How to capture the spend of returning Chinese tourists

This article is part of our Vogue Business Membership package. To enjoy unlimited access to Member-only reporting and insights, our NFT Tracker, Beauty Trend Tracker and TikTok Trend Tracker, weekly Technology, Beauty and Sustainability Edits and exclusive event invitations, sign up for Membership here. Before the Covid outbreak, tourists from Mainland China took 155 million outbound trips in 2019 with a total travel expenditure of $255 billion. This made China the largest outbound travel market in the world. Since the easing of travel restrictions in January 2023, the global economy — including the luxury industry — has been eagerly awaiting their return. There are positive signs. The China Tourism Academy projects that China’s outbound travel will total around 130 million trips this year — up on last year’s estimated 87 million. Chinese consumers spent $168 billion during outbound trips in 2023, a white paper by market research firm IClick estimates, which is approximately two-thirds of pre-pandemic levels. Meanwhile, the volume of visa applications from China is expected to rebound to 70 per cent of pre-pandemic levels in 2024, according to technology provider VFS Global. Barriers remain, however, including visa complications and a reduction in flight routes. Europe also faces stiff competition from other countries in Asia, particularly Japan — as well as from China itself, which is vying for more luxury spend from its citizens. For European brands, there are several possible strategies to adopt: open stores in Chinese tourist hotspots around the world, double down on drawing returning Chinese tourists into stores in Europe, and/or invest in expanding across China to capture the domestic tourist. “While spending on luxury goods in China may be close to flat this year, Chinese consumers are significantly increasing their luxury expenditures abroad, and therefore increasing their share in the global market,” says Jacques Roizen, managing director of consulting at DLG Shanghai. A Euro summer? Before the pandemic, the top outbound destinations for Chinese tourists were Asian countries like Thailand, Japan, Korea and Singapore, according to data from the China Tourism Academy. Online travel booking companies show these countries have largely regained their popularity. “Factors like economic uncertainties, geopolitical tensions and visa issues means many [Chinese] travellers tend to stay closer to home,” says Prudence Lai, research consultant at Euromonitor. However, Chinese online travel platform Fliggy also notes a surge in appetite for long-distance locations including Europe this summer. Countries requiring long-haul flights — such as the US, the UK and France — accounted for half of the top outbound travel destinations by transaction volume during Fliggy’s promotional event for China’s national 618 shopping festival. Chinese travel site Qunar says the number of customers opting for long-haul outbound tours beyond East and Southeast Asia last year was up 42.8 per cent on 2019 levels. “There is a polarisation among Mainland Chinese outbound travellers. High-net-worth individuals are keen to travel abroad even to long-haul markets such as North America and Europe, picking up their habits from before the pandemic and enjoying a premium outbound travel experience,” Lai continues. Trip.com confirms a “significant increase” (double-digit growth) in bookings across Europe among Chinese travellers. Jane McFadzean, senior director of destination marketing at Trip.com, reports a 105 per cent surge in bookings for Paris between 25 July and 1 August compared with the same period last year. And these tourists are splashing out: “Chinese tourists are showing a taste for luxury… The average spending per Chinese traveller has risen by 65 per cent with an increase in five-star hotel bookings from the previous year,” says McFadzean. Large-scale sporting events like the Euros and the Paris Olympics are having a noticeable effect. “Sustained interest in sports and the outdoors post-pandemic has meant that consumers [in China] are becoming more adventurous and more willing to spend on sports-driven travel,” says Rohini Wahi, APAC senior insight strategist at WGSN. European luxury brands have been targeting Chinese sports fans through sponsorships, endorsements and campaigns starring athletes. Tiffany, for example, released a campaign earlier this year starring Chinese skier Eileen Gu, while Boss has recently partnered with swimmer Wang Shun. Miranda Yuan, marketing strategy manager at agency Tong — who is helping a luxury client with a targeted influencer campaign focused on Chinese luxury travellers in Europe this summer — points out that a number of local food and beverage brands are also taking advantage of the travelling consumer in Paris. Popular tea brand Heytea opened a pop-up store in the city on 5 July with the aim of “connecting with drinks for those who go there to watch the Olympics”. “It’s a perfect time for luxury brands to create tailored marketing campaigns to engage with Chinese luxury travellers before and during their travels,” Yuan advises. Many brands and retailers are creating offers that