Estimated recovery timeline of China's outbound travel
We are pessimistic about the recovery of China's outbound travel
From the 11th UBS Evidence Lab survey on Chinese outbound tourism, we conclude that:
- there could be a one-quarter lag even after travel restrictions are relaxed post COVID-19;
- there is a preference for short-haul destinations over long-haul; and
- travel budgets are higher, but with a limited tolerance of price hikes.
As the pandemic is still uncontained, most prominent destinations have cross-border restrictions, and China has limited international flights with a 14-day quarantine requirement for returning nationals. We expect post COVID-19 recovery to be gradual and think it is unlikely that the 2021 market could return to 2019 levels even if the pandemic is over by end-2020.
A one-quarter lag from the end of COVID-19 to the return of travellers
In May 2020, UBS Evidence Lab surveyed 2,374 residents of tier 1-4 (T1-4) cities in China. Most respondents believe it could take longer than one month before it is safe to travel after the relaxation of cross-border restrictions, and another month for them to feel comfortable about actually travelling. On average, we estimate there would be at least a one-quarter lag between the relaxation of travel restrictions—likely after the end of COVID-19—and a return of Chinese outbound travellers.
Travel intentions further skewed towards short-haul destinations
A respective 57%/42% of respondents in T1-2/T3-4 cities indicated they are planning to change destinations after COVID-19, and among them more than half believe they may feel unwelcome. We believe Chinese tourists' travel intentions could be further skewed toward Asian destinations. Supported by the survey results: Japan, Korea and Thailand remained the most popular and gained mindshare from long-haul destinations.
Budget increases but within limited acceptance of price hikes
In the latest UBS Evidence Lab survey wave (May 2020), planned budgets per trip continued to increase YoY in almost all categories. We believe this is due to:
- a continuation of spending on quality over quantity, and
- pent-up demand. However, the willingness to increase travel budgets post COVID-19 does not mean Chinese travellers would endure a substantial increase in flight and accommodation