China National Day Golden Week 2017 Preview Chinese traveling during this year s National Day Golden Week holiday, which runs for eight days through October 1 8, are expected to drive both global and domestic retail sales. 1) Over 710 million Chinese will be traveling both within and outside of the country during this year s National Day Golden Week holiday, representing an increase of 10% year over year. 2) Total tourism receipts during Golden Week 2017 are expected to increase to 590 billion ($89 billion), up 12.2% year over year. 3) Thailand is expected to be the most popular destination for Chinese tourists, followed by Japan and Singapore. South Korea, on the other hand, has fallen out of favor in the aftermath of the THAAD crisis in March. Overview of National Day Golden Week 2017 This year, the China National Day Golden Week holiday overlaps with the Mid-Autumn Festival (October 4), leading to an eight-day long holiday that runs from October 1 to 8. According to the China Tourism Academy, over 710 million Chinese will be traveling both within and outside of China during this year s National Day holiday, representing an increase of 10% year over year, and equivalent to almost 1/10 of the world s total population. Total tourism receipts during Golden Week 2017 are expected to increase to 590 billion ($89 billion), up 12.2% year over year. 1
Mid- to Long-Haul Trips the New Norm We believe Chinese tourists will most likely be taking mid- to long-haul trips during this year s National Day Golden Week, mainly driven by: 1. The longer holiday of eight days this year versus seven days last year. 2. The higher exchange rate of the renminbi versus the US dollar year-to-date 2017, the renminbi has appreciated by 4.7% relative to the US dollar. 3. Chinese passport holders now benefit from visa-free or visa-on-arrival access to 65 countries and regions around the world, up from 57 last year. According to a survey administered by the China Tourism Academy in September 18, 2017, 64.8% of survey respondents say they will be traveling during the National Day Golden Week and the month of October, 9.3 percentage points higher than last year. Some 16.4% of those people surveyed will be traveling overseas. Mid- to long-haul trips appear to be the norm, with 49% of people preferring to travel for 4 7 days, compared to 31% preferring to travel for 2 3 days and 18% for one week to one month. The top destinations this year are expected to be Thailand, Japan, Singapore, the US and Vietnam, in order of preference. In contrast, the most popular destinations during Golden Week 2016 were Korea, Japan, Russia, Thailand and Taiwan. Figure 1. National Day Golden Week The Most Popular Destinations Among Chinese Tourists Note: As of September 18, 2017. Source: Ctrip Ctrip: National Day Golden Week Travel Trends Report 2017 China s largest online travel agency Ctrip also released the National Day Golden Week Travel Trends Report 2017, based on ordering activity for travel packages in 2017. The highlights of the Ctrip report are largely similar to the findings by other industry groups, namely: According to the National Day Golden Week Travel Report 2017 from online travel services provider Tuniu.com, the most popular long-haul destinations in order of preference are the US, Canada, Australia and France. The most popular short- to mid-haul destinations in order of preference are Thailand, Japan, Indonesia and Singapore. Korea, which was the top outbound destination last year, has dropped out of this year s top-10 destinations. 2
The results are consistent with Ctrip s Outbound Tourism Ranking for Summer 2017, in which Southeast Asian countries accounted for six of the 10-most-popular destinations. Winners and Losers We see Southeast Asia, Thailand and Japan as the top beneficiaries of outbound travel during China s National Day Golden Week, and Korea as the largest loser. 