China sees bumps in outbound travel but online opportunities on the rise

Although growth in international travel bookings have fallen for the first time in five years, the boom in travel is creating another industry dynamic and more investment candidates, writes Sally White

When an industry is worth over $50 billion, then every percentage move is big money. This is the latest Chinese official figure for the country’s online travel transactions last year, and it was a rise of 39%. China’s outbound travel has been seen as a rare bright spot in the economy. But in the last few weeks, things have changed.  

The state agency China Tourism Academy (CTA) has just published its China Tourism Development Report (CTDF). It shows that Chinese tourists led the world with their 2014 figure of $165 billion in foreign spending sprees. Right now, hardly surprisingly, the numbers seem to have followed the stock market down and fallen off a cliff.

Chinese OTA shares, however, have not moved in line. The price of Ctrip has climbed from $41 to $88 this year, and the price is currently much nearer the peak than the trough. The same is true of Qunar, which has risen from $24 to $54. Obviously, the punters have faith that the underlying upward trend in travel will soon pick up again. And that domestic travel will remain resilient.

Growth in international travel bookings fell in August for the first time in five years (by 8%) according to ForwardKeys, a Spanish travel intelligence company that analyses Chinese airline booking data. They continued to drop through September (down 14%), despite the start of a big holiday week.

The decline came after China’s summer stock market rout. Earlier this year the numbers were rising by above 20%. But in July the Shanghai Composite Index tumbled by 40% from its June peak.

Foreign travel was hit by a double whammy. Not only did middle-class Chinese (who account for 80% of stock market investors) see their savings savaged. The currency fell, making foreign travel more expensive. The dollar has been particularly strong, so the US has been the worst affected.

This year through to September 21 the number of tickets issued for travel to the US in November and December fell by 35% and 37% against the same time last year, according to ForwardKeys.

Europe visits have declined.(The yuan has fallen by 5% against the Euro in the last two months). Chinese bookings for Europe in November and December are down 7% and 33%, respectively, compared to the same time last year. Chinese Global Blue, a tax-refund service often used by Chinese foreign shoppers, said it saw a 75% rise in spending by Chinese tourists during the first six months of the year. The growth slowed to 72% in August.

Bright spots

Not all destinations have been affected. There are still some bright spots. Bookings for Asia, Australia and New Zealand, which account for 70% of outbound Chinese travel, grew year-on-year by 18% for November and 8% for December, according to ForwardKeys. It points out that these regions also saw their currencies decline, so the Chinese pockets were not so badly hit.

The top end of the market is still rising, too. Bookings for Africa and the Middle East, which account for 3% of total Chinese outbound bookings, grew by 120% for November arrivals and 200% for December.

Trends noted by the World Urban Tourism Federation (WTCF) in the latest outbound figures include the importance of those born after 1970. They’ve became the main group of Chinese outbound tourists, accounting for more than 70%. Behind this is their higher education background. But they are also wealthier and shopping is the major reason for travel.

Another trend is the growing importance of female tourists. They now account for 58.5% of all Chinese outbound tourists, according to the WTCF.

Digging deeper, China Tourism Academy’s report shows that air ticket transactions were still the largest segment of online spending. But online hotel transactions ‘showed rapid growth’. Airlines were actively working with OTAs, it said, to build direct sales platforms online. Traditional hotels were jumping on the online bandwagon to upgrade guest experience and increase market share.

5A-rated attractions and traditional tour operators were increasingly using new media for marketing, the report indicated. Up to 96.91% of 5A-rated attractions opened official Weibo accounts and 90.22% have opened WeChat accounts, the report stated. These were used along with other new media channels to conduct a variety of marketing campaigns.

Weibo (the Chinese for ‘micro-blog’) is akin to a hybrid of Twitter and Facebook and is it is one of the most popular sites in China. Launched in 2009 by Sina Corporation, it was floated off in an IPO last year. Having risen to a high of $ 20.70 this year from low of $ 8.78, it is now trading around $15.

WeChat (based on the Chinese for ‘micro message’) is a mobile text and voice messaging app developed by Tencentand released four years ago. It is one of the largest standalone messaging apps by monthly active users. Of course, it too is destined for the stock market, the rumours say. An IPO is expected in 2016.

So, in China there always seem to be new online developments opening up. The boom in travel is creating another industry dynamic and more investment candidates.

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