Yesterday’s evening news reported that over 50% of international travel bookings were delayed or canceled due to the fear of H1N1. The Chinese tourism industry is now faced with another blow after the global financial crisis.
Because of the global economic downturn, the number of international tourists visiting China have declined dramatically, with long distance visitors from Europe and the US more reluctant to travel to China than those from Russia and neighboring Asian countries. International tourists are more price sensitive, requiring more bang for their buck.
At the same time, the domestic travel market is still hot, with three-day “long weekends” and the seven-day “October Holiday” and “New Year Holiday” still being peak travel periods as people make the most of their time off. Clearly the market is shifting to the domestic market, and travel service companies are beefing up their marketing campaigns aimed at local tourists as evidenced by the increasing prevalence on travel ads on the streets and web.
There have been lots of optimistic media coverage and official statements from the government saying that the Chinese travel industry will be growing 10.4% annually over the next ten years, with personal and business (government) growing at rates of 9.8% and 10.9%, respective, until 2020. Domestic travel turnover increased 12.6% in 2008 and would increase similar rate in 2009.
What are they so optimistic about?
I certainly hope these growth rates become accurate. For now, I only can talk about what I have seen behind the growth of the Chinese travel industry.
Many of my friends and I have not changed our travel plans; perhaps because we choose to visit nearby destinations around Shanghai. Most people I’ve spoken with also did not feel a need to cut back on their traveling budget. Generally speaking，travel expenses can be reasonably managed. For example, I went on a daytrip to Suzhou (four people in a car) for about 300RMB in total; A weekend in Huangzhou came out to 900RMB, which included hotel rooms and great meals. Compared to a bottle of Lancome lotion (500RMB) and an ONLY top (300RMB), I’d much rather spend that money traveling. If I had to skimp on clothing and cosmetics in order to travel, I totally would. Many people would agree with me.
Thanks to media coverage and China’s super events, such as the 2008 Olympics and 2010 World Expo, Chinese people have been educated to believe in China’s future and confident in spending their money.
When exchange rates dropped on US dollars and British pounds, there was clearly an increase in international travel. The package price for a ten-day European tour dropped under 10,000RMB per person from Oct, 2008. More and more Chinese people are taking advantage of the more favorable exchange rates. I have friends who have recently returned from enjoying their holidays all over Europe for a fraction of what it would’ve cost a few months ago.
Another interesting development is tourism-dependent cities all across China heavily investing in infrastructure, accommodations and service. In Guangzhou and Sichuan, for example, government investment on travel-related projects have increased dramatically. Shanghai ’s 14 subway lines will be completed by 2010. Two subway lines are being joined under my apartment and there’s lots of construction going on.
Travel agents in China have to adapt to the new business environment. Travel service providers are now more innovative, coming up with more inventive packages to entice domestic travelers. For example, the 2009 Flowering Spring Tour was a huge success. The Chinese have a tradition of Taqing, which is a short distance break from the big city to see the green of Spring with family and friends. The Flowering Tour marketed tours in nearby destinations famous for different followers, giving more choices to this traditional break. These packages tend to be lower-budget, short distance deals that bring smaller profits. In the current business climate, even large travel websites like Ctrip that don’t normally offer these kinds of packages are getting involved.
I’m also seeing capital injections into the travel industry. Co-founder of tuniu.com, a travel booking site that allows customers to custom-tailor their own trips, told me that they secured their first round of funding from Gobi Partners. I was very happy for him.
A newly launched application piqued my interest recently. “Du Jia La“, which means ” taking a holiday” provides prospective travelers with real picture mapping technology that allows them to look around and explore the travel destination online. The website is created by a tech group that developed real videoed photograph of Tokyo for Google Japan.
Dujiala-reality map
Click here to “visit” the Mountain of Tianmu in Hanghzou.
As diversity leads to prosperity, I expect to see more and more improvements coming out from the Chinese travel industry.
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Baidu Data Research Center (百度数据研究中心) released a Online Travel Report 2007 on April. 10, 2008. It provides some very interesting data about online...
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photo courtesy: The Sietch Blog I attended the World Savers Congress panel on China hosted by Conde Nast Traveler on September 23. The panel was convened to...
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Several days ago, ESWN posted a translation of a Tianya post titled “What is the reason China’s younger generation is losing confidence in the Western...
