Hotels, luxury shops and attractions around the world that came to rely on a flood of Chinese tourists are facing an even bigger crisis than during the SARS outbreak as the new viral outbreak infects more people than the 2003 pandemic.
From Tokyo to London, hotels, casinos, airlines and retailers are already recording a downturn and are bracing for weeks, if not months, of plummeting spending after China curbed outbound travel and governments tightened border controls.
About 163 million Chinese tourists made overseas trips in 2018 — more people than Russia’s population — accounting for more than 30 per cent of travel retail sales worldwide. In 2003 when SARS broke out, only 20 million Chinese travellers went abroad. China’s increased affluence and consumption since SARS have made many international cities, luxury brands and retail industry groups more reliant than ever on Chinese travellers.
“Chinese travellers are the most significant and most important customers for growth in the travel retail industry.”– Stephanie Wissink, a Jefferies LLC consumer analyst
“It’s a triple whammy — Chinese travel more, they spend more and they spend more on beauty products,” said Stephanie Wissink, a Jefferies LLC consumer analyst who recently issued a report on the virus’ impact on travel spending. “Chinese travellers are the most significant and most important customers for growth in the travel retail industry.”
The virus adds a new level of uncertainty to a global industry that was already suffering the effects of China’s economic slowdown.
“The benchmark everyone is comparing this to is SARS in 2003,” said Luya You, a Hong Kong-based transportation analyst at Bocom International. “The actual cost and negative impact of this virus could be greater because more Chinese are traveling than before. The cost of preventing travel, grounding flights is magnitudes higher than what it was in 2003.”
Chinese tourists spent US$150 billion on purchases during last year’s Lunar New Year holiday, according to Jefferies. The travel retail industry, a segment that includes duty-free shopping and retail at airports and other transportation hubs, was a US$79 billion business in 2018 and saw the biggest growth in Asia, according to research firm Generation Research.
Just before this year’s Lunar New Year holiday, when hundreds of millions of people in China visit family or take vacations, authorities locked down Wuhan, the city of 11 million people where the virus originated. Travel has been restricted from much of the surrounding Hubei province, home to about 50 million inhabitants.