CHINA. China Tourism Group Duty Free Corporation Limited (CTG), the parent company of the world’s number one travel retailer China Duty Free Group (CDFG) today announced a +29.68% year-on-year increase in first-half sales to RMB35,858 million (US$4.92 billion).
Gross profit for the period ended 30 June reached RMB10,754 million (US$1.48 billion), an increase of +16.66% over the same period last year.
CTG said it had seized the opportunity in H1 offered by the liberalisation of inbound and outbound travel and continued to enhance its core competitiveness. “The company’s overall development trend became better, and the main business developed steadily,” the group said.
On top of the world
“In August 2023, according to the ranking released by the authoritative media in the global travel retail industry, The Moodie Davitt Report, the company ranked as the world’s largest travel retailer in 2022. The company has ranked first in the world for three consecutive years.” {Look out for our full Top 20 rankings for 2022, out on Monday}
Hainan recovery
Addressing the key Hainan offshore duty free market, CTG said the island’s tourism sector has shown good momentum and rapid recovery since the beginning of the year.
Citing Hainan Provincial Department of Tourism, Culture, Radio, Television and Sports (海南省旅遊和文化廣電體育廳) statistics, CTG said the total number of tourists to Hainan in H1 was 46.066 million, a year-on-year increase of +32.8%. Total tourism revenue surged +42.4% year-on-year to RMB 91.61 billion (US$12.57 billion). Both indicators were higher than in pre-pandemic 2019.
In the first half, Hainan’s offshore duty free market maintained “stable and healthy development”, CTG said.
Across H1, total offshore duty free sales rose +31% year-on-year to RMB32.396 billion (US$4.4 billion), according to the Hainan Provincial Department of Commerce (海南省商務廳). According to Haikou Customs (海口海關), offshore duty free sales from January to June reached RMB26.318 billion (US$3.6 billion), up +24.4% year-on-year. The number of duty free shoppers increased +45.4% to 3.733 million.
[Note: The variance is explained by 1) the first number including duty paid sales; 2) a time lag in Customs results. If a traveller has made a transaction but still not departed Hainan the sale will not be counted at that time; 3) Hainan retailers also pay taxes on some products which it sells to consumers in Mainland China through ecommerce. The Department of Commerce includes this data in sales revenue]
CTG said it has been continuously optimising its Hainan operation and management. Overall gross profit levels have improved through measures such as unified pricing across the island, optimisation of promotional discounts, and improvement of category sales structure.
Hainan expansion going to plan
CTG’s ambitious development plans in Sanya continued to progress through the reporting period.
Structural work on the commercial part of land parcel no. 2 of the Sanya International Duty Free Shopping Complex Phase I project, including the completion of roof sealing, advanced significantly.
The positioning of the hugely ambitious Sanya International Duty Free Shopping Complex Phase II (Hexin Island Project) was further optimised, with a prime focus on promoting the renovation of the project and introducing luxury brands.
Meanwhile the architectural design and earthwork construction of Sanya International Duty Free Shopping Complex Phase III (a joint venture with Swire Properties) was advanced.
In Haikou, the checking and acceptance of land parcel no. 2 (known as the Yueling Bay Project) of Haikou International Duty Free Shopping Complex Project was completed, and the construction of other land parcels carried out as planned.
The French Garden Project at Sanya Phoenix International Airport (三亞鳳凰國際機場) progressed steadily and is ready for opening and operation.
Successful business development
During the reporting period, the company successfully bid for several duty free operations including shops Tianjin Binhai International (天津濱海國際機 場) and Dalian Zhoushuizi International (大連周水子國際機場) airports, Yunnan Tianbao Port (雲南天保口岸), Yunnan Ruili Port (雲南瑞麗口岸) and Yunnan Wanding Port (雲南畹町口岸).
It also was awarded an important duty paid concession for Chengdu Shuangliu International Airport Terminal 2’s (成都雙流 國際機場T2航站樓) global boutique area.
Elsewhere, Chengdu Tianfu International Airport (成都天府國際機 場) and the arrivals store at Hangzhou Xiaoshan International Airport (杭州蕭山國際機場) commenced operation, which CTG said consolidated the company’s advantages in domestic large and medium-sized airports and ports
Downtown duty free stores on the horizon
Importantly, CTG said it is paying close attention to the policy dynamics of inner city (downtown) stores, actively promoting research, site selection, positioning and planning to prepare for the opening of such stores.
That is a reference to the long-anticipated opening of a traditional downtown duty free model (as per South Korea, for example) whereby Chinese travellers can buy pre-departure with airport pick-up.
Siem Reap success
Offshore, CTG continued to pursue development projects and participate in tenders. Notably it was awarded the duty free concession for Angkor International Airport in Siem Reap, Cambodia. The Moodie Davitt Report can confirm this operation will commence in October.
Tourism recovery accelerates
Since the start of the year, China’s tourism industry has started to recover at an accelerated pace, CTG noted.
According to the Ministry of Culture and Tourism (文化和 旅遊部), the number of domestic tourists rose +63.9% in the first half to 2.384 billion while domestic tourism revenue surged +95.9% year-on-year.
CTG commented: “China Tourism Academy predicts that in the second half of 2023, residents’ willingness to travel and the number of visitors will continue to recover, while the growth rate will be under downward pressure. The continuous implementation of consumption promotion policies in various regions is expected to accelerate the growth of per capita consumption of tourism.
“It is expected that the total number of tourists in China will reach 5.5 billion and the domestic tourism revenue will reach RMB5 trillion (US$685.8 billion) this year, recovering to 90% and 80% respectively of the same period in 2019.
“In terms of inbound tourism, the group tourism business between Mainland China and Hong Kong and Macau has fully recovered, the visa application for international tourists to China has been liberalised, and the travel agency business of group tourism for residents of Taiwan to Mainland China has resumed. All restrictions on inbound tourism policies have been opened up. However, inbound tourism is still facing supply chain restoration and other issues.
“China Tourism Academy predicts that the inbound market will have a significant year-on-year and quarter-on-quarter growth this year as compared with last year.”
Outbound travel’s “gradual recovery”
Citing the ‘Report on the Big Data of Outbound Tourism in the First Half of 2023’ (《2023年上半年出境旅遊大數據報告》) issued by China Tourism Academy, CTG said outbound travel has “ushered in a good trend of gradual recovery”.
Outbound tourism destinations received an estimated 40.37 million visitors from Mainland China in the first half of the year. Short-distance outbound travel took the lead in resuming, with 93.95% of visitors concentrated in Asia, CTG said.✈
