China and the tourism boom

In an analysis from Sally White, EyeforTravel hears how the latest developments in China are fuelling the digital boom times

Forget the pessimism on China’s growth, for overseas travel at least. Recent news shows that more Chinese are travelling and demanding more services. The stories show that, reflecting this, the Chinese travel industry is taking increasing global market share, developing digital strategies and services, and online companies are pulling in the money. 

Even the economy, a key driver for outbound tourism, is producing positive numbers. Just out is that very accurate barometer of activity, power consumption: it rose by over 8% in August.

While the outbound travellers figures are not rocketing in the way they have in the past (from a smaller base) they are still strong. According to the ChinaTravelNews website, travel agencies organised 13.7 million outbound trips in Q2 2016, up 17.3% quarter-by-quarter. Last year’s numbers were up ‘only’ 9.8% compared to 20% growth in earlier years, but they are forecast to rise by 11.5% this, it says.

Fuelled by experience-hungry millennials and a growing middle class, the number of Chinese passport holders is forecast to swell by over 100 million over the decade

‘Dramatic increases’ in Chinese visitors to destinations across Asia, Europe and beyond, have been forecast in an oft-quoted Goldman Sachs industry report. Analysts at the international banking group point out, in their report ‘The Chinese Tourist Boom’, that as yet only 4% of Chinese have passports. The report says: ‘Fuelled by experience-hungry millenials and a growing middle class the number of Chinese passport holders is forecast to swell by over 100 million over the decade - equal to 1.5X all outbound US tourists today.’ Thus, by 2020 outbound numbers will, it states, rise from this year’s 120m by 220m by 2025.


The moneybags certainly seem happy with China travel. BlaTravel, an aggregator platform for tours and boutique hotels, said a few days ago that it has received millions of yuan from a group of investors. SaaS platform Zowoyoo got away another round of funding, raising an undisclosed amount from Guangdong Cable Network. The parent company of Joyu, which aims to be the China’s one-stop travel industry O2O group, is going for RMB1bn to help establish it. PMS provider Green Cloud pulled RMB 15 million and is looking for a further RMB 30m. China’s largest OTA Ctrip said that two of its existing shareholders, Baidu and Priceline, have put in more money to boost its $2.7bn cash pile.

The moneybags certainly seem happy with China travel.

The buoyant mood is shared by China’s airline industry, which is rushing to fill demand. Three Chinese airlines have filed applications (Sept 8) with the Civil Aviation Administration of China to launch new international services, according to China Aviation Daily. As China builds up to become a major transit hub, Air China, China’s flag carrier, announced on September 1 that it would be the first airline to launch a thrice-weekly flight from Shanghai to California. Beijing and Shanghai are presenting themselves as new alternatives to traditional stops like Tokyo, Seoul and Hong Kong. (And hope that more travellers will stop a few days.)

At this rate, major aircraft manufacturer Boeing estimates, China’s will need 6,810 new aircraft in the next 20 years (costing $1 trillion-plus) - over 70% for growth rather than replacement. Those planes will make China the first $1 trillion aircraft market, and many of them will be for international travel.

The strength of China Air has attracted Lufthansa, which has just finalised a JV for share revenue and co-ordinate routes with its Star Alliance partner. (Air France-KLM already has JVs with Skyteam alliance partner Southern Airlines, China’s largest airline by passengers.)

The right ‘personal’ moves

Everything seems to be pushing in the right direction - the government target is to increase wages across the board; the Chinese want to spend this extra income ‘having fun’, says Goldman’s, getting abroad to tour and shop. This is especially the case among ‘the young millennial travellers who make up two-thirds of outbound travellers’, adds the report.  Visa barriers are tumbling in the face of the anticipated wall of Chinese cash.

Another change is that today’s Chinese travellers are becoming more sophisticated and increasingly travelling independently rather than in organised groups. This is what China’s largest online travel player, Ctrip, chairman James Liang told investors on a conference call in early September. Today the Chinese want to ‘personalise their travel experience’.

Today the Chinese want to ‘personalise their travel experience’.

Ctrip is responding by ‘..focusing on enhancing our one-stop travel platform, increasing our international inventory coverage...’ As the company centres in on travellers outside of China it is offering international products covering air tickets, hotels, rental cars, local attractions and shopping. In its package tour business (up 44% year-on-year) its tour-guide booking service enables customers to chose their own tour guide. To raise the game and its brand image overall it has become the first travel service management company to become certified for the British Standards Institute’s ISO 27001 standard.

What if China’s growth is not as steady as this month’s numbers indicate? Goldman’s ‘do not expect economic slowdown in China to have major impact on tourist numbers’. Rather, it expects tourist numbers to increase given: the Chinese passport ratio; middle class income is rising; households are spending more and millenials are not adverse to foreign travel.

To back up its view it points out that the Japanese did not stop holidaying abroad when Japanese economic bubble burst. Not only does there seem to be little of a link between the economy and foreign holidays in South Korea or even the UK, it notes, but not even a weak currency fails, it seems, to put off travellers.

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