Chinese outbound tourists adjust their spending: More luxury experiences, less luxury shopping

art-Chinese-Tourists-Sydney-620x349China Confidential, a Financial Times research service, estimates that total spending by Chinese travellers on outbound trips hit Rmb3.1tn ($498bn) in 2014. Spending by Chinese tourists is now greater than total spending on household consumption of around $436bn in Indonesia and $442bn in Turkey. And this figure is even more remarkable given that the Chinese outbound tourism trend is at a relatively early stage. Although the number of Chinese outbound trips grew 20 per cent year-on-year to 117m in 2014, according to official tourism statistics, less than 6 per cent of the population hold a passport.

China Confidential’s estimate for total spending is higher than the official estimate of $200bn, which excludes spending on flights, visas and other items. But the figures are in line with those from other external sources. They closely match estimates of non-educational spending by Chinese visitors to the US, for example, by the US National Tourism Office.
However, while the amount of current spending and the potential for growth remain enormous, there are signs that many travellers are starting to cut back on spending while overseas as their priorities change.
In particular, China Confidential’s latest annual report on outbound tourism, released this week and based on a survey of 1,288 outbound tourists and 40 travel agencies nationwide, identified a 6.2 per cent year-on-year slowdown in per capita spending on travellers’ outbound trips during 2015, following a 9.4 per cent decline between 2013 and 2014. The most recent contraction was led by an 8 per cent year-on-year decline in spending on shopping.

 

The lower spend on shopping is in part related to domestic conditions. The general macroeconomic slowdown may have prompted some travellers to rein in their spending during overseas trips, while Beijing’s anti-corruption drive has resulted in a marked reduction in gifting purchases among wealthier travellers in particular.
However, it would be wrong to view this slowdown purely in macro or policy terms. Instead, lower spending on shopping is part of a broader shift in spending priorities, with wealthier travellers increasingly prioritising experiences over luxury purchases. On average, travellers in the high-income cohort spent 31.1 per cent more than they had a year earlier on entertainment and 78.6 per cent more on other services including car rental and excursions. Those making purchases are increasingly opting for more affordable or lesser known brands, echoing trends seen domestically.

STC magazine - Gervois Hotel Rating CoverThese shifting priorities should broaden the potential beneficiaries of the Chinese outbound trend beyond the luxury retailers that have been the chief winners to date. Rising spending on experiences should benefit hospitality, entertainment and tourism service industries to a far greater extent than in the past, when many Chinese overseas travellers scrimped on hotels, food and activities to spend more at the shops. And the beneficiaries will not just be the big-name hoteliers, restaurateurs and tourist attractions, with many travellers seeking to ditch the growing crowds of fellow countrymen and venture off the beaten track.
China’s outbound journey has plenty of mileage left to run. Understanding rapidly shifting tastes and spending patterns will be key to capitalising on this long-term growth story.

Copyright : The Financial Times Limited 2015
Source: Matthew Plowright, article published on April 28, 2015 in http://www.ft.com

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The rise of the new Chinese International Traveler: Younger, Independent and Affluent.

The number of Chinese travelers making international trips was up by a strong 22 per cent in 2011, compared to 2010, and experts predict China is on track to overtake Germany and the US as the world’s largest outbound tourism market in the next few years.

The inaugural Chinese International Travel Monitor (CITM) from Hotels.com, one of the world’s leading online hotel booking websites, gives an insight into how the rise of the Chinese traveller is changing the dynamics of the global hotel market.

Johan Svanstrom, Managing Director of Hotels.com Asia Pacific, commented: “The Chinese made a staggering 70 million international trips in 2011 and, while many of these were to Hong Kong and Macau, the number going further afield is growing significantly. Implementing strategies to cater specifically to this burgeoning source market is moving from a nice-to-have to a competitive necessity.”

Surveying more than 5,000 Hotels.com’s hotel partners around the world, the report found the majority of respondents envisage the boom in outbound Chinese travel continuing. One in five (22%) expect to see an increase of as much as 40%. Many national governments are facilitating the boom by relaxing visa requirements. Japan and Spain are examples of popular tourism markets that have already done this and Korea, amongst others, will implement similar changes later this year. Chinese international travelers are known to spend significant amounts on shopping and there is a clear opportunity for the hotel industry to grab a share of that spend for the stay experience itself.

The study found that the profile of Chinese guests is changing as they become increasingly more independent, confident, younger and more familiar with foreign cultures and customs.

According to Pierre Gervois, author of the Best Selling book How U.S. Retail, Travel and Hospitality Industries Can Attract Affluent Chinese Tourists, “Chinese outbound tourists are now extremely mature consumers, and know what they want – and do not want. The time of low cost group tours is now definitely over as they want a true travel experience, specifically in the United States, the #1 dream destination according to China Elite Focus’ survey”

Among hoteliers polled, it is clear that many are starting to adapt, offering Mandarin-speaking staff, translated materials, Chinese menus, entertainment options and the China UnionPay card services for payments. Examples from the study found that 41% of hotel respondents are planning to offer Chinese TV channels, while 66% of European hotel respondents are planning to offer Chinese breakfast options.

The Chinese economy continues to grow at a fast rate, contributing to the build-up of a travelling middle class of several hundred million people. With the the ongoing economic uncertainty in key markets, catering to Chinese travellers should be high on the list of priorities.

“Hoteliers should form concrete plans in two areas. Firstly, develop marketing strategies to reach the Chinese source market; concentrating on online as the Chinese internet population has now crossed the 500 million mark. Secondly, adapt hotel property services to cater to the expectation and needs of this growing audience,” concluded Svanstrom.

Source: Travel Daily News, August 2012