Chinese consumers will soon be the largest group of global travelers, and hoteliers are gearing up to meet the expectations and demands of this segment with new products, services and marketing channels.
During a webinar titled “Moneyed, mobile and massive: China’s new traveler class,” travel research company PhoCusWright released data showing the potential for business from Chinese travelers. According to the company, the Asia/Pacific region is the largest regional travel market, ahead of North America and Europe. China is the largest travel market in the Asia/Pacific region, generating $96 billion in travel-related revenues in 2012. That market is expected to grow by more than one-third by 2015.
“While little is known about the more than 250 million Chinese who took a trip last year, one thing is certain: Habits are changing fast,” said Maggie Rauch, PhoCusWright research analyst and moderator of the webinar. “Large tour groups in matching hats on cookie-cutter domestic trips booked by state-owned travel agencies are quickly disappearing. In their place are free and independent travelers: families, couples, solo travelers, groups of friends. And the desire to go beyond China among these travelers is becoming a reality.”
A number of global hotel chains have formal or informal programs aimed at serving Chinese travelers. Most programs focus on a few important areas of the travel experience for Chinese guests. Language services is one key.
At Four Seasons Hotels and Resorts properties, for example, a Mandarin-speaking member of the staff is available 24 hours a day to assist guests.
“Serving these customers can be as simple as having a local map or guestroom collateral translated into Mandarin,” said Scott Taber, VP of rooms in the Americas for Four Seasons. “Also, there are some cultural sensitivities we always try to respect, things such as avoiding assigning rooms ending with the number 4 or assigning rooms at the end of a corridor. The Chinese customer likes red flowers, but we must avoid white and blue ones.”
Taber said the chain has seen a 76% year-over-year increase in business from Chinese travelers. While some of that business goes to hotels in the Asia/Pacific region, such as in Bangkok, Thailand and Singapore, properties across the globe are also seeing dramatic increases.
Two years ago, Hilton Hotels & Resorts launched Hilton Huanying, a property-level program with specific services and products for Chinese travelers. More than 85 properties globally participate in the program, with the latest addition the Hilton Los Angeles/Universal City.
The program has since become available to all Hilton Worldwide hotels that can meet the Huanying service standards.
“There are a few key areas to the program, broken down to staffing, service and product,” said Rob Palleschi, global head of Hilton Hotels & Resorts. “We require the properties to have at least one Mandarin-speaking team member, ideally in a guest-facing position. From a service standpoint, it’s ensuring we have communications translated at various guest touch points, such as room service and restaurant menus.”
Other aspects of the Hilton program include: Chinese programming on in-room televisions; slippers and robes for guests; and special breakfast menu items such as congee, dim sum, and fried rice and noodles.
Executives at several chains said breakfast and other food-and-beverage offerings are the most important aspects of serving Chinese travelers.
At FRHI Hotels & Resorts, which includes the Fairmont, Raffles and Swissôtel brands, breakfast service includes congee. In addition, a variety of white, black, green, oolong and flowered teas are available in restaurants and through in-room dining.
“In cases where the Chinese menu is requested, meals will begin by presenting the guest with a cold towel, and end with a hot towel,” said Carmen Lam, VP of sales and marketing in Asia/Pacific for Fairmont Hotels & Resorts, in an email. “Cutleries such as chopsticks and soup spoons are also available. Lastly, groups will have the added option of serving meals family-style with a variety of different dishes offered.”
Lam said the company’s 65 Fairmont properties instituted a Chinese menu program last year that provides enhanced culinary choices for these customers.
