The Chinese consumer is starting to flex its muscles to spend more of its growing disposable income on travel. China is already the second-largest tourism market in the world, accounting for half of the growth in the global travel industry, but much of that tourism is domestic, and its citizens only make an average of 0.09 overseas trips per annum, compared to 0.3 and 1.2 in the US and UK respectively.
Given the relatively low overseas-trip frequency in China compared to many of its Western peers the rise of global Chinese tourism is a structural growth story with huge long-term potential. Moreover, in 2016, just 6.3% of China’s 1.3 bn population had passports, but that number is expected to double within five years, with growth expected to stay well over 10% on an annualised basis.
It has been estimated Chinese tourism will become a RMB 7.5 trillion (US$ 1.1 trillion) market by 2020, with the sector expected to produce a compound annual growth rate (CAGR) of 13% over the next five years. Given the explosion in online travel booking in the country, Chinese online travel booking will grow could at an even faster rate – an estimated 30% CAGR – over the same time frame.
Nick Moss – portfolio manager. Newton, a BNY Mellon company
CLSA China online travel sector outlook, May 2016.