By guest authors Kay Chen, Will Enger, Jackey Yu, and Cherie Zhang from McKinsey. Kay Chen is a business analyst in McKinsey’s Taipei office; Will Enger is a partner in the Hong Kong office, where Jackey Yu is an associate partner; and Cherie Zhang is a knowledge specialist in the Shanghai office. The authors would like to thank Jia Zhou, Aimee Kim, and Peimin Suo for their contributions to this article.
A survey of 1600 travelers shows how their travel patterns may change in the near term.
The global travel sector has taken a catastrophic hit as a result of the COVID-19 pandemic, which continues to keep most of the world in lockdown, and away from resorts and tourist hotspots. As China’s economy emerges from the stasis engendered by coronavirus containment measures, it is important to understand how long it will take for consumers to regain the confidence to leave their homes for leisure travel. With this in mind, we surveyed 1,600 travelers in eight Chinese cities about their attitudes to leaving home for leisure, as the first wave of a broader COVID-19 Travel Sentiment Survey.
Respondents in our survey had taken a domestic or international leisure travel trip within the last year, and were based in Shanghai, Beijing, Guangzhou, Shenzhen, Chengdu, Xi’an, Xiamen, and Wuhan. Data were collected from April 13 to April 18. Where relevant, we compare responses with our 2019 McKinsey Consumer Sentiment Survey.
We asked respondents when they are likely to take their next trip, who is planning to travel, and with whom, where they want to go, and what they want to do (Exhibit 1). The upshot is that though various measures of economic activity are on the rise in China, the rebound in leisure travel sentiment has so far been conservative: 13 % of travelers report that they plan to take a trip in the next three months. Intracity leisure trips are more popular, with slightly more than a third of respondents expecting to increase local leisure trips in the next month. Most travelers will continue to stay close to home; less than 5 % expect to increase their overnight domestic leisure trips.
While overall sentiment among Chinese consumers has recovered rapidly over the past several weeks—with 36 % of consumers optimistic about China’s economy, when it comes to travel, the rebound in confidence appears to be slower. The survey also reveals several important insights into the way leisure travel behavior and sentiment is shifting in the wake of the peak of the outbreak in China.
1. Most travelers expect to make their next leisure trip between September and October, with a noticeable uptick around the National Day holiday. Expectations of future leisure travel are fairly evenly distributed around the National Day, with about 13 % of travelers expecting to travel over the summer for the first time, and 56 % of travelers in the September–October time frame. While a small proportion of respondents expect to travel in early summer, the majority do not expect to return to the market until the week-long National Day holiday around October 1. Travelers are waiting on an announcement from experts (54 % ), or the reopening of schools (54 % ), before they are ready to take their next leisure trip.
2. Young, single, and experienced travelers expect to travel first. Travelers who expect to take a trip in the next three months are generally young, single, middle-class, and experienced travelers (Exhibit 2). They are also from the enlarged group of 19 tier-one cities, with Shanghai and Chengdu most heavily represented. Some among this group have already explored local leisure travel postcrisis—31 % said that they engaged in intracity leisure travel in April.
Most respondents do not feel safe enough to travel for leisure, but sentiment is quickly improving. Overall, between 85-90 % of respondents felt that in early April it was “not safe at all” to leave their hometown for leisure travel. However, working in the local area is now seen to be “somewhat safe” (62 % ), while 36 % of potential travelers say they will travel within their cities more frequently in the coming month. Sentiment towards domestic travel is also improving, with the % age of respondents that consider it “not safe at all” to travel in the next month falling to 50-60 % of respondents (compared with early April).
This increasing confidence in the safety of travel, driven by the improving local experience, is giving potential travelers more range of movement—from local city to the provinces they live in. Although cross-province travel was still banned for the recent Labor Day Holiday, and outbound international travel is still not possible, the outlook from the perspective of safety for both shorter and longer distance domestic trips is improving—with trips within three hours of the city expected to be nearly as safe as local leisure travel is today.
3. Domestic travel is most favored, but many are undecided on destination. The majority of respondents (55 % ) expect their next leisure trip to be domestic (Exhibit 3). However, despite the challenges of COVID-19, almost a quarter think that their next leisure trip will be international. Another 22 % have not thought about the destination yet. Self-driving or car rental options are viewed as more acceptable and safer than rail or air transport.
4. Food and family destinations popular despite virus concerns. While travelers plan to avoid crowded tourist spots, visiting scenic attractions outdoors ranked as the most popular type of trip. Food- and family-themed destinations were also a top-three choice, with shopping falling to the bottom of the list (Exhibit 4).
5. Leisure travel groups are shrinking. Prior to COVID-19, 66 % of travelers planned to travel with family, either with their parents, or even with family members from across three generations. In a large reversal, 69 % of respondents now plan to travel solo, or with their significant other, compared with 30 % pre-epidemic (Exhibit 5).
Guided tour packages have fallen dramatically in popularity, with only 10 % of travelers saying they would take a group tour for their next trip; 68 % said it was impossible to even consider the option (Exhibit 6). In the pre-COVID-19 period, 28 % of travelers preferred tour formats with groups of 10 people or more. Smaller groups (<10 people) are now more popular, with 31 % of respondents likely to choose this as an option, nearly triple the % age observed in 2019.
Implications for players in the leisure travel value chain
While the travel sector is in the very early stages of recovery, we see opportunities for agile players to serve returning travelers by taking the following three steps:
- Target marketing: Leisure travel players should target marketing at the discrete categories of traveler who intend to return to the market in the next three months, from three to six months, and beyond six months, at the city level. Sentiment across cities varies, and we expect the rate of change in sentiment over time in cities will also differ sufficiently to impact the recovery curve—though this hypothesis is still untested.
- Adapt offerings: Players along the entire value chain will need to quickly iterate offerings to appeal to shifting traveler demographics that so far point towards smaller groups, as well as younger, urbanite travelers. There are suggestions that these travelers are seeking to scale up their experience: 41 % of respondents expressed a preference for luxury or upscale hotel options, compared with an actual share of 31 % of such bookings in China last year. There is also opportunity in the relatively high proportion of travelers who have not yet thought about their destination.
- Watch for retail opportunities: Travel retailers should adjust strategy in light of the abrupt shift to about 70 % of respondents planning to travel without their family. Historically, this travel group size spends a larger proportion of the total trip budget on retail, even if the purpose of the trip is not shopping. This represents an opportunity for retail brands to re-engage with customers.
While the recovery from COVID-19 will take some time—particularly for travel—it is promising to see early indicators of improving sentiment in China. While international travel will be subject to regulatory restrictions and quarantine challenges for the foreseeable future, domestic options are increasingly perceived as safe. As the “first wave” of travelers begin to post their experiences on social media, this trend may accelerate in China—offering hope for the global travel industry as a whole.