Taiwanese travel retailers are facing strong headwinds after the Chinese government halted solo travel permits to Taiwan, effective August 1.

As reported, China’s Ministry of Culture and Tourism announced last Wednesday it was restricting a pilot programme permitting travel by residents from 47 mainland cities.

The restriction is expected to have a major impact on bookings by Free Independent Travellers (FITs) planning to visit Taiwan, according to big data, IT and business intelligence company ForwardKeys.

Jérôme Goldberg, Global Retail & Travel Retail Division Director, ForwardKeys told TRBusiness: “As the ban on FIT travellers only started on August 1 for new bookings, it is too early to assess the potential impact on the total number of Chinese visiting Taiwan.

MAJOR BOOKING IMPACT

“What we can anticipate is a major impact on bookings by FITs planning to visit Taiwan. We saw how effective Chinese government actions can be on travel, when groups were banned from entering South Korea [during the THAAD missile crisis].”

In the first half of 2019, ForwardKeys reveals average lead-times (numbers of days between Chinese booking trips and travelling to Taiwan) of 2.9% (0 to four days), 17.2% (five to 14 days), 23% (15 to 29 days), 18.1% (30 to 44 days), 11.6% (45 to 59 days), 12.8% (60 to 89 days), 6.8% (90 to 119 days) and 7.7% (120 days or more).

According to Goldberg, it will be interesting to monitor if the anticipated sharp decrease of new bookings comes with the cancellation of existing bookings. “If this is the case, the Taiwanese tourism ecosystem will suffer much more as prior to the ban we had registered an increase in bookings from Chinese travellers planning to visit Taiwan in the second half of the year.”

He added: “Chinese FITs are heavy spenders so the duty free players in Taiwan will be facing strong headwinds in any case.”

A possible government ban on Chinese group travellers has also been mooted, but should this fail to materialise, Goldberg still believes Chinese group bookings could actually decrease.

“Future travellers are likely to play it safe and avoid selecting a destination with uncertainty around its future.”

With Chinese leisure FITs and group travellers to Taiwan accounting for 88% and 12% respectively, according to ForwardKeys, Goldberg remarked: “The burden will be mostly carried by FITs.”

EVER RICH ASSESSES SITUATION

All things considered, The Chinese National Day Golden Week period, beginning 1 October, is expected to be a testing time for the major Taiwanese retailers. “Preferential treatments targeting non-Chinese countries will take some time to be effective,” Goldberg emphasised.

Other DF&TR operators worldwide, could, however, benefit from the situation. He explained: “I’m sure operators all over Asia will carefully follow the alternative destinations Chinese FITs select instead of Taiwan. There is no reason why they will not keep travelling.”

Speculation over the timing of the ban has led to suggestions it is a political move from Beijing to frustrate Taiwan’s election run-in in January.

One industry source, who asked not be named, told TRBusiness: “I believe the ban is a deliberate attempt by the PRC to isolate Taiwan and also assist the Taiwan opposition party to win seats in the upcoming legislative election and presidency.”

This aside – and for all the talk of a reduction in FIT travel – it is generally acknowledged that Chinese arrivals to Taiwan have eased off in the past few years.

“In my view, ever since the Democratic Progressive Party (DPP) has been in power since 2016, PRC pax has been dramatically reduced, our government has encouraged other Asian nationalities – Korean, Japan, Vietnam etc – to travel to Taiwan,” commented the source. “The government provides subsidies to encourage other nationalities to travel to our country to compensate for the loss of PRC pax. I foresee the Taiwan Airport duty free business remaining in single-digit growth.”

With the diminished PRC numbers in mind,  leading Taiwanese travel retailer Ever Rich Duty Free has also played down the effects of Beijing’s move.

A Spokesperson said: “The banning […] will definitely cause some impact to the Taiwan tourism industry and Ever Rich. However, both the Taiwanese government and especially Ever Rich in recent three years has started to develop a diversity of customer sources – for many years the customer profile of Ever Rich has mainly consisted of Taiwanese.

“Moreover, we have seen gradually increasing numbers of Japanese and Korean customers and a large growth in the percentage of South East Asian tourist arrivals. Therefore, we don’t see it as too big an impact on us and also it should not be a long-term policy. We will still focus on what we should do: to enhance passengers’ duty free experience, provide unforgettable service to all our customers and to give back to society.”

Another well-informed industry source, who also preferred not to be named, questioned the significance of the ruling, calling it ‘just an announcement’ by the Chinese government on its travel policy. They told TRBusiness: “There is always a new rule in the build-up to the Taiwanese election which takes place in January 2020. I think the situation will be resolved if a new President is appointed or the existing one remains in office.”

MITIGATING ANY EFFECTS…

Shedding further light on the potential impact of the ban on Taiwanese travel retail, the source commented: “As this is a new policy, it will have no impact on those travellers who were issued visas before the ban was introduced.

“We are unsure of the number of visas issued by the Chinese government prior to the ban, but what we do know is that there will be an impact in terms of sentiment among those who are still planning to visit.”

Now that the ban on solo Chinese travellers to Taiwan is in place, preferential treatment for group and individual visitors to Taiwan from other countries, as previously mentioned, is expected to be introduced.

This, however, does not alter the fact that Chinese FITs, which account for 40% of total passengers passing through Taoyuan Airport, are usually high spenders. “They usually stay at better hotels and spend more on transportation and food.

“Apart from buying souvenir and package food, they also purchase luxury goods including watches and jewellery and luxury fashion products for themselves or as gifts,” the source continued.

As the impact of the ban kicks in, Taiwanese travel retailers such as Ever Rich and Tasa Meng, will hope marketing strategies already in place to attract more passengers from South Asian countries, for example, limit the impact.

TRBusiness understands these campaigns have already attracted more visitors and generated increased spend.

One source highlights a link between the situation in Taiwan and current anti-extradition bill protests in Hong Kong (the extradition bill has now been suspended) and suggests pro-democracy protestors will most likely head to Taiwan.

“As Hong Kong protests have progressed further in the past months, our DPP government is in support of anti-China protestors in HK and allows HK protest activists to flee to Taiwan to avoid arrest.”

Stay close to TRBusiness for further developments on this story…