The Receding Dragon: The decline in Chinese Tourists to the Maldives

Some tourists pictured in the capital Male. MIHAARU PHOTO/MOHAMED SHARUHAAN

Some tourists pictured in the capital Male. MIHAARU PHOTO/MOHAMED SHARUHAAN

by Mifzal Ahmed

According to figures by both the World Bank and the Maldives Monetary Authority (MMA), our economy grew by less than 2% in 2015. This is the first time since the Financial Crisis of 2009 that the country has seen such a slowdown. Both these institutions argue this was caused “mainly due to lower tourism sector growth due to lower arrivals from China and Russia”.

This refers to the decline in Russian tourists from about 66,000 to 44,000, and the decline in Chinese tourists from about 364,000 to 359,000 between 2014 and 2015. Unfortunately, most of the analysis goes no further; implying that the true cause of the decline is the domestic economic problems China and Russia faced in 2015.

China Russia

However, viewing China and Russia through the same lens would be a mistake. This is because while Russian tourists to all outbound destinations fell in 2015 by 31%, (the sharpest fall since 1998), the number of Chinese outbound tourists to all destinations actually increased by 12%. In other words, while the economic problems in Russia had a significant effect on outbound tourism, the effect in China seems less significant.

We see this further if you compare Chinese tourists to other similar destinations in 2015. In neighbouring Sri Lanka, Chinese tourists have increased by almost 70% (from 128,000 to about 270,000). In Mauritius, Chinese tourists have increased by 41% (from about 60,000 to 90,000). In Bali, Indonesia, Chinese tourists increased 17% (from about 586,000 to 688,000).

Therefore, by putting the decline in Chinese and Russian tourist markets together, we maybe misdiagnosing the problem. It implies that if the domestic economies of these countries recover, then so will tourist numbers to the Maldives. It further implies that there is relatively little we in the Maldives can do to address this decline.

While this may be true of Russia, what is going in China is certainly not that straight forward. Given China is our largest tourism market, we need to understand why the numbers from China are stagnating.

Misconceptions about the decline

Before we do that, it would be useful to identify some reasons that may not be the true cause.

First, we have the declaration of the State of Emergency in the Maldives in November 2015. Undoubtedly the 20% decline in November 2015 (compared to November 2014), and the 11% decline in December 2015 did not help. However, this masks an overall decline that was happening throughout 2015 – as can be seen below.

Figure 1 – Quarterly growth in Chinese arrivals to the Maldives  (Source Ministry of Tourism Maldives)

Figure 1 – Quarterly growth in Chinese arrivals to the Maldives
(Source Ministry of Tourism Maldives)

 

As shown above, the growth in the China market had begun to slow down almost from the start of 2015. By the third quarter of 2014, which is normally characterized by a spike in Chinese arrivals into the Maldives, we were already seeing a slowdown in growth rate of Chinese visitors.  The worrying thing is that this trend has continued into 2016:  the first quarter of 2016 has seen further declines in the Chinese market by 11% compared to the same period in 2015.

This highlights an important fact about the Chinese market; it is relatively resilient to most domestic shocks in the Maldives. We saw this for example in the strong Chinese arrival numbers of 2012, despite the political disturbance of that year.

A second argument that we hear is that the China market has reached saturation point i.e. that the Chinese market, having tried to the Maldives once, now want to go to different destinations. They argue that the Chinese, unlike Europeans, are not ‘repeaters’.

Some tourists greeted at the Ibrahim Nasir International Airport.

Some tourists greeted at the Ibrahim Nasir International Airport.

This however is to ignore the sheer size of the Chinese market. The Maldives gets about 300,000 Chinese visitors, but the total Chinese visitors going abroad to all destinations in 2015 was over 120 million. Therefore, the scope for the market to grow is certainly there, even if we just target first time visitors. Furthermore, if this argument is true, it would not explain why destinations like Bali, which already receive over half a million tourists in 2014 are achieving double digit growth in 2015.

So what’s going on? And what should we do?

The simple answer to the first question is that we do not really know. It could be a whole host of reasons, ranging from the price of Maldivian holidays compared to competitors, the popularity of other forms of holidays like cruise-ships or travel agents making better profits by selling other destinations.

The first step therefore would be to figure this out. To this end, there are various practical things we can do:

  • Employ a competent Chinese market research firm to provide data on the reasons for the slowdown in the Chinese market
  • Convene a meeting of the key Chinese travel agents, Airlines, MMPRC / Ministry of Tourism, and most crucially the Maldives Tourism industry itself for an open and honest round-table discussion on why this is happening.
  • Identify how other countries continue to attract Chinese passengers can also be undertaken. In other words, try and figure out why other countries are succeeding in generating growth from China.

On this last point, there are examples of various marketing and PR efforts that have proven to be very successful with the Chinese market. Some of these include:

  • Encourage high profile Chinese celebrities to come to the Maldives and publicise this on social media
  • Provide or subsidize the filming of Chinese movies or TV series in the Maldives
  • Give financial incentives to airlines to fly to new markets or cities in China, as is done by other airports of the world.
  • Conduct coordinated events among resorts around a certain theme during specific periods of the year. For example, a Chinese cuisine festival can be undertaken whereby celebrity chefs from China are present at various resorts – all of which is publicized on Chinese traditional and social media.
  • Coordinate and co-fund a marketing campaign (based on solid market research) between the many stakeholders (Resorts, Airports, Guest Houses, Liveaboards, MMPRC) so as to achieve maximum coverage for the Maldives as a whole.

The Chinese traveller has been the one reason why the true effects of the Global Financial Crisis that hit western countries in 2009 were not felt so badly in the Maldives. Today, our tourism sector is infinitely healthier for having a balance of Chinese and European travellers because it reduces seasonal variation in hotel occupancy. This is something for which we are the envy of many of our competitors and it would be a disaster for us to lose it.


Editor’s Note: Mifzal Ahmed is Co-Founder and Vice President of Strategy at MEGA Maldives Airlines. MEGA Maldives Airlines is the largest international airline of the Maldives and the market leader in direct flights to China from the Maldives.

Be the first to comment on "The Receding Dragon: The decline in Chinese Tourists to the Maldives"

Leave a comment

Your email address will not be published.


*