China's heavily-hit domestic tourism market may benefit from Chinese holidaymakers preferring to travel in the mainland in the near future due to global concerns about the coronavirus, says Qian Jiannong, chairman and executive director of Fosun Tourism Group.

With the virus spreading rapidly across regions outside China and international flights canceled, domestic travel will become the focus for the country’s struggling tourism sector. This also includes visitors to China, who have been waiting in the mainland for nearly two months since the virus outbreak, Qian told an online media briefing on Wednesday. 

With the virus spreading rapidly across regions outside China and international flights canceled, domestic travel will become the focus for the country’s struggling tourism sector

Qian Jiannong

chairman and executive director of Fosun Tourism Group

The company, which operates the Club Med holiday business and has operations in more than 40 countries and regions over six continents, reported a huge 97 percent increase in net profit to 609 million yuan ($87 million) for the 12 months ending in December 2019. 

During that period, revenue grew 6.6 percent year on year to 17.34 billion yuan. The tourism arm of Shanghai billionaire Guo Guangchang’s investment firm Fosun International will distribute a final dividend of 2 Hong Kong cents per share — taking the full-year dividend to 9 Hong Kong cents.

The Atlantis Sanya luxury resort, which made its debut in April 2018 in a $1.74 billion bid to become a tourism icon in “China’s Hawaii, the southern island province of Hainan, is a major cash cow for the company. The Atlantis Sanya luxury resort raised $428 million in its initial public offering Hong Kong in December 2018. It generated revenue of 1.3 billion yuan in 2019 — up 74 percent from a year earlier. 

“China’s tourism industry, which has long been grappling with the issue of attracting more international tourists into the country and boosting the industry-wide competitive edge with its global counterparts, is undergoing a shakeout amid the novel coronavirus outbreak,” Qian said.

 “Many domestic market players, with their businesses 100 percent in China, are suffering from a sudden cash drain and are on the brink of collapse. The incompetent companies may eventually get flushed out of the market,” he predicted.

Chinese policymakers are working to help hard-pressed tourism companies ride out the storm. On March 13, some 23 government departments, including the National Development and Reform Commission, jointly issued new guidelines. These detailed19 measures to remove institutional barriers for consumption growth and to revive pent-up demand.

Qian said the guidelines highlight a long-neglected imbalance between the rising spending power of Chinese travelers and a critical shortage of tourism products. He applauded the guidelines for updating and upgrading the domestic tourism industry, rather than simply offering subsidies that may only make incompetent companies survive, but not enhancing their competence. 

The Atlantis Sanya luxury resort shut down most of its facilities since Jan 25 and had almost zero business for the whole of February. 

But with China showing signs of initially containing the epidemic, the occupancy of Atlantis Sanya in mid-March quickly returned to roughly half the level of what it was during the same period last year.  

Over the first two months of the year, the business volume of the Shanghai-based company’s resort operations managed to increase by approximately 8 percent year on year. Qian said this was largely due to business from China in early January and from Europe, Africa and America during the whole period. 

For a multinational like Fosun Tourism, Qian noted, its global business footprint may help to counterbalance the overall impact of the outbreak. 

“What should be emphasized is that the future and its uncertainties are the norm for multinationals. Therefore, risk management should be integrated into our daily operations to ensure a sustained business growth in difficult times,” Qian said.

Share prices of Fosun Tourism dropped 1.5 percent to HK$6.8 on Wednesday, while Fosun International tumbled 3.44 percent to HK$7.87. The benchmark Hang Seng Index plunged 4.18 percent, or 971.91 points, to close at 22291.82 points.