Regional tourism is grappling with the absence of the prolific travellers and big spenders – the Chinese tourists. Cambodia, which has welcomed over two million Chinese tourists before Covid-19, is reeling from the economic loss despite being the first to fully open last November
‘To put it simply, tourism in Southeast Asia will not see a full recovery until Chinese travellers come back,” said Hannah Pearson, a Southeast Asia travel and tourism industry analyst.
Truth be told, it is not just Southeast Asian tourism but the world in general, given the fact that it is the largest tourism source market since 2012.
But the protracted travel restrictions relating to its zero-Covid policy, multiple pre-and-post departure tests and quarantine imposed on inbound travellers (which eased slightly this week) have discouraged its citizens from venturing abroad.
“The whole world is eagerly waiting for Chinese visitors to reappear on the global travel market.
“Unfortunately, while the rest of the world sees a strong rebound of tourism, China is still struggling with the Omicron virus,” said Prof Dr Wolfgang Georg Arlt, founder and CEO of China Outbound Tourism Research Institute (COTRI).
In addition, political development is currently concentrated on the preparation of the Communist Party of China’s 20th national congress.
“Therefore, if we are lucky, China’s outbound travel might start again in October, but it will probably be in the beginning of 2023,” Georg Arlt said.
In 2018, the UN World Tourism Organisation (UNWTO) said outbound trips from China climbed 15 per cent year-on-year to around 150 million (4.5 million in 2000), with Chinese tourists spending over $277 billion in their travels.
Broken down, 43 per cent of Chinese tourists surveyed by the organisation found that they would spend between $725 and $1,450 per person in one trip, or an average of $970. Of that, a quarter of the total expenses goes to shopping.
In comparison, non-Chinese tourists spent an average of $486 per person in one trip, measurement and data analytics firm Nielsen Holdings Inc said in 2017.
While total Chinese tourists expenditure retreated slightly to $255 billion in 2019, the sum represented nearly 20 per cent of total international tourism spending.
Economists Bernard Aw and Eve Barre, who noted that the global travel industry is “greatly dependent” on China, said in ASEAN, 23 per cent of tourist arrivals in 2019 consisted of Chinese nationals.
This is particularly the case for Cambodia and Vietnam where 36 per cent and 32 per cent of total international arrivals, respectively, were from China, they said.
The absence of Chinese tourists inevitably translates into smaller tourism revenue in ASEAN countries due to the “significant representation” to gross domestic product (GDP) and employment. It will also have implications on their external position.
“Smaller tourism revenue negatively weighs on the current account as it translates to a smaller exports of services. This adds downward pressure on ASEAN countries’ currencies, already affected by the US Federal Reserve monetary tightening,” Aw and Barre said.
‘Tricky times’
In Cambodia, where China is its single largest source market, the void left by its nationals since the beginning of the pandemic is palpable.
Back in 2018, Cambodia stood at the eighth spot out of 10 top global destinations for Chinese travellers, UNWTO said.
Out of 6.6 million inbound tourists in Cambodia in 2019, China represented 36 per cent with 2.4 million visitors, followed by Vietnam (908,803 visitors) and Thailand (466,493), an Asian Development Bank (ADB) report showed.
At the time, the tourism service share in total exports amounted to 25 per cent, before falling six per cent in 2020.
“The situation is not looking good for the businesses tailored to meet the needs of Chinese tourists, such as Chinese restaurants, hotels and big souvenir stores,” said Chhay Sivlin, president of Cambodia Association of Travel Agents.
She explained that although Chinese tourists go for budgeted tour packages, they usually spend more on souvenirs and optional tours which are big contributors to the income of local merchants.
Even the length of stay, averaging four days to a week, which are common short-haul plans among Chinese holiday makers in Cambodia have spurred the accommodation segment to meet their needs.
But the lack of Chinese tourists are causing these businesses to either shut down or struggle to stay afloat.
“There are building and hotel constructions that have been halted due to this situation. It is not a good image for the country to have many ghost buildings,” Sivlin added.
While there are some positive signs coming out of Shanghai, thanks to dwindling community spread and lower incubation period for Omicron, with plans to gradually lift restrictions beginning mid-June, analysts are saying the outlook remains bleak for outbound travel.
Aw and Barre, of Paris-listed credit insurer Compagnie Française d’Assurance pour le Commerce Extérieur (Coface), expressed that China is tightening its outbound travel restrictions instead.
“Previously, there were restrictions in group and package tourism, even though non-essential outbound travel was strongly discouraged.