Luxury Hotels of America, a Chinese language-only luxury travel magazine read by affluent Chinese travelers planning a leisure trip to the United States had a role in making Chinese international travelers more aware of their rights as valued guests. ” Five years ago, Chinese travelers did not dare to ask for Chinese breakfast, slippers, or in-room kettle with Chinese tea. Since we published numerous articles over the last years in our travel publications about the rights of Chinese guests in international hotels, Chinese travelers are now aware of their power as consumers and discuss about this on travel social media networks, such as the Shanghai Travelers’ Club Weibo page , or Niuyue Mag” said Pierre Gervois, CEO and Publisher of China Elite Focus Magazines, a New York based publishing company specialized in luxury travel magazines in Chinese Mandarin language. “We see everyday on our social media networks comments from Chinese travelers about the bad experiences they receive overseas. They call for a big change and want now to be respected as any other guests” Mr Gervois added.
Hilton, which instituted its Huanying initiative in 2011, earlier this year conducted focus groups in three Chinese cities to make sure the program is up to date. Palleschi said he expects Hilton will launch amendments to the program in the first half of 2014.
Taber said Four Seasons leans on the experiences of its eight hotels in China to ensure all properties in the chain are informed of changing trends.
“Our leaders in the region help us refine the requests and preferences of those guests, and then we recommend them globally,” he said. “With 93 hotels, we’re a relatively small company, so it’s easy to share the information.”
Not only are Chinese consumers traveling more, they’re turning to the Internet more frequently to research and book their travel. According to PhoCusWright, while today Chinese consumers complete 15% of travel bookings online, that percentage is forecast to rise to 24% by 2015. The projected increase is still lower than the other three largest global travel markets—the United States, Japan and Germany—which have online penetrations above 40%.
To take advantage of this trend, Ritz-Carlton Hotel Company recently launched a new Chinese website and a page on Sina Weibo, a social media channel which, according to PhoCusWright, is used by 71% of Chinese travelers.
“A year and a half ago we had a site in Mandarin but nothing else: nothing in our rewards program, nothing in the social space or in the mobile space,” said Clayton F. Ruebensaal, VP of global marketing for Ritz-Carlton. “We needed to get serious about understanding the luxury Chinese consumer through the digital space.”
He said the company conducted quantitative research followed by one-on-one meetings with luxury business and leisure travelers in China to understand what they wanted from Ritz-Carlton and other aspects of luxury travel.
“We determined we needed an ecosystem with three legs to the stool: website, social media and mobile. To do well in the Chinese market you need all three,” he said. The new website and social media presence launched in September and a Chinese mobile site is nearly ready to go live. Design of the website focused on functionality as well as cultural considerations. For example, the colors and patterns on the site reflect those seen in Ritz properties, as well as cues from Chinese traditions. “The color blue is used heavily, both the Ritz-Carlton blue but also a blue that is reminiscent of Chinese porcelain blue because it has symbolism around wisdom and immortality,” Ruebensaal said. “It was an opportunity for us to differentiate but also an opportunity to show we’re not just a visitor from Europe or America, but (we’ve taken) the time to understand Chinese culture.”
To further promote the site and, in particular, the chain’s rewards program, it has partnered with Mercedes-Benz China to create what Ruebensaal called “rewards that create a Chinese-specific experience.”
Source: Hotel News Now
A report from the Beijing-based World Luxury Association found that luxury spending in China last month fell to its lowest level in five years. Affluent Chinese spent $830 million on luxury goods in China — half of what they spend last year. The month included the important Chinese New Year holiday, which is critical for Chinese tourism and spending.
The report predicts the Chinese luxury market is slowing from double-digit growth to single-digit growth.
But that doesn’t mean the Chinese weren’t spending. While spending on luxury at home was down, the Chinese spent big on luxury abroad.
They spent $8.5 billion on luxury goods overseas during the month — an 18 percent gain over last year. The report said the Chinese accounted for half of all the global luxury products’ consumption during the period and remain far and away the largest luxury consumers in the world.
Such a huge share of the market may not be sustainable over the longer term, of course. Most luxury experts say Chinese consumers will account for about a third of the global market by 2015.
And the overseas spending will drive much of that growth. The Chinese are buying more luxury goods overseas primarily because they’re cheaper. The Chinese are also traeling more and they prefer buying luxury brands overseas because there is less likelihood of fakes (presumably they’re buying more on Fifth Avenue and the Champs Elysees than along Manhattan’s knock-off row, on Canal Street.)
