What is the future of China-Pacific tourism?

The Pacific tourism industry is likely to look to China to help it rebuild after COVID-19, but there are major challenges that need to be addressed if the sector is to recover in a sustainable way, Denghua Zhang writes.

Tourism is a pillar industry in the Pacific, contributing 11.1 per cent of the region’s gross domestic product or US$3.8 billion in revenue, and creating 131,010 jobs in 2018. China’s promotion of tourism cooperation as part of people-to-people links suggest there are opportunities for Pacific tourism as part of the region’s post-pandemic economic recovery.

Starting from a low base, China had become the fastest growing tourism market for the Pacific pre-pandemic. Chinese visitors to nine of the 14 Pacific Island countries (PICs) – excluding Cook Islands, Kiribati, Nauru, Niue, and Solomon Islands – rose from 278 in 1995 to 3,969 in 2008, 25,988 in 2009, and 84,468 in 2014. The share of Chinese tourists in the Pacific was seven per cent in 2014 and is expected to increase to 26 per cent by 2040.

The significant growth of Chinese visitors to the Pacific was driven by a fast-growing middle class in China and booming China–Pacific relations. China granted ‘approved destination status’, which is offered to countries recognising China over Taiwan, to nearly all its diplomatic partner countries in the Pacific. This status gives these tourist destinations the right to advertise in China and allows Chinese visitors to travel in groups to these countries.

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It is worth noting that more broadly, despite the rapid growth, the Pacific is still not a principal destination for Chinese tourists. In 2018, 124,939 Chinese tourists visited the Pacific, accounting for 5.84 per cent of all overseas tourists to the region, and 0.088 per cent of all Chinese outbound visitors.

By contrast, tourists from Australia, New Zealand, the United States, and Europe accounted for 28.9 per cent, 21.8 per cent, 10.5 per cent, and 9.7 per cent, respectively, of all tourists in the Pacific in 2018.

However, assuming China’s economy continues its growth at the pre-pandemic rate, the growth of Chinese visitors to the Pacific is likely to continue when pandemic restrictions are lifted and international travel eventually resumes, with strong interest likely from both Pacific and the Chinese governments.

With the pandemic having a devastating impact on Pacific economies, the prospect of a boost in visitor numbers from China will be attractive. Even prior to the pandemic, the World Bank recommended that PICs tap into the Chinese tourism market to assist them to reach their development goals.

From the Chinese Government perspective, it will likely seek to promote China-Pacific tourism cooperation as a way to strengthen its people-to-people diplomacy as it rolls out the Belt and Road Initiative.

In recent years, Beijing and the South Pacific Tourism Organisation (SPTO) launched the 2019 China–Pacific Tourism Year in Samoa and signed the China Pacific Tourism Development Initiative for 2020–2024. The SPTO is also helping its member states and tourism agencies within the countries to be ‘China ready’.

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As the geopolitical competition between China and traditional powers such as the United States, Japan, Australia, and New Zealand unfolds in the Pacific, China will look to tourism as an effective way to gain inroads into the region.

However, there are also challenges for China-Pacific tourism engagement.

The first challenge relates to the expected continued reduction in Chinese visitors to Palau – China’s former largest tourist destination in the Pacific – due to the Pacific state’s recognition of Taiwan. The Chinese Government has tightened control on its tourists holidaying in Palau since 2016 as diplomatic competition between Beijing and Taipei intensified in the region.

This coincided with the Palau Government’s efforts to limit the mass arrival of Chinese tourists, citing challenges on local accommodation and environment. In 2017 and 2018, Chinese visitors to Palau decreased by 11 per cent and 28.6 per cent respectively. The economic impact on the local tourism industry has already been felt, leaving local businesses struggling.

The second challenge is PICs’ limited carrying capacity and their need to preserve the environment and local cultures amid large influx of tourists. A report prepared for the Pacific Regional Environmental Program noted the need to emphasise sustainable tourism in the Pacific, adopt a development-centric rather than growth-centric model, and fully consider the environmental and social impacts of tourism on the region.

Third, the lack of regular direct commercial flights will continue to hinder China-Pacific tourism. In November 2013, Deputy Director of China’s National Tourism Bureau Du Jiang said China needs to open direct flight routes with PICs.

In 2017, Professor Ouyang Jie from the China Civil Aviation University and another scholar made the same proposal from the perspective of promoting the Belt and Road Initiative, suggesting that Chinese ministries establish an internal coordination mechanism to discuss this issue.

However, a senior Chinese expert who spoke with this author late last year indicated that little tangible progress has been achieved, despite China’s eagerness to open direct flight routes between their cities and Fiji in particular. The Fijian side is reportedly reluctant, fearing that Fiji Airways may not be able to compete with Chinese airlines. Conversely, Beijing is not interested in direct flights with other PICs as they are viewed as commercially unviable.

Last but not the least, some controversial or failed Chinese investments in the Pacific tourism sector are harming the credibility of China as a whole.

Looking into the future, there is potential for more growth of Chinese tourists to the Pacific region when the pandemic crisis ends. The disastrous impact of the pandemic on the mostly small, fragile island economies is likely to lead PICs to re-double their efforts to rebuild international tourist numbers, including from China. However, if the region is to reap the benefits of this growth in a sustainable way, substantial effort is needed to address the aforementioned challenges.

This article is based upon a paper published by ANU Department of Pacific Affairs (DPA) as part of its ‘In brief’ series. The original paper can be found here.