ALREADY larger than the entire population of the US, the Chinese middle class has already altered, and will continue to alter, the dynamics of the global travel and tourism industry. In fifteen years, the Chinese middle class will reach 800 million individuals, from 300 million today. Over the next five years, affluent Chinese consumers are expected to grow from four million to 20 million.
Chinese demand for international travel is still young. But it is expected to grow by 17 per cent annually over the next decade, driven by rising incomes and aspirations. There will be an average of 25 million first-time Chinese travellers every year, or 70,000 every day, for the next 10 years. International travel from China will become a major source of growth for providers in destination countries. An increasing number of second- and multiple-time Chinese visitors are more likely to travel independently, and not as part of a group, meaning that they will have a greater choice of timing and destinations. They will have the opportunity to explore off-the-beaten-track venues and can look for holidays and activities that suit their personal interests.
The rise of Chinese tourism has caught the attention of many travel, tourism and hospitality companies. The big US hotel chains such as Starwood, Hilton, Marriott, and InterContinental have announced programmes designed with Chinese tourists in mind. These include adding popular Chinese dishes to full-service restaurant menus, featuring one or more Chinese television stations in the guestrooms, and introducing in-room amenities such as slippers, tea kettles, and Chinese teas. Some hotels have also brought on a front desk concierge who speaks fluent Mandarin.
The start of the second wave of China’s outbound tourism, will change the face of Chinese tourists as we know them today. The ‘new Chinese tourists’ – knowledgeable, sophisticated, technology-savvy and predominantly below 45 years of age – are entering the scene. New Chinese tourists look for deeper experiences and closer contact with local host populations during their self-organised trips. Earlier, they took photos in front of the Sydney Opera House or Eiffel Tower, but are now drawn to new places and activities. New Chinese tourists offer an increased opportunity for off-the-beaten-track destinations and tourism service providers to get a piece of the Chinese outbound market.
Many travel brands are trying to capture the attention of this valuable new customer segment, but not without challenges and disappointments.
First, the way many Chinese consumers are finding out about new destinations and travel services, such as hotels or cruise brands, is via the Internet. With over 500 million Internet users in China in December 2011, more than 80 per cent of Chinese travellers research and educate themselves about destinations and brands online.
Second, unlike in the West, most of the money in China belongs to people who are younger than 45. Because of the Cultural Revolution in the 1960s and '70s, people older than 45 generally aren't well educated, live in government-subsidised housing, and have spent the bulk of their careers in state-owned enterprises. The younger generation tends to be better-educated and more likely to work in private firms, including foreign-owned enterprises. In addition, the fastest-growing millionaire populations are in third-, fourth-, and fifth-tier cities (including Dalian, Chengdu, Xiamen, Kunming and Nanning). In fact, 70 per cent of wealthy individuals in China are not living in the four largest cities (Shanghai, Beijing, Guangzhou, and Shenzhen), while 35 per cent are not living in either first- or second-tier cities.
Third, a structural change is happening in the way Chinese travel. A recent study by the Boston Consulting Group revealed that 95 per cent of Chinese tourists are unsatisfied with the current travel products and services, both domestic and outbound. While group package deals are still popular among most middle-class travellers, post-80s and ‘90s adults are not following a tour guide’s flag with matching red caps. There is a growing propensity for independent, self-organised travel, albeit still in small groups, interested in experiencing foreign cultures, and reflecting on it based on their own education and perspectives.
The income of Chinese in second-, third-, and fourth-tier cities is also rising, resulting in a change in consumption patterns that will drive market dynamics in unprecedented and unpredictable ways.
Additionally, Chinese consumers are at the forefront of technology and digital trends, and are ramping up their use of computers and mobile phones to research and purchase. Chinese consumers are also being influenced by digital and social media marketing. Ninety per cent of respondents to a 2011 Forbes survey of more than 300 senior executives in China said that digital and mobile marketing were a critical component for reaching Chinese consumers, especially the younger and affluent demographic.