With the number of overseas Chinese tourists predicted to rise exponentially by 2023, PSI’s James McEwan takes a closer look at the new Chinese travel market.
The Opportunity
Mainland China is experiencing rapid growth amongst its middle classes and with this comes greater prosperity. Increased spending power means that Chinese consumers are now contributing over half of their disposable income to the travel market, with the leisure sector projected to account for 62% of all their travel by 2023.
Traditionally, China’s travellers opted for shorter-haul destinations, with Special Administrative Regions (SARs) - such as Hong Kong and Macau - receiving almost half of all travel. However, between 2013 and 2023, 61 million households in China are expected to earn above USD 35,000 per annum – a key income threshold for opening up international travel.
According to TripAdvisor China, almost half of Chinese visitors to the site are now researching destinations outside Asia, with Paris, Rome, London, Los Angeles and New York amongst the most popular. Predictions suggest that by 2020 Chinese visitors will represent 9% of all North America’s tourists, 19% of Europe’s, and 29% of Australia and New Zealand’s tourists.
In Europe, the UK saw an 18% increase in Chinese tourists during the first half of 2017, 13% of whom combined their trip with at least one other European country. This UK-bound Chinese tourism stabilised at an overall +4% growth level for the year and, already in 2018, London’s West End has been enjoying predicted record-breaking levels of visitors for Chinese New Year celebrations.
What’s more, these increasing numbers don’t just originate from China’s Tier One Cities (Beijing, Shanghai, Chongqing and Guangzhou). The top five Chinese airports by passenger growth are currently: Xi’an, Tianjin, Haikou, Shenzhen and Chengdu.
Three segments of the outbound leisure market expected to grow the fastest are affluent youths (18 to 30), senior professionals (45 to 55), and small groups of families and friends (30 to 45 – increasingly travelling independently, but also part of organised tours). Cities are their primary destinations accounting for over 85% of outbound travel and when SAR regions are excluded, it remains that 70% of all outbound travel is to major cities.
When it comes to duration of stay, London is one of the top long-haul cities globally, with an average stay of seven nights. Melbourne and Sydney come a close second, at 6.5 nights. When choosing where to stay, luxury hotel brands remain top of the desirability chart, but high-end boutique brands are becoming more popular. As for airlines: price, safety record, and seat comfort come first.
Technology Transcends Censorship
At present, the Chinese Government prohibits foreign travel agencies from participating directly in the outbound tour business. The solution? WeChat.
WeChat’s seamless interface across the most popular Chinese apps includes those offering travel-related services. This all-in-one capability (messaging, commerce and payment cross-services) makes WeChat extremely powerful, especially given that it’s enjoyed by over 938 million active users.
Once users have booked any travel through the platform, WeChat sends an invitation to a group chat facility, enabling communication and sharing between those heading to the same destinations. Opportunity for advertisers to participate in these forums is prime. Furthermore, WeChat’s WeShake functionality allows advertisers to transfer additional content to these audiences on their handsets, through a simple ‘shake’ interaction with beacon-enabled OOH formats along their travel corridor.
Other popular travel-related platforms currently include: Sougou (China’s second-largest search engine), Youku (like Youtube), Qunar (similar to Skyscanner), Ctrip and eLong (China’s version of booking.com) and 12306 (train journey planning).
Spend, spend, spend:
By 2030, Chinese travellers are expected to spend $700 billion annually during overseas trips. Shopping abroad offers consumers the chance to purchase premium goods such as handbags and watches, aided by favourable exchange rates, and swerve China’s 30% luxury goods tax. Currently the average UK spend of Chinese tourists is £2,174 (200% more than the average visitor).
According to tax rebate company, Global Blue, Chinese global shoppers currently account for nearly 30% of all tax-free shopping worldwide. Some 80% of Chinese travellers make overseas purchases, and nearly 30% base their destination choice on retail opportunities.
Understanding how, when and where Chinese consumers pay for goods and services whilst abroad is key to engaging them effectively. Hotels are increasingly adjusting their on-site food and beverage offerings, as well as their customer services and interior design to reflect the desires of this lucrative Chinese audience.
In 2015, 10 million Chinese tourists visited Thailand. Six million of them shopped at King Power outlets, the country’s largest duty-free retail group. Chinese tourists are King Power's largest customer base accounting for 80% of revenue. Importantly, such retail is no longer confined to airport terminals. Across Asia, we are seeing the construction of large downtown malls by duty-free operators, featuring on-site luxury hotel accommodation, casino facilities and other premium entertainment. For some luxury brands, up to 50% of their duty-free sales are now attributed to downtown retail.
China has shifted to virtual forms of payment faster than any other market. 87% of people in China already pay via third-party mobile payment systems like Alipay and WeChat Pay, both of which are setting up shop in popular global tourist destinations. Furthermore, Global Blue customers can now receive their tax refunds directly to their Alipay wallets on mobile devices.
Another notable insight into the current Chinese shopping mindset is a growing obsession with health products. Following an influx of fake and contaminated wellbeing products on the Chinese market, Australia and Japan – who enjoy unequivocal Chinese consumer trust - are seeing a sales boom in this sector. Even duty-free retail is increasingly allocating shelf space for vitamin supplements and infant care products.
Increasing fortunes of Chinese middle-class audiences will continue to be an enticing focus for advertisers. Using widening travel corridors and emerging technology touchpoints to effectively reach these consumers, both during and beyond their journeys, currently represents a particularly rich territory for brand exploration.
