Suitcases packed, passports ready, and a global shift afoot – why the rise of international tourists from the emerging world is now a travel story, too, and a potentially transformative one.
By Afshin Molavi | August 23, 2017
Tis the season to go to Ibiza. Or Bali. Or Miami, or maybe just pack the car, round up the kids, and go to a nearby beach. August is, after all, vacation month in much of the Western world and is also vital to the bottom line of the global travel industry, one of the most unheralded economic engines in our world today.
Those sunburned Germans on Thai beaches, British package tourists in Dubai resorts, or selfie-taking Americans in Venice are not only having a holiday but contributing to the global economy. According to the World Travel and Tourism Council, the industry accounts for more than 10% of global GDP and nearly 300m jobs.
But the picture we get of global travel from glossy magazines – of mostly white Westerners experiencing “exotic” locales – fails to capture the biggest story in travel over the last decade: The rising tide of international travellers from the emerging world. The rise of “the rest” is now a travel story, too – and a potentially transformative one.
As middle classes grow across emerging markets, they have developed the middle-class taste for a holiday. According to a wide-ranging Credit Suisse survey, most people in emerging markets rank spending on holidays at or near the top of the list of things they aspire to spend money on. From China to South Korea, Malaysia to India, Asia is witnessing an international outbound travel boom.
As with all emerging market trends, China is the leader. According to the UN World Tourism Organisation (UNWTO), the number of Chinese outbound travellers hit some 135m last year. The Chinese traveller has surpassed the American traveller as the biggest force in the industry, beating Americans in total outbound numbers and in spending. Last year, according to the UNWTO, Chinese international travellers spent $261bn – larger than the entire GDP of Greece or Portugal.
A rising number of those travellers have come to the US, spending some $33bn in 2016, according to the US Commerce Department. The Chinese – thousands of miles away – are well on their way to becoming the third-largest visitor group to the country, after Canadians and Mexicans, respectively.
While President Donald Trump rails about the US trade deficit with China, US travel industry professionals are busy wooing Chinese travellers. At travel industry conferences in the US, there is the inevitable breakout session on “how to attract the Chinese traveller”. The one-word answer is: Shopping. According to the Commerce Department’s National Travel and Tourism Office, shopping ranks [first] among traveller priorities, followed closely by sightseeing and fine dining. The Chinese traveller also tends to favour the coasts, with California and New York the [number one] and [number two] states, respectively, accounting for some 70% of all market share. Los Angeles is the most oft-visited city, according to Commerce Department numbers.
US hotels were early pioneers in catering to Chinese tourists with tea kettles, Chinese-language menus, and familiar food items such as congee (rice porridge) and noodles showing up in hotel restaurants. This month, Maryland-based Marriott International announced a joint venture with the Chinese e-commerce behemoth Alibaba Group targeting the Chinese consumer. Alibaba, the world’s sixth-largest retailer, also owns Alipay, the online payments service that conducted $1.7trn in transactions last year (yes, trillion). Marriott is not alone. Caesars Palace in Las Vegas allows its Chinese guests to pay for their rooms on China-based WeChat’s digital payments platform, Alipay’s main competitor. Meanwhile, Virginia-based Hilton Worldwide has launched a Chinese-targeted program known as “Hilton Huanying”, derived from the Chinese word for “welcome”.
India, too, is rising in international travel. From some 20m international travellers today, the UNWTO sees a possible 50m Indian travellers by 2020. India’s young population and growing middle classes ensure a steady stream of outbound travellers. Top travel destinations include Singapore, Dubai, Bangkok, Paris, London, and New York. Countries such as Jordan, Australia, and Israel are also making it easier for Indians to get visas.
Indian travellers to the US broke the million mark in 2015 and now number 1.1m. Since 2009, the US market has seen a 113% rise in the number of Indian travellers, according to the Commerce Department’s India report, though these numbers are tilted more toward business travellers than leisure ones. Like Chinese leisure travellers, Indians cite shopping and sightseeing as the top two reasons for leisure travel to the US.
All told, Asia’s large economies could spend up to $365bn annually in travel by 2025, according to figures provided by Visa. That’s triple the amount forecasted to be spent by American travellers in the same year, and Asia’s dominant demographics suggest this gap will likely widen. By 2030, nearly 60% of the world’s population will live in Asia. Add Africa to the mix and you have some 77% of the world’s population in those two regions.
