Taiwan tourism sector face difficulties as tourist arrivals from China decline for three straight months

Taiwan’s tourism sector is facing deep troubles in the wake of reduced tourist arrivals, largely caused by the fall in Chinese tourists, which registered a more than 10 percent decline for three consecutive months during May-July, the first time since 2008. It appears that Chinese tourists have been diversifying overseas travel destinations, partly due to the deregulation of visa policies by a rising number of countries, and partly due to the deterioration in cross-strait ties.

Taiwan’s total number of visitor arrivals grew just 1.9 percent y/y in July, down from 2.2 percent in 2Q16 and sharply lower than the 15.9 percent in 1Q16. As a response, the Taiwanese government has adopted measures to attract visitors from other Asian countries, for instance, waiving visa for tourists from Thailand and Brunei starting from August this year.

However, this may not be enough to pick up the slack from China, given that Chinese visitors account for a dominant share of 40 percent in Taiwan’s total tourist arrivals. The contribution of tourism to Taiwan’s gross domestic product has increased steadily over the past several years, owing to the influx of Chinese tourists since 2008.

Further, as a percentage of GDP, tourism revenues have risen notably to 2.8 percent in 2015 from 1.4 percent in 2008. A slowdown in this segment will have a negative impact on GDP growth, inevitably. The spillover effects are likely to be felt by the labor market and a broad range of services sectors including retail trade, transport, food catering and accommodation, DBS reported in its latest research note.