ATR - Understanding China

China Market Updates, September 2010

Taiwan Attracts More Chinese Travellers
Taiwan Government plans to open individual travel visas for the Mainland Chinese tourists on February 17, 2011. Authorities are now selecting some mainland cities to launch individual visa on a trial basis for an official launch next year.

Britain Anticipates More Chinese Travellers
Statistics from British Tourist Authority showed that China is now the priority over other fast growing markets of BRIC nations (Brazil, Russia, India and China). Britain expected Chinese tourists to increase 89% in 2014. To attract more Chinese tourists, Britain will relax their current tourist visa policy by reducing the visa application fee and application time.

Travel Agents Recommend Countries with Flexible Visa Policies
Leading travel agents in Guangzhou have been promoting destinations with flexible visa policies to tourists who were late to decide their destination for the October holiday. South East Asia islands, Vietnam, Nepal and Brunei were some destinations being recommended to customers.

Shanghai Supports Non-Shopping Itineraries
Recent developments show that Shanghai tourism and travel authorities seek to curb shopping dominated tour programs. 41 outbound travel agents attended a seminar in which a Memorandum of Understanding (MOU) was signed. The MOU states that travellers will not be forced to join and pay the expense of optional products when on tour and they will not be charged additional costs for children and senior citizens.

Beijing Publishes Informative Outbound Travel Guide
Beijing Tourism Administration released 'Beijing Resident Outbound Travel Guide' on September 15th and it will be freely distributed by Beijing outbound travel agencies. The guide is designed to provide travelers more accurate information about the travel expectations of various popular destinations.

Largest Aircraft Purchase by Cathay Pacific Airways
Cathay Pacific Airways has signed a deal with Airbus for the delivery of 30 new A350-900 aircraft, representing the airline's biggest-ever single aircraft purchase. Deliveries will begin in 2016 and are scheduled to stretch over a three-year period.

Air China Increases Flights to Australia
Air China has announced it will increase flights to Australia. As of December, Air China will fly daily from Beijing to Sydney, with four flights per week from Beijing to Sydney via Shanghai, five flights per week from Beijing to Melbourne via Shanghai and two new direct flights per week from Beijing to Melbourne.

China Market Updates, August 2010

Chinese Outbound Travelers Keep Growing
Number of China’s outbound travelers is expected to reach 52 million this year, up 7 percent year-on-year, the China National Tourism Administration forecast in a report issued on July 16th. From January to May this year, China’s outbound travel tourists totaled 26.8 million, up 19% over the same period last year. This is further evidence that China is a major source of outbound travelers for all tourism destinations and attractions.

Chinese Outbound Travelers Desire for Travel Increases
The Asia Pacific Travel Intentions Survey 2010 has found mainland Chinese travelers plan to travel most out of all of Greater China. The survey, which was conducted in May 2010, found that on average, mainland Chinese travelers are planning for 7.4 business and leisure trips in the next 2 years.

Chinese Tourists’ High Interest in Canada Results in Sold Out Tours
At a meeting in Ottawa, Canada, the Director of China National Tourism Administration (CNTA) and Canada International Trade Minister signed a memorandum of understanding (MOU) enabling Chinese tour groups to visit Canada. According to the outbound department of China Youth Travel Service in Beijing, the first Chinese tour group to Canada will depart on August18th and travel to Vancouver, Toronto, Ottawa and Montreal. It has been fully booked within 1 week.

Aviation Route Expansions Indicates China’s Growing Trend in Travel
Hainan Airlines is preparing to launch non-stop flights from Beijing to Phuket on July 31, 2010, becoming the first and only domestic carrier to offer such a service. The non-stop flights will save the travelling time by more than five hours.

Changes in Government Policy that will Capture More Chinese Outbound Tourists
South Korea will soften the criterion of the multiple entry visa applicants in China. Media in South Korea believes that Chinese tourists will increase by 20% because of the new visa policy.

Taiwan’s Mainland Affairs council has announced that it will extend the duration of stay to 15 days from 7 days for mainland residents who visit Taiwan via the Mini Three Links (visit family members, attend funerals or tour Taiwan).
Japan has now withdrawn its “visa cancellation” policy for tour groups after easing visa application restriction for Chinese independent tourists,. The “visa cancellation” policy requests tourists to provide boarding passes, passports and other supporting information to the Japanese Embassy when tourists return to China.

