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Cash in on Chinese tourists

Cash in on Chinese tourists

OMD Sense latest research

In 1995, only 4.5 million Chinese traveled overseas, but less than ten years later, that figure had jumped to 31 million – that’s still only 2 per cent of the population.

Both Chinese and international travel-industry experts forecast that at least 50 million Chinese tourists will be traveling overseas every year by 2010.

By 2020, the World Tourism Organisation predicts China will be one of the world’s major outbound tourism markets, with 100 million tourists.  As always with China, the numbers are vast.

Let’s look at the effects of that growth and the opportunities for brands in this trend, which we’re calling The Great Mall of China.

Background
 
In communist times, China had, in practice, no outbound tourists.  The national economy had been virtually stillborn, thanks to excessive regulation and centralized planning by a government philosophically opposed to free enterprise.

As a result, the country lacked a viable middle class which could pay for holiday travel.  Political and economic conditions are now changing rapidly.

At the end of 2003, one study found that 19 percent of Chinese—247 million people—now qualify as middle class, and their numbers are growing by 1 percent per year.
           
In its post-communist phase, China has so far authorised 132 countries and regions as destinations for outbound tourism, with a further fifteen new destinations approved last year.
 
The increase of outbound tourist destinations has played an active role in promoting the country’s bilateral and multilateral relations with other countries and regions.
 
As it clear from the figures above, the Chinese have also leapt at this new opportunity to cross their country’s borders.


With a population of over 1.3 billion and a rapidly expanding economy fuelling the growth of mass affluence, China is likely to exert greater influence over the development and marketing of tourism destinations worldwide over the next decade than perhaps any other country on the globe.

China to the UK

The UK was granted ADS (Approved Destination Status) in 2005 which meant Chinese could travel to the UK as tourists. In that year, 96,000 Chinese tourists visited the UK spending £130million, and it is estimated that by 2010 that number will more than double to 200,000.

By 2020 there is potential for China to be in Britain’s top ten inbound markets, bringing £500 million annually to the UK economy.

Opportunity for marketers
 
This coming wave of Chinese tourists will profit canny investors. These visitors look set to unleash a phenomenal spending spree.
 
Even before travel restrictions on China’s wider population were eased, Chinese travelers clocked in as the fourth-largest spenders in Europe, after the Japanese, Americans and Russians, according to duty-free shopping group Global Refund.
 
The most popular destination activities and attractions for Chinese traveling overseas include shopping (90 per cent), dining (81 per cent), sightseeing (47 per cent), visiting historical places (40 per cent), theme parks (32 pre cent), and gambling (23 per cent).
 
Data from Australasian and North American destinations confirms that Chinese travelers are the largest per capita shoppers of any source country, since Chinese travelers purchase on behalf of, and are funded by, a large network of friends and relatives.

As a consequence, there is a huge opportunity for brands to meet their needs, tailoring products and services to the preferences of this lucrative market.

Understanding their specific habits will be essential for brands to profit from these consumers.  For example Chinese prefer to curb spending on accommodation to focus on shopping.

The UK has a shortage of low – mid priced accommodation, so hotel chains could benefit by tailoring their offering.

Even as the new prime minister seems to roll back pro-gambling initiatives, combining an outlet mall with a mid-priced hotel and gambling facilities begins to look like a very good idea.

Key tourist destinations in the UK are cities and major shopping hotspots, such as Bicester Village for example, which in 2005 was descended upon by Chinese tourist groups who reports said ‘cleaned out’ Clarks shoes.

The new Chinese middle class are also known to have an obsession with luxury brands, displaying their wealth with Louis Vuitton bags, Omega watches and bottles of Moet. Like the Japanese they tend to equate holidays with shopping.

Whilst marketers will utilise this steadily increasing stream of Chinese tourists, the UK will have to address gaps in its infrastructure to respond to their growing needs – renovating and improving facilities, creating extra parking for coaches, training multilingual staff and installing more cash machines to name but a few.

If infrastructure does not come up to scratch, we could see this lucrative market turning to other European destinations instead.

For brands, the opportunities are clear – this market’s growing at an incredible rate. The Great Mall of China can be anywhere and everywhere.

Should the needs of these tourists be well catered for by brands, those brands will reap rewards and there’s every reason to assume that the UK will leap up the league table of destinations for Chinese travellers.

Comments/Feedback? Please contact: Michael.Tully@omduk.com

AJR
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