// . //  Insights //  Chinese Travel Slowdown Impacts Luxury Trends

Following our research on Chinese travelers back in June, where we surveyed 3,495 affluent Chinese consumers, we did another pulse check in September with 3,858 such consumers to assess how the current economic uncertainty has impacted their appetite for international leisure travel and spending on luxury products. In both instances, we considered affluent Chinese consumers to be those with a minimal monthly household income of ¥30,000, a demographic that represented 5% of China’s total population in 2022. 

Economic uncertainty is causing a shift to domestic and short-haul travel

Our research shows that many experienced international travelers from Mainland China – namely, those who had already traveled internationally before the COVID-19 pandemic – are delaying their travel plans due to economic uncertainty. The proportion of these travelers who planned to travel internationally in 2023 dropped from 62% in June to 54% in September. Moreover, the proportion who want to wait at least two years before they travel internationally again rose from only 30% in June to nearly 40% in September.

Exhibit 1: Expected international travel timeline for experienced international travelers
% of respondents
Source: Oliver Wyman’s Chinese traveler survey (June and September 2023), Oliver Wyman analysis

However, there is still a strong desire among many affluent Chinese consumers to travel domestically and explore short-haul destinations. In fact, the willingness to travel domestically rose from June to September. Domestic travel was booming during the October National Day Holiday, surpassing 2019 levels for both number of tourists (up 6%) and average spending (up 10%). At the same time, of those traveling internationally this year, many have turned to short-haul options as destinations, such as Hong Kong SAR, Macau SAR, and Singapore, while fewer plan to go to Western Europe or North America. The switch to short-haul destinations that are easier to access should also allow them to travel more frequently, with the average expected trips per traveler increasing from 1.9 in June to 2.2 in September.

Exhibit 2: Travel destinations visited or planned to visit for 2023
% of respondents
Source: Oliver Wyman’s Chinese traveler survey (June and September 2023), Oliver Wyman analysis

Casual luxury shoppers are more cautious, but regulars continue to spend, especially offshore

We estimate there are about 10 million Chinese luxury shoppers, and they will spend about US$60 billion on personal luxury products in 2023. The majority of this spending, about 80%, will come from core luxury shoppers, who spend at least US$5,000 on luxury products per year. Despite the current economic uncertainty, China’s core luxury shoppers continue to indulge in luxury shopping experiences. However, casual luxury shoppers have become more cautious “as the economic outlook is concerning” and are cutting back on their spending. 

Exhibit 3: Expected luxury spending in 2023 versus 2022
% of respondents
Source: Oliver Wyman’s Chinese traveler survey (September 2023), Oliver Wyman analysis

Part of the luxury spending of Chinese shoppers will move overseas now they are traveling internationally again. Shopping is still an important part of their overseas travel experience, and a large part of their shopping budget is allocated to luxury products. While half of the core luxury shoppers who travel overseas in 2023 expect to spend less than 25% of their total luxury shopping budget overseas, the other half expects this proportion to be higher. With the number of international Chinese travelers expected to return to 2019 levels by 2025, we expect the share of overseas luxury spending to increase in the coming years. However, we still believe that Chinese luxury shoppers will continue to make most of their purchases domestically, given the strong offerings onshore and their preference to buy whenever they want it.

Hainan to capture even greater domestic luxury spending share in future

The number of travelers to Hainan remains strong, even after the reopening of borders, with overnight visitor numbers so far this year already 22% above 2021. Hainan is the top domestic travel destination, particularly for luxury shoppers. About 47% of the core luxury shoppers surveyed see Hainan as their top domestic destination, compared to 33% of the respondents as a whole, and only 22% of the non-luxury shoppers. We also see a higher interest in Hainan as a travel destination among families with children.

Exhibit 4: Top 10 domestic destinations in China in the eyes of different shopper groups
% of respondents
Source: Source: Oliver Wyman’s Chinese traveler survey (September 2023), Oliver Wyman analysis

Compared to Hong Kong and Macau, Hainan is a clear favorite among Chinese travelers due to its scenery, hotels, convenient location, and attractive shopping prices. Chinese travelers only prefer Hong Kong and Macau for their shopping experiences and entertainment offerings, respectively.

Exhibit 5: Comparison of travel experience among Hainan, Hong Kong SAR, and Macau SAR
% of core luxury shoppers who visited these destinations
Source: Source: Oliver Wyman’s Chinese traveler survey (September 2023), Oliver Wyman analysis

Hainan is a preferred shopping destination for many due to its lower travel costs and competitive pricing. However, for those who do not see Hainan as their top destination today, the main reason is the limited availability of top brands and product selection. As Hainan becomes fully duty-free, we expect to see an increase in luxury shoppers choosing to shop there. The opening of premium malls, such as MixC, Taikoo, and DFS, will enrich brand offerings, as they will provide high-end luxury brands the opportunity to operate their own stores in a more premium environment.

Looking ahead, the Chinese luxury shopper will remain a significant driver of growth in the global luxury market, particularly in the domestic space. However, overseas luxury spending by Chinese consumers is not expected to return to pre-COVID levels within the next five years. To capture a larger share of the smaller pie of overseas spending, it is important to invest in creating a unique shopping experience at key tourist stores. Hainan, in particular, is poised for growth in Chinese luxury spending. It is essential to prepare for Hainan’s full island duty-free status by establishing the right store presence, implementing the right pricing strategy, ensuring effective governance between travel retail and domestic operations, and implementing a connected loyalty system.