nNestled among the crumbling stupas of Laos’ ancient capital Luang Prabang, 525 Cocktails & Tapas was the city’s premiere fine-dining establishment, serving upscale local cuisine and perhaps the most delicious smoked negroni of Southeast Asia.
Foreign visitors made up 95% of the restaurant’s footfall, with tourist numbers to Laos breaking records year-on-year, as well as a high-speed train route due to linking the landlocked country with the Chinese city of Kunming in the north and Singapore to the country. South, business was going up.
Then the epidemic hit. With borders closed, British 525 owner Andrew Sykes had no choice but to suspend operations and instead pivoted to local customers by opening new premises in Laos’ modern-day capital, Vientiane. “The business is going very well,” Sykes says. “I will reopen in Luang Prabang but not quite yet.”
Laos opened its borders to visitors in May, but the uptick in foreign arrivals has stagnated. Many in the hospitality industry hope that will change after China’s borders open on January 8, given the free spending of Chinese tourists who made up nearly a quarter of the country’s 4.7 million international visitors in 2019. However, the results have been disappointing.
“We’re starting to see Chinese customers come in, but that’s less than 10% of our business,” says Sykes. “It’s still mostly Laos with some expats as well.”
Despite the unspecified human toll, the abrupt end of China’s non-coronavirus policy is an undoubted boon for the global economy, freeing consumers and retailers for three years from supply chain disruptions caused by arbitrary port and factory closures. The end of epidemic travel restrictions in China is a huge relief for the global hospitality industry. In 2019, Chinese travelers made 155 million trips abroad, spending $277 billion – a fifth of all global spending by international tourists.
But the experience of Laos, which borders China’s southwest, shows that returning to pre-pandemic level of travel will be a long and slow process.
Recoil in stages
The announcement on December 26 that Chinese people could once again travel abroad naturally sparked optimism in the regional hospitality industry that has suffered badly during the pandemic. Ctrip, China’s largest travel agency, reported that overseas bookings from January 1 to January 10 increased 313% year-on-year, with Singapore, Thailand and Malaysia among the most popular destinations.
However, overall passenger numbers remain a small fraction of pre-pandemic numbers. First, the sudden and chaotic end to COVID zero meant that airlines and travel agencies had little time to expand capacity before the rush of interest meant flights were limited as costs soared.
“A lot of airports, airlines and travel partners have let some of their employees go,” says Ctrip CEO Jin Sun. “So now they have to rehire and retrain staff. But we hope that during the second half of the year everything will be back to normal.”
When China announced it would reopen its borders from January 8, the focus was internally on preparing Hong Kong and Macao – two destinations within the PRC, but due to their “semi-autonomous” status still considered “outside” travel for tourist figures.
The second phase, which began on February 6, includes only 20 countries where Chinese travelers can book “package” tours and vacations (flight plus hotel): most Southeast Asian countries – including Laos – plus the United Arab Emirates, Egypt and Kenya South Africa, Russia, New Zealand, Fiji, Cuba and Argentina. In Europe, only Switzerland and Hungary achieved the cut, while North America was shunned entirely.
In any case, the surprise reopening in January meant few Chinese wanted to go abroad for the Lunar New Year — instead opting to spend it with families who had been cut off for the holiday over the past three years. The period immediately following the Lunar New Year was not a popular travel time in China, and so it is unlikely that there will be any significant recovery until summer at the earliest.
“October and the end of this year is when you’ll start to see the real upside,” says Gary Bowerman, director of Check-in Asia, a tourism intelligence and strategic marketing firm. “By then, you would think that the Chinese travel industry would have found its feet and be able to manage the demand.”
Changes in capacity and demand
As the largest travel industry in the world, it will take some time for China to return to full capacity. The positive factor is that domestic tourism in China is huge and allows tour operators to head inward rather than suspending operations entirely, as has been the case in smaller countries.
However, it is unlikely that tourism from China will return in the same form as before. Currently, there are not many flights. Travel data company OAG reports that capacity to and from China will rise from around 1.5 million seats in December 2022 to more than 4 million in April 2023. The Civil Aviation Administration of China (CAC) expects total air traffic for 2023 to reach 75% of seat levels. pre-pandemic.
CAC will soon publish its new flight schedules for the spring and summer, which will show where demand is headed over the next few months. Negotiations are currently under way with every major airline, though China will, as ever, protect its domestic carriers by giving them a choice of routes and timings.
In addition, political differences remain. China is the only country globally that has reopened its borders in the midst of a massive COVID surge (in fact, the largest ever). Some countries eager to get tourism dollars have chosen to back off from the public health implications. In Thailand, where 28% of all visitors in 2019 were from China, arrivals were greeted with wreaths and sanitary ware handed out personally by the deputy prime minister.
However, several governments have imposed new testing requirements or bans on Chinese arrivals, prompting Beijing to retaliate by suspending the issuance of short-term visas to its citizens, including those from South Korea and Japan. Tourism flows will continue to face such politically charged headwinds.
The pandemic has also left its mark on travel habits. Ctrip’s Sun says today’s Chinese tourists are looking to book flights on short notice — to mitigate potential pandemic disruptions — but also to travel in smaller groups, using more sustainable means, and in ways they feel safe. “More and more customers really want to have really good protection while they’re traveling,” says Sun.
This is another reason why the US will be the last to feel the benefits of any recovery. As relations between Beijing and Washington heat up over a myriad of issues, anti-Asian hate crimes and gun violence have been amplified in Chinese state media. Even before the pandemic, Trump-era trade tariffs and anti-China tariffs contributed to just 2.9 million Chinese travelers visiting the United States in 2018, down from 3.2 million in 2017, according to data from the US National Bureau of Travel and Tourism. “Chinese tourists are incredibly risk averse,” says Bowerman. “They don’t want to be near anything that jeopardizes their personal security.”
Of course, due to many Chinese studying, working, or starting a family in the United States, a large number will continue to move across the Pacific Ocean. However, concerns about safety and the high point for American travel amid a slowing Chinese economy, combined with onerous restrictions on Chinese citizens to obtain visas to enter the United States, mean that many will turn away. We will miss them. In 2018, Chinese tourists in the United States spent an average of $6,700 per trip—more than 50% more than the average traveler, according to US industry body Travel Association.
“The Chinese economy has been suffering, so I think more expensive destinations may find it a little more difficult,” Bowerman says. “Value will be a big factor over the next six to twelve months for sure.”
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