“On May 12, the National Immigration Authority announced it would strictly limit unnecessary outbound travel by its citizens,” they told The Post.
Indeed, these are “tricky times” for travel recovery in the region, Gary Bowerman, director of Check-in Asia, a tourism intelligence and strategic marketing firm, pondered in a recent LinkedIn post on the absence of the Chinese outbound market.
“Without China, Asia Pacific’s entire travel economy will shrink significantly,” he reportedly said in an article published by gaming portal AG Brief last December.
Though the Chinese play an important role in tourism and business activities, strict travel rules and controls are making it difficult to plan flights.
Last year, 23,837 mainland Chinese nationals arrived in Cambodia, Ministry of Tourism data showed. Between January and March this year, 9,753 Chinese visitors were recorded, which was 59 per cent lower than the corresponding period last year.
The situation is apparently complex as airlines weigh the cost of flying against the load factor when it comes to the China-Cambodia route, said State Secretariat of Civil Aviation spokesman Sinn Chansereyvutha.
There have been situations where flights have been cancelled and money refunded to passengers if the load does not justify the cost.
“The Chinese market is unpredictable and it is difficult to keep track of the flights. There might be flights this week but the following week, nothing. It depends on the demand or is reviewed on a case-by-case basis,” he said.
At the moment, Air China, Shenzhen Airlines, Xiamen Airlines and China Southern Airlines, Cambodia Angkor Air, Lanmei Airlines and Cambodia Airways ply the routes between both nations following the submission of flight permits if there is demand.
“They take turns to fly. So, one week it would be a Chinese airline, the following week a Cambodian airline. However, the ticket fare for one way is between $3,500 and $5,000,” Chansereyvutha said, indicating a 10 to 15-fold increase in ticket prices since pre-Covid days.
In 2019, Cambodia recorded flights to more than 30 Chinese cities, although this was also down to the fact that both nations share a strong trade and investment relationship.
China, which remains Cambodia’s largest foreign investor and non-institutional lender, has poured billions into infrastructure development, real estate, banking and service sectors in the last six years.
‘Do a better job’
Notwithstanding Chinese tourists, international arrivals have increased in Cambodia since it reopened in November – the first in Southeast Asia to remove pre-departure Covid-19 tests and quarantine for vaccinated travellers.
Ministry of Tourism data showed that arrivals more than doubled to 159,546 in the first quarter of 2022 from the last quarter of 2021, after cratering in 2020 and 2021.
Only a trickle was logged at the Phnom Penh International Airport as the nation’s two other airports, Siem Reap and Sihanoukville, remained closed for long periods.
Year-on-year comparison in this case would be pointless, given the low base effect in the last two years.
But, in 2019 – what would be Cambodia’s best year for tourism before Covid-19 – the sector collected $5 billion in tourism receipts, representing an average of $721 spent per arrival, the UNWTO said, or about $95 per person a day, according to ADB.
With some 630,000 directly employed, ADB added that the sector contributed 12.1 per cent to gross domestic product (GDP) that year. Last year, it plunged to 1.3 per cent to GDP, from three per cent in 2020.
Two thirds of international tourist arrivals in 2022 are from ASEAN, with Vietnamese and Thais leading the pack, ahead of others in the region, followed by Europeans (19,604) and the Americas (10,732).
“If you look at the world, they are worried. [There are] some barriers but in Cambodia, we are optimistic … advanced,” said Din Somethearith, president of Cambodia Hotels Association.
Yet, Cambodia is not able to compete with its neighbours, Thailand and Vietnam, because it does not possess adequate air capacity, he added.
Owing to the lapses of landing and take-off slots at airports abroad in the course of Covid-19, there are comparatively fewer flights operated by regional airlines than before. It is the same with its flag carrier, 51 per cent state-owned Cambodia Angkor Air, which only covers regional destinations.
Apart from Chinese routes, Cambodia has 26 daily flights to Singapore, 16 to Bangkok, 13 to Ho Chi Minh, nine to Seoul, five to Kuala Lumpur, four to Taipei, two to Manila and one each to Hong Kong and Hanoi.
“We don’t have big airplanes or air carriers to go to the US and Europe. So, we still depend very much on Malaysia, Singapore and Thailand because those countries have big carriers that have big access to big markets around the world,” Somethearith said.
They made a “smart move” and reopened, which enabled Cambodia to rely on them for air capacity but “many other markets are still very careful” and have yet to open up routes to Southeast Asia.
“So, we [continue to] struggle. It is not very easy because the world is now globalised, and everyone is connected to each other,” Somethearith said.