Hong Kong, Taiwan and Macau are still the most popular markets for Chinese luxury shoppers but about one in five Chinese consumers are now buying luxury goods in Europe (mainly Paris) – a share that’s doubled over the past two years, according to reports from McKinsey & Co. and KPMG.
A smaller but growing share of Chinese consumers is buying goods in the U.S., including New York and Los Angeles, the reports show. According to the Shanghai Travelers’ Club, the Chinese luxury travel magazine for very affluent Chinese travelers, the average spending in New York City for affluent Chinese tourists is between $15,000 and $50,000, mostly in jewelry and watches. “This new generation of affluent Chinese customers has a purchasing behavior that has not been predicted by any traditional economic models, and the retail industry must innovate to attract these customers” said Pierre Gervois, Publisher of the Shanghai Travelers’ Club magazine. He added “Audemars Piguet, for instance, has worked with us to target specifically wealthy Chinese tourists in New York City, that is a smart move”
The high costs of luxury goods in China is due mainly to stiff government taxes, which can range between 20 percent and 70 percent on some luxury goods. A designer bag can cost 40 percent less in Paris, for instance, than in Shanghai. While the government may be considering a reduction in those taxes, a report from McKinsey called “Luxury Without Borders” predicts that the Chinese appetite for luxury abroad will continue.
“The price gap is likely to remain substantial in the next two to three years,” the report said, “and assuming it does, Chinese spending on luxury goods will grow about as fast overseas as it will domestically.”
McKinsey said the migration of Chinese luxury spending makes it even more important for luxury retailers to maintain a consistent image in China and abroad.
Marc-Andre Kamel, a retail and luxury expert at Bain & Co. said luxury companies are also installing special payment systems for Chinese consumers and adding more salespeople who speak Mandarin.
He cautioned, however, that the big flagship luxury stores in Paris and other Western cities need to be careful of the long lines and crowd problems associated with an influx of Chinese tourists.
“They need to be mindful of their other customers, as well,” he said.
At the 5th avenue Cartier Flagship store, a Chinese customer in Gucci flip flops, Abercrombie & Fitch T-shirt and a Niuyue Mag Cap on his head is buying three gold “Tank” watches incrusted with diamonds “One for me, one for my wife, and one for my daughter, who is studying in Chicago”, he says with a big smile. “I’m also platinum member of the Shanghai Travelers’ Club”, he added ,“that gives me a VIP welcome in most of luxury stores here”.
Cultural training is imperative for New York-based luxury flagship store employees to build trust among affluent Chinese tourists and creating a custom experience for this group of travelers will help marketers gain brand loyalists, experts say.
Many luxury brands are focusing marketing efforts to Chinese consumers back at home, but with a rising wave of Chinese tourists coming to New York, it is important that brands cater to this group. Luxury marketers need to be more proactive to reach Chinese travelers by training employees and partnering with high-end travel services.
“New York flagships should be more aggressive in inviting and giving a fabulous experience to Chinese tourists,” said Milton Pedraza, CEO of the Luxury Institute, New York. “The city seems to be behind in attracting and nurturing Chinese consumers.
“New York has been slow to appeal to Chinese tourists, even though there is such as large Chinese population in the city,” he said.
“Retailers need to create personal, emotional connections with these consumers by nurturing them and caring for them, which will create a lasting impression.”
In the capital cities of European countries, luxury flagship stores get 50 percent of their value from Chinese tourists, per Mr. Pedraza.
Europeans have been smart in the way they care for Chinese tourists, who tend to buy in volume on shopping trips.
Meanwhile, the United States has not been as open to tourists in its efforts and may have suffered, given the economic times.
