Who are these big spenders?
More than six and a half million Chinese travelled overseas during the Lunar New Year break in February in what has become a frantic few days for many of the world’s holiday hotspots. Yet this is just the beginning of an outflow that seems set to transform the tourism map.
Their reasons for venturing overseas often reflect changes in their home country, highlighting trends such as the spread of wealth to towns and provinces in the central and western regions, newer attitudes towards leisure and lifestyle, and the rise of higher-earning, career-focused women.
What’s clear is that hundreds of millions of Chinese have aspirations to visit other countries, replicating the experience of the wealthiest urbanites on the southern and eastern coasts, many of whom are already experienced travellers.
Less sophisticated parts of the country are set to drive much of the growth in travelling numbers, while large cities like Nanjing, Changsha and Dalian are home to millions of people with the disposable income to spend on travel.
This mix in outbound travellers is feeding a range of destinations around the world, which are targeting their own niche of holidaymakers.
Generally speaking, the more novice tend to try Hong Kong or Macau first; second-timers opt for travel in the Asian region to countries like Japan or Thailand; and the most experienced tourists are heading to different parts of Europe, Australia and North America.
The same trends are shaping the ways that the Chinese choose to travel. First-time tourists are more likely to pick a holiday in a group and spend more of their time shopping, while seasoned travellers are graduating to holidaying by themselves or with their families, with less of a focus on tour guides and duty-free stores, often hiring cars to get around.
There’s also a change in the age groups of those travelling the most. In the past, the bulk of tourists were 30-49 year-olds, who were benefiting first from China’s economic boom and keen to show off their status as higher earners.
Today more of the growth is coming from different ends of the spectrum: younger people, including the children of the first generation of tourists, are demanding a more individual, adventurous experience, while older people are making waves as ‘silver’ tourists.
Sometimes both groups are travelling together on multi-generational holidays, which are becoming more of a feature for families.
Our list is far from exhaustive, but here is our profile of five of the most common types of Chinese tourist.
Spend some time at the world’s busiest airports and China’s package tourists will soon be apparent: groups of older-looking travellers, often wearing the same coloured caps and a similar slightly bewildered look.
These kinds of tourists give up control of their holiday itineraries to tour operators. They travel on lower budgets, choosing less expensive hotels and eating cheaper meals, primarily at Chinese restaurants.
Distinguishing ‘package’ tours from ‘free and independent’ tourists (FITs) isn’t always straightforward. Plenty of FITs rely on travel agents for their flight and hotel bookings but choose where to go, what to eat and how to shop on their own, rather than traipsing around behind a tour leader.
‘Semi-FITs’ plan most of their itineraries on their own but rely on the services of group buses to move between one destination and another.
Tour groups are often more interested in quantity than quality for their holidays, with a typical visit to continental Europe packing in five countries in 10 days. The idea is to get the major attractions ticked off the list as quickly as possible and to spend more of the holiday budget on consumer goods, sometimes in outlet malls.
Historically the Chinese have toured in groups because it was a cheaper and easier way to travel overseas. As other countries have made it more straightforward to get visas, some of the attraction of group tours is receding. More direct flights from Chinese cities to destinations around the world are also making it easier to travel independently.
Group tours from China tend to attract less experienced holidaymakers. Participants are older than average too, although younger tourists may take tours the first time they go abroad. Usually they are less affluent, with more customers from smaller, less prosperous cities. They like familiar things, such as kettles in their hotel rooms (to make instant noodles), and they expect their guides to speak Mandarin. The cheapest versions of group tours (‘zero-fee’ or ‘zero-dollar’ arrangements in industry parlance) get a bad press for corralling visitors into spending at specified shops. In an extreme case in Hong Kong three years ago a man refused to shop as enthusiastically as his tour guide wanted. The quarrel turned into a fight and the visitor died of a heart attack. The incident stoked an outcry on social media about the high-pressure tactics used to compel mainlanders to spend in the shops. “If you don’t buy enough in the shopping paradise [of Hong Kong], they will send you straight to heaven,” one cynic sniped.
the share of outbound travellers planning to make their own arrangements for their next overseas trip, according to a survey last year from China Luxury Advisors
Traditionally the group tour has accounted for a much larger share of tourist numbers than independent travel, although its dominance has been declining as more Chinese strike out on their own. Tours will diminish further in popularity as a proportion of outbound tourism, although the number of group tourists is holding up in absolute terms, because so many of the Chinese are wanting to travel for the first time.
A survey last year from China Luxury Advisors, a consultancy for retail brands, and the Fung Business Intelligence Centre, which monitors retail and tech trends, suggested that 70% of outbound travellers were planning to make their own arrangements for their next overseas trip. When asked how they travelled on their most recent trip, 35% said they went with a tour group.