Guam is applying visa-free policy for Chinese tourists. It is forecasted that there will be 5,000 Chinese tourists to Guam in 2010 and it will reach 80,000 after three to five years.

Current Economic Conditions

Much information is being forecast by tourism industry experts now in relation to China's outbound travel markets and the current global financial crisis. As governments all over the world are pouring billions of dollars into their financial system to minimize the impact of the world economic meltdown, many international tourism organizations are also now viewing China as the savior to their tourism industries.

China aims to now become the first nation to recover from the global economic crisis, as it too has been severely affected by the worldwide events.

In 2009, economic growth in China is expected to slow to 7.5 percent, a level not seen since 1990, according to the World Bank. In 2008, the Chinese economy expanded nine per cent, which was the first single-digit growth since 2003.

China's economy grew by just nine percent in the third quarter of last year. At the time of writing this 2009 market development plan initial macroeconomic key figures for December 2009 were released by the Chinese National Bureau of Statistics, outlining that China's gross domestic product slowed to 6.8 per cent in the fourth quarter of 2008.

China unveiled a four-trillion-yuan (590-billion- US dollar) spending package in late 2008 to revive the economy. It is now anticipated there will be further announcements regarding more efforts to spur growth in the Chinese economy. The government will next expedite the investment of 600 billion yuan into six major projects already approved as part of a master plan for scientific and technological development.

China to be the First!
China aims to become the first nation to recover from the global economic crisis, Premier Wen Jiabao was recently quoted as saying by Chinese state media. "Our aim is to be the first to recover from the financial crisis." Wen said, "Our measures have already taken effect", adding that the economic data for December was "better than expected". (Monday 12th January)

It is important to note that these numbers reflect the percentage growth of an already huge economy which should be compared to other major national economies around globe that have now quickly dipped into recession. These other major developed nations now in recession were also source for destinations around the world.

Current Tourism and Travel Forecasting

Outbound tourism in China, once privilege enjoyed by few, is now more accessible to the average travelers, due to cheaper packages and a stronger Yuan. The global financial crisis is affecting some industries in China, but outbound travel, to some extent, seems to actually be benefiting from it. Recent statistics from the China National Tourism Administration show that the number of Chinese outbound travelers reached 34.4 million in the first nine months of 2008, up 14.8 percent year-on-year. In September alone, about 3.7 million Chinese people traveled overseas, an increase of 9% year-on-year. Anecdotal research demonstrates that most foreign government tourism bureau’s are not just maintaining their market development investment in China but in many cases are now seeking to increase their investments to make up for the forecast shortfalls from Europe, the United States, Japan and other traditional markets. Certainly many industry analysts have reported that despite the global financial crisis and looming economic recession, many Chinese travel companies are confident the country's huge population and tremendous market potential will continue to maintain growth in demand for outbound travel. During November and December it also became very apparent that the Chinese government equally has mobilized its domestic marketing resources to make up for the downturn in inbound arrivals from its traditional international markets.

Chinese Tourism Still Flourishing Domestically
In a recent release by official industry figures from the Chinese National Tourism Administration (NTA), figures show domestic tourism is still flourishing. Domestic tourism will probably not be influenced very much by the financial crisis, believes Zhu Dan, a tourism official from the state-owned tour company. "China's tourism industry will be able to weather the storm. The crisis will have some effect on tourism, but it will not be very serious."

During the recent October National Holiday week, 178 million Chinese traveled within the country, up 22.1 percent from the same period last year. "Our business depends mostly on domestic tourism, and China's booming economy."

There are positive signs across China's outbound travel industry now emerging, as demand for Chinese New Year is exceeding expectations of most. However it is with optimistic caution, conscientious planning and a great sense of vigor that planning needs to be done for 2009 in China.

Overview of China Outbound Travel Market

China is now and will continue to be the biggest travel market EVER!

Over 45 million Chinese will travel internationally in 2009!

Most International companies are now very serious about this travel giant!

The Chinese travel industry is developing fast and eager for direction!