specifically cater to Chinese customers, according to Tong, such as French department store Galeries Lafayette’s selection of Asian restaurants as well as its dedicated space for tax refunds. “I think we’re going to see a lot more product brands think about how to partner with experiential brands (destinations, food and beverage locations, fine dining, hotels, outdoor experiences etc) as the experience economy continues to grow. Aligning with complimentary brands is going to have to be a focus now to reach the pockets of growth that are out there,” says Tong commercial director Jack Porteous. Other hotspots for Chinese spend While Europe’s sporting summer is helping it climb back up the ranks as a destination for Chinese travellers, it is facing stiff competition. Countries and neighbouring regions like Hong Kong, Thailand and Japan are experiencing a boom in Chinese tourism, thanks to factors such as favourable exchange rates, product availability and tax-free shopping. International traveller Leo Huang has been abroad four times since the borders reopened in January 2023 including Thailand (twice), Japan, and most recently for a “grand tour” around Italy. He, like his contemporaries, are availing of a number of factors like price disparity and product availability — especially in Japan. “Japan has been a cheap destination for all tourists since the devaluation of the yen last year. Middle-class Chinese travel to Japan for luxury goods shopping for 30 per cent off. Depending on what you buy, it might easily cover your week-long stay including the airfares,” says Huang. LVMH reported a 32 per cent surge in sales in Japan in the first quarter of this year, which it put down to the return of the Chinese consumer. Tiffany, Balenciaga, Hermès and Prada Group also reported substantial sales growth, prompting expansions and new store openings in the country. Chinese travellers are choosing “a wider range of geographies, including domestic destinations and newer overseas markets”, says Zarina Kanji, managing director of the UK and Europe at digital marketing agency WPIC Marketing + Technologies. She suggests that European brands hoping to draw their spend need to “adjust their inventory management, store design and marketing accordingly”. Almost half (48 per cent) of Chinese consumers surveyed by Mintel in April 2024 said a good, offline service experience is the top factor that would make them spend with a luxury brand. “In addition to this, we find that offering new lifestyle services is also an opportunity point; cafés, restaurants, and even hotels, opened by luxury brands have become entry points for attracting consumers to check in or experience a luxurious lifestyle,” explains Mintel senior analyst Blair Zhang. “Luxury brands must pivot to offering bespoke travel experiences that cater to a desire for self-contentment and exploration,” adds Fflur Roberts, head of luxury goods at Euromonitor, noting a shift towards a desire for “personal fulfilment and enrichment” through travel. Attracting the domestic tourist Many Chinese consumers are continuing to choose staycations, drawn by newly developed or upgraded locations that offer recreational activities such as skiing, or leisure destinations like beaches. “Provided that China has diverse domestic travel destinations — for example, shopping in Hainan island, food travel in Chongqing and cultural activities such as camel riding in Dunhuang — domestic travel is an attractive, value-for-money substitute to international travel,” says Lai. Spending per domestic tourist on the tax-free island of Hainan in 2023 has surpassed pre‑pandemic levels. “By the end of 2023, Mainland China accounted for over half of all global duty-free spending and these areas are expected to remain top shopping hotspots,” says Roberts. However, DLG’s Roizen points to a “noticeable decline” in the Hainan province this year, “largely due to the fact that many Chinese luxury consumers, who were previously limited to Hainan as their sole duty-free destination during the pandemic, now have greater freedom to travel abroad and access a wider range of luxury offerings globally”. He adds: “As a result, while overall consumer spending on experiences remains strong, the average spend on luxury goods has declined, as these affluent travellers are no longer confined to the Hainan market.” Brands like Loewe, Gucci, Louis Vuitton and Tiffany are continuing to invest in Greater China, including via large-scale exhibitions and exclusive VIP events. Chanel recently announced a runway show in Hangzhou this December. Roizen sums up: “Leading luxury houses recognise that while the countries where Chinese consumption is taking place might be shifting, they are doubling down on investments in China, because they understand that regardless of the purchase location they choose, Chinese consumers remain one of the most promising sources of growth.” Comments, questions or feedback? Email us at feedback@voguebusiness.com. More on this topic: As Chinese travel rebounds, can Hainan maintain its charm? Fashion is popping up at hotels as summer travel surges Luxury resale hits airports and cruise lines. Can it scale?

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