Three times a week, when Qantas flight QF 192 takes off from Beijing to Sydney, there is more on board than merely people and cargo. The plane also carries the ambitions of Chinese business people looking for global growth, affluent PRC travelers connecting with their families and having fun, tired but invigorated international business people returning home, as well as a hold full of increasingly value-added Chinese exports. The flight captures some of the trends that are driving the international dimension of the phenomenal growth in China's travel and tourism sector.
The return flight QF 191 from Sydney to Beijing, and indeed flights inbound from all over the world, carry almost as many growth stories as there are passengers. By 2020, the UN World Tourism Organization predicts that China will be the leading inbound destination in the world with 130 million tourists, and the fourth largest outbound destination with 100 million tourists.
This phenomenal inbound and outbound as well as domestic travel industry growth is creating a highly competitive environment in which both multinational travel industry leaders and established PRC local players and pioneers must find innovative and effective ways to build their brands and sell their services. Where people travel and what they buy is changing, as is the role of the travel agent. The new generation of traveler is demanding more, and is finding new ways to get it.
For the last 15 years, both domestic and international travel from China has been driven by increases in disposable income and the addition of more public holidays. A new breed of white collar Chinese leisure traveler is now going abroad, on FIT (Facilitated Individual travel) tours that give travelers the freedom to set their own itineraries. Previously they had to join a tour of three or more people in a tour organized by a registered travel agent. These restrictions have been withdrawn for travelers to Hong Kong, Macau, the majority of the South East Asian countries, and starting July 2006, Japan. Today with 31 million outbound travelers, China has the fastest outbound tourism growth rate in the world, having surpassed Japan in 2003. The vast majority (91%) are going to destinations inside the Asia Pacific region (UN World Tourism Organization 2020 market study statistics).
Chinese travelers are increasingly more independent and can choose to spend more time getting to know tourism destinations in depth, select what hotel they stay in, book a cruise, and travel without the strict regime of wake up calls and endless buses that typifies group travel.
"The previous generation of Chinese overseas traveler was shepherded around in large groups, and often stayed in each country for just a couple of days," said Ms. Susan Field, President of the Hong Kong chapter of the SKAL association of travel and tourism professionals and Managing Director of communications firm ImpactAsia. "Today's upscale Chinese traveler is more likely to be considering a week long spa and tourism trip to the Mandarin Oriental in Chang Mai. And before that traveler can make their choice, they have to understand what each hotel and airline brand offers. High end travel and leisure media, such as Vogue China, are becoming exponentially more influential."
The business environment for the travel agent is changing fast. While the demand for group travel is tailing off, this still comprises a substantial market, including first time travelers, those who don't speak English or other foreign languages, and those who wish to see numerous locations cost effectively without worrying about travel details. Travel agents are increasingly offering retail service, and also handling business travel arrangements, to grab a piece of the large, growing pie of business.
Hotel chains are also adding capacity to meet demand, through all tiers of the market. For example according to a June 2006 study by Lodging Econometrics, 188 of the 386 hotels projects being actively pursued throughout Asia are in China, and 134 of those are at four or five star rates. There is also a burgeoning one, two and three star tier of hotels emerging with limited F&B and leisure facilities and basic rooms. According to Jones Lang LaSalle, Beijing has 351 "star rated" hotel properties, with future growth driven by demand for the Beijing 2008 Olympics. Shanghai is expected to be home to 8,000 more four and five star hotel rooms by 2008. Apart from the "top tier market" cities of Beijing and Shanghai, places such as Shenzhen, Suzhou, Dongguan, Shenyang and Tianjin are emerging as key secondary cities for corporate travel. These cities are seeing the arrival of hotel chains that offer luxury accommodation, such as the launch of Palmerston Suites Tianjin Hotel in 2007, the first of its kind all suites, boutique-style deluxe hotel.
Employees of multinational companies (400 of the Fortune 500 companies have a presence in China) account for about 20% of domestic corporate travel in China. They are mostly with large and medium-sized IT companies, and in the automotive, heavy industry and pharmaceutical sectors. These employees usually rely on the company to make travel plans, within company policies and through authorized agents.
The vast majority (around 80%) of domestic corporate travel in China is undertaken by employees of State-owned companies going to meet colleagues and clients, and also incentive travel. The state-owned companies rely on the individual travelers (and their secretaries) to make travel arrangements, and as a result many are now comparing prices and making bookings online.
Established online travel agencies such as Ctrip, 96115.com (Beijing's largest ticketing agency), as well as newer firms such as Qunar.com and booking site Aoyou.com, are offering innovative services to exploit China's tremendous appetite for online travel.
According to a July 2006 survey by Beijing-based Qunar.com search engine, 57% of Chinese Internet users have already purchased a flight online, 43% have booked a hotel room and 24% have ordered a tour package.
Mr. Tan Zhi Guo, CEO of 96115, believes the industry is seeing a dramatic shift among consumers from offline to online as evidenced by the latest data. "The Internet provides consumers with a reliable and efficient medium to reach companies who offer great deals for consumers..." he said.
"From a demand-side perspective, passengers will benefit from increased transparency on selection and price, exploiting the newest technologies that promote customer-direct interaction, whether from the growth and enhancement of Internet connectivity or the continuing proliferation of mobile and wireless services," according to Mark Abe, Vice President, EDS Global Transportation Group. "Airports will also position to serve these passengers, becoming economic commerce centers outright with new channels of retail and commercial services."
The Qunar survey indicates that China's online travel buyers are both affluent and frequent travelers. When asked about their travel in the last twelve months, 25% of respondents said that they traveled four or more times for business, and 26% said that they traveled four or more times for leisure.
Chinese consumers already purchase 12% of the world's luxury goods (making them the fourth largest consumers worldwide). Judging by the data from the Qunar survey, those travelers who are online clearly represent an exceptionally affluent, Internet savvy and well-educated elite subset of the emerging consuming class in China:
- 73% use a credit card
- 22% own and drive a car
- 69% have a computer at home
- 35% own their own apartment or home
- 88% have received a university degree
The traveler who books online is an increasingly attractive target demographic for advertisers. With high disposable income, "We feel that from an advertiser's perspective, online travelers are a valuable demographic from which to build brands," noted Mr. Kevin Huang, CEO of Pixel-Media.
With China's Internet population at 111 million (around 8.5% of the population, compared with the US having 203 million users and flattening out at 68% of the population) there is still a long way up for this trend. However, the Internet is just one more accelerating element among dozens of market factors that are driving both travel expenditure and marketing campaigns to new heights.
Sources:
UN World Tourism Organization 2020 Market Study - June 2006 Interview with Susan Field, ImpactAsia
Business Travel News APAC - Issue: March / April 2005
Jones Lang LaSalle, and Lodging Econometrics, quoted in eHotelier.com "China's Luxury hotel sector strong despite curbs"
Qunar Survey of Online Travel issued July 2006
The Promise of China Air Travel, Mark Abe, EDS http://www.eds.com/news/features/3034/
Note: Upstream clients mentioned in this article include Qantas, Mandarin Oriental Hotel Group, Palmerston Suites Hotels, and EDS. Upstream has a business cooperation agreement with ImpactAsia.
