The dynamics surrounding affluent Chinese travelers and luxury spenders have undergone significant transformation in recent years. To understand the latest shifts in consumption and travel patterns amid economic uncertainty, we surveyed 3,563 affluent Chinese consumers in May 2024, and 3,787 consumers in October 2024. The survey also assessed whether we would see both foot traffic and spending return to previous levels. 

The global travel landscape is experiencing a gradual resurgence in Chinese travelers. However, key destinations like Hong Kong, Macau, and Hainan are struggling to capitalize on this trend. Our survey has revealed that ongoing economic uncertainty is affecting consumer sentiment and their willingness to spend on luxury products during international travel. Consequently, both domestic and overseas duty-free sales have been underperforming, prompting brands to adapt to changing economic conditions.

The gradual recovery of international travel for Chinese nationals

There has been a notable recovery in international travel among Chinese citizens, with the traveler count closing in on the pre-pandemic level by the third quarter of 2024. This resurgence is particularly evident in destinations such as Malaysia and Singapore, which have emerged as preferred places to visit. Malaysia has consistently welcomed Chinese travelers at levels exceeding pre-pandemic figures since June 2024, while Singapore experienced heightened numbers of Chinese visitors during the summer holiday period. This resurgence can be largely attributed to the introduction of visa-free arrangements. 

The largest outbound destinations, namely Hong Kong and Macau, saw mainland Chinese tourist numbers rebound to 2019 levels of 98% and 94%, respectively, in the third quarter of 2024. However, when considering the suppressed travel levels in Hong Kong in 2019 due to social unrest, there were still four million, or about 30%, fewer visitors to Hong Kong during the third quarter of 2024 compared to the same period in 2018. 

Despite the gap from a full recovery, we have observed more concentrated travel patterns around key holidays. During the 2024 National Day Golden Week in October, for example, the number of outbound travelers reached an impressive 7.6 million, surpassing the 2018 figure by 6%. 

How economic uncertainty is affecting outbound travel for Chinese consumers

Ongoing economic uncertainty continues to cast a shadow over consumer confidence. Factors such as declining property prices, rising unemployment rates, and stock market instability have contributed to a decrease in consumer sentiment. Our Chinese consumer sentiment index dropped to 74 in October 2024, seven points lower than two years ago during the pandemic. Sentiment with regard to the future for both the short term (73) and the long term (81) has significantly declined compared to two years ago at the end of the pandemic, with fewer respondents expressing confidence in the economic outlook. 

This lower sentiment is expected to impact the spending patterns of Chinese consumers. Moreover, sentiment for both international and domestic travel has reached a one-year low, with 33% of respondents indicating they will spend less on leisure activities in the coming year. 57% of respondents plan to reduce their spending on shopping during international trips. Notably, both core luxury shoppers, who spend ¥40,000 or more per year, and casual luxury shoppers do not anticipate spending much more on shopping during their international trips in 2025. Only millennials expect a meaningful increase of about 6% in their shopping budgets. 

Swapping luxury spending with increasing interest in dupe products 

In addition to shopping during travel, the willingness to spend on luxury products among core luxury shoppers has declined. Many consumers are turning to dupe products as alternatives, particularly in the apparel and jewelry categories. 

In 2024, 67% of core luxury spenders reported purchasing dupe products in the apparel category, and about one in four expressed a high likelihood of shifting most of their apparel and jewelry spending to dupe products in the next 12 months. In China, millennials are at the forefront of this trend. Over half of millennial core luxury shoppers have purchased dupe products in the apparel, beauty, and jewelry categories – substantially higher proportion than the other generations, where the gap is the widest for beauty products.

This shift in consumer behavior poses a challenge to luxury brands as they navigate changing preferences and seek to retain their customer base. 

Navigating the strong headwinds of duty-free sales

The weaker consumer sentiment also affects the performance of Hainan’s offshore duty-free sales. Despite 5% more travelers to Hainan from January to August 2024 compared to the same period in 2023, duty-free sales in Hainan decreased by 31%. This decline continues the trend of reduced spending per shopper. 

These trends signal a need for a refreshed approach to attract Chinese luxury spenders in Hainan, emphasizing the importance of enhancing the overall shopping experience and brand offerings in duty-free malls. 

So far, 2024 has proven to be challenging for both the luxury and travel industries. We maintain our view that the full return of Chinese travelers will take longer to come to fruition, and that luxury brands, retailers, and hospitality players will need to evolve and adapt to the changing spending patterns of Chinese travelers in this more challenging economic environment.