Research from the China Outbound Tourism Research Institute last November also claimed that FITs were responsible for almost all of the outbound sector’s recent growth. “While group travel will continue to remain a feature of the Chinese outbound travel market as increasing numbers of lower-tier city residents take their first overseas trips, growth in package tours is stagnating or even decreasing in numerous destinations,” the report concluded.
The preference for group tours has meant that many destinations have dealt solely with travel agents in the past. In future they will have to do things differently in marketing themselves more to their end customers. Another problem with groups is that they can create bunching at the most popular destinations, which can be overrun by visitors. The decline of the package tour could relieve some of the pressure, although the transition away from groups seems likely to be more advanced in English-speaking destinations, where the Chinese are more confident about speaking the local language.
Millennials in the tourism context are younger, more adventurous travellers who don’t want to be herded on package tours, preferring places more ‘off the beaten track’.
Born in the 1980s and 1990s, there are about 400 million of them in China, with many working in white-collar jobs.
Although they make up a little less than a third of China’s population they account for almost two-thirds of the country’s outbound tourists, which makes them a key demographic for the travel trade.
Millennials are already the segment where growth is strongest, with the China National Tourism Administration reporting 62 million outbound trips in the first quarter of last year, an increase of 36% on the year before.
Fortunately for tourism operators, many of the Millennials have money to spend, with less college debt than their peers in Europe and North America, and less of a focus on saving for their first home (because their parents often help out in buying them their first property).
A key feature is that they are looking to do different things to the previous generation of Chinese tourists. Although Millennials still enjoy shopping, it is less of a concern for them on holiday than for their parents. More active, more exploratory travel is a higher priority. Self-drive holidays, vacations spent enjoying nature and the outdoors, and holiday activities that offer ‘learning-by-doing’ are key trends.
Because their foreign language skills are usually better than their parents, Millennials are readier to book their own accommodation and more prepared to travel independently by train or rental car.
Another difference to earlier generations is that foreign food is a key feature: they want to try the local cuisine.
Millennials can’t be described in a similar way to the ‘backpackers’ from Western countries, who typically choose longer, more budget-conscious itineraries. That’s not to say that the Chinese aren’t price-conscious in how they select their holidays (most use price-comparison websites, and respond well to discounts and deals), but they are more often described as cash-rich but time-poor.
At the upper end of the age range many Millennials aren’t even that young and some are already spilling over into middle age. For instance, last year’s China International Travel Monitor from Hotel.com highlighted how middle-aged businessmen were featuring on road cycling and hiking holidays in Italy and Switzerland. It also reported that interest in eco tours was greatest among tourists born in the 1960s, while a fifth of respondents in the same age group said they planned to do ‘backpacking’ the following year, up from just 6% the year before.
Nor are the Millennials always quite so independent as their peers in the West. Many choose to travel with their parents (and older ones are often the organisers of larger family tours, see next section).
While they don’t want to be swallowed up in crowds of tourists from their home country, they expect their destinations to cater for Chinese visitors in basic ways. And Millennials also prepare carefully for their holidays, continuing to research during their trips with their smartphones. That means that destinations have to market themselves in the appropriate social media channels and they have to provide easy access to WiFi once the holidaymakers arrive.
Another challenge with this category of traveller is that they can be promiscuous in their travel desires. Surveys suggest that they change their minds frequently on where to visit and they are difficult to capture as repeat business. It’s better news for niche and up-and-coming destinations, however, which always have a chance to grab the Millennials’ attention.
Forget about heritage and history in the UK: most Chinese visitors to Britain make a beeline for Bicester Village, now the second most-visited destination after Buckingham Palace
Not much more than 20 years old, the retail park lures about two-thirds of Chinese tourists, who spend about three times more than the typical visitor on shopping.
Similar set-ups have been snaring shoppers at La Vallee outside Paris, Fidenza Village near Milan and Kildare Village in Ireland.
Shoppers from China have served as the lifeblood of the luxury goods sector in flagship stores and duty-free outlets for years. Bain, the management consultancy, thinks that they account for almost a third of luxury retail sales worldwide. That means that warnings about a lower share for shopping in tourist budgets can send shivers through brands and retailers alike. But fortunately it’s not happening yet: average ‘in location’ spending by outbound tourists from China last year was equivalent to $3,064 a head, according to a survey released last month by Alipay, the mobile payment app, and Nielsen, the market research firm.
Shopping was still the leading expense (25% of budgets), compared to 19% on holiday accommodation and 16% on dining. Smaller items included entrance fees to tourist attractions, the costs of local transportation, and expenses on phone calls and the internet.
