TARGET MARKET: CHINA

Transcription

1 TARGET MARKET: CHINA MARKETING STRATEGIES FOR TOURISM DESTINATIONS A COMPETITIVE ANALYSIS

2 Marketing Strategies For Tourism Destinations A Competitive Analysis Target Market - China A report produced for European Travel Commission (ETC) by Tourism Development International Brussels, 2014

3 Published and printed by: European Travel Commission Rue du Marché aux Herbes, Brussels, Belgium Website: This report was compiled and edited by: Tourism Development International on behalf of the European Travel Commission. The designations employed and the presentation of material in this publication do not imply the expression of any opinion whatsoever on the part of the European Travel Commission concerning the legal status of any country, territory, city or area, or of its authorities or concerning the delimitations of its frontiers or boundaries. Cover photo: Nanchang scenery, view from the Tengwang pavilion, China; Copyright: chungking.

4 Contents Foreword i Introduction 1 a. Defining the Competitive Environment for Destination Europe 2 b. Destinations in the Global Market Place: a Comparative Analysis 2 Summary of China Market Study The Chinese Outbound Travel Market A Large and Fast Growing Market Chinese Tourism to Europe Characteristics of the Chinese Traveller Drivers of Growth Successful Destination Strategies Travel Destinations in the Chinese Market Visa Regimes Air Connections Political, Economic and Socio-Cultural Links Consumer Assessment (TripAdvisor) Profile of Europe s Main Competitors in China Destination Marketing Organisations The Australian Tourism Sector The Republic of Korea Tourism Sector The Malaysia Tourism Sector The New Zealand Tourism Sector The Russian Federation Tourism Sector The Thailand Tourism Sector The United States of America Tourism Sector Conclusions Marketing Strategy and Activities of Tourism Australia and Brand USA in China Tourism Australia Marketing Strategy and Activities in China Brand USA Marketing Strategy and Activities in China Key Factors in Destination Marketing in China Market Perceptions Marketing Performance and Opportunities 79 Appendices Appendix 1 European and Competing Destinations WET TTCI and 84 Bloom Country Brand Rankings Appendix 2 Weekly City-to-City Flights from Main Chinese Centres 87 Appendix 3 TripAdvisor Ratings 89 Appendix 4 Bibliography and References 91

5 Acknowledgments This report was prepared by Peter Mac Nulty and Robert Cleverdon of Tourism Development International on commission to the European Travel Commission (ETC), and was carried out under the supervision of Ms Valeria Croce, Head, Research and Development Department at ETC. The report is part of a series of fact-finding reports on the tourism strategy developed by destinations competing with Europe in select long-haul markets. The project was realised as part of the European Commission and ETC joint initiative Destination Europe We would like to acknowledge the support and contributions of the many ETC members, marketing organisations and tour operators associations who contributed to the realisation of this report. We also gratefully acknowledge the support of ETC partners, who committedly contributed to the realisation of this project. A special note of thanks to Mr Charlie Ballard, Director of Advertising Research at TripAdvisor, Mr Xu Jing, Regional Director for Asia and the Pacific at UNWTO, and Mr Daniel Velasco, Consultant at Amadeus Travel Intelligence Unit, for their contributions.

6 Foreword In an increasingly vibrant landscape, marked by new players, technological innovation and rapidly changing consumers, the need arises for European destinations to closely monitor others effort to win market shares in the global tourism market. This compilation of best practice examples in tourism and promotion strategies is meant to provide insights relevant to ETC and its member countries through a better understanding of the environment in which they operate. This series of reports provides insights into the strategic vision and the operational actions tourism destinations worldwide are developing to attract an increasing number of visitors from the most promising source markets. This fact-finding research offers a bird s-eye view of the competitive environment, and a portrait of the tourism strategy and marketing activities of competing destinations. References to official documents and publicly available reports facilitate access to detailed information, for those interested in achieving a higher level of knowledge. For Europe s strongest competitors, portraits are enriched with first-hand information gathered through personal interviews with NTOs marketing directors, representatives of the travel trade and experts. The common structure of reports facilitates cross-market comparisons. Key results are synthesised in a highly visual executive summary, conceived for dissemination to the public at large. We trust these reports will become for ETC and its members an important tool to identify key opportunities and challenges, and to strengthen their comparative advantage in the global tourism market. Executive Unit European Travel Commission i

7 Introduction This report s aim is to collect meaningful knowledge about the tourism strategy of destinations competing with destinations in Europe in select long-haul markets. This study is part of a series of publications, which offer an overview of the environment, in which European tourism destinations operate, and a profile of the tourism strategy and marketing activities of competing destinations. A listing of official documents, publicly available reports and media features is provided in an appendix and through the footnotes to permit more detailed examination of the information presented and issues raised. Each report also provides first-hand information on a selection of competing destinations, gathered through interviews with NTOs marketing directors, travel trade and experts. Defining the competitive environment for Destination Europe This project focuses on countries competing with European destinations in high potential long-haul markets, namely Brazil, Canada, China, Japan, Russia and the United States. In this analysis, Europe is defined as the 33 countries which are members of the European Travel Commission plus France, the Netherlands and the United Kingdom. The analysis followed a three step approach. The first step was to identify the key markets for Europe and the primary destinations competing with Europe in those markets. These markets are presented in Figure 1. The second step consisted of assessing strengths and weaknesses of destinations, which are significant competitors to Europe in the six target markets. The assessment has been based on the following indicators: the World Economic Forum Travel and Tourism Competitive Index (WEF TTCI), travel trade interviews and expert opinion, visa regimes and other visitor entry requirements, air connectivity and capacity, price competitiveness, political, economic and socio-cultural links, destination tourism development policy, destination tourism marketing strategy. The third step consisted of identifying those destinations which are the strongest competitors for Europe in each market, i.e. destinations which attract significant volumes of travellers and are actively investing in increasing their share in the market. A detailed profile of the organisations in charge of promoting inbound tourism to these destinations has been compiled. Information about the strongest competitors has been collected by the means of personal interviews as well as from secondary sources. 1

