The global travel industry is bracing itself for a new wave of tourists out of China. Like the droves of Americans who explored Europe in the 1960s and the Japanese who traveled the world in the 1980s, the tastes and preferences of China’s new international tourists will have an enormous influence on the entire tourism ecosystem. Within the next five years, we can expect to see tens of millions of relatively young travelers pouring from the mainland, driven by rising disposable incomes, the easing of travel restrictions, and a deep curiosity about the world around them.

Currently, only about 2 percent of the Chinese population travels outside the mainland — well below the 15 percent of Americans who travel abroad. But China is catching up. The International Air Transport Association predicts the mainland’s international passenger traffic will grow at an annual rate of 9.6 percent between 2005 and 2009, while various other agencies estimate that China will be among the top four sources of outbound tourists by 2020.

What is unclear, however, is the quality and cost of the experiences these tourists will seek: bus tours of Paris’s outer arrondissements, or private tours of the Louvre? Spanish street food or tasting menus at El Bulli?

The earthier options seem to be more popular thus far. Ask for a description of the typical Chinese tourist and industry types are likely to use such words as value-conscious, shopping, gambling, and chain-smoking. Or, as the Economist put it in a June 2006 article, “Typically, a Chinese tour group will choose the cheapest hotel — even if it is 50km (30 miles) outside a city — travel by bus and eat only Chinese food.… Posh hotels, resorts and restaurants will have to wait for their Chinese windfall.”

These descriptions contain elements of truth, but they don’t offer a complete picture. Indeed there will be a dramatic rise in the number of Chinese tourists, but they won’t all be as frugal or provincial as many in the industry expect. As the New York Times recently noted, a significant subset of the overall population of Chinese tourists will be quite affluent and willing to spend accordingly. Consider this: China’s 31 million international travelers spent $15.2 billion in 2005. At nearly $500 per person, mainland travelers spent more per capita than international tourists from France, Japan, or the United States.

Chinese Travel Trends
Successful tour operators are offering upscale packages that promise deeper knowledge of a city, region, or country. They are also introducing lifestyle-oriented products, like fine-dining and wine tours that have proven popular with other nationalities and adapting them to the increasingly sophisticated tastes of mainland travelers.

Shopping continues to be popular among mainland travelers. But China’s growing manufacturing muscle poses a challenge for overseas retailers: How do you sell to a tourist from a country that makes just about everything? One option is to appeal to Chinese consumers’ brand-conscious nature, with a focus on items with labels that can be shown off. Smart sellers will remember the trend in China in the 1980s and 1990s of leaving tags on sunglasses and jackets to show off the brand; this practice has waned, but the impulse remains. For this reason, Louis Vuitton handbags, Swiss watches, and Chow Sang Sang gold are very popular. Service will also matter: Hong Kong retailers, for instance, often provide service in Mandarin and accept the renminbi (the language and currency of the mainland, respectively).

No review of Chinese travel would be complete without a discussion of gambling, a top travel pastime. The preferred destination continues to be Macao, the only place in China where gambling is legal. Chinese gaming revenues have revitalized the former Portuguese colony, sparking foreign investment, labor shortages, and a property boom. Macao’s success has inspired countries as diverse as Australia, North Korea, and Singapore to launch or intensify efforts to attract mainland gamblers. However, the profitability of this business will be hit by higher marketing costs and greater competition. Larger construction and maintenance costs will also play a role, as customers come to expect a luxurious, Las Vegas–style experience.

Placing Bets in the Industry
Companies within the travel and tourism industry stand to benefit from an abundance of opportunities, but must remain cognizant of the danger of significant pitfalls. For travel operators — whether theme parks, hotels, or cruise lines — the challenge will be to develop products that appeal to Chinese tastes. Hotels will need to keep costs down to meet mainland travelers’ value expectations. But at the same time, opportunities exist both for hotel groups that can migrate customers from the lower and middle tiers into more expensive properties, and for chains that can develop a strong brand in China and use it to attract mainland tourists when they travel abroad. Companies that find the optimum combination of home comforts, such as food, entertainment, and in-room amenities, and international service standards will also do well, particularly in midrange to high-end facilities.

Like hotels, cruise lines must gain an understanding of the Chinese market, as well as educate Chinese travelers by introducing them to the concept of cruising. Because cruising is a new vacation option for mainland tourists, cruise lines will need to sell the market on the romance of the sea and the ship as a destination, and give consumers a sense of the entertainment and other diversions available on board a modern ocean liner. Cruise lines will need to find a balance between the familiar and the new, which will enable guests to experiment or to play it safe, as their mood dictates. And they’ll need to figure out where Chinese tourists want to voyage, for how long, and at what time of year. Industry leader Carnival Corporation’s Costa brand entered the mainland China market with an up-market offering in 2006, sailing from Shanghai and from southern China. Royal Caribbean, playing catch-up, recently announced plans to begin sailing from Shanghai in 2007. Given the novelty of cruising as an outbound travel vacation option, both will need to target their offerings at specific, clearly defined markets and communicate value to first-time customers who will be comparing cruises to land-based vacations.