China Tourism Report Q2 2010

Overall Decline In 2009 In January 2010, the China National Tourism Administration (CNTA) released its full-year report on the country’s tourist industry for 2009. It shows that tourist arrivals fell by 3.0% year-on-year (y-o-y) in 2009, to total 126.6mn. This was a decline from the 143mn arrivals registered in 2008. This decline comes as little surprise, given the adverse economic environment. In particular, the global economic downturn weighed heavily on foreign tourism arrivals, while the outbreak of the H1N1 virus (swine flu) in China in April 2009 further deterred tourism. In addition, exchange rate fluctuations meant that foreign exchange revenues from tourism fell by 4.5% y-o-y, to US$39bn.

More positively, the government’s efforts to increase domestic tourism appear to have paid off, compensating to some extent for the downturn in foreign arrivals. Domestic tourist visits rose by an impressive 15% y-o-y, to 1.9bn in 2009, while domestic tourism revenues rose to US$185bn, a 9% yearon- year (y-o-y) increase. Although some of this domestic tourism boom was forced by the fact that more people could not afford to leave the country, it marks a positive development and means that the tourism industry has not suffered a major slowdown during the 2008-2009 economic downturn. Moreover, with foreign tourist arrivals picking up again towards the end of 2009, we expect arrivals to continue recovering in 2010, albeit minimally, and we forecast arrivals of 126.8mn.

Hainan Province Tipped For Development In early 2010, the government announced plans to develop the southern province of Hainan as a national and regional tourism centre. The province is in fact an archipelago of approximately 200 islands, although the main population and tourist infrastructure is found on Hainan Island. The island’s southern location and warm climate makes it ideal as a tourist destination, although it has largely been a location for domestic tourism so far. The government aims to change this by developing it as a site for international tourism and in particular by opening up its gaming industry. Given that several neighbouring countries, such as South Korea, prohibit gambling, this would position Hainan as a regional gambling hub, in a similar way to the special administrative region (SAR) of Macau. The government will also introduce a tax-free scheme system on Hainan Island, encouraging its development as a location for shopping visits.

Cruise Sector Builds On Potential Amid the general slowdown in 2009, China’s developing cruise sector performed well, with 156 cruise vessels arriving in Chinese ports, with passenger arrivals of 380,000. Although the industry began to grow in the 1970s, it only began to gain momentum in 2005 when Chinese nationals were first permitted to board cruises stopping in other countries. Cruises are becoming one of the fastest growing sectors of domestic tourism, with the number of Chinese passengers rising from 10,000 in 2005 to 110,000 in 2008.

Although China still lags behind the rest of the region in terms of cruise infrastructure, the industry’s potential is encouraging towns to upgrade their facilities. Sixteen of China’s 23 main ports now have cruise terminals. Tianjin will open a terminal in late 2010 and construction will begin at Dalian this year.