The long-term potential of Hainan and the habits of China’s newly released international travellers were all under the spotlight in today’s TFWA China Watch webinar.
Industry experts Jason Cao, Vice President at Global Duty Free (GDF); China Duty Free Group (CDFG) Assistant General Manager Michelle Sun and Dragon Trail Director of Marketing and Communications Sienna Parulis-Cook, joined TFWA Managing Director John Rimmer and TFWA Chief Representative in China Hannah Gao to discuss the latest developments in the market.
Here are some of the key takeaways:
1. Record highs for the 2023 Spring Festival
The Chinese New Year and Spring Festival period has always been a driver of travel in the country, and with restrictions eased for the first time in three years, this year has seen a boom in bookings a planned travel in the country. Sun told the webinar there was a “record high” of outbound passenger bookings when restrictions were lifted, coupled with a high intention to travel after the holiday period.
This year’s Spring Festival saw 308 million domestic tourists in China, which marks an 88.6% recovery against 2019. Revenue also recovered 73.1% compared to pre-pandemic, to hit RMB375.8bn
The benefits were seen in travel retail too, with Spring Festival offshore sales in Hainan up 20.69% to €350m.
2. When will Chinese international travellers return?
“I’m very happy to be finally talking about the return of the Chinese outbound travel market,” Parulis-Cook enthused. According to the latest figures from Dragon Tail 60.6% of respondents said they want to travel outside Mainland China in 2023, with most “full of expectation” and looking for relaxing, culture and shopping.
“It’s really going to be the second half of 2023 when we can expect the full recovery to get started,” she cautioned.
71% of travellers are looking at 5-10 day trips, almost half of those (48%) are with family, 29% with friends and 17% with a partner. Hong Kong (20.7%), Macau (11.4%) and Thailand (11.1%) top the list of destinations which broadly reflects the trends seen before the pandemic.
But Parulis-Cook added: “France often comes up even among all those short-haul Asian destinations…France has such a strong brand image and I think it’s such an aspirational destination that really kind of represent Europe in the eyes of many Chinese tourists.”
3. Challenges remain for travel recovery
The initial reaction to Chinese borders opening was a slew of restrictions imposed by other countries on outbound Chinese tourists. Those have hampered recovery in some regions. Parulis-Cook highlighted that while group travel and package travel began on 6 February, the list of approved destinations currently does not include any countries which imposed extra travel restrictions.
Further problems are being caused by the cost of flights and visa challenges. She explained that flight prices are still higher than pre-Covid, but they will come down as the number of flights recovers. The current two-month wait to get a visa for European travel is also an issue. “Right now, you almost have to discount planning a trip to Europe for the May holiday if you haven’t started the process,” Parulis-Cook said.
4. The enduring and evolving power of Hainan
Despite new opportunities to travel abroad, the panel all agreed that Hainan is set to remain a key destination, both within China and for Chinese shoppers.
“The sales figures are very exciting,” Cao told delegates. “The traffic is very much higher than 2019.”
Sun confirmed that CDFG has seen a 22% year-on-year increase in passenger flow at its CDF Sanya location, while there has also been a peak daily traffic of 48,000 people in Haikou.
“Hainan has been perhaps the only success story to come out of Chinese travel in the pandemic years,” Parulis-Cook concurred. She revealed that Sanya is leading the way on the island today, with bookings up 102% in the period from 7 December to 10 January, compared to pre-pandemic. Other locations, however, are lagging behind, with second-placed Chengdu at 92% of pre-Covid levels.
Cao believes that the three years of offshore development on the island will mean Chinese travellers will continue to return there: “They know Hainan more.”
“Hainan is different because it attracts shoppers from Mainland China and overseas,” Cao continued. “Offshore duty free is just one part of the acts that the government is doing to enhance Hainan. This is one part of the strategy to show that China is more open to the outside.”
5. An optimised retail offer in China
The upgraded quality of China’s retail offer has made domestic spend more attractive for shopper, Sun told the webinar. She highlighted the integration of F&B and experience into the retail ecosystem as an example of bringing brand DNA to life, rather than just focusing on transactions.
“Brands are also working very hard with us to create exclusive design and differentiated stores in our mall,” she explained.
“Brands also make a lot of effort to create interactive [experiences].”
Cao seconded her focus on an improved retail experience in China, but also highlighted the increased power of local brands and their appeal for shoppers as a benefit to the domestic travel retail sector.
“More travellers and local customers are looking to local brands,” he said. “They have the emotional bond.”
More travellers and local customers are looking to local brands…They have the emotional bond
6. Cultivating VIP experiences
CDFG currently boasts more than 26 million members in its VIP programme and Sun revealed the company is crafting VIP experiences to “provide a place to have more engagement with our members.”
Brands are offering café, tea and tasting bars to take their offer beyond products and the duty-free malls are hosting other marketing activities.
“I think the VIP spaces…it goes back to the same strategy and vision in Hainan,” Sun explained. “We want to build not only a duty-free shopping mall, we want to build a destination.
“The VIP launches for sure are going to provide an upgraded customer journey and we receive very positive feedback from our business partners. They want to use the space to hold activities and I think these activities will help to increase average transaction value.”
7. China’s domestic shopping trends
The focus from the Chinese Government on enhancing luxury spend in the country comes as retailers report a 12.2% increase in consumption compared to last year. Furthermore, Sun pointed out, China is set to account for 38-40% of global luxury market by 2030, with the number of middle and high income people in China set to double in 2030.
“We expect that Chinese luxury market will remain…even though shoppers can go abroad,” Sun said.
“We have seen great changes in the Chinese retail market in recent years and it impacts the expectations of Chinese consumers.”
Before the pandemic, Chinese consumers believed they could buy more exclusive and exciting products abroad, but that is not the case today. “CDFG has received great support from brands to release exclusive products,” Sun explained.
This is furthered by an increase in national pride which has seen more young shoppers choose to buy Chinese brands.
8. Generational shifts in Chinese shoppers
A focus on luxury and sustainability endures among Chinese shoppers, the panellists agreed. But generational shifts are also making their mark.
Parulis-Cook underlined the focus on individual travel among younger consumers, which takes them farther afield than the Asian destinations which traditionally dominate, to visit countries such as Spain, France and the USA.
“I think the Chinese travel market has been evolving over the past few decades and it has continued to do so over the past three years,” she explained. “
“Although things like dining and experiencing local culture might become more important to Chinese travellers, I think shopping is still a big part of the Chinese travel experience.”
9. Partnership & building for the future
With all the opportunities opening up in the market, both in China and abroad, Sun believes there is a real opportunity for collaboration to make the most of the situation.
“There are a lot of tasks and work to be done in the future,” she concluded. “We believe that under such a situation the mutual understanding and support from all the parties in the industry are important.”
There are a lot of tasks and work to be done in the future…the mutual understanding and support from all the parties in the industry are important