8 a. Defining the Competitive Environment For Destination Europe Experts from the European Travel Commission (ETC) Executive Unit, Market Intelligence Committee and Operation Groups, as well as experts from Tourism Development International (TDI), were involved in a two-stage process to define the competitive environment, in which European destinations operate. In the initial stage, those long-haul markets which show the best prospects for Europe as a tourism destination were identified. Based on a compound analysis of the relative importance of, and growth prospects for a large number of markets, six were identified as priorities for Destination Europe. The experts were then asked to list countries which are actively targeting those markets as tourism destinations. These competing destinations are defined as countries which are currently investing in tourism promotion and which already receive considerable volumes of tourists from the selected markets. The outcome of experts evaluation of the competitive environment is reported in Figure 1. Figure 1: Market: Destination Pairings Markets Brazil Canada China Japan Russia United States Competitor USA Mexico Australia Russian Federation USA /USA large cities Mexico China South Africa USA Australia Russian Federation USA Rep of Thailand Korea Rep of Korea Malaysia Egypt China Dubai United States China Brazil Australia USA large cities Thailand Malaysia New Zealand Thailand South Africa Factors and policies conducive of travel and tourism development b. Destinations in the Tourism Global Market Place: a Comparative Analysis An overall assessment of the comparative resources and capabilities of the selected destinations was undertaken based on publicly available international indicators, which monitor aspects crucial to determine their strength and weaknesses as tourism destinations. The World Economic Forum Travel and Tourism Competitiveness Index (WEF TTCI) provides a broad assessment of a large number of characteristics and features that facilitate the development and functioning of tourism in a country. The survey assembles results for 79 pillars under three main sub-indexes : 1. Travel & Tourism Regulatory Framework, 2. Business Environment & Infrastructure, 3. Travel & Tourism Human, Cultural and Natural Resources. 2

9 These illustrate the relative success of destinations in creating conditions to attract investment in tourism development. Figure 2 shows the ranking of the 13 destinations according to each of the sub-indexes and relative to each other. The rankings in columns i to iv are based on a total of 140 countries worldwide included in the WEF TTCI survey. The rankings in column v are within the set of 13 competitor destinations. Figure 2: WEF TTCI Rankings of Competing Destinations, 2013 Country Competitiveness Subindex Travel & Tourism Regulatory Framework Travel & Tourism Business Environment & Infrastructure Travel & Tourism Human, Cultural & Natural Resources Overall Ranking Ranking within 13 Competing Destinations (i) (ii) (iii) (iv) (v) Australia Brazil China Dubai (as UAE) Egypt Rep of Korea Malaysia Mexico New Zealand Russian Federation South Africa Thailand United States Source: TDI analysis of WEF TTCI report At a country level, European destinations (both ETC member countries and other countries in Europe) occupy the top positions of the WEF ranking - see Figures 25 to 28 in Appendix 1. The leading five positions in the overall ranking are European i.e. Switzerland, Germany, Austria, Spain and the United Kingdom. A further three European countries are placed in the band of 6 th to 15 th (i.e. France, Sweden, the Netherlands), and 15 rank in the top quarter up to 35 th place. Six of the 13 competing destinations examined in the study achieved a ranking in the top quarter of all destinations worldwide i.e. the United States 6 th, Australia 11 th, New Zealand 12 th, Rep of Korea 25 th, Dubai (based on the data for the UAE as a whole) 28 th and Malaysia 34 th. 3

10 Figure 3 shows the overall ranking position for four European countries (France, Italy, Spain and the United Kingdom), selected as benchmarks, and the 13 competing destinations. The comparative analysis of the resources and capabilities of the 13 destinations identified as competitors at sub-index level (see Appendix 1) suggests what follows: High ranking: United States, Australia and New Zealand. These countries show strengths in the following areas: New Zealand in respect of its travel and tourism regulatory framework, the United States for the travel and tourism business environment and infrastructure, and for travel and tourism human, cultural and natural resources, Australia for travel and tourism human, cultural and natural resources. The United States fares less well in respect of the travel and tourism regulatory framework, and lower rankings (though still in the top 25 globally) are recorded by Australia in respect of the business environment and infrastructure, and the regulatory framework, and by New Zealand for human, cultural and natural resources. Mid ranking: Republic of Korea, Dubai (UAE), Malaysia, Thailand, Mexico, China, Brazil. Six of these seven destinations, the exception being Dubai, score more highly than their overall ranking in respect of human, cultural and natural resources. The weaknesses for this group of destinations are in the regulatory framework (i.e. Mexico, Brazil, Thailand, China) and the business environment and infrastructure (i.e. Brazil, China, Mexico). Mid-to-low ranking: Russian Federation, South Africa. Both countries rankings are pulled down by their low assessment in respect of travel and tourism regulatory framework. In the case of South Africa, this is due to low performance on safety and security, and health and hygiene; while for the Russian Federation, the weaknesses are more widespread across four of the five pillars in the sub-index. Low ranking: Egypt. Its weak positioning reveals in each of the three sub-indexes suggests that this destinations doesn t have an overall comparative advantage in respect to destinations in Europe, but may be attractive in specific markets and segments. 4

