Hong Kong and Macau lead Asia-Pacific travel recovery, thanks to China’s reopening

China’s border reopening has brought green shoots of recovery in travel demand across the Asia-Pacific as international air capacity rebounded year-on-year in January. But it is still a long haul to full-blown pre-pandemic recovery, travel data provider OAG’s information showed.

Aviation seat capacity, which is a proxy for demand, showed that Hong Kong had gained significantly from China’s relaxation of travel curbs and topped the seat capacity with an increase of 69 per cent year-on-year to 184,936 in January.

That is still down 77 per cent for the same month in 2019. Hong Kong went into a recession because of tough Covid-19 controls and this month decided to give away 500,000 free flight tickets to encourage tourism.

Macau ranked second in seat capacity for January and was up 29 per cent year-on-year to 117,817, and below 38 per cent from the pre-pandemic month.

Other travel hot spots popular with Chinese tourists, including Thailand, Singapore and South Korea showed a similar picture, according to OAG data for airline seat capacity from China to other destinations.

Indonesia, Malaysia as well as Australia and New Zealand have also seen growth, with Malaysia recording a whopping 264 per cent year-on-year increase to 17,908, but 95 per cent lower than the same month in 2019.

“Many of the airlines are still struggling to get all the aircraft back into service because you need to plan for crew training, ground handling and a gamut of activities,” Mayur Patel, head of Asia at OAG Aviation told This Week in Asia.

“But the good thing is that confidence is coming back to the sector and people have money saved up over the last three years for travel,” he said.

“If you look at regional travel in Asia such as South Korea, Japan and Southeast Asian countries, Chinese travellers constitute about a third of the market. That is why Asia’s travel and tourism was lagging behind.”

“We may see a rebound in air travel across Asia-Pacific going into Q2, but Hong Kong and Macau will rebound much faster”, – Mayur Patel, head of Asia at OAG Aviation

China eased its tough border measures on January 8, ending its zero-Covid strategy after three years. It resumed visa applications for business, study and family reunions, and removed limits on international flights.

Since then, mainland residents have been booking more overseas flights, although soaring ticket prices and the ongoing Covid wave is impeding a complete recovery. Nearby destinations like Hong Kong and Macau are likely to recover faster than other destinations, analysts say.

“We may see a rebound in air travel across Asia-Pacific going into Q2, but Hong Kong and Macau will rebound much faster. Air travel will take seven to eight months to recover,” says Patel.

In 2019, Chinese travellers made 155 million trips abroad and splurged nearly US$255 million, accounting for about 14 per cent of the global tourism spent. Since the country’s reopening, the most searched-for destinations among Chinese tourists include Singapore, Bangkok, Tokyo and Seoul, according to insiders. The start of the Lunar New Year on January 21 also whet the travel demand.

However, Beijing’s abrupt U-turn amid a Covid wave has provoked mixed reactions, with more than a dozen countries including Canada, the United States, Japan and South Korea imposing either a negative Covid test requirement or testing upon arrival for travellers from China.

Thailand on the other hand sent three cabinet ministers to welcome the return of a first batch of Chinese tourists with flower garlands and gifts.

Thailand’s tourism authority forecast 300,000 Chinese tourists in the first quarter [of 2023] and 5 million through the year, but the projections are now being revised. “I think the number could easily be more than double the initial estimate,” says Patel.

Fragile recovery
A Fitch Ratings report stated Chinese outbound tourism recovery is likely to be slower in countries like South Korea and Japan that introduced additional requirements on travellers from China to limit Covid’s spread.

“We continue to expect a slow recovery in APAC’s international air traffic capacity, as it will take time for airlines to resume routes – both within China and within APAC more widely – that were previously suspended during the pandemic,” said Fitch.

The ratings agency anticipates a rebound in tourism in the Asia-Pacific this year, but says the region remains vulnerable to risks such as a fall in economic growth and higher-than-expected inflation growth that may reduce consumers’ spending power.

“In addition, consumer sentiment in China’s early reopening stages could be fragile,” it added.

Chinese travellers’ preferences are also likely to change post-pandemic and many are likely to take family holidays rather than travel in large groups. They are also likely to zero in on places perceived to be more friendly, offbeat locations as well as favour nature and health, analysts say.

US and European carriers are facing a harder time in building seat capacity to China because the Ukraine war has caused flying restrictions in Russian airspace. Fresh tensions between the US and China – after a Chinese spy balloon flew over US airspace this month and was subsequently shot down by Washington – could also be a spoiler.

“It can impede air travel unless it is handled well and the issue is sorted out diplomatically. [But] I think it won’t have a lasting impact,” says Patel.