China’s recent economic boom has seen the birth of new middle income and upper classes. About 345,000 of the country’s 1.5 billion people are millionaires in US dollar terms. China’s outbound market amounted to 41 million in 2006, overtook Japan in 2003 as the number one outbound travel market on the planet. In 2008 over 45 million Chinese will travel from China and this number is expected to increase to 100 million by 2020, according to reports by the WTO, PATA, WTTC and CNTA. China is the fastest growing economy in the world and is predicted to be the largest economy in the world surpassing the US by 2040.

China as Large and Diverse as Europe

Internationally, it is often not well understood that China is as diverse as it is geographically large! This diversity not only includes a multitude of ethnic populations, culture, language and traditions but also different business practices and market trends.

In the travel industry of China, there is little national centralization with each city or province often having its own government policies, business practices, strategies, itinerary and product programs.

Each city or province has varying levels of maturity in terms of international travel, industry structure and consumer desires. These differences are due to a variety of reasons including economic prosperity, aviations access and the development of the local infrastructure in accordance with the central and provincial government planning.

Aviation access is the first step to being able to the market, and this is best on a direct basis but also via nearby hub such as Hong Kong, Japan and Korea, and possibly soon Taiwan.

In order to truly develop the outbound leisure travel markets of Greater China, regular contact must be kept with the various offices of the major & minor travel companies located in cities across this vast country.

Key target markets within China are develop principally highlighted by average person income and travel industry sophistication.

Ability to gain the important visa to earn the right to travel is important, and many countries view certain provinces and cities as higher risks to non-return. MICE unlike leisure travel, the key decision makers mostly located in the major cities of Shanghai, Beijing, Guangzhou and Taipei.

The market is highly fragmented with top 100 travel agencies controlling 50% of the market.
These are large travel agencies that are operating on volume with slim margins to gain profit.
Most of these companies further to also have significant sales to organizational buyers (business and / or government).
Main channel for reaching end consumers is via retail agents provincially.
Consumers do preliminary research on their own. By the time they visit or call the travel agencies, they have a pretty good idea of where they want to go and are looking for detailed product information and price.
Resale networks are established through personal relationships and trade shows.
Customer acquisition costs are high. 70%+ of the gross profit goes to retailers in a wholesale transaction.
Sell to organizations through personal relationships or formal biding process (usually annually).

There are few retail only travel agencies in the strict sense as a significant percentage of retail travel agents do
resellsome of their low volume destinations products.
They purchase often through wholesalers as only the major retailers are capable of conducting international
travel business with out relying on locally based wholesalers.
Many retail travel agents do not have the necessary outbound travel licenses.
There are over 9000 travel agencies in China and mostly independent economic entities.
Divisions within these travel agencies could be owned and operated by independent contractors (without licences) who pay a fee to the agency, this is common.
Retailers advertise in local newspapers to drive traffic to their outlets.
Retailers are now increasing their online internet presence with many now doing business exclusively over the internet.

These travel specialists focus on serving government departments and state owned organizations
They have few retail outlets (often only one location) and they usually have long term relationships with
buying organizations
Approximately 100-150 business specialists nationally
The biggest of these business travel specialists are in Beijing
Ministries of Chinese central government are among the biggest customers
Local governments tend to go to local travel agents
There are considerable less business travel specialists outside of Beijing
There are two ways of getting organizational business
Through long term relationships with organizations
Through a formal bidding process (but one needs to have a reputation in order to be invited to the bidding)
Businesses are less price sensitive and require more services
They prefer inbound operators who have the ability to customise itineraries

Dedicated incentive focused planners on serving corporate direct often with no retail outlets just corporate style office
They seek to develop long term relationships with buying organizations but are often always made to tender for the business along with the competition
Approximately only 25 true incentive / travel companies
In China there are very few true incentive house operators yet
There are many conference organisers that do not have a travel license that are seeking to develop their market and
often combine with a major agents for large tenders
There are principally two ways of getting incentive business in China
- Solid long term relationships with the key incentive planners
- Be constantly prepared to submit proposal including suggested formats to the agencies preparing tender submissions
Prepared to have flexibility in rate as some become more price sensitive