Tourists from China are spending significantly more on shopping than visitors from other countries, the survey also reports. One reason why is that they are shopping for goods for friends and family, and not just for themselves. That helps to explain some of the high levels of per capita spend, as well as the robust contributions from visitors from lower-tier cities, where incomes are generally lower.
Generally speaking, the Chinese shop overseas with particular goods in mind. Arrivals in Japan have a hankering for electronics and household appliances. In South Korea, they want cosmetics and skincare. In Hong Kong and Europe the priority is watches, handbags and jewellery.
Duty free shops host the majority of the action, although luxury outlets take the lead in North America and Europe, and department stores have grabbed top spot in Japan.
Shopping abroad in its purest form is the domain of the daigou – or “shuttle traders” – who travel overseas to circumvent local Chinese taxes on imported goods, reselling their purchases in person or online.
Sizing the market is difficult but examples of daigou demand crop up anecdotally across the world map, from the queues to get into high-end stores in Hong Kong and Paris to the shortages of tins of milk powder in Sydney and trendy cosmetics brands in Seoul.
One suggestion is that the parallel trading accounts for as much as a fifth of the infant milk formula bought by Chinese worldwide, while newspaper reports from Australia have claimed that there are at least 3,000 daigou earning an income in Sydney alone, many of them Chinese students at local universities.
Undeclared income could have surpassed $750 million, the tax authorities have warned, although accurate estimates are difficult because the final transactions are conducted offshore.
Late last year the Chinese government cut tariffs on almost 200 consumer goods, including cosmetics, apparel and pharmaceuticals. But consumption and value-added taxes were largely untouched, bolstering domestic prices at a higher level than their international equivalents.
Luxury brands and duty-free retailers often denigrate the daigou, blaming them for confusion around pricing and product authenticity. In truth, the shuttle traders are significant customers, as last year’s duty free sales in South Korea confirmed. Although arrivals from China fell almost 38% year-on-year to December, duty free revenues jumped by more than a fifth. The best explanation is that daigou traders had taken up the slack. Spend per customer was up by more than two-thirds, the Korean Duty Free Association reported.
The daigou may run into difficulties as more Chinese start to shop for luxury goods on e-commerce platforms and as more of the luxury brands harmonise their prices between China and overseas (see next section for Erwan Rambourg’s account of how this is happening).
There are also signs that better-travelled tourists are less likely to purchase gifts abroad for friends and family, and the Alipay survey hints at changes in habits among younger travellers, who are switching their spending to dining and visits to local attractions instead.
Yet it’s too early to say that China’s tourists are losing interest in shopping. Even as shopping becomes less important for more experienced travellers, newer generations are venturing abroad. The likelihood is that overall spending by holidaymakers will stay buoyant, even if per capita spending is reduced.
‘Silver tourists’ and families
The estimate from Ctrip, the biggest online travel agency, is that travellers aged 50 and over accounted for about a fifth of the Chinese market last year. The segment was also said to be growing by at least 30% a year.
Much of the demand is concentrated on domestic tourism but the potential for ‘silver-haired’ tourists is clear. While the number of over- 60s in China numbered about 230 million last year, they will increase to 280 million by 2025, making up a fifth of the population.
Retirees have more time to travel and they can plan their holidays outside of the busiest periods, which translates into cheaper fares and longer trips.
Older Chinese are still more likely to choose package tours and book their breaks in groups through travel agents. But online travel platforms are starting to capture more of their business. Data last year from Tuniu, another online travel platform, suggested that travel had increased 88% among people older than 55 and the age group already accounts for 18% of Tuniu’s bookings.
One area where older tourists take the lead is holidays that are nostalgic for the Communist past. Thousands make the pilgrimage to Trier in Germany to visit the birthplace of Karl Marx (taking photos outside his house but rarely paying to enter the museum, the local media reports) and nearby Wuppertal is trying to tap into the same trend by promoting the birthplace of Friedrich Engels, its most famous son.
Red tourism has been a hit in Russia as well, prompting concerns in the media that the country isn’t attracting similar numbers of younger tourists from China, who lack the nostalgia about the Soviet era. In the meantime fans can sign up for the full revolutionary experience on a Lenin tour: starting out in Ulyanovsk, the city on the Volga where he was born, before moving onto Kazan, where he studied law, and then journeying to Saint Petersburg, the former capital, where the Bolshevik revolution was plotted.
For other holidaymakers a cruise is the bourgeois choice, offering a safe, predictable experience and an easier format for travelling as an extended family.
Indeed, China’s elderly are much more likely to travel with their children than ‘silver tourists’ from other countries and multi-generational holidays are increasingly popular, including the ‘6+1’ format of 4 grandparents, 2 parents and a child.
