With outbound travel growing at a staggering rate, China is the world’s most important tourism market. But who are these Chinese travellers, and what do they want?
China is the world's fastest growing tourist market – 83.2 million Chinese travelled abroad in 2012, according to the United Nations World Tourism Organisation (UNWTO) – a 395.7% increase from 2002. And it shows no sign of slowing down: by 2020, the number is forecast to grow to 200 million. As a result, tourist spending is expected to triple from RMB500 billion to RMB1.4 trillion within the next six years.
The stereotype of Chinese tourists swarming on iconic landmarks is quickly becoming outdated as the market enters its next phase of development. “The new generation of young, sophisticated Chinese travellers are looking for travel experiences that go beyond ticking off major sights and the dubious pleasures of forced shopping,” says Dr Wolfgang Georg Arlt, director of the Chinese Outbound Tourism Institute (COTRI).
Arlt breaks down the outbound Chinese tourism market into three segments: Package Tourists, Super-Rich and New Chinese Travellers.
- Still represent a large proportion of the Chinese outbound market
- Generally first time travellers
- Travel in large groups
- Book through Chinese travel agencies
- Packed itineraries – very much on the ‘beaten track’
- High retail spend
- China has 2.8 million ‘dollar millionaires’
- Ostentatious travelling style
- Demand VIP treatment
- Desire exclusive experiences
- Travel used as a shortcut to sophistication
New Chinese Travellers:
- Relatively young (under 45)
- Affluent – top 10% of society in terms of income
- Travelled outside Asia before
- Looking for a more immersive, authentic experience
- Keen to visit educational or enriching destinations
- Trips are part-organised or self-organised and increasingly independent
Hong Kong remains the top destination for Chinese tourists – 40.7 million Mainland Chinese crossed the border into the former British colony in 2013. But as international travel becomes more common and countries continue to waiver their visa restrictions, the Chinese are looking further afield for holidays that will distinguish themselves from other travellers and secure social capital back home. The notion of bragging rights is particularly key to the Super Rich Chinese traveller, who equates foreign travel with prestige and status.
Chinese consumers are increasingly favouring subtle luxury – fuelling the trend for experiential consumption and rare experiences over flashy status symbols. “High-net-worth individuals in China are starting to spend more on experiences, including travel and wellness, as opposed to luxury goods such as fashion and handbags,” says Gabriela Henrichwark, group-marketing director of COMO Hotels.
In terms of holiday destinations, the US, Paris, Milan and London continue to draw growing numbers of Chinese tourists – driven largely by Package Tourist demand for traditional hotspots rife with history and landmarks.
Exotic trips, such as safaris in Botswana, Africa or trekking in Burma are gaining popularity with New Chinese Travellers, who are keen to enjoy a more authentic experience. This segment is also seeking out trips with a cultural learning experience or activity at its source – such as a winetasting course in Italy or clay pigeon shooting in England. Flamenco dancing – an increasingly popular activity in Chinese cities – is driving tourism to its birthplace in Seville, Spain.
Chinese adventure company Bishan (Wild China) offers specialty travel packages, including an Alaska drifting tour, a California health training camp and the American Hollywood Disney backstage family tour. Bishan founder Zhang Mei believes her customer base crave high-end psychological enjoyment, she says: “They want to see and experience the local life and gain spiritual harvest.”
Even non-travel brands are vying for a profitable slice of China’s booming outbound travel market. In January this year, the German car manufacturer announced its Mercedes-Benz Travel brand in association with luxury Chinese travel agency HH Travel. Catering to outbound Chinese tourists travelling to Europe, the service promises custom luxury travel packages that combine carefully selected locations with exclusive itineraries and theme-based excursions. Mercedes-Benz Travel adds another dimension to the brand’s China offering, and will no doubt maintain and strengthen its Chinese customer base.
Western hotel brands have launched strategies to appeal to this increasingly important demographic. Starwood, Hilton and Marriott have added Chinese menus, Mandarin-speaking concierges and in-room amenities such as Chinese tea and slippers. The InterContinental Hotel Group has created a new brand of hotels, Hualuxe, designed exclusively for the Chinese market. Delicate cultural differences are even being addressed; at the Marriott and Hilton, no Chinese guest is put in a room containing the number four – an unlucky number in China.
The Peninsula Hotel chain is making a concerted effort to expand its Chinese holiday offering and grow awareness in local markets. To celebrate last year’s Mid-Autumn Festival in September, the hotel’s locations in New York and Chicago offered several promotional activities for its guests, including live mooncake and dim sum demonstrations, Chinese Tea tastings and Chinese inspired spa treatments.
But do Chinese travellers want this level of specialised treatment? The Chinese appreciate home comforts when abroad – but also want to experience something new. According to a survey of Chinese travellers by Hotels.com, only 15% of respondents said they prefer to stay in Chinese-style hotels when they travel, so what do they want from Western hotel chains? Surveyed hoteliers claim free Wi-Fi is the most common request, followed by tea-making facilities (44%) and translated travel guides (41%). Travellers singled out Chinese payment methods (58%) and in-house Mandarin speaking staff (54%) as the most crucial.
Retail: Big Spenders
Lack of supply at home coupled with lower taxes on luxury goods abroad has led China to top the world list in terms of travel budget spent on shopping, at almost 50%. Switzerland-based Global Blue – which organises tax-free shopping worldwide – reported a 63% rise in Chinese spending in 2011. In 2012, the Chinese spent a staggering $102 billion overseas, making them the world’s biggest spenders.
