Capitalising on Chinese tourism
Whilst the rate of growth of inbound travel numbers is subject to the usual ebbs and flows one may expect, Chinese tourism in Australia is proving to be an exciting secular growth story that can be capitalised on. But rather than simply invest in the tourism sector and hope that this broad trend brings success, a better understanding of the key drivers of this trend is far more likely to produce positive results.
Most are aware that China has a growing middle-class population that are reaching a level of wealth where overseas travel is possible and common. The businesses that take the time to appreciate the desires and demands of these potential travellers will stand the greatest chance of success.
Chinese tourists have a reputation for travelling on stringently organised larger tour groups. This type of travelling is still likely to be very popular in the future, particularly with those holidaying abroad for the very first time as well as with the elderly. However with technological advancements, younger generations are more likely to research their holidays and complete various bookings independently. Therefore companies that succeed in catering to the demands of each demographic can offer huge rewards for investors. No doubt there will be some great opportunities in this space that haven’t yet been thought of. It wasn’t long ago that home-sharing and ride-sharing apps first gained traction, and now cater to the needs of millions of travellers worldwide.
The Chinese are also usually confined more to certain key holiday periods in the year where they prioritise travel. For this reason, destinations that improve the convenience of access for the Chinese will offer better potential. It is worth regularly monitoring the news to see which global cities may be opening new airports or catering for more direct routes to and from the major airports in China, to make their cities more accessible for the Chinese. Likewise, one should keep any eye out for countries that are relaxing some of their visa rules with a goal to attract tourists from China.
In 2015, China spent around $10 billion on outbound medical tourism. This figure is set to continue to rise as factors including China’s growing number of High Net Worth Individuals (HNWIs), its increasing ageing population and growing emphasis on health and fitness. Combined with low government health spending in China, these factors are compelling Chinese to invest in healthcare internationally already, making medical tourism another sub-trend that has the potential for rapid growth from Chinese demand.
Infrastructure spend could be a flow-on effect from a healthy tourism sector whereby the weight of numbers may persuade governments to boost their spending on infrastructure to ensure they don’t fall behind as an attractive tourist destination. Last year the growth in China’s outbound tourism numbers did see some signs of slowing, which may be more of a trend in the short-term. During this time, we have seen some elevated levels of travel warnings in some counties, and the weakening of the Chinese Yuan may have curbed some demand. This may act as merely a blip in the longer-term secular growth story. For an investor examining how to capitalise on this longer-term trend, a slight slowdown in growth could lead to negative sentiment that offers more attractive buying opportunities.
WHERE DOES AUSTRALIA FIT IN?
Australia has already benefited significantly from this trend. There are certainly some boxes ticked for the Chinese tourist in terms of air quality, natural spacious beauty, good food and shopping, great beaches and interesting wildlife. Tourism Australia has also recently launched the China Australia Year of Tourism 2017. Businesses will be able to participate by co-branding their product with the Year of Tourism logo. There will be several events held during the year as part of the program which aims to provide a variety of benefits including bringing businesses from China and Australia together and developing partnerships to co-operate so both can benefit from the growing Chinese outbound tourism sector.