Interest from seniors has already prompted the design of the first cruise ship specifically for the Chinese market, the Norwegian Joy, which arranges programmes of entertainment designed to appeal to senior travellers.
Royal Caribbean, another of the world’s largest cruise lines, has introduced square dancing, which has more than 100 million practitioners in China, and connected cabins are another feature for passengers travelling together as extended families.
“Typically-speaking, a Chinese family group that might book a Norwegian Joy cruise package would consist of a wealthier couple paying to take their older parents on an overseas trip (often for the first time) in a comfortable, secure and luxurious environment as a means of ‘repaying’ them for having too little free time to properly care for them – as is expected in Chinese society,” reported the China Outbound Tourism Research Institute last year.
Cruise ship passengers from other countries are more normally retirees, travelling as couples. But the Chinese are being lured onto boats for all the family: casinos, duty-free shops, karaoke rooms, online game playing rooms, rock climbing walls and bumper cars are among the attractions on offer.
Of course, many of China’s older pensioners haven’t benefited from the country’s economic transformation in the same way as their children or grandchildren. So family holidays across two or three generations often see the parents make the arrangements, with the grandparents tagging along. Because the younger generation is in charge, older holidaymakers feel more confident about travelling to less-traditional locations or places where little Chinese is spoken.
The dynamic can be very different for parents travelling with kids from the post-90s generation. According to last year’s China International Travel Monitor study put out by Hotels.com, it is the older tourists that pay for these kinds of holiday because about a third of the Millennials lack income of their own. The lesson is that China’s family travel is characterised by a range of age groups and income brackets, so holiday firms need to decide which kinds of family group they want to target.
Girl power made headlines in March when a film studio in central China was mobbed by female visitors promised free entry on International Women’s Day.
The studio in Hubei, which specialises in the production of Tang Dynasty movies, was deluged by 45,000 visitors by opening time. It couldn’t cope and two hundred police officers had to be deployed to disperse the crowds.
China’s female tourists are a force to be reckoned with in countries like Thailand too. Better known for attracting men to some of its less salubrious nightspots, Thailand reported that women visitors were the majority for the first time two years ago. The main reason is a surge in female arrivals from China, which have increased by a factor of four. In 2016, almost 60% of the 8.7 million Chinese tourists to Thailand were women, according to Jing Daily, a specialist in travel and retail news.
“When Chinese men make a lot of money, they tend to take their wife, daughter, and mother to travel, making the ratio heavier on the female side,” explained Virat Chatturaputpitak of the Association of Thai Travel Agents, at the time.
In fact, the evidence points to women venturing overseas on their own volition, rather than relying on the men for vacation time.
A study from Ctrip last year said that Chinese women were more likely to travel alone than men, and that 58% of the customers for the agency’s self-guided and group tours were women.
Tourism was already the number one choice for wealthier women in terms of leisure and entertainment spending, the report claimed, and women are more prepared to spend a higher portion of their income on travel than men of a similar age.
Studies from travel sites Tuniu and Mafengwo have reported something similar: a higher share of women as customers, and female tourists more likely to make multiple trips abroad and spend higher amounts on shopping.
About half of Tuniu’s female customers last year were white-collar workers aged between 20 and 35. For the women who travelled overseas, Japan, Thailand, Indonesia, Vietnam and France were the top five destinations, followed by the Philippines, Malaysia, Singapore, Russia and the United States. Some of these tourists are s0-called ‘leftover’ women, the rather unpleasant term for those unmarried women of a certain age. The same group – often discerning, independently-minded with money to spend – is a prize target for retailers in other sectors. And correspondingly, women travelling on their own are more likely to focus on experiential holidays, put more of their budget into visiting attractions, and spend more on food.
Tuniu says that “film location tours” are another new draw, although the trend is a feature of the wider market and not just for female travellers.
Six years ago arrivals to Chiang Mai spiked after the city was featured in the hit Chinese movie Lost in Thailand, while destinations in Croatia, Iceland and Spain have been reporting an influx more recently on the back of the popularity of the Game of Thrones franchise.
It’s not just the singletons with wanderlust: the survey from Ctrip also suggests that women are opting to travel with close friends rather than their husbands or boyfriends. Younger women are also more minded to travel by themselves than their male counterparts because they are better at speaking other languages, although their personal security can be a concern, which steers many women towards destinations where they feel more comfortable, such as Japan and South Korea.
Safety fears are skewing a majority of female travellers towards packaged tours, Tuniu believes, although independent travel in the company of friends is getting more common.
To instill further confidence about travelling to a wider range of destinations, travel providers have also been developing features including SOS hotlines, certified networks of approved local guides, and booking options for breaks that allow customers to find like-minded companions for travel.
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