China Online Travel Industry Report of 2007 Q4 from Baidu 
Chinese Youth on Western Media: A Diversity of Opinion 
China will have more and more policies to encourage the domestic consumers’ market, which will definitely benefit the travel industry. As most Chinese people (not including farmers) haven’t been hit by the crisis so far, Chinese travel market can still be expected to grow rapidly in the coming seasons. However, it doesn’t mean there is no risk for the travel market in 2010. In most peoples’ opinion, travel is among the top list of expenditures that can be cut.
Interesting. I’m curious to understand what are the specific opportunities within the Chinese travel industry by segment. For example:
Domestic Business – it seems like CTrip has been dominant in the self-managed independent business traveler and corporate travel market.
Domestic Leisure – my understanding is that most Chinese domestic leisure is through packages and that people are focused on important, iconic attractions and landmarks (e.g. Guilin/Yangshuo, Hainan, Huangshan, Jiuzhaigou). Is this correct? If online leisure travel is mostly focused on packages, then this means that the opportunity is very different from Western countries that have a longer tradition of independent leisure travel planning.
Outbound Leisure – while small, this also seems like a very attractive segment. I expect it to be almost 100% packaged tours because of the visa issues involved. Maybe for some select countries and for a younger and affluent demographic, people will be looking for more services oriented toward independent travelers. What’s encouraging is the emergence of “self-travel” domestic packages (I forgot the term) where flight/hotel/transportation is bundled but the tours are unbundled. I hope that outbound leisure will also see this trend (probably for a very small niche of English-capable travelers that want to travel independently)
I’m hopeful that the consumer purchases that represent “freedom” and “independence” will continue to increase in spending. My belief is that travel is one of them, and that Chinese consumers will take the opportunity to travel because the freedom to do so is not something that has been always the case.
Anyway, these are just some thoughts based on *very limited direct information* about the market and I throw them out here to stimulate comment, correction, and criticism. Please correct these impressions without fear of any loss of face on my part! :)
About your question on specific opportunities, well, from my point of view, innovating process has just begun. Consumer behaviour has shifted from routine travel to more exploratory ways. Allowing travelers to design and manage own trips no doubt is hot now, as more and more people would prefer travel with family and friends, not with a group of strange people.
Giving people a good reason to travel can be another opportunities, in the post I mention the “flower trip”, and there are some other like “hot spring trip”;” car club trip” ( where one chooses a route with lots of driving points of interest, typically traveling for a weekend, with people who drive a same car);” Food trip” (try out different special types of cuisine, understanding the stories and even history behind these special types of cuisine.)
I agree with the point you made on consumer purchases. “Freedom” and “independence” will continue to increase in spending on outbound travel. However, this is not a issue that only can be solved on political level. Business only can make the process easier, but cannot overcome issues related to discrimination. You might have already heard that have a holiday in Japan, US or Europe, the traveler is required to provide proof of 100,000RMB in a frozen bank account. The process of getting a visa decrease the joy of having a holiday in these countries.
The points raised are of interest, and the comments mention the move towards independent travel among the young. I can see this trend within China with students and young professionals very skilled at finding good deals online for flights and hotels. They still try to plan their trip in advance and find local tours that they can pre-book online or by phone. It seems to me that someone like Viator or Isango for the domestic activity market would be quite successful. People do not have much holiday time, no paid holiday so they do not want to leave a lot to chance and just figure it our when they get here, as Western independent travellers do.
I echo the sentiment on visa for outbound travel. Many countries still make it very difficult because of worries about illegal immigration. This is based on outdated political thinking and not constructive, especially when Western economies could use the boost from Chinese consumers. Thailand, having its own crisis, is making things easier and S. Korea has a visa free trial. Hope more countries will follow this lead.
we can see the prosperity or a good future in the travel industry from the China Travel Innovation Summit, hold on 12th~13th May in Beijing. 1st, several big companies attended the summit and some of them showed strong wishes entering into the China market. 2nd, most of the speakers shared their successful stories, I must say, they are good and beautiful stories. one of the reasons they belive China is a good market is that the market is so big and the peopel have cash. but not all of them can make money. there are some basic rules. The Chinese like the real good product. the” real good “mean the consumers believe it is good, not the companies they themselvies believed. some of Chinese love the luxury products, some of them love the budget ones, or even some of them love the very cheap ones. they must learn the consumers’ characterics, and respect the consumers, otherwise they will have a bad luck. some of the foreigners dont realize China is quite different from any other countries. they thought they can make it in their own way, whatever they tried, the result is the same, No Way!