Arlt, Dr. Wolfgang Georg

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University of Massachusetts AmherstScholarWorks@UMass AmherstTravel and Tourism Research Association:Advancing Tourism Research Globally 2013 Marketing Outlook Forum - Outlook for 2014The Second Wave of Chinese Outbound TourismGrowth, Segmentation, SophisticationDr. Wolfgang Georg ArltCOTRI China Outbound Tourism Research InstituteFollow this and additional works at: https://scholarworks.umass.edu/ttraThis Event is brought to you for free and open access by ScholarWorks@UMass Amherst. It has been accepted for inclusion in Travel and TourismResearch Association: Advancing Tourism Research Globally by an authorized administrator of ScholarWorks@UMass Amherst. For moreinformation, please contact scholarworks@library.umass.edu.Arlt, Dr. Wolfgang Georg, "The Second Wave of Chinese Outbound Tourism Growth, Segmentation, Sophistication" (2016). Traveland Tourism Research Association: Advancing Tourism Research Globally. 7.https://scholarworks.umass.edu/ttra/2013marketing/Presentations/7October 28-30, 2013 ~ The Drake Hotel ~ Chicago, Illinois, USAThe Second Wave of Chinese Outbound TourismGrowth, Segmentation, SophisticationPresented by: Prof. Dr. Wolfgang Georg Arlt, COTRI China Outbound Tourism Research InstituteFor more information, contact Wolfgang at profarltcotri@yahoo.dewww.china-outbound.comThe Second Wave of Chinese Outbound TourismGrowth, Segmentation, Sophistication COTRI China Outbound Tourism Research Institute Prof. Dr. Wolfgang Georg ArltMarketing Outlook Forum: A Global PerspectiveOctober 29, 2013, Chicago, Illinois2www.china-outbound.comIntroductionChina's Outbound Tourism Development: Past-Present-FutureMarket segments, product adaptation, marketing strategies: Increasing and sustaining the growth of China’s outbound tourism to North AmericaConclusion3www.china-outbound.comIntroduction4www.china-outbound.comCOTRI China Outbound Tourism Research Institute5The world's leading independent research institute for information, training, quality assessment, research and consulting relating to the Chinese outbound tourism market.Established: 2004 Headquarter: Heide (Germany) China offices: Beijing, Shanghai, Guangzhou, Chengdu COTRI Country Partner in: Australia, Belgium, Bhutan, Bosnia-Hercegovina, Cambodia, Croatia, England, Estonia, Finland, France, Ireland, Italy, Kenya, Kosovo, Laos, Latvia, Lithuania, Luxembourg, Macedonia, Mauritius, Mexico, Myanmar, Morocco, Netherlands, New Zealand, Peru, Russia, Scotland, Serbia, Slovenia, Thailand, Tunisia, USA, Vietnam, WalesCOTRI Germany Headquarter:Fritz-Thiedemann-Ring 2025746 Heide / GermanyPhone +49 481 85 55 523Fax +49 481 85 55 121Email info@china-outbound.comCOTRI China Headquarter:101/2B Gui Gu Liang Cheng1 Nong Da Nan Rd., HaidianBeijing 100084 / P.R. of ChinaPhone +86 134 2603 6722Email china@china-outbound.comCOTRI Office Shanghai:Suite 1512 Shui On Plaza333 Huaihai Rd. Shanghai 200021COTRI Office Guangzhou:Suite 2412 South Tower WTC371-375 Huanshi East Rd.Guangzhou 510095www.china-outbound.com6Prof. Dr. Wolfgang Georg Arlt FRGSFirst visit to People’s Republic of China in 19781991-1999 owner of Inbound Tour Operator China -> Europe (offices in Beijing and Berlin)COTRI founder and director since 2004Professor for International Tourism Management at West Coast University of Applied Sciences (Heide)Visiting Professor at universities in China and United KingdomFellow Royal Geographical Society (London)Research Fellow Japanese Society for the Promotionof Science (Tokyo)Latest publications: Editor English Issue: Prof. Zhang GuangruiChina’s Tourism Development COTRI eBook Editor:China Outbound MarketIntelligenceCOTRI Online Quarterlywww.china-outbound.comGood news: New Chinese governments campaign against conspicuous consumption excludes outbound leisure tourism Chairman of the China National Tourism Administration (CNTA), Shao Qiwei: “Outbound tourism will boost China’s development in the long-term.  The government, and particularly CNTA, will continue to promote the travelling of Chinese people abroad as we believe in the mutual benefits of collaboration.” (Traveldaily Asia, 1/2013)“The 2013 Annual Conference of Boao Forum for Asia opened on the morning of April 7th in Boao, Hainan. President Xi Jinping said in his keynote speech at the opening ceremony that China in the next five year .. will invest US$500 billion in foreign countries, and have probably over 400 million tourists traveling abroad.” (Xinhua News Agency 4/2013) For the first time ever a Chinese communist party leader speaks internationally – and in a positive way – about outbound tourism.  