The delay in a revival to pre-COVID levels by China's outbound travellers, the world's top spenders on international tourism and airlines, is hitting travel-related companies, hotels and retailers globally.

Eighteen months after China dropped strict zero-COVID policies and reopened its borders, the recovery in overseas travel is lagging behind market expectations and the shape of Chinese travel is changing, with a surge in domestic trips.

Pressured by a prolonged property crisis, high unemployment and a gloomy outlook in the world's second-biggest economy, Chinese consumers have become more frugal since the pandemic, prompting discount wars on everything from travel to cars, coffee and clothes.

Chinese people took 87 million trips abroad last year, down 40% from pre-COVID 2019, and industry observers say the pace has slowed since the Lunar New Year in February. China's travellers spent 24% less last year than in 2019, while U.S. travellers' spending was up 14%, according to U.N. Tourism data.

The Chinese lag is bad news for countries like France, Australia and the U.S., which were among the top destinations for Chinese travellers before the pandemic.

Liu Simin, vice president of the tourism branch of the China Society for Futures Studies research institute, forecasts China's international travel might not recover to pre-pandemic levels for another five years.

"The recovery is a lot slower than expected," Liu said. "The devaluation of the Chinese yuan combined with inflation in the U.S. and Europe is a double blow."

The Chinese currency has fallen more than 2% against the dollar since the start of the year, raising costs in yuan terms for Chinese travellers abroad.

Consultancy Oliver Wyman last month pushed its estimates for China's international travel recovery to late 2025, half a year later than it forecast last year.

"I would actually argue that consumers are even more cost-conscious than last year, and you'll also see that feed into travel trends," said Imke Wouters, Hong Kong-based partner at Oliver Wyman.

To be sure, overseas travel is rebounding, with Chinese travellers again the world’s top spenders on international tourism last year after falling behind the United States in 2022, according to U.N. Tourism data.

This summer 8% of flights at Chinese airports have been international, up from just 1% in 2022, according to aviation data provider OAG.

FLIP TO DOMESTIC TRAVEL

That recovery, however, is overshadowed by the surge in domestic trips, which hit a record 295 million during the five-day May Day holiday, up more than 20% from 2019, official data showed.

Domestic airlines seats were up 16% in May from the same month in 2019, while international flights were down 30%, Cirium data shows.

Wouters at Oliver Wyman said 40% of those who travelled abroad in 2023 for the first time since borders reopened had decided not to travel internationally again this year, mainly due to inconvenience and long visa processing times for many European destinations.

Beijing resident Wang Shu, 38, vacationed domestically after cancelling a trip to France because he could not get a visa, despite trying to book a visa appointment months ahead.

"I tried booking the interview in late March, as I planned to attend the French Open tennis in late May, but the earliest date that I could book was June 19," Wang said.

Wang instead vacationed in Changsha, the capital of Hunan province, known for its spicy food.

"The food was great, I watched a concert and spent one-tenth of the money I'd have spent in France," he said.

Australia's top source of tourists before COVID, China is now number four, with arrivals down 53% in March from March 2019, said Margy Osmond, chief executive of Tourism & Transport Forum Australia.

Chinese travellers to France, the most visited country in the world, have reached only 28.5% of 2019 levels, according to airport operator ADP.

Capacity on U.S.-China routes remains down more than 80% from 2019 levels, weighed by intensifying bilateral political tensions. The U.S. National Travel and Tourism Office expects Chinese tourism to the U.S. to recover fully only in 2026.

By contrast, countries with visa-free policies have received strong growth in Chinese visitors.

These include Singapore, Malaysia, Thailand, the United Arab Emirates, Qatar and Saudi Arabia, where flight capacity has also increased.

Switzerland, growing in popularity with high-end travellers on Trip.com, boasts a seven-day visa process, said Jane Sun, CEO of Trip.com Group (9961.HK).

Japan has also received a surge in Chinese travellers this year, boosted by a plunge in the yen's value.

"We are not just seeing a market re-growing, we are seeing a market re-shaping," Gary Bowerman, director of tourism intelligence firm Check-In Asia, told an OAG webinar last month.