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Asia sees lower average regional spend, driven by value seekers


The rise of less affluent middle-class Chinese travellers continues to bring down the average spend of Tax Free Shopping (TFS) globally, with a sizeable impact in Asia.

August sees the region’s lowest negative TFS sales growth of -13% (vs 0% in July) year-on-year (YoY) since the beginning of the year. Across the region more ‘value seekers’ from second-tier and third-tier cities are growing their transactions, which are up +25%, but with less affluent spending patterns – average spend is down -30%, largely a result of the stronger yen affecting Japan’s performance.  

The number of travellers continues to grow in Asia, with increased visitor numbers travelling via new air routes, and this correlates with higher numbers of transactions in South Korea, Japan and Singapore. But the overall sales performance in the region is significantly limited by a number of key headwinds: the stronger yen in Japan is causing a decline in average spend; Japan has recently dropped its minimum tax-refund spend threshold from 10,000 yen (88 euro) to 5,000 yen (44 euro), which is mechanically averaging down spend per transaction; plus Chinese spending in the region is increasingly being driven by  new value-seeker globe shoppers, who are spending less.

Singapore has seen a +55% increase in tourist numbers in the first half of the year. However, this has prompted Jing Daily to ask if the recent luxury cruise boom in the region has been the cause of the inbound numbers bump, or if it is in fact more likely to be down to higher numbers of Chinese visitors from second-tier and third-tier cities; these tourists are making the most of cheaper tour packages, such as those advertised by Ctrip.

All Global Blue’s Asia TFS destinations are relying on increased arrivals and traffic, yet the common theme is lower spend potential.

With -33% sales, Japan continues to be affected by the strong currency, which is negatively impacting the number of transactions, while the new minimum spend here reflects the shift towards a lower normal regional average spend. Global Blue estimates that 23% of Japan’s negative sales performance this month is driven by the softer yen and the other 10% is due to increased numbers of less affluent Chinese globe shoppers arriving in Japan (+20 to +30% more in the first half of the year at Narita airport) from second-tier and third-tier cities.

South Korea’s sales performance of +44% this month (vs an impressive triple digit growth of +215% for July) is still largely a benefit of the late-summer MERS comparison period; between June and August last year tourists stayed away and as a result the TFS sales base is extremely weak. However luxury brands are wary of the impact that China’s recent politically motivated K-pop ban might have on luxury consumers visiting Korea, reports Jing Daily.

In Singapore the recent Zika virus scare has caused tourists to skip Singapore and head for Kuala Lumpur instead, meaning the country’s sales are down -3% for August.

Transaction numbers are significantly up across all globe shopper nationalities in Asia, except for Hong Kong (-10%), reflecting the increase in air arrivals across Japan and South Korea. With Taiwanese globe shoppers (+43%) showing the highest transactions growth in the region, followed by Chinese (+28%), and with Thais and Indonesians up too, the decline in average spend per transaction is a long-term trend to be considered.

Year to date: Asia trends

The new Chinese value seekers are having a negative impact of between -6% and -10% across Asia as their demand for regional travel increases, driven by the Chinese government’s strategy of strengthening the economy by localising part of discretionary spending.

Year to date sales performance across the region is flat and average sales are down -21%. Overall, due to the current less favourable economic situation in mainland China, frequent Chinese globe shoppers are reducing their average spend through reduced numbers of trips and lower spend per trip, highlighted by Japan’s current picture for the year to date: +26% increase in transactions and -25% decline in average sales.

Look ahead: Golden Week

Travel within Asia looks likely to be the dominant trend, especially for Chinese travellers this Golden Week.

‘Japan and South Korea have had a good performance this year and for Golden Week, the performance is ever better,’ a leading Chinese tour operator in Beijing, tells Global Blue. ‘Customer capacity has been achieved and although many of them are FIT [Free Independent Travellers] customers, the volume of package tour bookings is still quite big. Japan and Korea will continue to grow for us.’ The tour operator adds that over the summer South Korea has been ‘packed’ and the market there has improved rapidly this year. ‘The advantage of package tours is that they are cost-effective and convenient, so many travellers still prefer them. If the national policy between Japan and South Korea and China stays the same, trips within Asia will keep growing steadily,’ says the spokesperson. 

While Hong Kong remains a popular travel choice for Chinese (especially younger millennials), South Korea and Thailand are catching up as experiential destinations, says Jing Daily, citing new research from Daxue Consulting. Millennials, especially FITs, are booking trips with experience or culture in mind, and China Daily reports increasing numbers of 30-somethings with disposable incomes of about 17,000 yuan (2,275 euro) per month are originating in second-tier cities, according to The Changing Face of the Chinese Traveler, a report from global management consultancy Oliver Wyman.

Global Blue takeouts:

• Global Blue’s Asia sales performance for August is the lowest since the beginning of the year.

• The rise of middle-class Chinese value-seeker travellers originating in second-tier and third-tier cities continues to bring down average TFS spend in Asia, despite increased numbers of arrivals and transactions in the region.

• Forward bookings for the upcoming Golden Week in October indicate localised Asia travel will be the biggest trend.

• Increased FIT and experiential travel tastes among millennials are negatively impacting tour operators’ forward bookings for Golden Week, as FITs prefer to make their own travel arrangements.

 

Global Blue corporate data reporting includes Tax Free Shopping (TFS) transactions from our key TFS destination markets across EMEA, Asia and Americas, where more than 24 months of back data is available. Global Blue data points referenced within our corporate content may vary from other third party reports that publish our data, due to different parameters set by these third parties

 


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