Glitzy street no more: Vanishing Chinese tourists leave Orchard Road’s landlords hanging

Desperate owners are starting to get panicky.

The country’s posh shopping center is bearing the brunt of the sharp decline in Chinese tourist arrivals. According to Maybank Kim Eng, short-term headwinds are in the forecast for Orchard Road’s landlords.

The report stated that Orchard Road shops are dealing with a new Chinese law that bans “forced shopping” for tourists.

Hoteliers are also now focusing on corporate and transient segments as tour groups become more scarce.

“Our conversations with Orchard Road landlords suggest that the current headwinds may be short term in nature. Chinese visitors have been declining since last October, partly because of a new mainland law
that bans “forced shopping”, which prompted sharp rises in prices for outbound tours in China. In addition, many hotels along Orchard Road have progressively moved away from the wholesale customer segment (tour groups) to focus on the higher-yielding corporate and transient segments,” the report stated.

Here’s more from Maybank Kim Eng:

The Chinese are no longer coming in droves. Following the political upheaval in Thailand and the mysterious disappearance of Malaysian Airlines flight MH370, there have been concerns that this may have a negative impact on Chinese visitor arrivals.

Mainland Chinese typically holiday in Singapore, as part of their tours to Malaysia, Thailand and Indonesia. Based on 2013 data, mainland Chinese were the second-largest international visitor group to Singapore (2.3m) after the Indonesians (3.1m).

Anecdotal evidence points to Chinese tourists cancelling their travel plans to Southeast Asia in recent months. The initial signs of a slowdown are already evident with Chinese visitor arrivals down 31% and 14% YoY in 4Q13 and 1Q14, respectively.

More recently, the April retail sales of watches and jewellery, which are highly dependent on tourist purchases, registered a sharp YoY decline of 16.3%.

The law was in response to recent years of public outcry in China over extremely cheap tours tied to “forced shopping”. The law, which took effect at the start of the seven-day National Day “Golden Week” holiday on 1 Oct 2013.

The upshot was substantial increases in tourist agency costs, especially salaries for tour guides, who previously received commissions from designated shops. As a result, sales of such tours have fallen, even at what is a peak period for holidays.