Outward bound
Jun 22nd 2006 | HONG KONG
From The Economist print edition
CHINA'S citizens do not only export goods; increasingly they export themselves. The concept of tourism—going abroad for pleasure rather than for business—is less than a decade old in China. Yet since the Chinese government sanctioned overseas leisure trips in 1997, tourism has grown hugely. Last year more than 31m Chinese travelled outside mainland China and the World Tourism Organisation expects this number to grow to 50m by 2010 and 100m by 2020. Across the world, hotels, shops, restaurants and travel agents are salivating at the prospect.
Which way to Galeries Lafayette?Although there is money to be made, profits will be harder to come by than the headline numbers suggest. For a start, of those 31m, some 21m only made it as far as Hong Kong and Macau. Half of the rest were “border tourists”, on day trips to Russia, Vietnam or Laos to trade or gamble in casinos, which are illegal in China. Only 5m-6m Chinese could be called international tourists and most chose Asian destinations such as Thailand and Malaysia. Just 1m visited Europe and only a handful made it to America and Canada, which still restrict Chinese visitors.
Nor are the Chinese likely to resemble the free-spending Japanese visitors who lifted global tourism revenues in the 1980s. Most first-time travellers from the mainland are deeply frugal. 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, says Wolfgang Georg Arlt, a professor of tourism at Stralsund University in Germany and author of a new book on China's outbound tourism. They visit only the most famous attractions and even these often get only a cursory glance.
Those who return for a second or third visit will often spend more. But return visitors will be a minority for a long time to come—and so posh hotels, resorts and restaurants will have to wait for their Chinese windfall. At a recent conference organised by the European Tour Operators' Association, hotel owners complained that the Chinese were pushing down room prices. Hard beds and cold noodles
Chinese tourists are willing to put up with hard beds and cold noodles for a reason: they are champion shoppers who prefer to concentrate their spending on luxury branded goods, which are cheaper than back home and guaranteed not to be fakes. In 2005 they spent more on shopping, per day and per trip, than travellers from Europe, Japan or America.
The biggest winners of the Chinese tourist boom are therefore likely to be international retailers and luxury-goods manufacturers. In Germany the second most visited place by Chinese tourists after Berlin is Metzingen, a small town in the Black Forest unknown to most Germans, but home to a giant Hugo Boss discount store—since joined by another 20-odd factory outlets for designer labels. Big, diversified luxury-goods groups—including LVMH, Richemont and Swatch—which are present in duty-free outlets and big cities worldwide and have established brands in China itself, should also do well. Antoine Colonna, an analyst at Merrill Lynch in Paris, reckons that the Chinese account for around 11% of the €97 billion ($121 billion) annual revenues of the luxury-goods industry today and that this will rise to 24% by 2009, surpassing the Americans, Japanese and Europeans.
Those that do best, though, understand that Chinese shoppers can be tough customers, says Mr Arlt. “Compared with the Japanese, Chinese mainland tourists coming to Europe for the first time are ruder, louder and more demanding,” he says, citing a tendency to smoke under “no smoking” signs, haggle over prices and rip off packaging at the checkout to be sure that everything is in the box. “All that makes sense in China, but European salespeople think it is very rude,” says Mr Arlt.
A growing number of organisations are, however, more than happy to cater to the Chinese. Galeries Lafayette, a famous department store in Paris, celebrated China's “Year of the Dog” this February with decorations of red and gold pooches, New Year messages in Chinese wishing happiness, prosperity and longevity together with greeters fluent in Mandarin, a Sichuan restaurant and deep discounts on its designer goods. Small wonder, then, that the Chinese spend more in the shop than any other group of foreign visitors do.
Accor, a French hotel group, has adapted 56 hotels (the bulk are its mid-range Mercure and Novotel hotels) in Europe for Chinese tourists, offering noodles for breakfast, Chinese TV channels and Mandarin-speaking staff. Rosita Yiu, who oversees the effort, says Accor will open another 50 this year and perhaps 50 more next year.
Tourist authorities are also trying harder. Switzerland's has a website with local attractions explained in Mandarin. Berlin's city tourist authority has opened its own German-themed shops, partly aimed at the Chinese, and selling, among other things, cuckoo clocks and Swiss army knives—considered German by some in China.
Tactics like these will pay off as more Chinese travel. Mr Arlt estimates that by 2020 there will be 30m “genuine” international tourists from China. They will demand more sophisticated service and new experiences, and will also be increasingly willing to pay for them. Accor's Ms Yiu says that Chinese tourists making return trips to Europe want to stay in nicer, four- and five-star hotels. The western tourism industry will need to adapt quickly and intelligently to the demands of Chinese visitors—but the prize is huge for those who can manage it.
