China’s travel recovery is proving “slower than expected” with outbound leisure travel “not considered safe”, business services giant McKinsey has reported.
McKinsey partner and lead on travel for Asia Steve Paxton said China “is headed in the right direction”, but he noted “good and bad news” from research on consumer confidence in China.
He said: “Chinese consumer optimism about economic recovery stands out.” More than half (53%) of Chinese consumers expected China’s economy to recover in McKinsey research in late May.
However, just 4% said they expected to travel more post-Covid than before, with 36% expecting to travel less.
Paxton also warned: “Business travel is not likely to return to its previous level. We see a structural shift in business travel. Maybe 20% is not coming back.”
Speaking on a Hong Kong Tourism Board global online forum, Paxton said: “China shows signs of recovery. Roughly 90% of domestic flights are back and about 70% of domestic passengers, led by visiting friends and relatives and some leisure travel.
“Hotels are still 30% down on occupancy and seeing greater drops in revenue per available room because of promotions.
“Tourism attractions have almost all re-opened, tourism businesses are open and people are back at work.”
However, he said: “The recovery is slower than expected. Numbers are still relatively low and outbound leisure travel is not considered safe. The industry has a lot of work to do to convince people it is safe to travel.”
Paxton reported: “We asked in April how confident people expected to be in May about travel and asked again in May to compare the results. People showed less confidence in May than they thought they would. There is still a lot of caution.”
The research suggested a majority of consumers not just in China but across major travel markets in Asia, the US and UK expect to travel less post-lockdown than before the pandemic.
Paxton said: “Travel is discretionary spending and spending is likely to be well down on the peaks we saw before Covid-19.”
He noted “domestic travel is coming back first” and said this would be of benefit to some economies while damaging others.
McKinsey and Oxford Economics data suggests the UK economy could benefit to the tune of $31 billion a year and Germany’s economy by $30 billion if outbound travel spending switched wholesale to domestic tourism.
But Italy would lose $27 billion and Spain $52 billion in earnings.
Speaking in the same forum, Trip.com Group chief executive Jane Sun said: “Travel bubbles will probably become the new normal post-Covid. Customer demand for risk-free travel will become the new normal.”
She added: “Free cancellation will become a number-one priority. Deep discounts will be a priority, and insurance coverage.”