23 Jan 2017
Travel Sector Looks to Address Priorities of Mainland Millennials
Although China remains the biggest source of outbound tourists, it was a younger generation of bolder, more independent, digitally savvy holidaymakers that many exhibitors at the recent ITB Asia travel trade expo were most keen to cultivate.
China remains the largest travel market in the world and its lead is only set to increase. At the recent ITB Asia show, one of the continent's leading events for the travel trade industry, however, there was also something of a focus on a number of the other emerging markets.
Fenady Uriarte is the Southeast Asia Business Development Manager for STR, the Tennessee-based hospitality benchmarking organisation. Outlining the current state of the industry in the region, he said: "In 2015, the world saw an increase of 5.3% in inbound tourism, taking the total to more than one billion leisure travellers. The number of visitors to the Asia Pacific region grew by 9%, while Southeast Asia grew by 10%.
"Vietnam recorded a particularly strong performance, a consequence of the relaxation of its visa requirements in June. Across the Asia Pacific region, Singapore had the highest average daily rate for hotels – US$205 – while also enjoying an occupancy rate of 82.7%."
According to Hamish Wang, Chair of the Global Travel Business Association's China Advisory Board, with a value of $494 billion in 2015, the Asia Pacific region now accounts for 40% of the world's business-travel market. Expanding on the growth of individual markets, he said: "At present, China is slowing – it has dropped to single digits in line with Chinese economy. Despite this, the Chinese business-travel market grew to $291.3 billion in 2015, representing 59% of all spending in the Asia Pacific region. By 2020, we believe it will account for 62% of the market.
"From our point of view, the other fast-growing countries are India and Vietnam. By contrast, Japan, Thailand, Indonesia and Malaysia are all showing slow growth or, in some cases, an actual decline."
The Pacific Asia Travel Association believes that by 2020, 10 countries in the Asia Pacific region will each see their Chinese visitor numbers increase by at least 500,000. By far the biggest beneficiary will be Thailand with a rise of some 13 million in inbound Chinese tourists.
In 2015, Chinese tourists accounted of 27% of all visitors to Thailand. By 2020, the figure will be closer to 43%. Despite this, Thailand is not the fastest-growing market in terms of Chinese travellers. In fact, it is outperformed by two surprising destinations. In first place is Palau, with the Western Pacific archipelago enjoying a 52% growth per annum in mainland visitor numbers. Not far behind is Sri Lanka, currently seeing a 47% rise in Chinese arrivals every year.
Taking an overview of the changing behaviour of mainland tourists, Dr Wolfgang Georg Arlt, Director of the China Outbound Tourism Research Institute, said: "In terms of numbers and spending, China became the largest source of international tourism in 2012. In 2016, there were 140 million outbound Chinese travellers, representing a total spend of about $220 billion.
"For the first time, less than half went to Hong Kong, Macau or Taiwan. While, at -10.6%, Hong Kong saw the biggest drop in 2016. The three big winners were Japan (up 42.1%), South Korea (27.2%), and Thailand (22.3%). In many ways, the Chinese market has split. While many – more than 100 million – are travelling for the first time, usually on package tours, others are travelling much further on trips they have organised themselves and, typically, looking for deeper experiences. They are upgrading from must-see places to seeking out sights few others have seen.
"In terms of shopping patterns, there is also a notable shift. Louis Vuitton, for example, is no longer a must-buy, though it remains one of the top 13 most-sought-after brands. A massive 50% of Chinese travellers are now more interested in less well-known and niche brands. This is partly because it's no longer middle-aged travellers that account for the majority, with 60% of all China's outbound tourists now millennials.
"Overall, though, I can see four factors ensuring that the China market will continue to grow. Firstly, despite the economic slowdown, for the top 5% of mainlanders at least, spending a few thousand dollars on a trip is not an issue. Secondly, given the environmental problems in many mainland cities, a significant number of holidaymakers want to take a break somewhere that is clean and safe. Thirdly, visa procedures have now been made easier for the typical Chinese traveller. Finally, for many mainlanders, the freedom to travel is one that cannot now be curtailed."