1. Southeast Asia (+) The China National Tourism Administration released the Holiday Travel Guide, which indicated that the Southeast Asia region remains the most popular short-haul travel destination, largely attributable to the relative ease with which certain countries grant visas to Chinese passport holders as well as the increase in the number of direct flights between Chinese and Southeast Asian cities. According to the latest figures from China s Ministry of Foreign Affairs, Chinese passport holders benefit from visa-free or visa-on-arrival access to 65 countries and regions around the world this year, an increase from 57 last year. Visa-on-arrival: Thailand, Vietnam, Myanmar, Laos, Cambodia, Brunei and East Timor grant Chinese passports a visa-on-arrival. Visa-on-arrival for tour groups: The Philippines introduced a visa-on-arrival program for tour groups from China in August 2017. Electronic visas: Malaysia and Singapore allow Chinese tourists to apply for an electronic visa. The opening of direct-flight routes between Southeast Asian and Chinese cities has also encouraged the growing appetite of Chinese for outbound travel. Direct-flight routes are in operation between many Chinese and Southeast Asian cities. Within Southeast Asia, China is the biggest source of tourists for Thailand, Vietnam, Indonesia and Cambodia. There are over 2,700 flights between China and Southeast Asian cities every week. 2. Thailand (+) During the National Day Golden Week this year, Thailand is expected to be the top destination among Chinese tourists. For full-year 2017, the number of Chinese tourists traveling to Thailand is expected to increase to 9 million people, and tourism receipts will increase to THB 480 billion ($14.4 billion), 26% of Thailand s total tourism revenues. The Tourism Authority of Thailand created its official account on WeChat called Visit Thailand to attract Chinese tourists to the country. 3. Japan (+) This year, Japan is expected to become the second-most-popular destination among Chinese tourists for National Day Golden Week. The prefectural governments of Hokkaido and Miyagi launched promotional tourism videos in the hopes of attracting Chinese tourists in October. Many retailers across Japan have also adopted Chinese mobile payment systems such as Alipay and Tenpay. The Fukuoka prefectural government timed the Fukuoka Shopping Festival, to be held October 1 31, to overlap with the National Day Golden Week. 3
Retailers Are Positioning Themselves by Partnering with WeChat Tencent s Tenpay has signed an agreement with Premier Tax Free to launch a program that enables Chinese tourists to obtain their tax refund through WeChat and QQ. Convenient tax refund options would then be available for Chinese tourists at airports or points of sale (POS). WeChat and QQ have combined monthly active users (MAU) of 963 million as of the end of 2Q17, and this partnership, which was announced before the National Day Golden Week, should help drive Chinese tourist traffic to overseas retail stores. Losers South Korea Likely to Lose Out on Chinese Tourists Spending ( ) This year, Korea fell off the league table for the top-10 most-popular destinations for Chinese tourists. Since the THAAD missile incident earlier this year, the number of Chinese tourists to Korea has plummeted. According to official data, the number of Chinese tourists who have visited South Korea year-to-date July 2017 has fallen 20.9% year over year. During the same period, the total number of Chinese outbound tourists increased by 5.1% year over year. Ctrip expects the number of Chinese tourists visiting Korea to decline by 70% year over year during National Day Golden Week 2017, primarily because there will be no travel agencies organizing tours to Korea. Yonhap News Agency reported expectations that the average spending by Chinese tourists during National Day Golden Week 2017 will decline over 30% year over year. For our analysis of the performance of Korea s retail sector in the aftermath of the THAAD missile incident, see our Deep Dive: Future Proofing Department Stores in Asia Part 1 Figure 2. Chinese Outbound Travel Annual Change (%) 150% 100% 50% Hong Kong Thailand South Korea Taiwan Macau Japan Singapore Malaysia Malaysia is becoming a popular desnnanon. 0% -50% -100% THAAD's impact on Korea. 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Source: National Tourism Organizations 4
Deborah Weinswig, CPA Managing Director FGRT New York: 917.655.6790 Hong Kong: 852.6119.1779 China: 86.186.1420.3016 deborahweinswig@fung1937.com Esme Pau, CFA Analyst Hong Kong: 2nd Floor, Hong Kong Spinners Industrial Building Phase 1&2 800 Cheung Sha Wan Road, Kowloon Hong Kong Tel: 852 2300 4406 London: 242 246 Marylebone Road London, NW1 6JQ United Kingdom Tel: 44 (0)20 7616 8988 New York: 1359 Broadway, 18th Floor New York, NY 10018 Tel: 646 839 7017 FungGlobalRetailTech.com 5