11 Figure 3: WEF TTCI Overall Rankings Source: WEF - TTCI, 2013, 140 destinations Another competitive edge for destinations is the value of their tourism offer. While the perceived value of tourism services is a subjective construct that varies across markets, segments and experiences, an assessment based on standardised indices can highlight destinations comparative advantages related to cost-related aspects. The value of tourism products across destinations The WEF TTCI survey examines components that impact on price levels at a destination, including taxes levied on ticket sales, airport charges and fuel costs, as well as general taxation levels. The overall price competitiveness of destinations is derived from these five factors. The WEF TTCI also provides a hotel price index, as a proxy of price competitiveness from a consumer perspective. The WEF TTCI s rank order in terms of overall travel and tourism price competitiveness and the hotel price index for destinations competing with Europe are shown in Figures 4 and 5. It found that Malaysia and Thailand are the most price competitive destinations, although the United States fares well on hotel prices; Australia is the least competitive destination in terms of prices. By comparison, all European destinations are in the lowest tercile (ranked 100 th or lower), largely because of travel and fuel taxes. They are more competitive in respect of hotel prices, with Spain featuring 42 nd and the United Kingdom 53 rd while other European countries score less well, ranging from the Baltic states of Lithuania, Latvia and Estonia (all in the top 12 of hotel price competitiveness) to Switzerland, Serbia and France all ranked worse than 100 th in respect of hotel prices. See details in Appendix 1. 5

12 Figure 4: Destination Travel & Tourism Price Competitiveness: 13 Primary Competitors to Europe 1 European Benchmark Egypt Malaysia Competitor Destinations Thailand Mexico UAE-Dubai China South Africa Russian Federation New Zealand 1 01 Republic of Korea USA Spain Italy UK France Brazil Australia 1 61 Source: WEF - TTCI Source: WEF - TTCI Figure 5: Destination Travel & Hotel Price Competitiveness: 13 Primary Competitors to Europe Source: WEF - TTCI 6

13 The rating of a country as a brand in the perception of prospective visitors is an important travel decision making criterion in respect of choice of destination. The impressions created in the minds of consumers in travel markets around the world are created through a large number of influences. The Bloom Consulting Group in its annual Country Brand Ranking 1 identifies four variables as contributing to a destination s image and thereby establishing its tourism brand rankings i.e. 1. Tourism economic receipts and growth (a first indicator of a country s appeal), 2. The destination products and experiences researched online (measuring its online appeal), 3. The country s brand strategy (assessing the accuracy and effectiveness of its communication efforts), 4. Official website and social media performance. The results of the 2013 Country Brand Ranking of 187 countries and territories are outlined in Figure 6. It shows that the United States has the strongest tourism brand followed by Thailand, Australia, China, Malaysia, the Republic of Korea and Mexico which all feature in the top 20 destinations. None of the 13 primary competitors to Europe across the six selected markets is ranked lower than 42 nd (Brazil). Nine European countries are ranked in the leading 20 destinations, led by Spain, France, the United Kingdom and Italy. Full details for all European countries are presented in Appendix 1. Country Brand Rankings Figure 6: Country Tourism Brand Ranking: Primary Competitors to Europe Source: Bloom Country Brand Ranking Tourism Edition Bloom Country Brand Ranking Tourism Edition Brand_Ranking_Tourism_2013.pdf 7

14 The competitive strength of any country as a tourism destination is a combination of many factors, some of which are fixed or otherwise factual while others are subject to the influence of both product developments and marketing and promotional activities. No destination is outstandingly strong or weak across all parameters. The strongest individual destination is the United States, rated as having the leading tourism brand and achieving 6th place in the global WEF TTCI survey of all tourism development factors (behind five European countries). The power of strong tourism industries combined with market-driven tourism product/experience development and well-targeted marketing is illustrated by comparing rankings on the WEF TTCI broad tourism development and facilitation survey (that does not take account of destination marketing) and the Bloom Consulting Group destination brand ranking (which features destination marketing elements as a key criterion). This is borne out particularly in the cases of Thailand, China, Malaysia, Mexico, Egypt, South Africa and the Russian Federation where weaknesses in either or both of the regulatory framework, and business environment and infrastructure, may be compensated for by price advantages and the appeal of the countries tourism product offering. Figure 7: Country Tourism Rankings Country Bloom Country Brand Ranking Overall WEF TTCI Ranking Europe s Competitors United States 1 6 Thailand 6 43 Australia 8 11 China Malaysia Rep of Korea Mexico Egypt UAE - Dubai South Africa Russian Federation New Zealand Brazil European Benchmarks Spain 2 4 Germany 3 2 France 4 7 United Kingdom 5 5 Italy 7 26 Austria 11 3 Switzerland 14 1 Sources: WEF TTCI survey, and Bloom Country Brand Ranking Tourism Edition

