The tide of Chinese visitors has turned - should the tourism industry be worried?
Friday, 4 October 2019
Abby Cao's Chengdu home is an 18-storey apartment building set amid lush gardens behind a security gate.
It's a world away her New Zealand holiday snaps of a deserted Muriwai Beach, the sparkling waters of Lake Tekapo, and a table loaded with takeaways from Queenstown's famous Fergburger eatery.
Together with eight friends and family members covering three generations, Cao, her 5-year-old daughter Smile Li , and husband Li Yang made the 16 day trip last year, travelling in two SUVs, staying in holiday homes, and hitting many of our tourism hot spots.
They are exactly the sort of Chinese visitors Tourism New Zealand wants, but after several years of spectacular growth, arrivals from China are dropping.
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The irony is that this has happened during the China New Zealand Year of Tourism, an event billed as an opportunity to bolster relations between the two countries and boost for our travel industry.
It got off to a shaky start back in February when the opening ceremony was postponed at short notice by the Chinese because of a 'scheduling' issue, read by some as a sign of displeasure over Huawei being blocked from Spark's 5G network over security concerns.
Now we have a speed wobble in Chinese arrivals, and the question is whether it is merely a 'blip' in a volatile market, or a more serious long term slide.
A couple of years ago the Ministry of Business Innovation and Employment (MBIE) was predicting close to 1 million Chinese visitors annually by 2023, but has since reduced that to 608,000.
The downturn emerged in October, and despite a rebound in January it has continued with total Chinese arrivals falling 10 per cent (28,000) over the first seven months of 2019.
Some serving the China market are definitely hurting and Tourism Export Council chief executive Judy Chen says for them it's been 'a pretty tough winter.'
It's too early to say how things will go over summer and into Chinese New Year, but this month is 'not looking that great.'
Economic uncertainty surrounding the US China trade war is widely regarded as the main reason for the fall off in arrivals.
The Chinese are our second largest tourism market after Australians and they tend to be big spenders ($1.7 billion for the year to the end of June).
That works out to $4341 per head on average; $1035 more than other international tourists.
Auckland Airport's general manager aeronautical Scott Tasker says Chinese are opting to holiday closer to home for perfectly rational reasons.
'If you're feeling a little bit less certain about the economy or your job, maybe you don't do the expensive long haul trip to New Zealand, Australia or Canada this year; you go to Japan, Korea or Thailand instead.'
The canning of some flights from China to Australia and New Zealand has undoubtedly had an effect too.
Hong Kong Airlines exit from its Auckland-Hong Kong route removed 177,000 return seats annually, and Tianjin Airlines dropping of Chongqing to Auckland flights over the summer will remove about 40,000 more.
Tasker is confident that direct flights will grow again, in part because large state owned Chinese airlines have a lot of new planes on order 'and they will need to fly them somewhere.'
He says the drop has mainly been in the short stay group tours, and independent travellers who stay longer and spend more are actually up slightly.
Other factors in play include the measles outbreak in Auckland which is making some Chinese families nervous about coming here, according to Chen.
And the recent bus crash near Rotorua which killed five Chinese tourists, resulting in charges against the driver, has seen overseas agents question the quality of vehicles, operating practices, and the level of public liability insurance.
Cancellations followed the March terror attack in Christchurch that left 51 dead and Sheepworld owner John Collyer is still feeling the ripple effect.
The attraction north of Auckland runs shearing and sheep dog demonstrations popular with overseas student groups, and he says the Mosque shootings occurred during his prime recruitment period.
'One agent that sent 400 [Chinese] students the year before sent 100; that's big numbers.'
Amway China last year rewarded 6000 staff with trips to Queenstown worth an estimated $50m, but the incentive market is very sensitive to security risks and a large corporate on the verge of booking pulled out after the attack.
China Travel Service (CTS) chief executive Lisa Li says the loss of that business was a major blow.
'The company coming to New Zealand to do the advance inspection cancelled their trip and said they wouldn't think about this destination in the short term.'
CTS brings about 35,000 Chinese here each year, and although numbers have dipped a little, Li does not believe the tragedy will have a long term impact.
She is already planning tour itineraries based around Chinese romance movie Only the Cloud Knows, which is due for release in December and features picturesque locations such as Clyde, Aoraki Mt Cook and Kaikoura.
He Yu was part of Cao's Chengdu tour party, a well travelled group whose previous trips had covered Australia, Asia and Europe.
She says they intended coming to New Zealand sooner, but were put off by the 2016 Kaikoura earthquake, and estimates the cost of coming here was about a third more than going to Tokyo.
Despite that they are keen to return to tour more of the North Island and see a live Kiwi instead of just a stuffed museum specimen.
Tourism New Zealand (TNZ) has positioned the country as a premier destination, targeting independent Chinese travellers who stay longer and spend more, rather than cheap shopping tours tacking a few days in Godzone onto the end of an Australian trip.
There is concern New Zealand may be pricing itself off the market with some three star accommodation demanding five star prices.
Li warns that middle to high income Chinese expect value for money,'they're getting more and more picky on the quality,' and some are hotels falling down on service standards.
Skyline Gondola commercial manager Craig Douglas says that in the context of how quickly the Chinese market grew, a correction was expected, but pricing is an issue.
'We're a small operator in the global tourism space, we're an expensive offering, and we need to ensure we deliver up the value that goes with those costs.'
The fact that the total Chinese spend has largely held up in the face of falling arrivals is cited as proof that the tourism industry's value over volume approach is working.
However, by its own admission MBIE spending estimates for China have a relative margin of error of 13 per cent.
Tourism research company Fresh Info managing director Shane Vuletich describes the spend data as 'heinously inaccurate' because it is hard to get Chinese to respond to the online survey it is based on.
He says the boom in Chinese visitors was off the back of more airline capacity and cheaper seats.
'Everyone thinks Chinese airlines' pockets are infinitely deep, but the reality is if you haemorrhage cash for a few years you're going to pull the plug.'
That said, he does not expect the China market to go the way of South Korea that in the late 90s and early 2000s 'came big time and went big time, I think China is different and more resilient.'
Even so he believes it will be quite some time before China is as stable as markets like Europe and we can expect to see volatile ups and downs of 20 to 30 per cent.
To turn around the decline, TNZ is investing more in promotions on Little Red Book, a Chinese social media site with 200 million users, and it is targeting three specific age groups instead of aiming at a broad Chinese audience of 25 to 55-year-olds.
TNZ's Asia general manager Gregg Waffelbakker says they are also turning their attention to western cities such as Chengdu and Xi'an, and other parts of China.
'While the [Chinese] economy continues to grow, per capita GDP in these tier 2 and tier 3 cities is in many cases growing faster than tier 1 cities, so that's our future play, but we're only doing it where there is airline connectivity. There's less value promoting where people can see New Zealand, but they can't easily get there.'
Sheepworld attracts about 100,000 visitors a year and Collyer has introduced a Mandarin commentary to cater for the Chinese market.
He hopes to increase their tiny slice of that particular pie, but warns a lot of the hype about New Zealand's tourism boom is just that, and the story at a grassroots industry level is very different to official utterances about how good things are.
'It's not all plain sailing, it's not all growth, people in the industry will tell you it's a lot more difficult that than, and it's nowhere near as rosy as the media headlines and the people with a vested interest will tell you.'
Stuff travelled to China with assistance from the Asia New Zealand Foundation