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Flight constraints expected to weigh on China travel rebound

A lack of international flights is preventing a full recovery in the outbound Chinese tourism industry despite the resumption of quarantine-free travel, according to the top executive at China's largest online travel agency, Trip.com Group.
China said it would scrap mandatory isolation and mass testing for international arrivals on Jan 8., fueling huge demand for international travel as the world's second-largest economy pivots away from one of the world's strictest COVID-19 policies. The move coincides with Chunyun, the peak travel period in China during the Lunar New Year holiday.

But flight capacity is below 50% of pre-pandemic levels, according to Trip.com Group CEO Jane Sun, at a time when interest in traveling to foreign countries is surging. Trip.com Group recorded a 254% increase in outbound flight bookings on the morning of Dec. 27 compared with the previous day.

Sun was "prudently" optimistic that China's travel industry may return to 2019 levels by the end of the year. But capacity constraints are weighing on the industry's recovery.

"It's a capacity issue," Sun said in an interview with Nikkei Asia. "Right now we feel the capacity is not back to the 2019 level yet, so even if we fill all the available planes ... it's not at the 2019 level."

According to data from the travel group, large cities, including Shanghai, Beijing, Guangzhou were the most popular departure points in online searches for outbound flights.

Sun predicted the travel industry will see a triple-digit growth this year, but that a spike in "revenge" travel won't happen until the later half of 2023. "The first part [of the year] will be a gradual process for the industry ecosystem to rebuild its capacity," she said.

"There is lots of pent-up demand. But the infrastructure, staff level capacities do need to be rebuilt. So I'm sure we will be working very hard with our industry partners to increase the capacity and make sure they're very well prepared for the pent-up demand."

High infection rates could also hinder outbound travel, but Sun believes residents will learn to live with the virus. "It's not something that's as scary as the beginning of the pandemic," she said.

The return of Chinese tourists may not be the sudden wave that some observers were expecting, but it is still expected to give tourism numbers and revenues a boost. An ING economist noted in November, "It is extremely unlikely that Asia-Pacific tourism can manage a full recovery without Chinese tourism returning."

China's Ministry of Culture and Tourism data revealed there were 155 million departures from the country in 2019, a figure that plummeted to 20 million in 2020, when the coronavirus outbreak led to severe global travel restrictions.

Since Beijing announced it was relaxing its travel rules, countries across the world, including the U.S., U.K., Japan, India and Australia have required passengers flying from China to be tested for COVID-19 before arrival. Foreign governments cite opaque Chinese government statistics and concerns over the emergence of new variants as reasons for the requirement.

Sun said these restrictions will not do much to deter pent-up demand and would not be a concern in the long term. "Whoever gives the best options and makes it easier for the Chinese tourists to go, they will benefit from [Chinese visitors]," she added. Lunar New Year, typically a peak season for Chinese outbound travel, has seen demand skyrocket.

"The demand is already more than eight times [higher], compared to last year. ... As long as you have the flights that's available, hotel that's available, it will be filled very quickly."

For the past three years, Trip.com Group's operating revenue derived mostly from domestic travel, with almost no income from outbound travel.

Sun predicts that outbound tourism will help generate up to 30% of the company's operating revenue for the year ahead as China reconnects with the rest of the world.

"So going forward, we would like to see domestic, Chinese people travel within China, account 50%... and the rest is foreign [country] to foreign [country]."

Domestically, travel is expected to continue recovering. China's State Council on Friday said nearly 2.1 billion trips will be made during the Chunyun period, which runs from Jan. 7 to Feb. 15. That is an increase of 99.5% over the same period last year and 70% of pre-pandemic levels.
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