15 Information Note - Exchange Rates The monetary values quoted in the report are taken from the sources referenced, including amounts stated in the source document in US dollars. In all cases, conversion has been made to Euros. The conversion rates used are the average rates across the year between the local currency (or US dollar where that is the currency stated in the source document) and the Euro for the year of the data. For future forecasts/targets, the rate between the local currency and the Euro as at June 2014 have been used. 9

16 Summary of China Market Study OUTBOUND TRAVEL AND COMPETITIVE ENVIRONMENT KEY DEMOGRAPHIC AND ECONOMIC DATA 2013 Population 1,351mn GDP PPP per capita $9,828 7,280 Average annual GDP growth over past decade CHINA S PERFORMANCE IN INTERNATIONAL TOURISM International arrivals generated 2012: 82mn 2013 : 97.3mn up 18 to 19% GDP PPP per capita current prices 2 CNY42,026 5,075 Expenditure 2012: $102bn ( 78 bn) 2013: $ bn ( bn) up 18 to 27% in dollar terms but slightly less in Euros (14 to 23%) as a result of the depreciation of the dollar against the Euro since 2012 Leading outbound tourism country in terms of EXPENDITURE Second largest outbound market in terms of OVERNIGHT STAYS in OUTBOUND DESTINATIONS VISITED BY CHINESE 1. Hong Kong 6,752, Thailand 4,997, South Korea 3,440, Macau 3,132, Taiwan 2,815,741 Total trips to Europe: 3 million (first stop) with aggregate arrivals circa 5 million World Economic Outlook Database, October 2013, IMF. Euro values converted at average exchange rate for World Travel Monitor 2013, IPK International Singapore 1,563, Malaysia 1,476, Japan 889, Vietnam 682, France 648,376 TOP destinations are Asian 10

17 STRONG NON ASIAN GROWTH MARKETS GROWTH PER ANNUM p.a. p.a. p.a. p.a. United Arab Emirates United States of America Switzerland France POSITIVE INFLUENCES ON GROWTH PURPOSE OF VISIT Steadily developing economy Increasing international flights Appreciation of Chinese currency Expanding tourism consumption demand Easing of visa policies of foreign countries/regions Public (business, official) Private (leisure) Public (business, official) Private (leisure) OUTBOUND TRAVEL AND COMPETITIVE ENVIRONMENT Destination success in the Chinese tourism market from: 1. Understanding and catering for cultural needs, 2. Innovating, investing and working across sectors to deliver the right products/experiences, 3. Catering for increased FIT travel, 4. Focusing destination marketing on authentic features and offerings, 5. Incorporating China-friendly elements in the experiences offered, 6. Accurate product: market matching in line with the preferences and trends of the Chinese market, 7. Facilitating Chinese travellers to enter, travel around and obtain Chinese-oriented service. Europe s primary competitors across all aspects of tourism according to the WEF TTCI are other industrialised nations e.g. United States, Australia, New Zealand, Republic of Korea, In terms of overall price competitiveness in travel and tourism, European destinations are among the world s most costly, The 2013 Bloom Consulting Country Brand Ranking rates the United States as the leading tourism destination brand with Australia also in the top ten, while nine of the leading 20 tourism destination brands are European. 11

18 PRINCIPAL COMPETING DESTINATIONS Seven destinations are shortlisted as significant competing destinations to Europe in the Chinese market: Australia, Malaysia, New Zealand, Republic of Korea, Russian Federation, Thailand and the USA, All seven are making major efforts to support and increase the competitiveness of their travel and tourism industries by: 1. Seeking to develop new and improved infrastructure and tourism products/experiences across a broad range of visitor interests, 2. Focusing on delivering a high standard of tourism service, 3. Paying special attention to facilitating entry into their countries and targeting the Chinese tourist. The seven countries competing with Europe for the Chinese tourist are pursuing marketing strategies that: 1. Stress the authenticity of their natural and cultural heritage in developing brand images and positioning, 2. Pay equal attention to established source markets and newly emerging ones to achieve a balanced set of markets, 3. Seek a market: product matching approach that provides high quality experiences based of detailed research into the needs and expectations of different market segment, with China a primary target market target, 4. Focus on a number of common segments across competitors e.g. MICE, medical tourism, shopping, festivals and events, 5. Pay special attention to attracting high value/affluent tourists, 6. Show a significant and continuing switch away from traditional advertising and promotional methods to electronic digital marketing. Europe s primary competitors across all aspects of tourism according to the WEF TTCI are other industrialised nations e.g. USA, Australia, New Zealand, Republic of Korea COMPETING DESTINATION ORGANISATIONS Australia and the USA are the most active and effective long haul competitors to Europe for the Chinese tourist, Australia s success in the Chinese markets is a result of: 1. Early awareness of China s potential and the need to understand the Chinese traveller, 2. The necessity for a partnership approach to developing the Chinese market, 3. Substantive and sustained marketing campaigns targeted at affluent, urban Chinese who are experienced travellers, 4. Deploying marketing and promotional tools tailored to the needs and expectations of the Chinese traveller. Brand USA s achievement in only its third year of operation has been to translate interest and desire to visit the country into firm travel intentions close to 60% of respondents intending to visit in the coming year, In terms of overall price competitiveness in travel and tourism, European destinations are among the world s most costly The partnership approach is central to Brand USA s marketing strategy and campaign components, giving a wide range of destination, travel trade and media partners the opportunity to piggyback on the digital and traditional marketing tools, public relations and promotional efforts developed and conducted by Brand USA, In any destination marketing strategy based on partnerships, accountability to its partners is vital. Brand USA has a rigorous system of monitoring, assessing and evaluating its activities. 12