Clear signal: Outbound travel is supported by the party and government.7www.china-outbound.comGrowth slowing down…8www.china-outbound.com… and China’s HNWIs getting nervous…  9Survey results from Bank of China/Hurun:44% of all Chinese with more than 10 million RMB (app. 1.65 million US$) in personal wealth (about one million households) are considering emigration85% of all Chinese with more than 10 million RMB in personal wealth are sending their child to study at a foreign university or plan to do sowww.china-outbound.com… but more good news: Chinese outbound travel will continue to expand 10China’s GDP growth: single digit to stay, Wealth creation slowing downChina’s outbound tourism growth: double digit  continuingChina already  most important global source market for many countriesShanghai Stock Exchange Composite Indexwww.china-outbound.com11www.china-outbound.com12www.china-outbound.comChina's Outbound Tourism Development: Past-Present-Future13www.china-outbound.comTravel has been an important part of the education process in Imperial China, but outbound travel has no tradition Xu Xiake (1587-1641), China’s most famous traveller, was no Ibn Battuta or Marco Polo, he was interested in China onlyExceptions: Buddhist monks and Admiral Zheng He (1371-1433), the “Chinese Columbus”14www.china-outbound.comBefore the start of Reform and Opening policy in 1978, travel and leisure were held in contempt in the P.R. of Chinaborder crossings 1983 - 1996  VFR and delegations1996: 8 mio. 1997 - 2004  ADS and chaotic growth2004: 29 mio. 2005 - 2010  Gaining experience and scope2010: 57 mio. 2011 - ?       The Second Wave of China‘s Outbound Tourism: Segmentation, Sophistication2011: 70 mio.2012: 83 mio.2013: 95 mio. e15www.china-outbound.comDemand pushing open the gatesAfter 1989 (Tiananmen movement and Fall of Berlin Wall) preventing outbound tourism (politically dangerous and expensive) is no longer feasibleADS Approved Destination System installed after 1997 to control and slow down demand for outbound leisure travel –unsuccessful Since 2004 incremental paradigm change toward “Soft Power” approach Since 2009 government support of outbound tourism – opening to selected foreign tour operators in 2011 unsuccessful2013 new party leadership curbing official travels but first time officially “encouraging” outbound tourism16www.china-outbound.comMore border-crossings in first five months of 2013 than in the whole year of 200617www.china-outbound.comFirst half of Year 2013: Further diversification of destinations,strong growth in Asia outside Hong Kong and Macau18TOTAL +17%Hong Kong +10%* Macau +10% Taiwan +12%Thailand +95%South Korea +46%Singapore +8%Malaysia +25%Vietnam +23%Japan -28%Switzerland +27%Germany +13%Canada +21%* overnight visitors USA 2012: 1,474,000 arrivals +35% USA 1-4 2013:     497,000 arrivals +24%www.china-outbound.com19Top 5 Markets: Canada, Mexico,  UK,Japan, Germany/Brazil www.china-outbound.comSituation today: Global No. 1, but only the upper class travelling abroad In 2012, 83.2 million border-crossings and 102 billion US$ spending elevate China to the position as the biggest global outbound tourism source market. 30 million Chinese travels in 2012 went beyond Hong Kong and Macau, almost double the number of all Japanese outbound trips. Not for all: App. 5% of all Mainland Chinese (app. 65 mio.) can afford to travel beyond Greater China (Hong Kong, Macau, Taiwan). 3% of all Chinese (app. 40 mio.) hold a private passport.Average spending of all Chinese citizens for outbound travel: 75 US$/yearNumber of Chinese US$ millionaires households: 1.3 million, 3‰ of the 400 million households in China. 83 million border crossings are not done by 83 million different persons! 