China’s Covid stance has created $280 bn black hole for global tourism

BLOOMBERG: China’s borders remain effectively sealed as the country continues to pursue a zero-tolerance approach to a virus that other parts of the world have accepted as endemic.

For the country’s 1.4 billion people, international travel is basically off the table with weeks-long hotel quarantines on return and flight options severely limited. Fear of Covid, which is stamped out aggressively when it flares in China, is also a factor.

For the world’s tourist hotspots, that’s a problem. Chinese travelers spent US$ 277 billion overseas in 2018 and another US$ 255 billion in 2019, accounting for almost 20 percent of all international tourism spending, data from the United Nations’ World Tourism Organization (UNWTO) show. As the virus emerged in 2020 — with the first cases in the central Chinese city of Wuhan — their expenditure slumped to US$ 130.5 billion, most of which would have come in the months before March, when much of the world went into lockdown. 

Revenue is now a fraction of that. UNWTO reported a 61 percent drop in spending by Chinese tourists from 2019 levels in the nine months through September last year.

“It’s impossible to make a prediction about when we’ll see Chinese travelers again,” said Imke Wouters, a Hong Kong-based partner at consultancy Oliver Wyman who covers greater China and Southeast Asia.

“Even when borders reopen without quarantine requirements, tourism will take some time to fully recover as only a small group of travelers will jump on a plane right away.”

While there are signs Beijing is at least considering its exit strategy from Covid Zero, border curbs and other restrictions are unlikely to be eased meaningfully before 2023, given the need for stability in a politically important year for President Xi Jinping.

McKinsey & Co. said in a report in August that outbound travel from China may remain muted for as long as 18 months, while Goldman Sachs Group Inc. predicts border restrictions could remain in place for the whole of this year and may even extend until the spring of 2023 considering transmissions are typically higher in winter months.

Globally, Hong Kong was the No. 1 destination for Chinese tourists in 2018, playing host to 33 percent of the almost 145 million Chinese who traveled overseas that year. They poured about US $27 billion into the economy, according to the city’s statistics department.  

Macau, known for its casinos, wasn’t far behind, receiving 25.3 million, or more than 17 percent of all China’s outbound tourists. Thailand was the third-most popular destination in 2018, the year prior to the pandemic with the most complete data available. Some 16.9 million Chinese traveled to the Southeast Asian nation, spending around US $16.1 billion.