By Adam Knight, TONG Cofounder
Three years of Zero-Covid restrictions have taken their toll on global travel retail and hospitality. As the last of China’s pandemic measures were lifted at the beginning of this year, how quickly should we expect Chinese outbound travel to recover, how have the expectations of China’s travelling shoppers changed, and what can brands do now to prepare for their return? TONG cofounder Adam Knight outlines the key takeaways for luxury brands and what to expect from China’s Great Reopening:
1. When will the global Chinese shopper return?
China’s reopening came as a shock to governments, diplomats and businesses alike. The complete 180 from the draconian though effective Zero-Covid that had become a hallmark of Chinese governance ‘innovation’ was suddenly a thing of the past. Stories circulated on Chinese social media of flight attendants triumphantly changing out of their hazmat suits mid-flight at the stroke of midnight, and planes scheduled to land perilously close to the cut off doing a couple of laps of the airspace above Shanghai before landing to avoid passengers having to quarantine.
The change in China’s international travel policies at the end of December 2022 had an immediate impact on Qyer users’ plans for outbound travel. After the policy change, 94.3% of survey respondents said they planned to travel outbound within one year, with 73.6% planning a trip within half a year. Despite already driving more outbound travel and spend than any other market pre-pandemic, with 110 million visits forecast this year; currently, only about 10% population even have a passport. This shows huge scope for growth.
2. What impact has the pandemic had on Chinese luxury traveller sentiment?
The pandemic had a profound impact on the make-up and expectations of Chinese luxury travellers and shoppers. Many of these shifts, already in motion, were accelerated by the pandemic. One of biggest trends in international tourism marketing circles from the last 10 years of Chinese tourism, again accelerated by pandemic, has been the rise of the new independent Chinese traveller, with new communities of young travellers increasingly rejecting the traditional 996 culture.
A key source of optimism for luxury brands is that China’s consumer market is still fundamentally sound despite the Covid-related disruptions. According to Bain’s 2021 Worldwide Luxury Market Monitor, it is estimated that 30% more consumers will join the ranks of mid and high-income class in the next eight years.
3. What’s the outlook for luxury hospitality and retail?
Post-Zero Covid, consumers want to reward themselves, emotionally and rationally. Despite economic difficulties during the pandemic in 2022, the per capita monthly income and monthly expenditure of Xiaohongshu users continued to grow compared with 2021.
Another survey by ILTC found that at least in the short term, looking to splurge – even if more Chinese travellers plan to opt for a little domestic de-stressing rather than high-octane shopping sprees, the majority plan to spend more in the year ahead. But they’re also more likely than average to travel to celebrate something like a milestone birthday (70 percent compared to 45 percent among all APAC respondents), take more extravagant trips (59 percent compared to 37 percent), and – echoing the “revenge spending” we’ve seen among Chinese consumers after sporadic COVID lockdowns – travel “to make up for lost time”
4. What trends do we need to look out for?
Chinese consumers are investing in a comfortable and quality life, starting at home. A healthy body, work-life balance and free time were ranked as the top three by Chinese consumers. Likewise, food, travel, exercise, mental health, beauty and apparel were identified as the top categories consumers are willing to increase spending on in 2023.
Having spent significantly more time at home during the pandemic, improving comfort and convenience has become a greater priority; people are also interested in taking home memories from their travels, especially hotel spa cosmetics and skincare products to recreate spa and wellness experiences.
This focus on experience is all important; Chinese luxury clients are becoming increasingly aspirational and sophisticated, even at a young age. Hence, brands are confronted with the highest share of affluent Gen Z and young millennials of any major country in the world, a clientele that many brands are still not taking seriously enough. It’s a generation that deeply cares about client-centric brand stories, or what the brand means for them. They seek the cultural value of brands and appreciate cultural capital.
This is very different from the endless reiterations of heritage that so many brands are focusing on. Instead of caring what a brand did 30 or 40 years ago, they want to know how the heritage enables brands to provide them value today – how do brand attributes correspond with the fairly unique social challenges facing target audiences in China today?
5. What practical advice do you have for brands re-engaging with the post-Zero Covid luxury consumer?
As consumers become more cautious about their purchasing decisions, they’re turning to those they trust for help: other shoppers. Product seeding, or peer-to-peer recommendations, plays a crucial role in communicating product value; 60 percent of Xiaohongshu users trust the experience of other customers, while 59 percent said they are willing to share their own experiences to benefit others.
Of course, this isn’t limited to sharing experiences. From the packaging design, to the materials and formula, to the functionality, consumers want all the details about a product; check-in experience, concierge services, online integrations. Product seeding is particularly useful for smaller or niche brands in China. These user recommendations are typically more convincing and relevant than marketing campaigns, and can help widen the brand’s exposure to various consumer groups. 2023 might be the year that travel brands should take a serious look at how consumer behaviour has changed and how their target market segment has shifted.
Luxury rebound is real. A recent report by Morgan Stanley states Chinese consumers will make up 60 percent of total spending growth on luxury items including fashion and accessories by 2030. Globally, mainland Chinese buyers will boost demand for luxury items by 20 percent in just 2023 alone. By providing the latest insights into the Chinese consumer, TRAVEL 游 by TONG is an essential resource for any brand operating in the luxury, retail, and hospitality space looking to re-engage with their China market.
Issue #1 TRAVEL 游, serves as a gateway for readers to explore the reopening of China in the post-Zero Covid era. The paper draws on the genuine behaviours and experiences of Chinese people both domestically and internationally, and reflects the expertise of our team of consultants, researchers, and strategists.
