China Outbound Leisure Travel Unlikely to Make Full Recovery Before Mid-2023

Hainan competing with Hong Kong as the Chinese shopping paradise 

Shanghai, April 29, 2021 – While Chinese travelers are eager, their outbound leisure travel will not be back to pre-COVID levels until the second quarter of 2023 at best, according to a new study from consulting firm Oliver Wyman. Quarantine measures are the key roadblock for most travelers, which continues to make Hainan Island, China’s rising duty-free shopping hub, one of the most popular leisure destinations.

“Chinese consumers are looking forward to outbound travel, but border re-openings alone are not enough to convince them to travel again,” said Jacques Penhirin, a partner at Oliver Wyman. “What stands in the way are quarantine requirements. No Chinese leisure travelers are interested in international travel with the current 14 to 28 days quarantine requirements. Having no quarantine is critical for travelers, which is only expected to happen when China and other major countries achieve herd immunity.”

The study is based on Oliver Wyman’s Pandemic Navigator, an AI enabled tool, and consumer sentiment survey conducted in late March 2021. According to the survey, Hong Kong remains the most desired destination on travelers’ wish lists, with 41 percent of the respondents seeing the city as one of their top destinations once the border reopens.

“Hong Kong is a key destination to visit for Chinese travelers, given the city is expected to open its borders without quarantine requirements on both sides much earlier than the rest of the world,” said Imke Wouters, a partner at Oliver Wyman. “Our study predicts some Southeast Asian countries are going to see a full recovery as early as the beginning of 2023. That gives Hong Kong a short window of opportunity to re-establish its tourism and attract tourists from the mainland, specifically from the fourth quarter of 2021 to the end of 2022.”

Hong Kong’s regional status as a shopping paradise is however being challenged by Hainan, with 40 percent of the survey respondents choosing the island as their top destination even when international travel is available.

Total visitor arrivals in Hainan have already returned to 2019 levels since August 2020, as a result of international travel restrictions and the favorable offshore duty-free policies. The penetration of Hainan’s duty-free market still has huge room to grow. With lower travel expenses and better shopping experiences, 70 percent of the surveyed consumers considered Hainan as their long-term shopping mecca, even when international travel can resume.

“Hainan’s opportunity looks sizeable, but its steep discounts pose risks on pricing and profitability for brands,” said Wouters. “The brands and retailers operating in Hainan need to strike a balance across sales maximization, margin erosion, and more importantly impacts on China’s price perception due to Hainan’s low prices.”

Short-haul travel is preferred among Chinese travelers, while long-haul destinations such as Europe and the US are unlikely to see a full recovery until mid-2023 earliest, according to the study. Early outbound travelers from China tend to be the younger generation and big spenders who are eager to shop. Group tours are losing their attraction as social distancing is one of the concerns of travelers. Nearly 70 percent of the survey respondents said they would prefer making their own travel plans rather than joining group tours, while only 40 percent of the respondents were willing to do so pre-COVID.

“We estimate approximately US$200 billion consumer spend trapped in China to be readily unleashed once international travel resumes,” said Penhirin. “Asia is likely to see Chinese tourists first when borders reopen, but the numbers expected will still be far from a full recovery. We anticipate the vaccine rollout to be accelerated to expedite the pace of tourism worldwide.”

About the survey
Oliver Wyman surveyed 2,000 travelers in the Chinese mainland to understand their attitudes, considerations, and preferences towards outbound travel when borders reopen. The online questionnaire was fielded in late March 2021. Aged 18 or above, all respondents had at least one outbound leisure travel experience in 2019. Of the 2,000 respondents, 49 percent were male, and 51 percent were female; 85 percent of the respondents have a monthly income between RMB10,000 and RMB50,000.

About Oliver Wyman
Oliver Wyman is a global leader in management consulting. With offices in 60 cities across 29 countries, Oliver Wyman combines deep industry knowledge with specialized expertise in strategy, operations, risk management, and organization transformation. The firm has more than 5,000 professionals around the world who work with clients to optimize their business, improve their operations and risk profile, and accelerate their organizational performance to seize the most attractive opportunities. Oliver Wyman is a business of Marsh McLennan [NYSE: MMC]. For more information, visit Follow Oliver Wyman on Twitter @OliverWyman.

About Pandemic Navigator
The Oliver Wyman COVID-19 Pandemic Navigator forecasts the number of new, active and cumulative coronavirus cases as well as deaths across 90+ countries and sub-regions, including all 50 U.S. states, 3000+ counties and MSAs. The tool is part of a fully integrated framework that connects pandemic forecasts and scenarios to economic and business outcomes. Our best-in-class analytics are currently helping clients across industries and continents—including governments, financial services firms, central banks, regulators, Fortune 500 companies, hospitals, airlines, hotels, and more—address their toughest pandemic challenges.

Pandemic Navigator forecasts are being cited by the Reich Lab COVID-19 Forecast Hub and the US Centers for Disease Control and Prevention (CDC) alongside models from other leading institutions. It has been awarded one of the top private models by the CDC.