20www.china-outbound.comIncreasing segmentationChinese tourists are not only growing in numbers, the market is increasingly segmenting: Still majority of Second tier and Third tier cities citizens first-time travellerin package groups Increasing number of experienced repeat travellers: “New Chinese Tourists”, luxury travellers, “Generation 2” youngsters all moving away from “cheap photo-op & shopping list” sightseeing to experience seeking, moving away  from package tour to self-organised or private group travelTravellers outside package tours are no longer hostage of tour operators and tour guides: Opportunities for smaller and budget service providers and second tier destinations to attract individual travellers21www.china-outbound.comPrestige and Respect 22Chinese outbound traveller see themselves as – and are told by their government they are in the new Tourism Law (came into effect Oct. 1, 2013) – representatives of their country, going to potentially hostile alien surroundings. Showing to the world and to themselves that they have personally made it but also that CHINA as a nation has made it (back) to the top is a major part of the fun of traveling and spending overseas.Most Chinese see themselves as victims of western oppression since the Opium Wars and suspect to be treated as second-class customers out of racism and envy by the non-Chinese. Their demand is not to be treated as well as everybody else, but BETTER than anybody else.www.china-outbound.comPrestige and Respect 23Chinese outbound traveller are looking for signs of respect. Even English speaking visitors will be happy to see Chinese language information materials, even Muesli-munching Urbanites will be happy to see chuk (Congee) on the breakfast buffet.Emphasising historical and current connections between the destination and China or recent visits of Chinese celebrities, a Chinese flag in front of the hotel, all helps to show respectVisibly caring for the Chinese visitors, by Quality Labels, by engagement in Chinese Social Media, by teaching staff a few words of Chinese and not to annoy sophisticated Chinese by telling them that they fear the number “4” helps too.www.china-outbound.com24Travelling abroad means for Chinese outbound travellers first of all:Investmentin:- Personal prestige within the group- Self-esteem- Social capital- LearningBut also in:- Business opportunities- Investment in real estate and companieswww.china-outbound.comReturn on Investment25If international travel is investment, the services and products offered should be organised in a way to guarantee the Chinese visitor a good Return on Investment (ROI):Value for money and for time Guaranteed quality as seen from a Chinese point of viewNo more time spent on an activity as needed for prestige gainSupporting the bragging value of a place/an activity/a product: famous, typical, oldest/highest/awarded, celebrities choice, unusual (but not unknown), authentic (but not against expectation) hard to get, VIP only, as seen in TV and moviesConnecting fun und investmentGiving face to China and all Chinese Safe and without riskwww.china-outbound.comChinese Outbound Travel 2017 (barring Wild Card events)1. Chinese transcontinental travellers are not travelling just for fun, but for confirmation of their abilities. Therefore even with a slowing Chinese economy, in 2017 at least 170 million outbound border crossings will take place, double the number of  2012.In the WTCF meeting in Beijing in September 2013 the tourism scholar Wei Xiaoan discussed a world coping with a billion Chinese outbound travellers – are we prepared?Half of all outbound travels will go beyond Greater China26www.china-outbound.comChinese Outbound Travel 2017 (barring Wild Card events)2. Package group travel will be seen even more as a less prestigeous travel form mainly for unsophisticated newcomers. At least half of the travels will be either self-organised or by customised flexible offers for small groups of friends, family or colleaguesTour operators and tour guides will stop dominating the high-end of the market27www.china-outbound.comChinese Outbound Travel 2017 (barring Wild Card events)3. Chinese travellers are insisting more and more on China-specific offers according to their special expectations and interests. They will not over time become “normal”, i.e. like the Western tourists who used to dominate international travel in the past. Commitment has to be shown by properly trained staff, Quality labels and positive User Generated Content on Chinese Social Media  Adaptation and commitment will decide who is hot and who is not.28www.china-outbound.comMarket segments, product adaptation, marketing strategies:  Increasing and sustaining the growth of China’s outbound tourism to North America29www.china-outbound.comMarket segments VFR – Visiting Friends and RelativesABC and recent immigrantsBusiness/MICE travellerTrading and investmentShopping travellersIt’s cheaper in CaliforniaGambling visitorsLas Vegas is only No. 3 but far away from BeijingSightseer and experience seekersI’ve been there vs. I did thatStudentsPrestigeous but dangerous30www.china-outbound.comProduct adaptation Chinese customer needs and wants are very