19 COMPARATIVE ASSESSMENT: EUROPE, THE UNITED STATES, AUSTRALIA Traditionally-held perceptions of Europe, the United States and Australia in China are that Europe is rich in cultural heritage, tradition and luxury, The United States represents wealth, modernity and popular culture, and Australia offers a natural environment and a relaxed lifestyle, Europe and the United States are top of the list in terms of choice as first time overseas destinations, while all three destinations can offer the range of attractions and activities to cater for the more experienced traveller seeking places to visit and things to do outside the normal tourist circuits, All the three destinations have extensive Chinese language programmes both in marketing campaigns in China, and in the delivery of tourism products and services in the destination. The United States has an advantage in that it is seen by the Chinese as being more attuned to Chinese tourists needs, All have invested heavily and effectively in studies and surveys to better understand the attitudes, motivations, behaviour and characteristics of Chinese travellers in order to be able to design marketing and promotional strategies and campaigns to achieve the highest possible penetration of the China market, The 2013 Bloom Country Brand Ranking rates the USA as the leading tourism destination brand with Australia also in the top ten, while nine of the leading 20 tourism destination brands are European The ETC is disadvantaged against Tourism Australia and Brand USA through a far smaller marketing budget in China, The disparate and limited marketing activities of European countries, without a strong, financially-empowered coordinating mechanism, lead to the prevailing market perception of Europe of a collection of countries without a central theme. Competition can be fostered indeed market competition is the essence of business in both Australia and the United States by linking together on certain marketing activities, generating benefit to all, in the spirit of co-opetition (i.e. cooperation AND competition) whereby the overall market is increased through working together enabling the destination s individual marketing activities to compete for a larger total market. The strength of both Tourism Australia and Brand USA is their focus on the partnership approach to destination marketing, Historical culture and heritage are Europe s key assets in the current (unmanaged) positioning of Europe; but the challenge of any future marketing campaign will to shift this positioning to highlight Europe s contemporary vibrancy, enterprise and innovation within tourism, and in particular to create knowledge about the rich and diverse tourism experiences that Europe can offer beyond the introductory tour of iconic sites and features. 13

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21 The Chinese Outbound Travel Market A Large and Fast Growing Market China represents one of the principal motors for the growth in international tourism. Between 2000 and 2013, the volume of outbound departures of the Chinese population rose by between 18% and 19% a year reaching 97 million in Spending by Chinese tourists on international tourism also grew, reaching an estimated record level of between US$120 and 130 billion (EUR89 96 billion) in Average expenditure per outbound trip was calculated at US$1,226 (EUR943) in , with spending on long haul trips significantly higher than on trips to intra-asian destinations. Outbound travel from the leading source markets Germany, the United States and the United Kingdom - is growing far more slowly than from China with the result that China is now second for trips of one night or more as well as becoming the world s leading outbound travel market in terms of expenditure in 2012 with the total of US$102 billion (EUR78 billion). This represents a near five-fold increase from US$22 billion (EUR18.6 billion) in 2005 when it ranked seventh in international tourism expenditure, overtaking Italy, Japan, France, the United Kingdom, the United States and Germany in the seven-year period 7. China ranks high both in outbound travel and expenditure China now the leading outbound market in terms of expenditure Figure 8: Leading Outbound Travel Markets, 2013 Rank Trips (1+ nights) Overnight Stays Spending 1 Germany Germany China 2 China United Kingdom United States 3 United States United States Germany 4 United Kingdom China United Kingdom 5 France Russia Japan 6 Canada France Canada Source: World Travel Monitor 2013, IPK International 4 China Outbound Tourism in Travel China Guide 5 Ibid 6 The Chinese Outbound Travel Market 2012 Update. ETC/UNWTO 7 Ibid 15

22 Most travel from China remains within Asia The main destinations for Chinese tourists are in Asia, with the Special Administrative Regions (SAR) of Hong Kong and Macao attracting over 2/3 of total departures from China. In terms of arrivals of Chinese tourists, the top ten destinations are (2012 data): Hong Kong & Macau (China) 23 million, Rep of Korea 3.4 million, Thailand 2.8 million, Taiwan 2.6 million, Singapore 2.1 million, United States 1.6 million, Japan 1.5 million, Vietnam and Malaysia both 1.4 million. The trend towards intraregional travel within Asia reflects the continued expansion of the Chinese population able to travel abroad and who choose a nearby destination for their initial trip. In 2013, while total outbound trips rose 25%, Asian destinations recorded a rise of 31% while long haul trips grew by a lower 11%. Intra-Asian destinations also dominate for Chinese outbound trip destinations organised through travel agencies, as illustrated in Figure 9. Figure 9: Top 10 Outbound Destinations Visited by Chinese Tourists in Hong Kong 6,752, South Korea 3,440, Taiwan 2,815, Malaysia 1,476, Vietnam 682, Thailand 4,997, Macau 3,132, Singapore 1,563, Japan 889, France 648,376 Source: China National Tourism Administration Easing of travel regulations contributing to growth outside of Asia Outside Asia, the strongest growth has been recorded to the United Arab Emirates (30% p.a ), the United States and Switzerland (both 29% p.a.), and France (20% p.a.). In the last two years Australia (+16% in 2012 to 0.6 million arrivals), and New Zealand (+48% to over 0.2 million) have been especially strong destinations for the Chinese. The United States, Europe, Australia and New Zealand have grown substantially in recent years, in response to easier travel regulations and increased promotional targeting. Figure 10: Strong Non-Asian Growth Markets (% Growth Per Annum ) United Arab Emirates United States of America Switzerland France Source: Euromonitor International 16

