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Jun
2015

The Travelling Chinese

‘On Monday, I boarded a plane from Rome to Beijing packed with Chinese tour groups returning from their Golden Week vacations in Europe. After sun-drenched, insouciant Italy, the rowdy cabin was a shock.

Turning to a Chinese tour guide on my right, I asked whether his charges had enjoyed Rome’s grand churches. “Churches?” he repeated, surprised. He pointed to overflowing duty-free bags around us. “Trust me, they don’t like churches. They only want to shop!”

Clarissa Sebag-Montefiore in the New York Times

The Chinese luxury market should never only be considered as the luxury market within China. The simple fact is that luxury consumption by Chinese overseas is far greater than that within China itself, and this itself is a problem the government are struggling with at this moment (see Tan Lun). However, whether you operate a hotel or a luxury brand without a presence in China, this is a huge opportunity for you, and one you ought to capitalize on.

There are two major national holidays in China, the first takes place in late January or early February and is a weeklong celebration of the Chinese New Year, and the second is the ‘Golden Week’ holiday in October which originally was when the foundation of the PRC was celebrated, but which has been extended to last about 7 days.

Both are excuses for all Chinese to travel and spend money, lets take the Golden Week national holiday period in China as an example.

According to the World Luxury Association, this year between October 1st and 7th, the overseas consumption of luxury by travelling Chinese was 3.85 Billion euro’s, a year-on-year increase over 2011 of 14%. 63% was spent in Europe, 25% in North America and 12% in Hong Kong, Macau and Taiwan. If the consumption of other luxury services such as hotels and restaurants is taken into account, then the estimated total exceeds 6 Billion euro’s.

Use of the Chinese Union Pay card grew by 33% year-on-year, with an estimated volume of 48 Billion RMB. Perhaps part due to increased average spending, and part by greater acceptance of the card amongst retailers and service providers.
Shopping plays a major role in any trip a Chinese takes whether domestically or internationally, even for those less well off, the holiday time is a time to spend! Travelling Chinese will be buying luxury products to benefit from lower prices than they pay at home, to buy as gifts for friends and business associates, and to buy product on behalf of others who aren’t travelling, but have given them money to purchase luxury items on their behalf.

Like many people the holiday period leads to impulsive purchases, but for the Chinese, the impulse drive is 10 times higher when outside the country than when at home, and over 80% make repeat purchases. Although roughly one quarter do buy for themselves, 75% of purchases are made for others, which means they are buying to order from brands that are known and recognized in China.

This point should not be ignored. Chinese consumers will specifically seek out the brands that they can buy in China, and those they have seen and heard of in the media, or through recommendation of friends. It is therefore very important for a brand with no physical presence here in China to be talked about in the media regularly, perhaps seen in some introductory form, and discussed on social media sites.

There is often an argument from brands currently without a physical presence in China that investing in brand building here cannot be justified. We would argue, that not doing so when Chinese consumers are so critical to the luxury industry is like putting their heads in the sand. This group of consumers will only grow in number and will want to find new and more interesting brands to engage with.

In 2011 over 70 million Chinese travelled overseas, the estimate for 2012 is that this number will increase to over 78 Million. The 2011 figures were 1.2 times that of those from the USA and 3.5 times those from Japan, and the figures are continuing to rise. According to Global Blue the international shopping trip website, Chinese travellers spend almost € 11,000 each time they take a shopping tour to Europe, Singapore, and Hong Kong.

Other than Chinese tourists who are middle-class or affluent, there is a growing market delivering custom high-end travel solutions to the wealthy, which is currently estimated to represent approximately 5% of the overall Chinese outbound tourism sector.

This group of Chinese tourists are typically successful business leaders and their families, unlike their peers in the west, these people travel firstly because they want to meet others they regard as having a similar status, and then secondly to enjoy the scenery, sights and the relaxation. Business comes before pleasure! The large investment in an expensive tour, or bespoke access to a dinner with someone ‘famous’ is a small price to pay for the potential commercial value that might derive from it, and to a lesser extent, the social value of having met names of global recognition.

Those operating these high-end tours have as existing clients, VIP’s from China all of whom want to expand their network of connections. Being able to pamper to this need is an opportunity for any travel business outside of China, but it has to prove its credibility first. We have seen ourselves in our work with football at the highest level, that hospitality at a match is measured by who they will meet and not the teams playing the game.

If a travel company has the ability to provide a suitable high level of service and contacts, it will typically charge a 5 to 7% service fee to its clients, although some charge purely by days of travel.


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