(Bloomberg) — China lifted a ban on group tours to a slew of countries including the US, UK, Australia, South Korea and Japan, in a major test of demand for overseas travel from what was once the world’s biggest source of tourists.
Group tours will start immediately on Thursday and the easing applies to all travel agencies and online platforms across the country, the Ministry of Culture and Tourism said in a statement. The move sparked a rush to buy Japanese and Korean tourism stocks, with package tour operator Lotte Tour Development Co. jumping 29% in Seoul and Japan Airport Terminal Co. up as much as 12%.
The relaxation may set the stage for an acceleration in the global tourism industry’s rebound from the coronavirus pandemic, which has been sluggish amid a slow rebound in flight capacity to and from China. But a full return to the pre-pandemic heyday is likely to take time — if it can be achieved at all — amid a weakening economy, a strong desire from Chinese holidaymakers to travel domestically and the enduring damage of geopolitical tensions.
“There will be someone going, you’ll probably still have someone, but the size of overseas travel won’t be as large as you saw before pre-Covid or the pre-economic slowdown,” said Dongshu Liu, an assistant professor specializing in Chinese politics at the City University of Hong Kong. “A lot of Chinese people will be hesitant to go to Western countries, worried that they’ll face discrimination. They may also simply not have the funds.”
US Commerce Secretary Gina Raimondo welcomed the decision in a statement on Thursday, calling it “an important step forward to promote the type of people-to-people exchange that is crucial for our bilateral relationship.”
China’s pandemic-era shift inward effectively turned off the flow of outbound travel for three years, leaving many tourism-dependent countries struggling to find alternative sources of visitors. Chinese travelers spent $277 billion overseas in 2018 and another $255 billion in 2019, accounting for almost 20% of all international tourism spending, data from the United Nations’ World Tourism Organization show.
Even months after the country’s dismantling of virus curbs, outbound tourism is muted. In the first half of this year, Chinese tourists made about 40.4 million trips overseas — mostly to Asia — representing 26% of pre-pandemic levels, according to the China Tourism Academy. Domestic flight capacity has reached 17% above pre-pandemic level in July, but international capacity is still about half of 2019 level, data from aviation analytics company Cirium shows.
Those constraints are likely to linger. Koji Shibata, chief executive officer of Japanese airline ANA Holdings Inc. said that while the easing of the group ban will give momentum to travelers visiting Japan and the carrier plans to increase the number of flights, it faces challenges due to lack of staff. As of July, it operated 62 weekly round trips to and from China, 35% of pre-pandemic levels.
In 2019, Chinese tourists accounted for about one third of Japan’s international visitors, spending more than $12 billion in the country — the highest among all overseas markets, according to data from the Japan National Tourism Organization. In the first half of this year, the number of Chinese travelers in Japan only returned to 13% of the pre-pandemic levels.
In a further sign of the difficulty ahead, Southeast Asian countries that were already accepting group tours haven’t seen a rush of visitors. The number of Chinese arrivals in Indonesia, Thailand, Vietnam, Singapore and the Philippines varied between 14% and 39% in May compared to the 2019 numbers, and summer tour bookings have also disappointed.
Read more: Millions of Chinese Staying Home Curb Southeast Asian Growth
Some of the world’s top consumer brands are already ramping up their presence in China on bets the shift to spending more money at home will last. Luxury conglomerate LVMH Moet Hennessy Louis Vuitton SE is still seeing about 70% of its sales from Chinese customers happening within the country and few group tours have been seen in Europe, Chief Financial Officer Jean-Jacques Guiony said last month.
China’s economy is also a major headwind to overseas travel. Consumer spending growth remains subdued, a prolonged property slump has dented confidence and the country slid into deflation in July, ramping up pressure on officials to stimulate domestic growth this year.
Since China’s reopening, the country has resumed group tours to dozens of countries across Asia, Africa, Europe and South America. But bans on places like the US, UK, Australia, South Korea and Japan have been maintained until now amid geopolitical tensions.
Still, it’s unclear how far the easing on group tours goes in thawing those relations. In addition to sluggish demand for Chinese to travel abroad, China is seeing a dearth of inbound travelers.
After welcoming a stream of high-profile foreign visitors in recent months, some overseas investors and business people traveling to the nation for the first time since the lifting of pandemic restrictions said the environment has grown more hostile to foreigners, Bloomberg News has previously reported.
That’s given rise to concerns among some Chinese about how they’ll be treated abroad. A recent poll by Pew Research Center recorded negative views of China reaching record highs in 10 of the 24 nations where it conducted its survey.
“It might be well the case that Chinese policymakers realized how detrimental isolation might be in terms of relations with the rest of the world and China’s soft power,” said Alicia Garcia Herrero, chief Asia Pacific economist at Natixis. “It is surprising since this is happening at a time when exports are plummeting, so opening up to group tourism will also worsen the trade balance and reduce the contribution of external demand to China’s growth.”
Read more: Investors Visiting China Find Officials Fearful of Upsetting Xi
–With assistance from Rebecca Choong Wilkins, Supriya Singh, Danny Lee and Jinshan Hong.
(Updates with Raimondo statement, in paragraph.)
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