Stansberry Research

Chinese Tourism Portends Global Travel Industry Boom

C. Scott GarlissStansberry NewsWire

China is about to flood the world with tourist dollars...

The country's "zero COVID" policies have kept its population more or less locked down for the past three years. But that's rapidly changing.

In early December, the government removed many of those restrictions. And as of this past weekend, China's borders are open once more to visitors. At the same time, its citizens will be allowed to travel abroad.

In other words, Chinese travelers will hit the skies and seas after three years of hibernation... which will unleash a wave of spending.

Before the COVID-19 pandemic, Chinese visitors made up the bulk of global tourism spending. According to the United Nations World Tourism Organization ("UNWTO"), travelers from the country spent $277 billion overseas in 2018 and another $255 billion in 2019. Here's a look at where that money went in 2018...

That made up roughly 20% of global tourism dollars. To put it in perspective, in those same two years, U.S. visitors spent about $176 billion and $185 billion abroad, or roughly 15%.

But with pandemic restrictions in place, those spending numbers have plummeted... Foreign spending by Chinese travelers more than halved, dropping to $131 billion in 2020 and $106 billion in 2021. Similarly, their U.S. counterparts' spending overseas plummeted to $48 billion in 2020.

However, widespread inoculations and the removal of restrictions stateside have allowed for a recovery in travel spending by Americans... travel outlays rose to $73 billion in 2021. And according to the U.S. Travel Association, that figure has improved even more in 2022, with travel spending up 3% from 2019 levels through November.

So, as China's government relaxes COVID-19 restrictions, it's only natural that travel abroad will resume. But how will the timeline play out?

Let's observe the following chart from data provider Worldometer as it relates to U.S. COVID-19 infection waves...

With Beijing removing restrictions, the country is at the point we were in late 2021... Plenty of Chinese individuals have previously been infected, but there hasn't been a widespread transmission until now. As we can see from the chart, it took about two to three months for cases in the U.S. to peak and subside. Then, as we moved forward, the cycles shortened.

China announced the policy change in early December. That means we're a month out. In other words, the current infection wave may peak and then start to ebb in February. That's important for two reasons: Recovering individuals will feel more confident about traveling abroad, and foreign countries will be more willing to accept those travelers.

And these folks have money to spend...

According to Beijing-based think tank China Finance 40 Forum, households have boosted savings in 2022 by about $1.8 trillion through November. That's on top of a roughly $1 trillion average in 2020 and 2021. So from the pandemic's onset, you're looking at a grand total of around $4 trillion... which can buy plenty of tickets to anyone's version of paradise.

Another factor to consider: Chinese visitors like to buy high-end goods. They view foreign goods as higher quality than domestic goods. And these shoppers typically find it cheaper to purchase overseas. According to the Financial Times, Chinese tourists accounted for almost 20% of all global luxury sales in 2019.

And according to consulting group Bain & Company, there's little evidence that appetite has changed. The firm said Chinese consumers spent $73.6 billion on luxury goods at home in 2021. That's more than double the amount spent in 2019. By 2025, Bain expects China to become the largest luxury goods market.

As we noted above, U.S. tourism outlays are already back to 3% above where they were pre-pandemic. If China's numbers do the same, it should portend a $157 billion surge compared with 2021's $103 billion. Considering UNWTO is forecasting $1.3 trillion in tourism spending this year, that's a lot of extra flights, hotel-room nights, and designer handbags to be purchased.