Trade war puts Chinese tourists off US
Many opt for ‘more welcoming’ nations in Europe
published : 15 May 2019 at 19:03
writer: South China Morning Post
Chinese tourists are shunning the United States amid the trade war and opting for more welcoming destinations in Europe, according to Jane Sun, chief executive officer of Asia’s largest online travel platform Ctrip.
When the China-US trade war started last year, there was a slowdown in Chinese tourists travelling to the US during China’s October golden week holiday in the fourth quarter, which eased when the two countries made progress in their trade talks, Sun said in an interview on Friday.
The US slid to tenth spot in the list of China’s top overseas destinations in the week-long holiday in 2018 from fifth the previous year, according to Ctrip. In the recently-concluded Labour Day holiday in early May, the US ranked as the ninth most popular travel destination for Chinese tourists, down from fifth spot last year. Thailand and Japan remained the top choices for holidaymakers in the country.
Sun is clear about the reason why — Chinese tourists are taking their money to European countries such as Italy and the UK because they feel welcomed.
“People like to travel to countries that welcome them,” she said. “When Chinese consumers have the buying power, if they are not going to the US then they are going to the UK, Europe, Australia or New Zealand … they’ll find an alternative. The US really needs to be very careful if it wants to attract affluent travellers.”
China is the world’s largest outbound travel market in terms of numbers and expenditures, according to a report from McKinsey and Company in September, with Chinese tourists expected to make 160 million overseas trips by 2020 and spend over US$315 billion next year. Ctrip has broadened its reach in recent years to cater to this powerful force, which has grown by a double-digit percentage number each year from 2002 to 2013, according to the World Tourism Organisation.
One of the biggest recent beneficiaries of the Chinese tourism boom has been Croatia, which saw a more than fourfold surge in visitors during the May holiday this year as fans of the hugely popular fantasy TV show Game of Thrones flocked to the show’s filming location, according to latest statistics from Ctrip. Malta and Iceland, which are also featured in the show, saw the number of Chinese tourists rise 300% and 140% respectively over the Labour Day holiday.
“Based on our observation, countries which have easier visa applications and direct flights, and have demonstrated hospitality to travellers, will win,” said Sun. “Travel itself is very international … we designed our network to cover places that Chinese people are going to travel to.”
Revenue generated from international business made up 30 to 35% of Ctrip’s total revenue in 2018, according to the Shanghai-based company’s annual report. The company, which has a market value of US$22 billion and is increasingly applying AI technology to personalise more trips, will continue to expand globally by serving Chinese outbound tourists, as well as bringing non-Chinese travellers onto Ctrip’s platforms and products, Sun said.
Ctrip has targeted the international travel market with a string of investments and acquisitions in recent years. In 2016, Ctrip bought UK-based travel search engine operator Skyscanner for US$1.7 billion to “complement Ctrip’s positioning on a global scale”, according to a statement. It acquired Silicon Valley-based start-up Trip.com in 2017 and relaunched it in the same month as the company’s global brand non-Chinese markets.
In April Ctrip increased its stake in MakeMyTrip, an Indian online travel agency, to 49 per cent through a share swap deal with Naspers, a South African company and the biggest investor in Chinese tech giant Tencent, and has also gobbled up three Chinese travel agencies which operate in the US in the past few years.
"Such international M&A expands Ctrip’s addressable market and increases the likelihood that Ctrip turns these overseas markets into earnings drivers over the long run,” JP Morgan analyst Alex Yao said in a May research note. “We think Ctrip has an established leadership position in traditional outbound (China to overseas), and pure outbound (overseas to overseas) is likely to play an increasingly important role in driving group growth."
Apart from deals, Ctrip is also developing its own products for non-Chinese markets. TrainPal, a project under Ctrip’s Baby Tiger program that incubates new products, is an online train ticketing service for UK and other parts of Europe. The rail ticketing app helps customers find the best-priced train fares for their journey by offering split-ticketing, a service which can look through the various price combinations over the same route.
By February this year, ticket sales on TrainPal had grown almost 100 times year-on-year since soft launch of the app last February, according to Ctrip.
Sun believes organic growth, such as self-developed products like TrainPal, should always be a priority for Ctrip though. “We have a lot of initiatives internally to make sure everything our customers need will have a Baby Tiger program to incubate it,” Sun said.
Sun accepts that Chinese companies face a learning curve when expanding overseas. Beijing-based ByteDance has faced regulatory hurdles for its popular TikTok short video app while Chinese bike-sharing firms Mobike and Ofo are retreating from many foreign markets after breakneck growth previously.
“Organisational design and talent recruitment represent big challenges for any company that wants to expand abroad,” said Sun, adding that finding the right talent that understands overseas markets is the key for smooth expansion.
“When you move abroad and talk to train or airline partners, you need people who understand the local market very well.”