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Chinese Travelers Will Spend 86% More Abroad by 2025

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Retailers may soon be able to bank on tourists to boost their bottom lines again—especially tourists from China.

Decreased tourisms, and lower spending by travelers who do venture overseas, has been the brunt of blame for many brands’ unfavorable quarterly reports, including Neiman Marcus, which last month said a chunk of its 81 percent profit loss had to do with the dwindling presence of tourists.

Hong Kong’s retail sales have also been hurting due to a lack of travelers from Mainland China.

Though Moody’s Investor Service said earlier this month that U.S. retail would pick up a tad in 2017, it also warned that lower tourist spending in the U.S. could weigh on retailers with flagships in popular tourist destinations.

But according to a new report out by Visa, which used transaction statistics to assess consumer travel spending, more than 1.2 billion people made an international trip in 2015 and that number is expected to increase 50 percent to more than 1.8 billion over the next 10 years.

Spending while traveling (pre-travel spending, like airline tickets, not included) between now and 2025 will rise “dramatically” to $1.5 trillion a year, according to Visa. Households traveling abroad will spend more than $5,300 a year by 2025, and nearly half of all households globally will likely be able to afford to travel, though only one in eight will do so.

This is thanks largely to three things: increasing income levels and a growing middle class, global aging making for older more established travelers with more disposable income, and increasing connectivity, i.e. the addition of new airports and flight routes.

Chinese consumers—who Bain & Company said in a May report will be “the key to unlock recovery around the world”—are expected to spend 86 percent more on travel shopping by 2025.

Despite China’s currency devaluation, which makes it more expensive for its citizens to travel abroad, international travel from China increased 13 percent in 2015 from the year prior (by comparison, Russia—which also suffered economic turmoil with the plunge in oil prices—saw a 26 percent drop in the number of citizens’ international trips over the same period). And despite a 5.1% increase in the luxury consumer price index, an indicator of the annual changes in price for a set of goods, Chinese shoppers are still spending.

According to Visa, traveling class households in emerging markets will converge with those from developed markets in terms of travel spending within the next 10 years. Emerging markets are expected to account for 45 percent of the $1.5 trillion in global cross-border travel spending by 2025.

“China will be the top spender—with Chinese travelers projected to nearly double their spending to $255 billion, representing nearly one-sixth of global travel spending in 2025,” the report noted.

Spending by U.S. travelers ranks the second highest on Visa’s list, and the number will increase 33 percent to $134.1 billion. Germany follows, with its travelers spending 31 percent more to $97.6 billion by 2025. Travelers from the U.K. are expected to spend 58 percent more, or $96.9 billion, while on the road (though that number may change in the face of Brexit), and Russian tourists will spend 118 percent more, or $49.1 billion.

The middle class is expanding—in China and in other parts of the developing world—and opportunities and resources for travel are becoming easier to come by.

“This democratization of travel will lead to a profound increase in global tourism spending,” Visa said.

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