23 Looking ahead, UNWTO forecasts that Asia and the Pacific will generate 358 million tourist arrivals in 2020 and 541 million tourist arrivals in Of these, nearly 20% will travel to destinations outside the region 8. China will be the prime generator of Asian outbound travel. The forecast of 100 million Chinese trips abroad by 2020 made by UNWTO in the late 1990s 9 will be achieved in While faster growth will remain for intraregional travel, demand for long haul trips will remain strong, growing by between 6.5% and 7% a year over the next five years to exceed 35 million by China will be the prime generator of Asian outbound travel to 2020 In terms of individual long haul destinations, Euromonitor International s forecasts for the period see the strongest growth in Chinese visitors in Switzerland, Spain, the UAE, the United States (all more than doubling the level of arrivals), Italy, Austria, New Zealand and Australia. 1.2 Chinese Tourism to Europe Chinese tourism to Europe has grown at the rate of 18% a year between 2008 and 2013, reaching a level of 7,475,000 12, following an annual rise of 11% in the previous five years, illustrating that Chinese outbound travel growth was largely unaffected by the global recession 13. Despite this rapid growth, Chinese tourists comprised just 1.3% of total arrivals in Europe in As a proportion of all Chinese long haul trips (defined as outside Northeast Asia), Europe s share has fallen by over 9% between 2004 and 2014, now accounting for one-in-three such trips 15. China is the 2 nd market for Europe from outside the region, after the United States The average expenditure of a Chinese visitor on a trip to European Union states was US$3,734 (EUR2,835) in China was the 15 th most important source market for European destinations in terms of international tourist arrivals in 2013, but the 2 nd market from outside the region, after the United States. The leading European destinations visited by the Chinese in 2012 were the Russian Federation 0.8 million, France 1.3 million, Germany 0.8 million, Switzerland 0.7 million, Austria 0.4 million, Italy 0.3 million, United Kingdom 0.2 million 17. In terms of regions within Europe, Chinese travellers primarily visit Western European and Central/Eastern European destinations, these two regions accounting for 55% and 20% respectively of Chinese arrivals in Europe in Western Europe accounts for over half of Chinese arrivals in Europe 18 8 Ibid 9 Tourism 2020 Vision UNWTO 10 European Tourism in 2014: Trends and Prospects (Q1 2014). ETC. 11 Euromonitor International 12 ETC Dashboard 13 European Tourism Portfolio Analysis: Market Share and Origin Market Growth. ETC 14 Ibid 15 European Tourism in 2014: Trends and Prospects (Q1 2014). ETC. 16 Market Profile China. December ETC 17 Euromonitor International 18 European Tourism Portfolio Analysis: Market Share and Origin Market Growth. ETC 17

24 Total Chinese arrivals to Europe forecast to reach 12 million by 2019 Chinese trips to Europe are forecast to grow at an average annual rate of between 7.5% and 8% over the next five years, resulting in a reversal of the decline of Europe s market share of Chinese long haul travel 19. Total arrivals will approach 12 million by Characteristics of the Chinese Traveller Population: 1,351 million population, forecast to grow at 0.23% to 2025, but declining thereafter as deaths outnumber births 20. Gross Domestic Product (2013): US$8,939 billion (EUR6,900 billion), with growth of between 6 and 7% a year forecast to China GDP forecast to grow to US$9,300 by 2017 GDP Per Capita (2013): US$6,569 (EUR5,075), rising to a forecast level of US$9,300 (EUR6,890) by Wide variation in the distribution of income, with 120 million Chinese having a disposable household income of over US$6,000 (EUR4,330) in 2010, while the lowest quintile of 151 million people had just over US$1,100 (EUR795) 23, as converted from Chinese yuan at the average 2010 exchange rate of 6.77 yuan to the dollar. Figure 11: Demographic and Economic Facts Population 1,351mn 1 GDP per capita $7,958 2 Average annual 3 GDP growth over past decade The major urban centres of Beijing, Shanghai, Guangzhou and Shenzhen account for most of the outbound travel demand among Chinese, but demand from smaller cities and towns is also growing fast. Shanghai is the primary source of outbound business travel 24. Chinese travel is traditionally concentrated from May to October Chinese travel is traditionally concentrated in the May and October holiday periods, but it is becoming increasingly spread across the year. A continuation of this trend is anticipated as holiday entitlements increase and longer duration trips are taken 25. Air transport dominates. China has a target of 244 airports by 2020, with a total of over 300 million passengers a year at present and a forecast growth rate in domestic air demand of 8% a year to 2028, fuelled by strong economic growth, market liberalisation and fast urbanisation with rising household travel expenditures European Tourism in 2014: Trends and Prospects (Q1 2014). ETC. 20 China Population World Population Statistics. 18 September IMF World Economic Outlook China 22 Ibid 23 The Chinese Outbound Travel Market 2012 Update. ETC/UNWTO 24 Ibid 25 Ibid 26 Ibid 18

