China Travel Rebounds After a Three-Year Hiatus
EXCLUSIVE CLA INSIGHTS
Tourism Destinations Are Readying for Chinese Tourists Return
Lunar New Year saw a surge in domestic tourism in China, with more than 300 million trips taken in the first 6 days of the Chinese New Year festival alone, and total domestic tourism spending was up 30% from 2022 and up 73% from 2019 according to China’s Ministry of Culture and Tourism. As international carriers begin to ramp up flight capacity, restrictions on group tours are lifted and passport issuances return to normal, we expect this growth to quickly expand outside of China’s borders.
As tourism destinations, retailers, and destination marketing organizations gear up for the return of Chinese tourists, CLA is excited to announce we will be launching a series of online training modules geared toward helping businesses attract, serve and retain Chinese tourists. If you would like to learn more about our training or provide input, contact us below.
Luxury Redefined
Building trust with Chinese consumers through authenticity and integrity
China has been the main growth market for many luxury brands for some time. With the country having undergone a rapid economic development over the last decades, so too have the levels of sophistication among its consumers. Overseas luxury brands need to understand how Chinese consumers have evolved to provide a better customer experience and to maintain sustainable growth in this market.
This study aims to deliver insights into luxury consumption in China, focusing on Tier 1 and 2 cities in the Chinese Mainland and Hong Kong SAR. The research was based on a consumer survey held in mid-2022 among 2,653 consumers. Through interviews with a wide range of executives from across the luxury industry, the findings of the survey were put into context against the emerging trends and changes that are taking place in the luxury industry in China.
To understand the changes in consumer behaviour, a cluster analysis was conducted to segment consumers into five distinct mindsets: ‘Going global’, ‘Look at me’, ‘Fitting in’, ‘Quality first’ and ‘Striving for the greater good’. Consumers move from cluster to cluster as their experience with the luxury market and their outlook evolves due to socio-economic factors such as increased disposable income.
Through analysis of the survey results, five main personas were identified in addition to two emerging personas. The five personas are: Luxury Newcomers, Status Reflectors, Community Approval Seekers, Luxury Connoisseurs, and ‘New Luxury’ Pioneers. However, it should be noted that these personas are fluid, and some characteristics may overlap between them. As the Chinese luxury market continues to mature, two emerging personas – Luxury Investors and Cultural Resonators – are starting to rise to prominence as well. The study also sets out to profile the current and rising consumer personas driving luxury consumption and provide recommendations to brands willing to capture the next generation of consumers.
The China Imperative
Multinational companies operating in China must reconfigure for opportunity and risk.
Over the past 30 years, multinational companies (MNCs) have enjoyed an increasingly open world. Taking advantage of a unipolar globe with relatively free flows of capital, trade, and ideas, MNCs tapped capital from wherever they chose, built businesses optimized for global supply and global demand, and served increasingly globalized customers. That may no longer be possible. In a world reshaped by the coronavirus pandemic, rising geopolitical tensions, renewed inflationary pressures, and war, MNCs must reassess, reevaluate, and reconfigure their businesses for a new era. And China is where some of the most dramatic reconfiguration may take place.
The reconfiguration will not be easy. The sheer size and complexity of the Chinese market may mean that notions of outright decoupling are simplistic; furthermore, we continue to live in a world connected by those global flows of capital, trade, and ideas. MNCs face a much more difficult imperative: maintaining access to China’s upsides while managing increasingly complex risks. It is a challenge that will define the next era for MNCs, and those that solve it will be tomorrow’s winners.
China’s 2023 Rebound
China’s consumption recovers during the Lunar New Year holiday
As millions of Chinese re-emerged from the sudden wave of Covid-19 infections experienced after China relaxed control measures in early December, the country’s consumption and travel saw promising rebounds during the week-long Lunar New Year holiday (Jan. 21 to Jan. 27). This recovery may set the stage for major Chinese tech companies to recover some of their losses in the coming months.
Why it matters: China’s major mobile payment platforms, WeChat Pay and Alipay, each saw about a 20% yearly increase in transactions. Meanwhile, food, travel, and entertainment businesses saw a similar yearly increase during the festive period, with spending on restaurants and movies returning to 2019 levels.
Details: The Lunar New Year holiday this year marked the first time in three years that people were able to travel freely across the country. Although it is traditional for people to reunite with their families during the period, since early 2020, the Chinese government had discouraged people from traveling home due to fears of large outbreaks of Covid-19.
Travel & Logistics
What to expect from China’s travel rebound
Back in 2019, mainland China was the world’s largest outbound travel market with over 150 million outbound travelers. Since then, strong COVID-19 safety measures, including quarantine on arrival, have all but eliminated China’s inbound and outbound travel.
China recently announced that quarantines will be removed on arrival from January 8 2023. This is similar to Hong Kong’s announcement in September 2022 that it would drop mandatory quarantine on arrival.
If mainland China’s air travel were to follow Hong Kong’s recovery curve, mainland China would see four million air passengers a month by April 2023, pushing air travel back up to 40 percent of preCOVID-19 levels (exhibit).
Maintaining Luxury Image
Bernard Arnault slams duty free daigou trade and expresses optimism in Chinese travelling shopper rebound
LVMH Chairman & CEO Bernard Arnault has underlined his determination to maintain the allure of the house’s luxury and beauty lines by rejecting the daigou sector that has seen huge volumes of product – mostly from duty free – pouring into the China local market in recent years*.
Speaking at a post-results call yesterday after LVMH posted strong full-year 2022 results, Arnault said: “We’re refusing and we’re fighting against so-called parallel exports. A number of our peers need to generate revenue and don’t hesitate to sell through resellers who buy products abroad and then sell them on at discounted prices in China. But we avoid that.
“Absolutely ditto for cosmetics and the sale of products that we see offered by a certain competitor,” he added. In a clear reference to the South Korean duty free market which has been almost solely reliant on the daigou business into China during the pandemic, Arnault commented: “I mean it’s quite fascinating to see the duty free stores where there’s nobody – because their airports were empty – [and they] were generating huge sales, huge revenues.
“Why? Because the products never arrived on the stand. They went straight from the inventory – the reserve of the seller – to the professional seller who sold them on a discount in China. I mean, for your image, there is nothing worse. It’s dreadful.”
Revenge Travel & Spending
Chinese New Year Domestic Tourism Generates Over $55 Billion In Revenue
What Happened: In the first six days of the Chinese New Year holiday, a total of 308 million tourism trips within China were made, data from the Ministry of Culture and Tourism showed last Friday. With revenge travel also came revenge spending; total revenue generated from domestic tourism during this year’s holiday stands at 375.8 billion yuan ($55.6 billion), a 30 percent year-on-year increase from 2022, and 73.1 percent higher than in 2019.
It was good news for luxury as key malls like Shanghai’s Plaza 66 saw long queues form outside Chanel, LV and Hermès. The LV store’s total revenue reportedly reached 10 million RMB ($1.48 million) a day during the festive season.
The mainland is finally on the move again — these travel figures being the latest sign of China’s travel rebound after a hiatus of three years. Travel saw a 23.1 percent increase from the same period last year and is at 88.6 percent of 2019’s level, prior to the COVID-19 outbreak, reports Reuters.