Tourism: the business of leisure

The Chinese are clogging the railways, roadways, and airports like never before.

This market has been given a boost in recent years with the introduction of the "Golden Weeks", three week-long national holidays at Chinese New Year, May Day and National Day. They were phased in following the Asian financial crisis in 1997 as a means of encouraging greater consumer spending.

According to official figures, more than 78 million Chinese people travel by road, rail and air during the one-week Spring Festival holiday at the end of January. However, this mass movement of people sends ticket prices soaring and, with tourist attractions across the country packed to bursting, the government is reconsidering mandatory holidays.

"The quality of people’s traveling experiences has been negatively influenced during the past six years due to contradictions between consumer demands and service capacity," Wang Zhifa, the vice-director of the China National Tourism Administration (CNTA), told state media in September, ahead of this year’s National Day weeklong holiday.

Wang envisions a future in which Chinese pick and choose when and where they take their holidays. The demise of mandatory holidays will do little to burst the World Tourism Organization’s forecast that China’s domestic travel market will be the world’s biggest by 2010.

But people are not just traveling internally. As the concept of leisure travel takes hold, and as incomes continue to climb higher and travel restrictions ease, more and more Chinese holidaymakers are venturing overseas.

Between 1999 and 2005, the number of Chinese traveling overseas more than tripled from 9.23 million to 31.5 million, according to CNTA figures. By 2020 China is expected to be the world’s largest source of departures with 115 million people traveling overseas every year.

Outward bound

Overseas tourism industries have started to realize the impact a flood of Chinese tourists could have on their markets, and cities like Shanghai are festooned with billboards promoting destinations around the globe.

But it’s not simply a case of waiting for the tourists to roll up and spend large, especially in destinations far from home. According to a survey carried out last November by the International Forum on Chinese outbound tourism, 90.4% stick to Asia, with eight of the top 10 outbound destinations located in the home continent.

Chinese tourists are also not big spenders, tending to go for low to mid-range hotels and cheap meals.

This is not, however, the case with shopping.

According to a study jointly conducted by ACNielsen and Tax Free World Association (TFWA), Chinese travelers spend an average of US$987 shopping each time they take a trip out of China, making them the world’s biggest spenders.

China is also becoming a major leisure destination in its own right. Around 120 million tourists visited the country in 2005. The numbers grew a further 10.5% in the first four months of this year, according to the World Tourism Organization, or around four times the rate of growth for North America and Europe.

Boosted by such events as the Beijing Olympics and the Shanghai World Expo, China is expected to become the most visited country on the planet by 2020, playing host to around 180 million overseas visitors annually.

To accommodate the hordes, gleaming new airports are going up across the country, new rail lines are being laid, and new highways are being paved.

China’s hotel scene has also seen furious activity with establishments under construction in almost all the major cities. In the big economic centers such as Shanghai, Beijing, Guangzhou and Shenzhen, the appetite for hotels shows little sign of abating. Beijing’s Olympic Committee, for example, plans to more than double the city’s portfolio of 392 star-rated hotels in time for the 2008 Games.

Shanghai also plans to double its tally of 342 hotels in time for the opening of the 2010 World Expo.

The rapid rise of China’s tourism industry offers foreign tourism operators a great opportunity to take a slice of the domestic market. China is ripe for consolidation from the bookings and travel agency perspective, with 16,846 travel agencies registered across the country at the end of 2005. Of those 1,590 are capable of planning and booking international vacations.

One-click solution

One of the fastest-growing sectors within the industry is online booking. Companies such as Ctrip and eLong offer a range of services from flights to hotel bookings and car hire over the Internet. Such companies are rapidly coming to challenge the traditional high-street travel agent.

Since July 2003, the government has allowed the establishment of wholly foreign-owned travel agencies. This came four years ahead of the deadline China agreed with the WTO for opening up the sector to outside competition.

To date, however, few investors other than a small number of Japanese agencies have taken up the opportunity, accounting for only 2% of the total revenues of all of China’s agencies on international travel.

For those looking for the next China business goldmine, the time is ripe to try mixing a little business with leisure.