According to Pierre Gervois, author of “How U.S. Retail, Travel and Hospitality Industries Can Attract Affluent Chinese Tourists”, “The U.S. travel and tourism industry has understood the financial power of the new generation of affluent Chinese inbound tourists, and how it can give a boost to the country’s economy, but needs to improve the way Chinese visitors are welcomed and understand better the intercultural issues of marketing”
In the past, European tourists were key for New York-based retailers, but tourism from Europe is on the decline. Travelers from China are now the largest group of tourists in New York, and Indian tourists are another group to look out for in the next decade.
To get Chinese consumers into New York flagship stores, luxury brands should partner with high-end hotels, tour operators and restaurants to keep the brand top-of-mind, according to Mr. Pedraza.
But the marketing strategy for luxury retailers also starts in China, when affluent Chinese travelers are planning their NYC shopping trip, and use Chinese social media networks such as Niuyue Mag, with 200,000 registered members, giving shopping tips and specific insights to Chinese shoppers.
Also airports, limos and hotel concierges play a major role in influencing affluent Chinese tourists since these are all stops on the journey to New York.
“There is no question that luxury brands should be using print and their Web sites to attract tourists to their New York stores by showing the experience that they can expect,” Mr. Pedraza said.
“The travel industry is also a huge opportunity,” he said. “Luxury brands have to romance travel agents to get on the map within the travel industry.”
“Brands need to do a better job at creating these partnerships with travel-oriented brands.” Once in-store, affluent Chinese tourists will need to be made comfortable. To do so, New York flagship stores should start by training their staff on the Chinese culture and traditions.
Stores should have, at minimum, Mandarin-speaking employees and may also want to train in other dialects from Asia.
“Employees should be well-educated in relationship building, not just to process tourist transactions, but to develop longtime relationships with the brand,” Mr. Pedraza said.
“There are luxury brand stores in Shanghai, Beijing and Hong Kong, so these tourist transactions are not a one-shot deal,” he said. “They can also be relationship building.”
Luxury retailers should be aware of the Chinese holiday calendar to understand buying habits during certain holidays and target Chinese consumers for in-store gift buying, per Ken Morris, principal at Boston Retail Partners, Boston.
The holiday calendar may also hint at the time when Chinese tourists are more likely to travel.
Training sales associates on cultural greetings can quickly build trust with incoming tourists and encourage foot traffic.
Stores should also offer in-store shipping options so that Chinese consumers can ship items home. This will eliminate the need to pay sales tax and leave the customer more room in their luggage, per Mr. Morris.
“Not only is the size of the luxury market in China significant, but it continues to grow with a burgeoning middle class aspiring to own luxury brands to demonstrate their wealth,” Mr. Morris said.
“New York is a unique, international city where tourists can readily find bilingual associates,” he said. “By focusing on hiring multilingual staff, a retailer has the opportunity to offer exceptional customer service and make the customer comfortable shopping in the store.”
Source: Luxury Daily
InterContinental Hotels Group Plc (IHG), the world’s largest provider of hotel rooms, will begin opening locations as soon as next year under a new brand designed to appeal to Chinese travelers.
The Hualuxe brand of hotels will have teahouses instead of bars and feature other designs that target Chinese consumers, Chief Executive Officer Richard Solomons said in an interview. They’ll first open in China before expanding overseas targeting Chinese travelers, the company said.
InterContinental in the past was “based on bringing western brands into China,” Solomons said in Beijing. “What we have done is to, first time ever, create a brand that really talks to Chinese hospitality.”
Growing wealth and the construction of highways, rail lines and airports is boosting demand for hotels as more Chinese travel. One in four of the hotels in InterContinental’s pipeline is in China, Solomons said. The company’s operating profit in China, Hong Kong, Taiwan and Macau increased 24 percent last year to $67 million, according to its website.
The company has already signed 20 letters of intent to build Hualuxe brand hotels across China. InterContinental will manage the hotels built by the property developers that are its partners, Solomons said. Hualuxe hotels may be opened in 100 cities across China in the next 15-20 years, he said.
InterContinental’s sales in Greater China accounted for about 12 percent of its total revenue last year, Solomons said. This year, Greater China’s share of total revenue will be “a bit higher” than 12 percent, he said.
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