BANGKOK • From quiet beaches in Bali to empty rooms in Hanoi's hotels, pangs from China's economic malaise and weakening yuan are being felt across South-east Asia's vacation belt.
A boom in Chinese outbound travel that stoked tourism across South-east Asia in recent years is now in reverse gear. The abrupt decline of Chinese travellers is becoming a painful lesson for countries such as Thailand and Indonesia that had become overly dependent on Asia's top economy.
"The slump in Chinese arrivals and tourism spending is being felt throughout the region," said Mr Kampon Adireksombat, Bangkok-based head of economic and financial market research at Siam Commercial Bank. "There is always a concentration risk when relying on one market, and many countries may not be able to find a replacement for growth fast enough."
The slump is expected to continue next year if the trade war continues to weigh down the Chinese economy, he said.
Rising incomes over the past decade fuelled the wanderlust of middle-class Chinese consumers, making them the world's largest outbound travel market, according to a McKinsey report, with the total number of outbound trips more than doubling from 57 million trips in 2010 to 131 million trips in 2017.
"South-east Asia is usually the first destination for Chinese travellers when they opt for farther destinations," said the report. McKinsey's 2017 China Outbound Traveller Survey had shown that the highest number of package trips were booked to South-east Asia.
Mandarin-speaking tours, Chinese eateries and Chinese mobile payment services mushroomed from Danang in Vietnam to Yogyakarta in Indonesia, as these travellers thronged South-east Asian hot spots, lured by their proximity and familiar cuisines.
The pullback now threatens the tourism industry with pockets of overcapacity, after companies and local governments doubled down and poured millions of dollars into expanding resorts, hotels and travel facilities.
The decline is already showing up in some hotel operators' results.
DANGERS OF ONLY ONE MARKET
There is always a concentration risk when relying on one market, and many countries may not be able to find a replacement for growth fast enough.
MR KAMPON ADIREKSOMBAT, Bangkok-based head of economic and financial market research at Siam Commercial Bank.
Thailand's Central Plaza Hotel reported a softening of its hotel business in the second quarter due to decreasing Chinese demand, Mr Ronnachit Mahattanapruet, the company's senior vice-president, said at an investor briefing last month. Occupancy in its Thai properties dropped 7 per cent in the quarter, and the Bangkok-based operator has 2,040 rooms in the pipeline to add to its existing portfolio of 6,678 rooms.
On Phuket Island, there will be 18 per cent more hotel rooms by 2024, according to consultancy C9 Hotelworks. International arrivals in Thailand this year so far have grown only 2 per cent. "The supply was based on people's unrealistic expectations," said C9's managing director Bill Barnett.
In Singapore, casino operators Las Vegas Sands and Genting Singapore announced a US$9 billion (S$12.4 billion) expansion of their resorts earlier this year after the country's skyline was beamed across cineplexes as the setting of the Hollywood hit Crazy Rich Asians.
Marriott International has 140 hotels in the pipeline across the region, with plans to more than triple its portfolio by 2023 in the Philippines.
Chinese travellers became the biggest group of visitors to the region, adding US$403.7 billion to its gross domestic product in 2019. In Thailand and the Philippines, tourism grew to account for over a fifth of their GDP - twice the global average.
The boom dissipated in the first half of this year as China's economy slowed, its yuan weakened to historically low levels and an ongoing US-China trade war weighed on consumer confidence.
The slowdown in tourism weakens another growth pillar for South-east Asia at a time when exports are taking a knock from the trade war. Countries are now trying to diversify their outreach efforts to lure visitors from other nations.
But in the short to medium term, at least, the hole left behind by Chinese travellers seems too large to fill.
"Chinese tourists are the largest group of visitors by numbers," said Bali's tourism promotion board deputy chairman Ngurah Wijaya. "Even the rise in holiday makers from other countries cannot compensate for their absence."