25 As of September 2010, 23 airlines operated 471 weekly flights between Chinese and European airports, with a capacity of 140,000 seats 27. The split between public (i.e. business, official) and private (leisure) changed dramatically between 2000 and 2010, from 46:54 to 10:90, as holiday travel surged. Holiday travel particularly group travel expanded throughout the decade in line with the liberalisation of outbound travel. Private travel accounts for 90% of outbound travel Information is readily absorbed by Chinese people though there remains heavy reliance on peer group information from other Chinese. Electronic technology combines these two characteristics to fuel outbound travel growth, and to increase the proportion of trips or trip components booked online. There are 591 million Chinese internet users with 464 million citizens accessing the net via smartphones or other wireless device 28. Already, one-in-five Chinese travellers books online, a proportion that will rise significantly as independently-arranged or FIT (flexible independent travel) - travel expands. The incidence of first time overseas travellers still accounts for the majority but the proportion is declining (65% to 59% between 2011 and 2012) as regular overseas trip taking grows 29. One third of all trips are through travel agents 33.6 million in The Chinese Government regulation requires leisure travel to long haul destinations to be booked via licensed travel agencies but this condition has been eased recently resulting in travel agencies share of trips to destinations except Hong Kong and Macau falling from 89% in to between 70 and 75% in One-in-five Chinese travellers books online First time overseas travellers still account for the majority but the proportion is declining Given the size of the Chinese population and the severe restrictions on overseas travel until 1988, the majority of outbound travellers are still on their first trip outside the country. Highly structured package tours are the medium for such travellers, largely unaware of what to expect or do when in a foreign country. However, informed and stimulated by digital media, Chinese travel tastes are broadening out and the main trend now is for diversification, with niche products and destinations gaining ground, and more self-organised trips being taken. More experience and language skills lead to different forms of semi or partly organised trips with tour operators providing visa, air trip and, in some cases, hotel bookings. Just under half - 47% - of Chinese outbound tourists are travelling with members of their family, and another 24% with friends. Only 7% travel entirely without companions. 3% of travellers are participants in groups organised by their work units or companies - mostly for technical tours, incentives, and study 33. Trend towards more self-organised trips Just under half of Chinese outbound tourists are travelling with members of their family 27 Ibid July ibid 31 The Chinese Outbound Travel Market, 2012 Update, ETC/UNWTO 32 Author s estimate based on data in 33 Annual Report of China Outbound Tourism Development 2010 cited in The Chinese Outbound Travel Market, 2012 Update, ETC/UNWTO 19

26 The Chinese leisure market divides between the first time traveller attracted by: doing lots of things in a short timeframe, shopping for international brands, good value-for-money, finding familiar foods and interacting with Chinese communities, the prestige of visiting and having photos taken in front of iconic sites, a safe environment. the more experienced traveller, still attracted by many of these features but also looking to travel as a means of: expressing increasing self-confidence and individualism, seeking an emotional connection with the destination, through authenticity, clean air/blue skies, access to arts and culture etc. Greater segmentation of the market will require more effective online marketing The non-traditionalist Chinese tourists are fragmented into a range of sub-segments or niches but even niche products have relatively large volume demand given the scale of the Chinese market 34. Nonetheless, the greater segmentation of the market makes it more difficult to achieve economies of scale in terms of costs. This needs to be compensated for by using new online booking and sales concepts, making it possible to specifically address customer groups even for very special interests and destinations. Figure 12: Sophistication and Status for the Chinese Traveller Source: Understanding Chinese Outbound Tourism: What the Chinese blogosphere is saying about Europe. UNWTO/ETC Destination Investment. New Networks for Serving Affluent Chinese Visitors. Dr Wolfgang Georg Arlt, COTRI Chinese Outbound Travel Research Institute, IRB, March

27 The characteristics of the different tribes are summarised in Figure 13. Traditionalists, estimated to still account for 70% of demand, travel predominantly for reasons of prestige and are in tour groups. The Wenyi youth and Experience-centered tribes each account for 10%, with the remaining estimated 10% split between Connoisseurs (7%) and Hedonists (3%). Figure 13: Characteristics of the Chinese Travel Tribes Tribe Why They Travel Mode of Travelling With Whome Brings on the Trip Traditionalists Prestige Tour Groups Tour Groups Camera Wenyi Youth Experience centered Freedom, Uniqueness Togetherness, curiosity Backpacking Backpacking or independent driving Hedonists Pleasure City travel, shopping Connoisseurs Aesthetics, knowledge Independent driving Alone or with Friends Alone, with family or in in-depth travel tour groups With friends With partner or family Notebook, favourite book, mp-3 player, internet device Guidebook, phrasebook, electronic dictionary Their parents credit card Camera with equipment, specialised guidebook, laptop Source: Understanding Chinese Outbound Tourism: What the Chinese blogosphere is saying about Europe. UNWTO/ETC For the first time Chinese overseas traveller, the focus is on doing as much as possible. Trip durations are short typically 4 days, each day packed with activities, and duty free shopping is given the highest priority. The more experienced Chinese traveller is increasingly seeking out sites and attractions away from the honeypot areas, seeking a more depth experience of the destinations visited. There is a trend towards deep tours focused on a single country, or two countries 35. For the first time Chinese overseas traveller, the focus is on doing as much as possible 35 The Chinese Outbound Travel Market, 2012 Update, ETC/UNWTO 21

