15 Feb 2017
Have Cash, Will Travel
China remains the world’s largest travel market and its lead is only set to increase, according to exhibitors at the 2016 ITB Asia show held in Singapore last October. Valued at US$494 billion in 2015, the Asia-Pacific region now accounts for 40 per cent of the world's business-travel market. "At present, China is slowing – it has dropped to single digits in line with the Chinese economy,” according to Hamish Wang, Chair of the Global Travel Business Association's China Advisory Board.
“Despite this, the Chinese business-travel market grew to US$291.3 billion in 2015, representing 59 per cent of all spending in the Asia-Pacific region. By 2020, we believe it will account for 62 per cent of the market,” Mr Wang noted.
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 inbound Chinese tourists.
In 2015, Chinese tourists accounted for 27 per cent of all visitors to Thailand. By 2020, the figure is expected to be closer to 43 per cent. But Thailand is not the fastest-growing market in terms of Chinese travelers. In fact, it is outperformed by Palau, with the Western Pacific archipelago enjoying a 52 per cent growth per annum in mainland visitor numbers, and Sri Lanka, which is currently seeing a 47 per cent rise in Chinese arrivals annually.
"In terms of numbers and spending, China became the largest source of international tourism in 2012. In 2016, there were 140 million outbound Chinese travelers, representing a total spend of about US$220 billion,” said Dr Wolfgang Georg Arlt, Director of the China Outbound Tourism Research Institute.
While more than 100 million mainland tourists are travelling for the first time, usually on package tours, others are travelling much further on self-organised trips, typically, looking for deeper experiences. They are upgrading from must-see places to seeking out new more adventurous experiences.
"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 per cent of Chinese travelers are now more interested in less well-known and niche brands. This is partly because it's no longer middle-aged travellers who account for the majority, with 60 per cent of all China's outbound tourists now millennials,” said Dr Arlt, who noted that despite the economic slowdown, mainland tourists are expected to continue to spend.
In terms of market segments, it was the millennials who attracted the most attention during the event. "Millennials now account for 23 per cent of all international travelers,” said David Chapman, Director General of the World Youth Student and Educational Travel Confederation. In 2015, there were 272 million millennial travellers, with a collective spend of US$283 billion. By 2020, this is set to rise to US$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 travel 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 end of the scale are the silver travelers, 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 per cent of the world's population, this demographic will have US$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.
"This is clearly one of the emerging-market segments,” said Abhineet Kaul, Public Sector and Government Consulting Associate Director for Frost & Sullivan, a Texas-based market research group. “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 travelers, both for leisure and business purposes, as well as the growing prominence of LGBT holidaymakers."
As in many sectors, the rise of digital technology has had a huge impact on the travel industry. "Online travel booking started about 20 years ago and now accounts for 50 per cent of all bookings around the world,” said David Peller, Booking.com's Director of Strategic Partnerships for the Asia-Pacific region. “It's changing again, with one-third of travel bookings now being made via mobile devices.”
According to Diana Helander, Senior Director of Product Marketing for Revinate, a San Francisco-based specialist in the hospitality social media sector, "mobile really matters for the travel industry. This year, for instance, more than 50 per cent of Chinese travelers booked their holidays via mobile devices.” Overall, the conversion rate from mobile travel sites is growing by 10 per cent per annum, with 53 per cent of business travelers and 13 per cent of leisure travelers now booking via their smartphones or tablets.
Ms Helander said that online reviews are particularly important to mobile bookers, with 79 per cent choosing a hotel based on its reviews and 41per cent saying they would never stay in a hotel that had no reviews. For six per cent of business travelers and 58 per cent of tourists, their search starts with Google, while 77 per cent of hotel guests claim to have checked out their hotel on TripAdvisor, she added.
"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 targeted."
For more China market opportunities, please visit: http://research.hktdc.com.