beyondbrics

It’s not hard to spot Chinese tourists in China. They go around in large groups – usually single file – led by a guide with a flag and loud speaker, and sport brightly-coloured, matching baseball caps.

But this stereotype is changing. And as it does, so does the market. By 2020, the Chinese will spend more on tourism than their neighbours in Japan, becoming the world’s second biggest source of travel business after the US.

On average 25m Chinese take their first overnight leisure trip each year. This is expected to double by 2020, according to a report from Boston Consulting Group. Understanding how Chinese travellers are changing will give foreign companies first mover advantage in a market that is set to be worth $590bn by 2020.

BCG estimates that China has already risen from the world’s sixth biggest to third biggest tourism market. According to its new report, Taking off: travel and tourism in China and beyond, Chinese travellers are defying commonly-held assumptions and spending more of their disposable income on travel, both within China and internationally.

But they’re set to spend more on domestic travel first. The report, which is based on findings from 4,250 Chinese travellers polled in 15 cities across the country, forecasts that the value of China’s domestic travel market will quardruple by 2020, and that demand for domestic accomodation will double.

That’s because Chinese travellers are already willing to pay 8 per cent of their annual income on a single domestic trip. This is more than any other emerging market and much more than what a traveller from a developed country is willing to spend (on average 2 per cent of yearly income).

And while business travel is expected to remain static, China’s overnight leisure market is expected to overtake the business segment, to account for nearly half of the domestic travel market by 2020.

Chinese tourists are flocking to international destinations in droves as well, albeit in smaller relative terms. China’s market for international travel is expected to grow by 17 per cent a year over the next decade. By 2050, 25 per cent of international tourists to South Korea and Japan will come from China, while arrivals to Europe from China will quadruple, according to BCG.

But the broader point of the report is that Chinese travellers are unique and any business interested in tapping China’s booming tourism sector had better first understand what it is that Chinese travellers want, because they are currently being under-served. The authors of the BCG report argue that understanding the nuances of what they demand could mean larger profit margins for foreign companies.

So what are these nuances? Chinese travellers tend to travel in larger groups; they are mostly young; and they plan their holiday at much shorter notice: 39 per cent of US travellers previously polled by BCG said they began planning 3 months ahead, compared with 4 per cent of Chinese travellers.

They value baggage delivery from airport to hotel much more than American travellers (in the US it is not even in the top ten priorities) and they enjoy the exclusivity of priority lounges and priority security lines.

And why are they being under-served? A majority of respondents said they were dissatisfied with their travel and tour options. Online booking is one particular bone of contention. It is seen as unreasonably complex, despite its growing popularity in the industry.

A few companies have addressed these concerns and in return have reaped the benefits. China’s leading travel website Ctrip, which offers online booking and ticket delivery, allows customers without a credit card to pay cash. Club Med is also gaining loyal customers by putting emphasis on building relationships with their customers.

This is just the tip of China’s tourism iceberg. Those interested in tapping the market should pay close attention to a continually changing sector.

Related reading:
Consumption file, beyondbrics