China – A glimpse at Travel

Introduction

The Year of the Dragon kicked off on January 23, 2012, and with it, concluded the Year of the Rabbit. To the Chinese, the Lunar New Year is a significant period in which everyone travels back home to visit their families and loved ones. With a population of 1.3 billion, it is not surprising that this travel period has been called the “biggest human migration in the world”. (MSNBC, 2011)

Economic Issues

The economic boom in China is no secret, while most of the world suffers from the repercussions of the economic downturn in 2008, China experiences positive growth. A December 2011 article published on Huffington Post (Huffington Post, 2011), states that the Chinese Yuan is at an all time high versus the US dollar, attributed by resolute fiscal policy and a robust trade surplus.

Favorable economic conditions have augmented domestic and international travel amongst business and leisure travelers. An Ipsos study conducted in 2011 on Chinese’s travel behaviors, found three

characteristics within the business and private travel markets:

  • Overseas business travel continues to expand In 2011, over 30% of China business travelers visited a foreign country. Hong Kong is the gateway for most travel, with Europe and the United States following behind.
  • The future of the private market is bright The average business person travels 3 times per year. With an average spending of RMB 26,000 per private trip, the tourism industry relies heavily on the Chinese businessmen’s expenditures.
  • High-speed rail is growing in popularity Despite previous setbacks on high-speed rail, the number of business travelers using this mode of transit grew 19% from 2010 to 2011.

 

[When asked about particular modes of transit, both domestically and internationally, we see that airplanes and high-speed trains are the preferred method for both occasions.]

 

Consumer Trends

Trends within several different industries are showing that Chinese consumers are growing more sophisticated. According to a 2011 Ipsos (formerly Synovate) study, Media Atlas China (MAC), the top three spending habits for consumers across tier 1 through tier 5 cities are as follows:

  • Investments
  • Going out to eat
  • Apparel & accessories

Winnie Cheng, (Project Director for the Travel, Tourism, and Leisure team at Ipsos) stated that “studies show that the Chinese consumers are becoming more sophisticated, purchasing top tier brands and even favoring international brands, which they view as high quality”. This perception carries over across different categories of products. Examples include: airlines, hotels, and luxury goods.

If we dig deeper into these three areas we can see which brand(s) are the most popular/preferred, for each category. Within the airline industry, domestic travelers choose Air China, China Eastern Airlines, and China Southern over the other competing airlines. International travel is especially worth noting, consumers are more willing to choose a foreign airline over their local counterparts, with Cathay Pacific, Dragon Air and United leading the way.

When it comes to accommodation, 4 and 5-star luxury hotels tend to be their preferred home away from home. The top hotel chains are: Shangri-La, Hilton, Marriott, Westin and Sheraton. Trends do show that budget hotels are on the rise, and when we look at a few key cities in China, the preferences from city to city are different. Guangzhou and Shenzhen tend to prefer budget accommodation while Shanghai business travels favor the 4 and 5- star hotels.

The luxury goods industry has a wide continuum of offerings, according to an Ipsos PAX study conducted from Q3 2010 to Q2 2011, respondents who have taken one business or leisure trip to Hong Kong in the past 12 months consider the following products as Hot Duty-Free Items:

  • 36% chose Wine
  • 29% chose Cosmetics
  • 19% chose Perfumes/Fragrances
  • 17% chose Chocolates
  • 17% chose Cigars/Cigarettes

These same Hong Kong bound travelers have a psychographic profile that suggests:

  1. Paying extra for quality is worthwhile
  2. Sometimes I like to treat myself with something special
  3. Buying new product/service makes life more enjoyable

[When asked about accommodation choice, (domestically from 2010- 2011), we see that 4-5 star hotels remain the top choice and a slight increase in budget hotels.]

Booking Their Trip

According to the Ipsos Media Atlas China (MAC) study, internet tops other media with the highest engagement across tier 1-5 cities. “Online travel market” is challenging “High-speed Rail” as one of the top buzz words within the travel industry. The future of online travel is bright, leading to a swell in market competition. The recent launch of Trip Taobao, large investments in Qunar, and Tencent securing shares of eLong are all helping to encourage online travel. Consumers who choose online travel products are using these services for information enquiries, ticket bookings, and hotel reservations. The chart below illustrates consumer preferences in online service providers for Beijing, Shanghai, and Guangzhou/Shenzhen.

 

Click for Larger Image

Final Conclusion

Hong Kong is a natural stepping stone for Chinese travel. Proximity, business relations, luxury brands, and the advantage of a strong Chinese Yuan make the Hong Kong market an attractive destination for businesses seeking to reap the benefit of travel expenditures. These travel trends go well beyond the market of Hong Kong; interesting trends are developing across Europe, the United States, and Australia, all of which are destinations the Chinese tourist indicate they want to explore.

[toggle title_open=”Bibliography” title_closed=”Bibliography” hide=”yes” border=”yes” style=”white” excerpt_length=”0″ read_more_text=”Read More” read_less_text=”Read Less” include_excerpt_html=”no”]Huffington Post. (2011, 12 26). Yuan, Chinese Currency, Hits All-Time High. Retrieved from https://www.huffingtonpost.com/2011/12/26/yuan-high_n_1169935.html

Hurun. (2011). Global Blue Statistics on Chinese travelers shopping and spending.

MSNBC. (2011, 1 30). PhotoBlog – Biggest human migration in world as Chinese travel for Lunar New Year. Retrieved from https://photoblog.msnbc.msn.com/_news/2011/01/30/5954596-biggest-human-migration-in-world-as-chinese-travel-for-lunar-new-year[/toggle]