China's Post-Pandemic Pullback: A $129-Billion Blow To Global Tourism Sector

China’s overseas travel has never significantly recovered since the COVID-19 pandemic. Although the country lifted all pandemic measures over a year ago, foreign tourism remained substantially lower than pre-pandemic levels.

Data from aviation analytics firm Cirium, reported by Bloomberg, showed outbound airline capacity in 2023 stood at just 60% of 2019 levels.

Trips by Chinese tourists to the U.S. have fallen dramatically. Data from Statista showed that in 2023, just 850,000 Chinese visitors entered the U.S. Although this was more than double the 2022 numbers, it remained substantially lower than the 2.83 million visitors welcomed in 2019.

Globally in 2019, Chinese travellers made 170 million foreign trips in 2019 and spent $248 billion on plane tickets, hotel rooms and luxury items. China’s post-pandemic pullback cut $129 billion from global tourism, according to the Cirium data.

Other forces are at work too. Russia’s invasion of Ukraine and the subsequent sanctions and measures mean that U.S. flights to Asia can no longer travel over Russia. This has led many airlines to cut U.S./Asia links in half.

Meanwhile, China’s economic slowdown means that much of the population simply doesn’t have funds to spend on extras such as foreign travel.

So, what does this mean for companies with exposure to China tourism?

Airlines

In a recent note on the airline industry, analysts at Bank of America wrote: “The recovery in international
travel in China is showing a mixed picture, as China to North America capacity is lagging far behind China to Europe capacity.”

Looking at Delta Air Lines DAL fourth-quarter results, the company didn’t see a significant impact, beating forecasts on all metrics with record full-year revenues.

The shares were down around 8% in January, however, after the company trimmed its outlook for 2024.

Other airline stocks also fell: American Airlines Group Inc AAL was down 1.3% so far in January, while United Airlines Holdings Inc UAL fell nearly 6%, with UAL hit by the grounding of its Boeing 737 MAX 9 fleet.

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The BofA analysts saw a strong recovery of Chinese travellers in 2024 as more air routes opened up.

“The return of airlift should support the recovery in outbound Chinese travellers as well as growth of wider Asia/Pacific market revenue per available room.”

Hotels

Hotel groups on the S&P 500 have had a much better start to 2024 than the airlines.

MGM Resorts International MGM, which operates casino hotels and has been popular with Chinese visitors, is down 4.3% so far this year.

Marriott International Inc MAR was mitigating some of its loss of Chinese tourists by taking the brand to them. At the beginning of January, it announced the launch of the Ritz-Carlton Beijing and the Beijing Marriott Marquis Hotel.

Its shares were up 3.3% so far this year, hitting a new all-time high.

Hilton Hotels Corporation HLT shares were up 2.6% in January, while Wynn Resorts WYNN gained 2.6%.

Luxury Goods

It’s hard to quantify how much luxury brands will be affected. Retailers certainly noted the positive impact on sales as the growth of Asian visitors soared in the late 1990s and 2000s.

However, seeing this, many of them opened up large outlets in cities such as Hong Kong, Beijing and Shanghai, making it less imperative for tourists to spend on luxury when abroad.

The Roundhill S&P Global Luxury ETF LUXX was down 6.5%. This is an exchange-traded fund that tracks S&P 500-listed luxury goods stocks such as Estee Lauder Companies Inc EL, which in 2024 was down 14% and Lululemon Athletica LULU, which was down 6.3%.

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