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What Happened To All Those Chinese Tourists?

29 Jul, 2023

Before Covid-19, Malaysia’s luxury mall beneath Kuala Lumpur’s iconic Petronas Towers echoed with the sound of Chinese tourists and their dialects. But recently, during a busy dinner hour, they were missing. Din, the mall’s outlet of famous Taiwanese chain Din Tai Fung, a favourite of Chinese tourists, was half-full with local Malaysians and Middle Eastern customers. When I asked a cashier whether they had served many Chinese lately, she shook her head with a tight smile.

That is a problem.

China was once the world’s most plentiful source of international tourists, and Southeast Asia was among their top destinations. The buildup happened quickly. In the 2000s, affluence, a growing surplus of leisure time and a relaxation of government travel restrictions made tourism available to China’s rapidly expanding middle class. From 2009 to 2019, the number of travellers grew from 47.7 million to 154.63 million.

These new tourists spent handsomely. In 2019, Chinese accounted for one-fifth, or US$255 billion, of international tourism spending. The effect on Southeast Asia was immense. Tourist receipts accounted for 5.7% of Malaysia’s gross domestic product in 2019, and Chinese tourists accounted for 17.8% of that revenue. Similarly, 11.4% of Thailand’s GDP was generated by tourism, with a whopping 28.1% accounted for by Chinese spending. 

Covid interrupted the trend, but many governments and businesses believed it would be temporary. That turned out to be false. In 2021, Chinese tourists fell below 2000 levels to 8.5 million globally; in Southeast Asia, the arrivals dropped to negligible levels. For example, Chinese arrivals to Malaysia dropped to 7,701 for all of 2021, down from 3.1 million in 2019. In Thailand, there were 13,043 Chinese arrivals in 2021, a catastrophic drop from the 11 million who visited in 2019. The recovery, so far, has been disappointing. Chinese bookings of summer tours this year are at 30% of their pre-pandemic levels in Malaysia and 10% in Thailand.

Will the tourists ever return? Southeast Asia could be waiting a long time.

There are several problems. Flight capacity — especially between China and Southeast Asia — has not returned to 2019 levels, and China’s economic downturn is making the country’s consumers cautious. Both problems will reverse eventually, but Southeast Asia’s travel sector should not count on a return to the booming 2010’s when they do.

Long term, deep structural issues exist. First, younger Chinese are no longer interested in the group travel experiences that long dominated Chinese holidays, which their parents took overseas. A recent survey of 2,000 likely Chinese travellers found that 76% were seeking “fewer people” and fewer itineraries driven by online posts. Rather, today’s Chinese travellers are seeking “niche” experiences that provide access to unique cultural attractions. Phuket’s crowded beaches and chains like Din Tai Fung do not qualify.

Tourists rent traditional costumes near the Temple of Dawn (Wat Arun) in Bangkok. (Photo: Apichart Jinakul)

Second, Chinese are spending more money at home, especially on luxury goods. In 2019, Chinese accounted for 35% of the global luxury market, yet just 11% of their purchases were made in China thanks to high taxes at home. Luxury boutiques and duty-free shops in places like Bangkok, Phuket and Kuala Lumpur were the beneficiaries. But thanks to a government effort to open duty-free shops at home, luxury sales are expanding quickly in China and could account for nearly 90% of Asia-Pacific’s duty-free sales in a few years.

Finally, there is the ever-present risk of politically motivated interruptions. For example, in 2017 China banned Chinese tour groups from visiting South Korea in retaliation for the deployment of a US-built missile defense system, causing billions of dollars in losses to South Korean business. Southeast Asia has yet to experience a tourist trade retaliation, but as tensions over the South China Sea grow, tourism-dependent countries must be prepared to be squeezed. It is time for Southeast Asia to expand the welcome mat.

Destinations across the region cultivated growth by customising hotels and other travel experiences for Chinese tourists, expanding air routes, easing visas and developing marketing relationships in China.

In the short term, it is impossible for Southeast Asian countries to make up for China’s missing tourists. But in the long term, countries should expand tourist marketing and outreach to other countries with expanding middle classes. India is a good place to start. Like China in the 1990s, it is home to an increasingly affluent population with a bug to travel and a growing airline industry. Earlier this year, the Asian Development Bank (ADB) argued that India could emerge as “the next China” in terms of outbound tourism. It has a point. In May, Indian tourists outnumbered Chinese in Singapore, and numbers are surging in other parts of the region.

Cultivating the Indian tourist market will require taking many of the same steps that Thailand, Malaysia and other countries have long taken with China: ease visa policies, expand air links and assist hotels, restaurants and attractions in customising their offerings for Indian arrival. India will not soon make up for the decline in China tourists. But by diversifying its tourist marketing, Southeast Asia sets itself up for a more sustainable tourism industry. For years, the region rushed out the welcome mat for China. India and other countries should receive an invitation, too.



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