February 7, 2017    5 minute read

Europe versus the UK: Who Will Win China’s New Tourists?

The Battle Takes Off    February 7, 2017    5 minute read

Europe versus the UK: Who Will Win China’s New Tourists?

 

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Between 4% and 5% of Chinese citizens currently hold a passport, but within the next decade, this figure is expected to rise to around 12%. This would correspond to more than 100 million new holders, and thus a great many more outbound tourists.

Chinese tourism statistics from the China National Tourism Administration have revealed fairly consistent choices for the most popular destination over the past decade. Japan, South Korea and Thailand always rank highly, and Asian countries dominate the top ten destinations. This trend seems set to continue, as these countries are closest to home and are obvious choices for new holidaymakers who are more likely to seek shorter, cheaper trips abroad. However, with a wealthier middle class emerging, there will likely be an increase in tourism to more expensive locations.

Europe Battles for China’s Tourists

Mainland Europe has traditionally done much better than the UK in attracting Chinese tourists. In particular, Italy, France and Germany have been visited by over a million Chinese tourists annually in recent years, while Austria remains more than three times as popular as the UK, receiving nearly three quarters of a million Chinese tourists in 2015.

The UK is not inside the Schengen zone that encompasses the vast majority of Western Europe, which will undoubtedly have influenced the thought process of potential tourists when selecting their vacation destination. Limited by holiday time, travellers from outside of Europe must often decide which of the two main visas to buy: Schengen or UK.

The Schengen visa is cheaper than its UK counterpart, and grants access to 26 countries. For many, this decision is a no-brainer as they pack their bags for the continent.

Changing Trends and Travel Fears

However, times have changed, and the continent is not as harmonious as it once was. For instance, the recent migrant crisis engulfing parts of Southern and Eastern Europe has weighed on tourists’ minds.

Terror attacks in prominent French and German cities projected the negative image of unrest in Europe, and put fear into the minds of potential tourists. This combination of negative factors has no doubt played a part in the slowing growth of traffic from Asia to mainland Europe.

Figures from the European Travel Commission show that “passenger demand growth for Asian routes has diverged from total European passenger demand to an unprecedented extent in 2016”. Over the first three quarters of the year, the percentage point difference went from an already high level of 2.5 to 3.4.

This is reinforced by data from Italy showing that its share of tourists from China has plateaued at around 2.8% in recent years. Share_Of_Tourists_To_Italy_From_China_%_TMMChartIn contrast to this, the UK has experienced a surge. Last year saw a record number of  270,000 visitors from China. Whilst the absolute numbers paint the picture of an insignificant competitor to mainland Europe, the percentage change seen in the UK is staggering: in 2016, for example, Chinese visitor numbers were up 46% from 2015 (according to Visit Britain). This is perhaps an indicator of future trends.

Reinforcing the prospect of a boom in Chinese tourism to the UK are data from airlines. Visit Britain reports a 17% increase in bookings for the period from November 2016 to January 2017 when compared to the equivalent one year prior. Furthermore, the 2016 holiday period (18th-31st December) showed a staggering 37% increase on 2015.

Flying Forward

With significant distances to be covered in order to reach other Asian countries, flight is, of course, the favoured mode of transport for Chinese tourists. Over the past seven years, China’s three main airlines (China Southern, China Eastern, and Air China) have seen a steady rise in the number of passengers carried, with a peak seemingly not yet in sight.

Anticipating further increases in tourist numbers over the next decade has led the Asia-Pacific region to invest more heavily in airport infrastructure than any other part of the world.   Regional_Investment_Into_Airport_Infrastructure_Investment,_USD$bn_TMMChart

The Winners: A Round-up

An obvious winner in all of this is the construction industry: it is ultimately that sector which will provide the airport expansions and extra runways that will eventually be necessary to cope with the increase in demand. With the shorter, cheaper trips likely to be taken by first-timers, budget airlines stand to do well in the near future.

Singapore Airlines is confident of this and actively seeking to diversify its high-end business by increasing its exposure to low-cost carriers. It currently owns such a carrier (Scoot), but joint ventures with both Indian and Thai companies will see this exposure increase further (Bloomberg).

Fleet expansions and upgrades will benefit Airbus and Boeing who provide the overwhelming majority of aircraft for China’s main airlines. The weaker pound has helped to make the UK a more attractive place for tourists, and more competitive with its mainland rivals.

In particular, high-end retailers have benefitted from wealthy foreigners spotting opportunities to buy luxury items at a relative discount. With the pound looking likely to hover around its current levels, this should continue for a while. In absolute terms, the UK will not attract more Chinese tourists than its continental neighbours in the near future, but the percentage increase is almost certain to be significantly larger than in mainland Europe. And with the average Chinese tourist spending over £2100 during their stay without even counting their accommodation expenses (according to Visit Britain), this is surely good news for the UK.

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