“To travel,” Aldous Huxley once quipped, “is to discover that everyone is wrong about other countries.” A new generation of Asians is discovering their own continent and maybe discovering that old stereotypes or state propaganda hardly reflects the truth. While hard to pinpoint, the explosion in intra-Asian travel over the past decade could have a similar effect as the explosion of intra-European travel since the fall of the Soviet Union and the rise of the EU: A generation of Germans and English and French and Scandinavians who know and understand each other better and are less likely to resort to national stereotypes. This is not a small thing for a continent that has given us two of the deadliest wars in the past century. The Erasmus pan-European student exchange programme is particularly credited with building a European identity among young people.
To be sure, geopolitics still plays a role in Asia travel, and Chinese tourist numbers to Japan and South Korea ebb and flow with the political temperature, but the genie is way out of the bottle. But make no mistake: South China Sea tensions will not go away because Chinese like to shop in Tokyo, but, over the long term, this level of interactive travel will lay the social groundwork for a more peaceful Asia.
What’s more, easy access to air travel has, in the words of University of Hong Kong professor Max Hirsh, “fundamentally reshaped the mental map of Asia’s urban middle classes”. Their mental map is far more expansive and confident. This confidence contributes to what might be viewed as a hope gap dividing the West and the rest. This time, the hope gap has shifted, and the balance is tilted toward “the rest”. According to the Pew Research Center, people across emerging and developing countries are more optimistic about their future than Americans or Germans or French. This might be because middle classes are growing across the emerging world, especially in Asia, while they are faltering in the West.
While this might be seen as a good news story in the emerging world, there’s a darker side to this as well. Rising middle classes have rising expectations, and, when unmet, uprisings can ensue. In some ways, the Arab uprisings played to this script. It’s much more difficult to grow a mature middle class than build one from a poverty-stricken country with nowhere to go but up.
Finally, what of local tourism industries in places like China and India? Will they lose out to the Londons and New Yorks or to the Hong Kongs and Dubais? As China shifts its economic focus toward domestic consumption, national tourism could be a significant boost. The answer to that question may lie in the sheer numbers and in global competition. With numbers like India’s and China’s, there is plenty to go around, but tourism industries in both countries will need to step up their game, targeting local tourists rather than always looking to the Western traveller.
It should come as no surprise that the emerging-world consumer is reshaping the travel industry. They have already reshaped industries including smartphones, spirits, cars, and commodities, among many others. Rapidly urbanising middle classes from Karachi to Kuala Lumpur, Johannesburg to Jakarta, have become engines of consumption growth. As the Brookings Institution scholar Homi Kharas notes, from 2015 to 2030 middle-class consumption worldwide could grow by $29trn. Only $1trn of that added spending, Kharas notes, will come from the advanced economies. The rest will come from, well, “the rest” (and mostly Asia).
The rise of the traveller from the emerging world is also reshaping the aviation industry. The International Air Transport Association estimates that by 2036, 7.2bn passengers will fly annually, up from 3.8bn today. More than 50% of that growth will come from the Asia-Pacific region, and two-thirds of air travel growth in that period will come from emerging markets – often on emerging-market carriers (another global travel industry disruptor).
By 2024, China will surpass the US as the world’s largest aviation market, measured by both internal and external travel, and, one year later, India will jump ahead of the UK into third place. This shift in travel should not be underestimated. As late as the end of the 20th century, Chinese travellers hardly ventured beyond their own shores or Hong Kong and Macau. At this same time, international vacation travel for the middle-class Indian was rare. For most Asians, travel was exotic, a luxury.
According to HSBC, Chinese travellers could number 224m by 2024, and five US cities are among the top 10 fastest-growing destinations for Chinese travellers, according to Oxford Economics.
The rise of the Chinese traveller is of a piece with three trends that are changing the world: Growing middle classes in the emerging world, rising connectivity (both physical and technological), and rapid urbanisation. With more than 85% of the world’s population living outside of North America and Europe, it’s no wonder that the future growth of travel will depend on rising middle classes in Asia, Africa, and Latin America – and none will be more important than China.
Connectivity has become a buzzword in talk of globalisation, where it often refers to internet connectivity and global supply chains, but the air connectivity of the past quarter-century should not be discounted, and it’s bringing Chinese to the world in ways unimaginable a generation ago.
Another US-based hotel group sees the writing on the wall. It has been actively courting the Chinese traveller with Chinese-language welcoming notes and red envelope specials during the Lunar New Year. That hotel group? Trump Hotels.
Business is business, after all.
Afshin Molavi is co-director of the emerge85 lab.
A version of this article first appeared in Foreign Policy on August 23, 2017.