China’s Severed Air Links Drain $130 Billion From Global Tourism
A familiar visitor has retreated from the world’s skyways and tourist meccas. Chinese travelers, once the biggest spenders on overseas trips, have been staying close to home since the country reopened its borders 12 months ago from the Covid-19 pandemic.
Outbound airline capacity from China stood at about 60% of 2019 levels during the fourth quarter, based on figures from aviation analytics firm Cirium. That’s a much slower recovery than in the US or UK — something that has disappointed airline executives, tourism officials and luxury store owners alike.
Chinese travelers made 170 million trips outside of its borders in 2019, according to the China Outbound Tourism Research Institute. The $248 billion they lavished on items from plane tickets to hotel rooms and designer brands made up 14% of the globe’s foreign-travel spending, based on World Travel and Tourism Council data.
Top 5 Sources of Spending on Outbound Travel & Tourism
Annual spending ($ billions)
Source: World Travel and Tourism Council
The Chinese pullback has erased $129 billion from global tourism, a loss being felt from Taipei noodle shops to Paris boutiques. China’s network of international airline routes has retracted by 43%, according to Cirium. Forty-five foreign destinations are no longer served by direct flights at all.
Bloomberg analyzed 18 million global flights scheduled for the fourth quarters of 2019 and 2023 to visualize the decline in China’s aviation links, using data provided by Cirium.
Many of the reasons for the drop-off are by now well established: lethargic economic growth has spurred Chinese consumers to choose less-costly domestic vacations. Political friction has stalled the rebuilding of some tourism ties. Conflicts from Ukraine to Gaza have made flying long-distance more complicated, while external destinations look less appealing to a safety-minded Chinese public.
But the policy imperatives of President Xi Jinping are also at work. With the economy struggling, Chinese officials have prioritized local tourism over distant trips – adding duty-free shopping on the island of Hainan, for example, and opening new concert venues. The government has also pushed travel to a handful of spots like Saudi Arabia, a key partner in China’s One Belt One Road initiative.
“Geopolitics have played a role in influencing which international destinations Chinese tourists go to,” said Duncan Wrigley, chief China economist at consultancy Pantheon Macroeconomics – even if the slow economic recovery is the main factor behind the weak rebound of foreign travel.
There are 70% fewer routes to Taiwan than before the pandemic, with Chinese cities like Tianjin and Kunming no longer served. Differences over the island’s status have raised tensions – intensified by Taiwan’s presidential election this month – and made it a potential flash point in China-US relations.
The political friction has slowed Taiwan’s effort to resume two-way group tours with mainland China. As a result, there is still no reciprocal agreement ahead of the travel-heavy Spring Festival.
Despite lengthy historical ties, a shared border and a growing aviation sector in both countries, there are no longer any direct passenger flights between the world’s two most-populous nations. India’s ascent as an economic power has posed a threat to China’s influence, and a border dispute has dragged on.
Rather than increase ties, India has been trying to reduce its reliance on Chinese imports such as solar panels. In December, China extended a temporary relaxation of visa rules for Indian visitors, but those adjustments are set to expire at year-end.
The discord between the two powers has had a knock-on effect in Nepal, which sits between them and has seen its tourism sector damaged by a tug-of-war over a Chinese-financed airport in Pokhara, Nepal’s second-largest city.
US and Canada
External factors have also hampered China’s contact with the outside world. Carriers in the US, Canada and the European Union, for example, can no longer traverse Russia — making flights with Asia longer, costlier and less attractive.
Many foreign airlines that flew to China before the pandemic have reallocated airplanes to other routes, said Julia Simpson, CEO of WTTC, the travel-industry group. “This has implications for Chinese tourists and poses challenges for airlines, especially in smaller cities,” she said.
Prior to the pandemic, 17 Chinese cities were connected to 20 destinations in the US and Canada through direct flights, according to Cirium data. The links have been cut in half on both sides, with Chicago, Montreal and Saipan no longer served. China’s aviation regulator said this month it will push for a “significant increase” in direct flights with the US.