Looking at other significant developments in the industry, Rushdi Siddiqui, Chief Executive of Zilzar Technology, a Kuala Lumber-based Halal e-commerce platform, posed a question: "What is 57, $12 trillion, two billion, 400 million and 500 million and a virtual China?" The answer, he told delegates, is the Muslim travel market, which comprises 57 countries with a combined GDP of $12 trillion.
Outlining the particular needs of this sector, he said: "Of the world's two billion Muslims, 400 million live outside one of these 57 countries, while 500 million are millennials. By 2019, the Muslim travel market is set to be worth $238 billion, with that figure divided across 168 million travellers. Together, these numbers are very close in value to that of the China market.
"At present, a number of destinations are not properly meeting the special needs of these travellers and are losing out as a result, with Hong Kong being a prime example. Apart from faith-based tourism – most notably the pilgrimage to Mecca – Malaysia is the most popular Muslim destination for these travellers, while Singapore is the most favoured non-Muslim country, both for sightseeing and for shopping."
In terms of market segments, it was the milliennials who attracted the most attention during the course of the event. Summarising the importance of this demographic, David Chapman, Director General of the World Youth Student and Educational Travel Confederation, said: "Millennials now account for 23% of all international travellers. In 2015, there was 272 million of them, with a collective spend of $283 billion. By 2020, this is set to rise to $400 billion.
"Millennials tend to stay longer and spend more than other travellers. In the case of those doing volunteer work, for example, their average length of stay in 2012 was 69 days. They are also driven to experience countries as a local would, while also believing they can make a difference to the world.
"Overall, only about half travel solely for leisure, while the other half travels for language immersion, study, internships and volunteer work. Their top five destinations in Asia are South Korea, Macau, Japan, Hong Kong and India."
At the opposite of the scale to the millennials are the silver travellers, a high-spending sector that many at the ITB were keen to cultivate. According to figures from Euromonitor, by 2020 the world will be home to 1.1 billion people aged 60 and above. Representing 14% of the world's population, this demographic will have $15 trillion in spending power. At the same time, advances in medical science have ensured that this age group will remain fit to travel for many more years than was previously the case.
Highlighting the importance of this sector, Abhineet Kaul, Public Sector and Government Consulting Associate Director for Frost & Sullivan, a Texas-based market research group, said: "This is clearly one of the emerging-market segments. As such, there are now a number of initiatives designed to address the specific needs of the older traveller, most notably the Senior Tourism Quality Certification in Europe.
"There are also several other emerging-market segments, including flashpackers – backpackers with serious cash to spend. There is also an increasing number of solo female travellers, both for leisure and business purposes, as well as the growing prominence of LGBT holidaymakers."
As in many of sectors, the rise of digital technology has had a huge impact on the travel industry. Acknowledging this, David Peller, Booking.com's Director of Strategic Partnerships for the Asia Pacific region, said: "Online travel booking started about 20 years ago and now accounts for 50% of all bookings around the world. Now, though, it's changing again, with one third of travel bookings now being made via mobile devices.
"In terms of future trends, voice-assisted computing will have a big part to play, while virtual reality will be the norm with people trying before they buy in terms of travel bookings. In the service industry, we also expect that robots will have an ever-increasing role. Overall, in order to succeed in the travel industry, operators will need to blend the online world with the real world."
Peller's sentiments were broadly echoed by Diana Helander, Senior Director of Product Marketing for Revinate, a San Francisco-based specialist in the hospitality social media sector. She said: "Mobile really matters for the travel industry. This year, for instance, more than 50% of Chinese travellers booked their holidays via mobile devices. Overall, the conversion rate from mobile travel sites is growing by 10% per annum, with 53% of business travellers and 13% of leisure travellers now booking via their smartphones or tablets.
"Online reviews are particularly important to mobile bookers, with 79% choosing a hotel based on its reviews and 41% saying they would never stay in a hotel that had no reviews. For 68% of business travellers and 58% of tourists, their search starts with Google, while 77% of hotel guests claim to have checked out their hotel on TripAdvisor.
"In today's world, it is guest feedback that drives revenue growth. This has an impact not only on operational issues, but also on how marketing initiatives should be targetted."
ITB Asia 2016 was held at the Sands Expo and Convention Centre in Singapore from 19-21 October.
Ronald Hee, Special Correspondent, Singapore