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The performance of China’s tourism sector attained pre-Covid-19 levels with a considerable increase in domestic travel during this year’s May Day vacations, as per government data released on Wednesday.
Domestic trips soared by 70.8% year on year to 274 million for the five-day holiday break, which began on Saturday. In addition, domestic trips were 19% higher during this period than in 2019. Consequently, domestic tourism revenue during the holidays was 148 bn yuan ($21 bn), a 128.9% increase over the previous year while being at 101% of the pre-pandemic levels.
The rise in domestic tourism revenue is in line with an increase in Chinese consumer spending this year, as the country’s retail sales spiked by 10.6% in the first three months of 2023. All in all, Chinese domestic tourism is expected to increase by 73% year on year in 2023 to 4.55 billion tourist trips, as per the China Tourism Academy.
“The strong Labour Day holiday tourism data, together with the still-solid April services (purchasing managers index), bode well for consumption and services recovery in coming months, despite the softening in manufacturing growth momentum,” said Goldman Sachs.
Outbound China tourism bookings at three-year high
While domestic travel in China’s tourism sector is growing at a robust pace, the country’s demand for outbound tourism is also recovering in 2023.
Despite a mere 12% increase in Chinese international air travel in the first three months of this year, outbound flight bookings in the country increased by 331% year on year, as per Travelport. However, this represents only 21% of the outbound booking levels in 2019 as international airline capacity is currently at 37% of its April 2019 availability, as per OAG Aviation.
Additionally, outbound travel bookings in mainland China during the May Day holiday season hit a three-year record high, rising by 470% compared to the same period in 2022. As tourists from China are embarking on shorter trips this year— Hong Kong, Macau and Thailand have emerged as the top three favourite travel destinations. Before the Covid-19 pandemic struck, Japan, Thailand and South Korea were among the favourite places for Chinese outbound tourists in 2019.
“Hong Kong, Macao, Thailand and Malaysia will probably benefit most from these trends. The effects on Thailand may be particularly important, as several of its credit metrics, including fiscal ones, have deteriorated as a result of weak tourism activity and stepped-up fiscal efforts since 2019,” said Fitch Ratings.
The American credit rating agency also said that a rise in Chinese tourists travelling abroad will aid the macroeconomic performance of other Asian countries like Singapore, Vietnam and Sri Lanka. Additionally, it believes that economies with a robust tourism sector will benefit from the rebound in China’s tourism sector.
Previously, around 150 million Chinese tourists travelled abroad in 2019, the highest in the world as per a report by the United Nations World Tourism Organisation and the China Tourism Academy. That year, the Chinese spent approximately $277 bn on global tourism, while the travel and tourism sector contributed to around 11.6% of the country’s GDP.
However, the Covid-19 pandemic had a significant impact on the sector in 2020, and its contribution to the Chinese economy fell by 59.9%, to 4.6 tn yuan ($666.6 bn), as per data from the World Travel and Tourism Council.
“…China’s reopening should also provide a boost to global growth by driving a recovery in demand for foreign services, particularly for international travel. Prior to the pandemic, China was a net importer of travel services from most economies, with an overall travel trade deficit of more than $200bn,” said Goldman Sachs.
“A sharp reduction in visitors to and from China while it pursued a zero-Covid policy led the travel trade deficit to shrink to just over $100bn in 2022, but a normalisation in travel patterns—which we expect will mostly occur in 2023H2—should lead China’s travel trade deficit to increase and boost foreign GDP,” it added.