In Europe, the trend is similar: More than a quarter of European cities that had nonstop flights to China now lack direct access, including Prague, Oslo and Nice. The number of Chinese cities with air links to Europe has fallen by a similar proportion.
Sarah Sun, who operates a duty-free shop near the Palace of Versailles, said many such stores in Paris are still losing money after “blowout” spending expected from Chinese tourists failed to materialize.
“Chinese are really unwilling to spend money in case another shock takes place,” Sun said. “For those who can still afford a trip to Europe, their pockets have shrunk. They’ll only open their wallets when a product has a very significant price difference or is truly unavailable in China.”
Chinese travelers have, however, flocked back to the Middle East, an important plank in the One Belt One Road initiative. Economic ties to the region, on the rise prior to the pandemic, have resumed swiftly.
The Middle East and Africa landed about 22% of Chinese construction and investment deals for these infrastructure-led projects in the first half of 2023, according to research conducted by Christoph Nedopil, director of Griffith Asia Institute.
Chinese state-owned media is helping to stoke interest in the area.
The popular reality show “Divas Hit the Road” devoted its current season to the ancient Silk Road trade route — sending well-known Chinese stars into Saudi homes and showcasing a high-speed railway built by a Chinese company.
Change in Airline Seat Capacity With China From 2019 Levels
An inward turn among Chinese consumers that took hold during the pandemic has also siphoned interest from foreign travel. Transport officials predict a record 9 billion domestic trips during the Spring Festival travel period kicking off later this month.
While the shift is partly down to tighter pocketbooks, Chinese consumers developed a greater awareness of domestic destinations while the border was closed, according to Joanna Lu, Asia head of consultancy at Cirium Ascend.
“This period allowed the domestic market to mature, and travelers became more sophisticated in their pursuits,” Lu said. “We must not expect the same travel pattern as before.”
Pre-pandemic Overseas Spending Won't Recover Soon
Chinese luxury spending (¥ billions)
Source: Oliver Wyman
Some 22% of experienced international travelers plan to hold off from resuming trips outside of China until 2027 or later, a September survey by Oliver Wyman found. That’s triple the number who gave the same answer three months earlier. The consulting firm doesn’t expect a full restoration of Chinese outbound travel until 2025 — a view echoed by analysts at Bloomberg Intelligence and Morgan Stanley.
Chinese travelers are increasingly chasing adventures such as island hopping, rather than shopping attractions like the Champs-Élysées in Paris, according to Shannon Liu, senior travel and leisure analyst at consultancy Mintel Group.
Among the beneficiaries: Coastal cities like Sanya, where surfing has gained popularity, and the western province of Tibet, where order volumes for plane tickets and hotel reservations vaulted 17-fold during the National Day holiday in October from a year earlier, according to Trip.com.
Growth in seat volume
Ultimately, analysts expect China to retake its crown as the largest source market for foreign travel.
Chinese authorities have taken some measures to try to stimulate external trips and attract foreign tourists. A ban on outbound group tours to many popular destinations, for example, was lifted in August, though it hasn’t had a major impact.
Chinese visitors can also travel visa-free or with no-cost visas to a growing list of countries like Malaysia, Thailand and South Korea, while China has waived visas for inbound arrivals from France, Germany, Italy and Spain, among others. In December, China launched a three-year plan to promote inbound tourism while also improving services for domestic travelers.
By 2025, the WTTC predicts China’s outbound travel spending to rise to 21% above 2019 levels – a greater increase than in the US, the current leader, as well as for Germany, the UK or France. By 2033, it’s forecast to more than double from 2019 levels, vastly outpacing those markets.
Outbound travel agencies are now rejigging their itineraries to meet the desire for richer experiences, said Mintel Group’s Liu.
And as Chinese spenders reshape their preferences, the travel industry is moving on as well.
Sun, the duty-free shop owner in France, expects business will be brighter this year as Paris hosts the Summer Olympics. Big spenders can also come from other places, like South Korea, Vietnam, Indonesia, Cambodia and Thailand, she said.
“The industry has learned this lesson,” she said. “They can survive without relying on Chinese tourists.”