Khieu Thy, president of Khmer Angkor Tour Guide Association, agreed, though he urged the government to work on bringing direct flights from the West, so it need not depend entirely on its neighbours for tourists and flight connectivity.
“That way we can do a better job. Otherwise, we are not going to have as many tourists as Vietnam and Thailand,” Khieu said.
However, he is thankful that things are looking up this year as there are direct flights to Siem Reap from Singapore, Malaysia and Thailand.
“At least we have 200 tourists per day visiting Angkor Wat compared to 2021 when we did nothing. There were no foreign tourists [arrivals],” he told The Post.
Some 10 to 15 tour guides in Siem Reap have returned to work in the Angkor Archaeological Complex but the number is dismal, he said, given that there are about 5,000 guides, including 200 of his members, operating in the province.
A clear disaster
Going forward, reviews are mixed as analysts mull over the probability of a surge in Chinese outbound travels, as restrictions gradually ease amid China’s slowing economy and its austere capital controls still in place.
They, however, agree that Chinese tourist numbers will stay subdued as headwinds such as fuel surcharges, rising inflation and the risk of a resurgence of Covid-19 play out in the background.
For now, China’s zero Covid policy has compromised some travel behaviour, as quarantine and other related pandemic measures act as “significant deterrence” towards travelling for Chinese citizens.
“In 2021, only 25 million outbound tourists departed from China, lower than one-fifth of the over 154 million in 2019,” Aw and Barre pointed out.
Will a slow Chinese economy affect travel? Georg Arlt of COTRI does not think so.
“The 10 per cent of the Chinese population which holds a passport and has enough money to travel internationally is still able to spend a few thousand dollars on an international trip,” he said.
Also, there are many trips not only taken for leisure, but for business, health, education or family visits.
“Therefore, there is a high level of pent-up demand waiting to start a new wave of Chinese outbound travel,” said Georg Arlt, whose institute helps companies and destinations outside China prepare for the Chinese outbound travel market.
In terms of long-distance destinations, he opined that the loss of Chinese visitors is “regrettable”, but as Europeans, North Americans and Australians are “eager to travel” now, tourism in those sectors is booming.
Not so much for ASEAN and Greater China where the absence of Chinese visitors is a “much greater problem”.
“[For instance] Thailand cannot compensate for 11 million [Chinese] arrivals in 2019 and Vietnam cannot compensate for six million arrivals. Hong Kong went from 14.5 million arrivals from China in the first quarter of 2019 to less than 10,000 arrivals from China in the first quarter of 2022 … that is clearly a disaster,” Georg Arlt shared.
Chinese versus Indians
Hannah Pearson, founder of tourism consultancy and research firm Pear Anderson, concurred with him, adding that until the Chinese market returns, the region would see subdued tourism potential. “This, despite efforts to supplant the key inbound market with other countries.”
Hence, the reason why efforts to woo the Indian market might be a tad challenging for the region. In Cambodia, talks of an agreement with the Indian government to fly her citizens to Siem Reap and Phnom Penh have been on the table for years with some certainty achieved last year.
Pearson acknowledged that the Indian market is a robust one, evidenced by the fact that even in 2021, it was the top source market for the Maldives and Dubai, despite the pandemic.
Therefore, she stressed, it is a good sign for Cambodia – that Indian outbound travellers are choosing to travel, and if they did choose to visit Cambodia in greater numbers, then that could “of course help to boost arrival numbers and revenue”.
However, the drawback to the strategy of hoping that the Indian market can replace the Chinese market’s gap is the competition, Pearson warned.
“Many Southeast Asian countries are also intensifying their promotion to the Indian market, such as Tourism Malaysia, which has recently held a roadshow there, Thailand is targeting 500,000 Indian travellers, and even Vietjet has stepped up its connectivity to India from Vietnam,” she said.
Admittedly, all of these are expected to take a while to materialise for Cambodia, as is the case with the return of Chinese tourists in the travel sector.
“I hope the Chinese government will reconsider [relieving travel restrictions],” Somethearith of CHA told The Post last week. “I don’t know what is the reason behind this policy, especially when they have produced a lot of vaccines and even donated them to us and many other countries.”
However, assuming Cambodia’s source countries fully open up, he believes that “we can secure something”. While it would not be a bright future, it would be sufficient to survive.
“Now [the hotel sector] is seeing a recovery of 20 per cent and it will keep increasing. There are challenges but the future prospect is nicer. Not as nice as pre-Covid days but better than the days of the pandemic,” he said.