The Super Rich spend lavishly on themselves, while Package Tourists often bring shopping lists from family and friends, as well as purchasing gifts and items using their own money. Shopping is also important to New Chinese Travellers, but they spend less time on it and look for more unique purchases, such as artwork.
Well-established luxury brands and department stores are the biggest draws – 30% of British fashion brand Burberry’s sales in London are made to Chinese tourists. Galeries Lafayette in Paris and Harrods in London report an average Chinese consumer spend of more than $6,000 and $5,500 respectively. Both stores employ Mandarin speaking staff and accept China’s most popular bankcard, UnionPay. In March 2012, The Ritz became the first five star hotel in London to accept UnionPay cards and now offers a shopping tour of boutiques that accept UnionPay.
Chinese tourists tend to visit these destinations during three distinct times of year: Chinese New Year, Chinese Labour Day and National Day. During these three annual celebrations many Chinese exit the country to take extended trips abroad. This year’s Chinese New Year Holiday saw Chinese tourists spend more than £4.3bn overseas, according to the Beijing-based World Luxury Association. The items most commonly purchased abroad are watches, clothes and accessories, leather goods and jewellery.
Regardless of consumer profile, Chinese shoppers want special treatment, such as offers, tax rebates and gifts that make them feel like VIPs. The Beverly Center in LA offers discounts to international tourists, including special offers in mandarin. Luxury brand Ermenegildo Zegna is providing Chinese tourists access to its factories, founding family villas and behind-the-scenes invites to its Milan fashion show.
The Future is Online
The vast majority of holidays are booked through Chinese travel agents, as organising flights and visas for outbound travel can be expensive and intimidating for first-time travellers.
However, a 2011 study by American business strategy firm Boston Consulting Group (BCG) revealed that 95% of Chinese tourists are dissatisfied with current travel products and services. “Travel company staff in China find it incredibly difficult to empathise with the desires of their rich clientele,” says George Morgan-Grenville – founder of Red Savannah, a bespoke travel specialist. “On the whole, these Chinese members of staff have never left their home town, so how can they be expected to design a luxury trip to Paris for a multi-millionaire?”
This burgeoning high-end Chinese traveller is fuelling a surge in exclusive online travel agencies, such as Beijing-based Zanadu, Trip TM – owned by Chinese travel service Ctrip and Africa-focused Quafrica. Luxury travel service Zicasso’s revamped website allows wealthy consumers to design itineraries sorted by country and theme, such as shopping, romance and wine. Once the information is submitted, the request is passed to a team of travel specialists who are best qualified to make the dream a reality. Each specialist designs an itinerary for the traveller to review – adding a healthy dose of competition. This customised service isn’t cheap – a three-hour afternoon tea at Downton Abbey in the UK cost $12,000, but it promises truly unique travel experiences. “That included the staff at Highclere Castle being in full period costume,” says CEO Brian Tan. “They had the castle to themselves with the staff catering to their every need – essentially like royalty.”
In China, 15% of holiday bookings are now made online – presenting great opportunities for brands that execute it well. In August 2012, China’s largest search engine giant Baidu partnered with UK-based flight search specialist Skyscanner, allowing Baidu’s 440 million users to search for international flights. Airline tickets are the largest category of travel product searched and purchased online, representing 61% of the Chinese online travel market in 2012 (iResearch). Baidu is also the controlling shareholder in China’s largest travel website Qunar – a search-based commerce platform that aggregates hotel and flight information from thousands of travel agencies. Using a cost-per-click advertising model, Qunar covers all travel-booking bases, including photo sharing, user-generated reviews and tools to organise travel itineraries.
More than 80% of Chinese travellers research their destinations online. Social media is a big influence, particularly Sina Weibo – China’s equivalent of Twitter – which boasts more than 300 million users. According to Hotels.com, 30% of young Chinese travellers use social media for travel tips and personal recommendation plays a vital role.
With over 320 million smartphone users in China – many who have skipped the desktop experience entirely – mobile is a key travel-booking platform. In October last year, Ctrip said its mobile app contributed to over 40% of total hotel booking transactions – exceeding its websites and call centers. For hyper-connected Chinese travellers, making travel plans and booking flights and hotels via mobile apps is becoming commonplace.
The stereotype of Chinese travellers is dissolving as the country’s outbound tourism market enters a new phase. Three market segments – Package Tourists, Super Rich and New Chinese Travellers – have different tastes and requirements.
Bragging rights is a key driver of intercontinental travel. France and the US continue to rank highest as destinations but their appeal is diminishing as travel becomes more common. Many Chinese are dissatisfied with cookie cutter holidays and increasingly want authentic, culturally enriching experiences in exotic locations that their friends are unlikely to have visited.
Chinese travellers are essentially no different to Western travellers. They want to enjoy their destination’s culture but also want to be able to speak to staff in their native language, enjoy home comforts and pay with their credit cards. Six out of 10 Chinese travellers claim the ability to accept Chinese payment methods – Unionpay and Alipay – was the single most important thing affecting their hotel choice.
Internet booking is set to boom in the next few years – more than 80% of Chinese travellers already research their destinations online. Brands with tailored websites in Mandarin and a strong Chinese social media presence will reap the greatest rewards.