Attempts to woo the Chinese market can be quickly and effectively undermined by geopolitical issues.
Laurens van den Oever, CMO at scheduled flight data analysts ForwardKeys, says the ongoing Terminal High Altitude Area Defence System (Thaad) missile crisis in South Korea reveals the speed at which the market can collapse.
However, he adds one destination’s issue can provide opportunities for others, as analysis of flight booking data reveals.
The Thaad missile crisis really took off in March when work started in South Korea to implement the system that is intended to shoot down missiles from neighbouring North Korea, which is developing a nuclear arsenal of intercontinental missiles.
The building of the system has angered China’s officials who are concerned of its radar’s impact on their own military security. They are also concerned the missiles’ installation upsets the balance of power in the region as well as threatening the country’s own sphere of influence in the area.
While the impact has been felt at many different levels, van den Oever says the effect on the travel market has been almost instantaneous as the China National Tourism Administration issued a warning against travelling to South Korea in March.
He adds that in 2016, South Korea’s inbound international traveller numbers grew by 25.3%, prompting an 11% capacity increase between the two countries.
However, the growth quickly fell apart once the crisis kicked in, with data revealing that the total international market shrank by 28.5% in the first seven months of the year. This was driven by Chinese travellers as the entire international market was only down 0.5% once they are taken out of the equation. It was also reflected by a 19% fall in flight capacity between the two countries.
Nor is the immediate future looking any brighter. The data, which was compiled at the end of July, shows that forward bookings for South Korea from August to December have fallen by 31.5% in total, but only by 9.3% once the Chinese market is taken out of the equation. Flight capacity is also down by 18% for the rest of the year.
Van den Oever says: “It kicks in almost immediately; the week after we could see a drop in bookings and slightly later the capacity changes take into account the falling traffic.
“It is simply thanks to the Chinese government saying there’s a safety warning in travelling to South Korea. The Chinese travellers obey it and don’t go there anymore.
“It shows the power China has in the international travel space to make or break a destination overnight.”
However, van den Oever adds that while Chinese tourists might have been put off visiting South Korea thanks to local events, they are not put off taking a trip. As a result, certain other neighbouring countries are feeling more positive effects.
He says: “As soon as the first warning was issued, Chinese travel agents immediately started to rebook their travels for their customers. The lesson here is they don’t stop travelling. It is a case of where they go instead as they just change their itineraries.”
ForwardKeys data reveals that Vietnam was the beneficiary of the biggest growth in forward bookings for August to December, with an 80% boost in Chinese international departures, followed by Malaysia, India, Canada and Australia. Meanwhile, the fact that the overall number of Chinese travellers remained essentially stable – it grew by 0.1% – shows the appetite for travel was not affected by the row with South Korea.
Indonesia also proved to be a massive beneficiary from the crisis, with bookings more than doubling for China’s Golden Week from September 20 to October 8, when many Chinese families like to travel.
Van den Oever says: “The Chinese government facilitates it [the shift], and there are plenty of alternatives. The rerouting of flights from South Korea will mainly be diverted to the Asian countries we see doing well.”
He adds that the Chinese authorities have a number of tools available when it comes to driving tourist traffic to their preferred markets, with the most powerful one being the visa programme. Any agreement with a foreign country to either waive visas or allow them to be issued on arrival jumpstarts the Chinese visitor market.
Van den Oever says: “It saves an awful lot of trouble for the Chinese. They don’t have to go to Beijing with the whole family and get visas, which is an incredible amount of hassle for them.
“Visa relief is a big thing for the Chinese and it shows an immediate change on the bookings once it is implemented.”
He adds Mexico is a beneficiary of the change in paperwork. Although Chinese visitor numbers to the country remain small, they account for only 1% of all Chinese arrivals to North America from January to July, 2017, they have been boosted by a change in the first quarter of the year, which meant they could be given a visa on arrival. This has led to a 34.1% increase in Chinese arrivals to the country in the first seven months of the year, while forward bookings were up by 95.6% for the rest of the year.
Canada has also seen a similar change in the Chinese visa process and has also enjoyed a boost in visitor numbers as a result. The destination, which accounts for 14% of Chinese visits to North America, has experienced a 50.4% increase in Chinese visitors in the first seven months of the year, with 51.6% forward bookings for the remainder.
However, van den Oever believes both destinations have also benefited from a number of factors that have driven down the popularity of the US in China.
He adds: “It is a bit of a perfect storm for the US. The Chinese are known for price sensitivity so a strong dollar doesn’t help and we believe the Trump administration did not help as the feeling of welcome in the US changed. The loyalty towards a destination is extremely low and can change overnight if there is a bad feeling.”
Flight capacity increases to the other North American destinations helped facilitate the movement away from the US. However, van den Oever also believes the US has fallen victim to a far more common-place problem that many destinations succumb to – overfamiliarity.
He adds: “The US is a very mature market for the Chinese, it was one of the first foreign markets that was open and had a lot of bilaterals.
“The US, like Paris, is one of those destinations that have been visited by the Chinese for a long time now so they are looking elsewhere over where to visit. They’re very much looking for new destinations and new experiences, and that’s having an effect as well.”
Another destination that is set to receive a big boost from the Chinese market is Morocco which, since a visa exemption in June 2016, has seen the number of arrivals increase by 419%. While van den Oever admits this growth is off small figures, saying “it is in the tens of thousands”, he believes the trend will continue. However, the people of Morocco must also play their part to ensure it does.
Van den Oever says: “If the destination doesn’t offer the value and meet expectations, or if they are not slightly attuned to Chinese standards, then the market moves on. If word gets round they are not welcoming to the Chinese or it is not easy to travel around, then after one or two years the route is broken.”
What is certain is the Chinese appetite for travel remains strong and as more people in the country join the middle class, so even more will want to see the world. All the world needs to do is ensure they remain on the right side of the country’s leaders, who possess a strong ability to guide Chinese tourists where to go.
Overseas travellers: 122 million
Proportion of China’s population: less than 10%
Total overseas spend: $109.8 billion
Overseas spend per capita: $900
Top cities for Chinese spend: Seoul, Bangkok, Tokyo, Osaka, Singapore, Chiang Mai, London, Moscow, New York, Rome, Sydney
Proportion of Chinese travelling in a group: 40%
Proportion of individual travellers: 60%
Split between male and female overseas travellers: 44%/56%
Busiest departure cities: Shanghai, Beijing, Guangzhou, Shenzhen Source: China Tourism Academy