room of the travel retail community prior to the pandemic. Their return – even if on an initially limited, phased basis – comes as a huge fillip for a retail channel now in accelerating recovery mode in most markets.
How many Chinese will travel in this initial transition phase? Where will they travel (and be encouraged to travel)? For what purposes? What will their spending habits be?
Click on the image to view the China Daily report and photo gallery
All critical questions but whatever the answers, consider this. While any 2023 number is certain to fall far short of the record 155 million in 2019, the upwards trajectory from the miserable 2019-2022 years (the 2020 total of 20.3 million was roughly on the same level as 2003 and the gains since have been marginal) is certain to be steep.
While there is no final number available yet, let’s say some 25 million Chinese travelled abroad in 2022. That is short of 2004’s 28.9 million.
Now let’s pluck another number as a guesstimate for 2023. 70 million (some say higher, some say lower). That would be roughly equivalent to 2011 levels. 80 million would be close to 2012 (83.2 million). Say 100 million and we’re really starting to motor at above 2013 levels (98.2 million). Make no mistake: after three desperately difficult years, this month represents a landmark moment in travel – and therefore travel retail – history.
History of a very welcome kind in the making. China Daily reports on China Southern Airline flight CZ 312’s landing Guangzhou Baiyun International Airport early this morning – the first international flight to land in the Mainland since the country optimised its COVID-19 policies. Click on the image to read.
Hong Kong’s South China Morning Post also dedicates extensive treatment to this landmark day. Click on image to read.
China opening the “last piece in the travel puzzle”
Collinson President Asia Pacific Todd Handcock has delivered an upbeat message on the reopening of the Chinese market to international travel and the significant positive impact it will have.
Speaking to CNBC earlier this month, he described the development as the “last piece in the travel puzzle” and reported an immediate growth in the company’s airport lounge business.
Talking to travel experts and presenters during the American business news channel’s Squawk Box programme, Handcock provided insight based on Collinson’s 1,300-strong portfolio of lounges across 650 airports. That portfolio includes 460 in Asia, of which 233 are in China.
He noted that Collinson has continued to invest in China in anticipation of the rebound, opening up about 70 new lounges and experiences in Chinese airports over the last 12 months.
Handcock said: “We can already see an uptick in terms of visits to our lounges in the last 24 hours across China, including Hong Kong, where we opened a brand new lounge a couple of months ago.”
He continued: “It [the reopening] is significant, when you think that the authorities are predicting there are going be 2 billion domestic trips during Chinese New Year and, if we go back to 2019, there were 166 million overseas trips by Chinese travellers. We’re ready to go as the markets open up.”
On the challenges of staffing lounges in airports to meet demand, Handcock said: “There’s no doubt everywhere in the world, whether it be ourselves in the lounge space, airport operators, ground handlers, food & beverage and retail outlets and the airlines themselves, there’s a labour shortage, and that will temper the acceleration of the growth rate.
“But we see in the medium term, in the next 12 to 18 months, we should be getting back to the pre-COVID numbers [across the Collinson global business].”
The subject of soaring airline ticket prices in China was raised, with CNBC pointing out that a return trip from Shanghai to Hong Kong or Singapore pre-pandemic cost US$300-500 but has now risen to between US$2,000 to US$3,000.
Asked if this would be a “massively prohibitive factor” to growth, Handcock replied: “Absolutely. And we think it’s going to be specifically prohibitive towards the long haul market. So in the coming 12 months we think that because of those ticket prices, people will limit their travel to intra-regional.
“In fact, the Chinese travel agents are saying that Southeast Asia is the top destination; it’s not the long haul to North America and Europe. The beneficiaries will be the Hong Kongs, the Koreas, the Japans, the Thailands and Singapores. A big reason for that is lack of capacity and those ticket prices.”
Handcock identified India as where Collinson is seeing the strongest growth for its airport lounge business, with the market already exceeding pre-COVID levels.
“The United States is doing extremely well for us and our home market of the UK is doing well,” he said. “But the one that’s overachieving all markets right now is India, which I think is promising. India and China have had very similar travel trends in the past. So to see that the India market has more than recovered, it bodes well for China as we look forward to the next 12 to 18 months.”
Todd Handcock: Return of outbound Chinese travellers an industry game-changer
As we have reported on our website, Chinese and international media have been covering the reopening extensively in recent weeks.
On 8 January itself, powerful Chinese state media Global Times reported that order numbers for international flights recorded +628% year-on-year growth, the highest since March 2020 (citing data from online travel agency LY.com).
Global Times also highlighted the surge in planned international passenger routes among leading Chinese airlines, and the “surging vitality” of China’s civil aviation industry. This includes a strong recovery rate of flight numbers between Beijing and Sanya, epicentre of the offshore duty free business.
Quoting Trip.Com Group Head of Media and Executive Communications Wendy Min, CNN said that the most popular destinations in the early 2023 Chinese travel wave are Singapore, South Korea, Hong Kong, Japan and Thailand. For long-haul destinations, the US, UK and Australia lead the pack.
China Outbound Tourism Research Institute (COTRI) CEO Dr. Wolfgang Georg Arlt told CNN that Q1 will be almost exclusively urgent non-leisure travel, including business trips, family reunions, student travel or healthcare needs.
COTRI said that the total outbound number, including Hong Kong and Macau, could reach 115 million in 2023. Arlt said that leisure travel will start to pick up in Q2 as passport and visa approval processes quicken, and more flights have resumed.
Dragon Trail International Director of Marketing and Communications Sienna Parulis-Cook observed in the same report: “The destinations that were popular before the pandemic are likely to resume their popularity when China reopens. The Chinese travel industry, and Dragon Trail, definitely expect destinations in Greater China (Hong Kong and Macau), Southeast, and East Asia to recover first.
“They’re the closest to China, they have the most-recovered flight connectivity so far, and they are likely to seem safest and easiest for a first post-Covid outbound trip.”
More good news from China Daily as it reports the resumption of ferry services between coastal areas of Fujian province on the Mainland and the outlying islands of Kinmen and Matsu. The route had been suspended for almost three years. Click on photo to read.
Click on the photo and the respective images below to read the original reports
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The Moodie Davitt eZine Issue 319 | 20 January 2023
The Moodie Davitt eZine is published 14 times per year by The Moodie Davitt Report (Moodie International Ltd). © All material is copyright and cannot be reproduced without the permission of the Publisher. To find out more visit www.moodiedavittreport.com and to subscribe, please e-mail kristyn@moodiedavittreport.com
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