different from those of American, European or Japanese visitors –and will stay that way• First step to success: Accept that fact• Second step: Understand them deeply – learn• Third step: Differentiate between customer groupsand between real and symbolic needs and wants31www.china-outbound.comCustomer needs and wants - some examples:Chinese customers are „money rich“ but „time poor“ Chinese customer need to be connected to their company and country at all timesChinese customers look for prestige and self esteemChinese customers see themselves in all situations asChinese first and person second while in a foreign country32www.china-outbound.comProduct adaptation – helping to spread out• VFR and Package groups concentrate on four states only: California, Nevada, Florida, NYC • Chinese self-organised traveller start to explore the restof the country but need products adapted to their levelsof knowledge, interest, experience, connection to localChinese history and customs• Offering prestige and respect – even English-speakingChinese visitors insist on Chinese brochures and apps• Cruises are a growing trend for affluent Chinese, but they want international atmosphere and Chinese comfort at the same time33www.china-outbound.comMarketing strategy • Social Media - the key to affluent Chinese customers• Free WiFi• Social Media Instruments like DT Tripshow• Quality assurance with Quality Label like CTW• Brand ambassadors online and offline• Let Chinese UGC tell your story• Either draught or deluge – are you prepared for a lotof Chinese arriving at your doorstep? 34www.china-outbound.comSelling the USA is hard because it is so easyAll Chinese know the USA - Think Slovenia, Uruguay Let‘s go to look to learn about the only country still  standing between China and renewed world domination– Year 1500: Half of global GDP produced in ChinaTrap 1 for USA: I know all about Chinese, even myneighbour is Chinese – ABCs are not MainlandersTrap 2 for USA: President Obama: We need to welcomemore Chinese tourists. US consulates: But we will not give them a visa – Its getting better but slowly35www.china-outbound.comFive insights about the Second Wave of Chinese Outbound Travel1. Chinese outbound travellers will continue to gain importance in terms of number of visitors, bednights and amount spent per person per trip  ignoring or dismissing them is not an option2. Distinguishing between the segments of the Chinese market is essential  averages won’t help you to satisfy the different customer groups3. Chinese are not just travelling for relaxation and fun to other countries and regions. In different forms, gaining prestige, self-esteem and knowledge are main motivators for package group members, self-organised travellers and MICE customers alike learning to adapt your offers and stories to cater to the fulfillment of  motivations will attract Chinese tourists also to “smaller” destinations4. Chinese are first-generation affluent, “money-rich” but “time-poor” help them choosing, offer them more value for money, not discounts5. Chinese will be Chinese, with growing experience and language skills they insist more, not less, to see signs of appreciation of the Chinese culture signalise your extra attunement and commitment to Chinese visitors36www.china-outbound.comThe future’s so bright, we have to wear shadesIn the market dominated by outbound tour operator, price has been the only criterion, with a low end mass market engaged in a race to the bottom, and a high end market which mistook “expensive” and “big brand” for “luxurious”.As self-organised travellers increasingly shape the Chinese outbound market, quality criteria start to count. Destinations and attractions beyond the trodden path can attract Chinese guests with their documented engagement to understand Chinese customer, with their CSR and green activities, with their offers to experience local culture beyond Disneyland. Chinese outbound market: You ain’t seen nothin’ yet.37www.china-outbound.com38Thank you for your attentionLooking forward to your comments and questions!ContactCOTRI China Outbound Tourism Research InstituteProf. Dr. Wolfgang Georg ArltTel. +49 481 8555 523Mail arlt@china-outbound.comWeb www.china-outbound.comBlog www.forbes.com/sites/profdrwolfganggarlt/

The Second Wave of Chinese Outbound Tourism Growth, Segmentation, Sophistication

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The Second Wave of Chinese Outbound Tourism Growth, Segmentation, Sophistication

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