28 Travel has become integral to the Chinese middle-class lifestyle 1.4 Drivers of Growth Idealised as means to greater self-realisation, travel has become integral to the Chinese middle-class lifestyle 36 There seems little doubt that outbound travel for both business and leisure purposes will continue to expand over the present decade and beyond given: the dynamics of the socio-demographic trends in China, the Chinese population s rising awareness of, and interest in, engaging in foreign travel, the greater ease of making foreign outbound travel arrangements arising from the Chinese Government s commitment to support tourism, improved connectivity and changes to visa regimes. Though the Chinese population is forecast to grow at a low rate of 0.23% a year, this will still represent an increase in the country s population in excess of 3 million people a year. By 2030, the Chinese will make up just under 20% of the world population 37. Ageing Chinese population will boost overseas travel Key demographic trends with implications for travel and tourism are: the levelling out of fertility rates, large-scale urbanisation and the rapidly ageing population 38. By 2030, the largest group in the Chinese population will be aged An ageing population with retirees having financial means to travel will boost overseas travel. Increased and diversified leisure time, outside the prescribed Golden Weeks will also serve to increase travel. China s economic growth rate will slow down over the next five years, edging down from the 7.7% recorded in 2012 and forecast in 2013 to an annual rate of expansion of 6.5% by This is still above the rate of economic growth achieved elsewhere in the world. Income levels will continue to rise both in the medium and longer terms and will lead to growing numbers of middle class Chinese consumers with sufficient disposable income to travel. At the centre of the growth of all forms of consumer spending and activity including overseas travel and tourism - is the Chinese urban middle-class population. In 2000, only 4% of urban households in China were middle class; by 2012, that share had soared to over two-thirds; and by 2022, China s middle class should number 630 million that is, three-quarters of urban Chinese households and 45% of the entire population. 40 The numbers of affluent middle class Chinese is forecast to rise from 175 million in 2011 to 1.4 billion by The Chinese Outbound Travel Market 2012 Update. ETC/UNWTO. 37 Demographic Change and Tourism ETC & UNWTO. 38 Ibid 39 IMF World Economic Outlook China 40 Half a Billion: China s Middle Class-Class Consumers. D Barton, McKinsey and Company in The Diplomat, 30 May China Digital Times, Chinese Middle Class four times larger than America. 22

29 At present only about 7% of the Chinese have an annual income above US$15,000 (EUR11,000) and the country s total consumption expenditure per household at US$13,428 (EUR9,950) a year is relatively low compared to other Asian countries such as Japan and the Republic of Korea. The relatively small number of affluent Chinese consumers will grow and will follow the same pattern of spending on property, Western branded goods and luxury items, as well as travel. Given the young profile of these consumers, this spending trend is predicted to continue for the foreseeable future 42. The increasing urbanisation of the Chinese population will also be an important factor in stimulating travel and tourism. Already half of China s population live in Cities, a proportion that will grow to two-thirds by Major cities like Beijing, Shanghai, Guangzhou and Shenzen will get bigger but the approximately 170 second tier cities, many of which were boosted through the Chinese stimulus package providing better transport infrastructure and services, will also represent large travel markets e.g. Chongqing (29 million population), Chengdu (14 million), Wuhan (8.3 million). The increased rapid, recent and continuing urbanisation of the Chinese population has led to environmental problems of pollution in many cities leading to a desire to go to places without such issues. Worsening pollution and overcrowding will increasingly act as push factors for outbound tourism 43. The impact of digital technology on Chinese travellers continues to be immense. The Chinese have over 600 million smartphone users, the largest in the world, with sales of 283 million smartphones (to 216 million new users) forecast in Two-thirds of Chinese blog/have a personal space, almost half use social networking sites and and 83% use instant messaging 45. More extensive uses of digital technology will be made both by destinations and travel organisations so that, combined with the Chinese public s heightened use of social media, awareness of, interest in, and demand for travel will continue to grow. Increasing urbanisation of population will stimulate outbound travel from China Environmental problems of pollution will stimulate desire to go to places without such issues Digital technology crucial for Chinese travellers This heightened understanding of tourist destinations around the world is giving rise to a growing sense of prestige among the Chinese about the type of trip with package tours regarded as inferior to independently-organised travel and destinations that have been little visited by the Chinese and/or which create a strong desire among the Chinese to visit through their marketing campaigns having a high prestige. The Chinese outbound market will increasingly fragment, with package tours gradually losing relative importance towards growing semi-packaged and fully independent travel arrangements. 42 ITB World Travel Trends Report 2013/2014. March IPK International reporting presentation of Chandrashekhar Singh Khangjrakpam, Centaur Research. 43 Nine Important Developments in China s Outbound Tourism Wolfgang Arlt, COTRI China Outbound Tourism Research Institute profdrwolfgangarlt/2014/01/01/nine-important-developments-in-chinas-outboundtourism-2013/ 44 Smartphone explosion in 2014 will see usership in India pass US. The Guardian Global Development. 13 January China Internet Network Information Center, 2013 cited in Chinese & Brazilian Outbound Tourism Markets and Netnography, Eduardo Santander, ETC. 7th UNWTO/PATA Forum on Tourism Trends and Outlook, October