Hainan unveils ambitious US$21 million tourism rejuvenation plan with offshore duty free at its core

CHINA. Hainan’s provincial government today announced a CNY150 million (US$21.2 million) rejuvenation plan for the island’s beleaguered tourism industry with duty free shopping at the heart of its plans.

Hainan, often dubbed ‘China’s Hawaii’, and famous for its pristine environment, tropical climate, beach resorts and beautiful forested, mountainous interior, is hugely dependent on tourism income. Visitor numbers plummeted after the COVID-19 outbreak began to gather pace in early January but have begun to pick up as the crisis has eased across China.

On the recovery trail: As the COVID-19 crisis has eased across China, tourists have started to return to the resort island. Todays stimulus package is expected to accelerate the flow.

CDFG  was forced to close the CDF Mall in Sanya – the biggest duty free door in the world for many beauty brands – and its Haikou downtown store on 26 January due to the health crisis. Both stores subsequently reopened on 20 February as the situation improved.

Based on the early 2020 pre-closure performance, informed observers believe business could recover relatively quickly. According to one leading Chinese analyst, sales at CDF Mall in January actually increased by +16% year-on-year. Given the five days of trading suspension, the like-for-like growth rate was over +30%, with cosmetics sales particularly strong. The stimulus package unveiled today and announced across Chinese state media, including China.org, includes 30 measures across six different areas of the tourism industry.

Ready to boom: CDF Mall in Haitang Bay, Sanya, is the biggest travel retail door in the world for many beauty brands. The rejuvenation programme announced today will be warmly welcomed by China Duty Free Group and its supplier partners.

The province will continue to simplify the offshore duty free shopping procedure introduced in 2011 and expand online sales of duty free products, according to Liu Cheng, Deputy Director of the Provincial Bureau of Tourism, Culture, Radio, Television and Sports at a press conference on the island today. We will bring you the specific details of the programme as they emerge in coming days.

Today’s announcement was anticipated in a landmark Podcast interview yesterday conducted by The Moodie Davitt Report with Charles Chen, President of China Duty Free Group (CDFG) and its parent company China International Travel Service.

Chen told The Moodie Davitt Report: “We’ve been talking with the Governor of Hainan province and they have given us a lot of support. They asked us to reopen all the spaces and all the stores and to do a lot of promotions. So, we are thinking that from the beginning of May and maybe even from the end of April, that we will start planning for the promotions.

[Click on the Podcast icon to hear Charles Chen’s interview with Martin Moodie]

New store to boost capacity

“Each month they want to do a promotion in Hainan. In Hainan we already have four stores – in Sanya, Haikou Airport, and downtown Haikou Riyue and Qionghai Bo’ao. Also, we have a new upcoming store in Haikou, under construction. It’s going to be ready very soon,” commented Chen.

[More like this coming soon? Click on the icon to discovery why the world’s most powerful beauty brands like to conduct blockbuster launches and activations in Sanya. It feels like the world has changed since but in fact it’s just four months since this spectacular launch of the Lancôme Absolue Gold Power pop-up in the CDF Mall.]

Charles Chen says that CDFG is already working with Hainan local government and Customs on ambitious plans for the May holidays. “I think the opportunity could be huge,” he says.

The new shopping mall is underpinned by a government belief that its opening will stimulate the economy in the second half, he noted. “They know that within the channel there is a lot of consumption and a lot of consumers, and they want to encourage people to spend money,” Chen said.

“You’ll see in the coming days that the sales in Sanya and Haikou are still very good. This will be especially true in the coming months, especially from June, July, and August when students go on holidays and we have the mid-autumn festivals; and in October when we have our national days.”

“The Hainan market is there and each year there are so many visitors. We have a quota of RMB30,000 (US$4,230) per person per year but so far the average transaction is around RMB5,000 (US$705). So I said to the brands, we have RMB25,000 (US$3,520) to play with that is travel retail business.”

CDF Mall hosted some of the most spectacular brand launches and campaigns in travel retail history last year, including these from (above and below) Estée Lauder, Dior, Kiehl’s and Shiseido. Expect more of the same in coming months, says Chen.

Because of the virus, people had avoided Hainan and Sanya during Chinese New Year, Chen pointed out, saying that would only escalate the desire to visit the island to shop duty free. “We should think about that demand. They missed the chance to come but they still want to buy. We can tell them they can still purchase. We can do travel retail business while not affecting the local market. That is exciting for the brands. Chinese people want to buy.”

CDFG is already working with local government and Customs on ambitious plans for the May holidays, Chen said. “I think the opportunity could be huge,” he said.

All aboard the Hainan express

The May edition of The Moodie Davitt Report Magazine (Print & Digital) profiles Hainan’s burgeoning offshore duty free industry and examines its likely pivotal role in leading the Asian travel retail sector’s recovery.

This special report, written by Martin Moodie and themed ‘All aboard the Hainan express’ will profile China Duty Free Group’s acclaimed CDF Mall and other Hainan travel retail locations, examine the tourism rejuvenation programme and explore why the offshore duty free business is so critical to many of the world’s leading brands.

The May edition will also carry a special ‘Road to Recovery’ report, edited by Dermot Davitt, which assesses how travel retail will look – and might best prosper – once it emerges from the biggest crisis in its 73-year history.

Tourism bounce already under way

All A-level tourist sites in the city of Sanya have resumed operation since 21 February, according to a 15 March report by China.org, leading to a steady build-up of visitor flows.

“The number of tourists has been rising since the reopening, from 270 tourists on the first day to more than 1,100 on the International Women’s Day,” Zheng Conghui, Chairman of Sanya Tianyahaijiao Tourism Development Co told the media title.

“Special epidemic prevention measures are in place in each scenic site, covering ticket purchases and checks as well as tours, which are taken to protect both tourists and the workers from infection.”

Zheng said he was confident about prospects for Hainan’s tourist market, although a full recovery would not happen until the epidemic is declared over.

“The tourism products based on health and sunshine will attract more tourists, as people will pay more attention to their health and families after the epidemic, and they will develop a propensity for taking holidays,” he said.

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