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This analysis is by Bloomberg Intelligence Senior Associate Analyst Eric Zhu and Bloomberg Intelligence Senior Industry Analyst Tim Bacchus. It appeared first on the Bloomberg Terminal.
China’s tourism recovery could be primed for take-off through 2Q as the country’s Covid wave fades, with 92% of residents planning to take at least one trip over the next three months, according to BI’s proprietary survey, carried out jointly with Attest over Feb. 8-9. China’s three biggest airlines, along with Korean Air and ANA, could receive a boost, as North Asian countries top the list of favorite destinations, particularly as people appear willing to splurge on travel after nearly three years of Covid-related movement restrictions.
Travel floodgate to open as covid cases fall
China’s travel rebound could pick up speed in February and further accelerate through 2Q as Covid fears that hindered the initial reopening begin to recede. Nearly 92% of the 1,088 respondents to BI’s survey of mainland residents are considering at least one domestic or international trip in the next three months to May, with about 47% planning to travel twice or more.
Covid-related restrictions and severity of local infections are still major areas of concern for Chinese travelers, with 40-41% citing these as very important factors in their selection of travel destinations. This compares with 25-30%, who chose the strength of the local currency and availability of tour groups.
Overseas trips are as popular as domestic ones
Chinese residents appear to be as enthusiastic about overseas travel as they are about domestic trips. More than 92% of respondents planning a holiday over the next three months are considering at least one overseas trip, similar to the 95% intending to travel within the country. This eagerness for cross-border trips should bode well for non-Chinese airlines that won’t benefit from a recovery in domestic travel, particularly those domiciled in countries whose tourism industries are more reliant on visitors from mainland China.
About 54% of survey respondents are considering multiple outbound trips as part of their travel plans, below the 62% for domestic travel.
Higher budgets might temper impact of pricier tickets
Higher international ticket prices could be offset by travelers’ willingness to spend more, as pent-up travel demand exceeds limited capacity. Of survey respondents who are aiming to travel over the next three months, 80% are planning to increase their spending vs. similar trips in the past. About 18% aim to spend the same amount and only 2% plan to decrease expenditures. The higher propensity to spend is likely driven by accumulated savings over the pandemic as China’s household savings surged 48% between 2019 and 2022 and should support China’s big three full-service carriers’ yield as well as efforts to slash losses in 1H.
Chinese travelers’ willingness to splurge on holidays could cap demand for bare-bones services offered by budget airlines’ such as Spring.
Japan, Korea’s popularity grows; HK, Macau, Thailand Sag
Higher travel budgets could be one of the factors in the popularity of pricier locations such as Japan and South Korea. The duo top the list of favorite destinations, with 48% and 43% of respondents wanting to visit. Hong Kong and Macau are next, with 40% considering visiting. This reflects a slide in the two cities’ popularity, considering the fact that Chinese visitors to Macau from provinces other than Guangdong in 2019 were more than the total to Japan and South Korea combined.
The popularity of Southeast Asia, ranked fifth, could introduce a snag in Thailand’s goal of hosting 7-8 million Chinese visitors in 2023, a 60-70% recovery vs. 2019 levels. We calculate that outbound Chinese passengers may recover to only 45% of 2019 levels this year, meaning Thailand will need to draw an outsized share of tourists.
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Bloomberg
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