Innovation and Antitrust: How China’s Travel & Consumer Market Recovery is Shifting
The Chinese travel industry recovery is increasingly looking like a blank canvas for incredible diversification of consumer experiences, as incumbents are felled and runners-up expand. With Meituan coming under the regulatory magnifying glass on the heels of Alibaba, China’s market regulators certainly look to be eyeing a level playing field for the digital platforms that will power regional discovery, booking and spending. As May brings with it a return to flight connectivity from China to the rest of the world, a post-COVID China outbound travel market may look nothing like it was before.
Flight connectivity is starting up again out of China’s South in May, as 27 international routes connecting Guangzhou and Shenzhen to Amsterdam, Paris, Los Angeles, Sydney, Singapore, Tokyo and Nairobi were announced (Mandarin) recently by China Southern Airlines. Domestically, too, China has set the ball rolling for tourism to reach the one of the country’s most beloved but hard-to-reach destinations: Tibet. China’s National Development and Reform Commission has approved a roughly US$2.1 billion project to construct three new airports in Tibet, in addition to the addition of a second runway to Lhasa’s Gonggar Airport. As the domestic tourism market develops and strengthens in years to come, it may make less and less sense to speak of the China tourism outbound market as a unified concept. Increasing choice of experiences close to home, increasing travel experience, language proficiency, income and domestic consumer experience innovation that outpaces the rest of the world will likely splinter the China tourism market into smaller niche segments.
Perhaps the most telling dynamic is a pivot to smaller, private tours in Mainland China, as Trip.com has seen a 533% year-on-year bookings growth for the May 1st holidays powered largely by smaller travel groups, typically populated by families and close friends. According to Trip.com chief executive Jane Sun, small, customised groups have allowed Trip.com to counteract the downturn in group tours booked during the pandemic. As the Chinese domestic travel market now sees a travel rush that outstrips May 1st holiday figures before the pandemic, concerns about contracting virus remain strong, driving a significant spike in car rental purchases. While it’s difficult to tell how many COVID-generated behavioural ticks will remain once risk of contraction is effectively eliminated, the likelihood of a SARS Mask Effect kicking in are significant. Just as face masks adoption exceeded official advice in East Asia, and became a symbol of responsibility toward societal and personal health that were worn long after SARS subsided, similar behaviours may remain in place in China after COVID. Small, individual tour groups, increased prevalence of self drive travel and risk aversion around travelling too far away from home may be consumer behaviours that stick, which may radically change the outbound travel market.
Further enabling this atomisation dynamic of the Chinese domestic consumption economy, Beijing is becoming increasingly focused on levelling the playing field for the tech behemoths that power the food, leisure and travel industries. From the launch of the digital yuan to the antitrust action against Meituan that follows on a slew of regulatory moves to put an end to monopolistic practices, it’s clear that Beijing is counteracting “winner takes all” dynamics in tech industries surrounding the country’s eyed domestic consumption boom. Greater innovation and a likely increased geographic spread of competing tech clusters are bound to characterise the domestic economic future envisioned by Beijing.
China’s tech innovation also appears to be spreading to neighbouring South Korea, as Tencent Cloud has commenced collaboration with Incheon Tourism Organisation to offer comprehensive digital solutions that will help Chinese tourists find their way around the city. Offering WeChat connectivity in functions such as navigating the city, finding coupons, arranging tax refunds, checking tour guides and finding restaurants, Tencent is looking to pave the (sometimes rough) road that Chinese tourists have to take in international free independent travel (FIT) adventures. Where this trend in international travel becomes valuable for international destinations looking to build China outbound market share, is in its enabling power for FIT. With the newfound risk aversion around large travel groups possibly a permanent feature of the Chinese outbound travel landscape, FIT’s moment may very well have arrived as Chinese tech companies look to build out convenient FIT architecture for not only intrepid early adopter market segments, but also for the less experienced majority.
