PM Perspectives: Chinese Tourism Growth Creates Online Travel Tailwinds

A surge in overseas travel by Chinese nationals is expected to create long-term tailwinds for travel companies, especially those with exposure to the burgeoning online market, says Portfolio Manager Garth Yettick.

Key Takeaways

  • The number of Chinese nationals traveling overseas is forecast to reach 230 million over the next five years, from 130 million in 2017.
  • Chinese tourists spent $258 billion, the equivalent of the GDP of Finland in 2017, a number that is expected to reach $462 billion, or the GDP of Belgium, within five years.
  • Surging overseas tourism is set to benefit online travel companies, along with the mobile payments businesses of several e-commerce giants.
  • In Part Two , consumer goods analyst Greg Kuczynski assesses the impact on luxury brand owners.

Transcript

Yettick: We are in the midst of a multi-decade trend where the Chinese are starting to travel, and travel in very large numbers.

The 130 million Chinese travelers compares to 20 million peak travelers coming outbound from Japan in the height of the Japanese travel boom in the 1990s.

The $258 billion spent by international travelers from China in 2017 is roughly equal to the GDP of Finland. We expect that to grow to $462 billion over the next five years, which is roughly the size of the GDP of Belgium.

Chinese travelers spend an average of $2,000 a year on outbound travel for those who do travel. And already given the large number of outbound Chinese, the total spend by Chinese travelers exceeds any other country in the world.

So what is driving this? There has been three major shifts. One, we have seen a rapid increase in the number of Chinese people who have the means and desire to travel.

Secondly, there has been a simplification in the visa process, and as a result, a number of other countries have reciprocated by simplifying the process for Chinese to get visas into their countries. We have also seen a dramatic simplification of the passport application process in China. It is now just a one-day visit rather than a multi-step process, as it had been in the past.

 

By Garth Yettick