– A world of opportunity for brands by James McEwan, PSI
China’s growing love affair with international destinations has seen a significant increase in air travel and overseas spending, with numbers predicted to rise exponentially by 2023.
We have recently forged a strategic partnership with ForwardKeys, a company dedicated to studying global travel movements. We’ve overlaid its global air travel data with further insight including our unique OCS* profiling plus location heat-mapping across 48 of the most prominent global cities, to identify the biggest changes to Chinese traveller movements and mind-set.
Mainland China is experiencing rapid growth amongst its middle classes and with this change comes greater prosperity. This increased spending power means that Chinese consumers are now contributing over half of their disposable income to the travel market, with the leisure sector projected to account for 62% of all their travel by 2023.
Traditionally, China’s travellers opted for shorter-haul destinations, with Special Administrative Regions (SARs) – such as Hong Kong and Macao – receiving almost half of all travel. However, between 2013 and 2023, 61 million households in China are expected to earn above USD 35,000 per annum – considered a key income threshold for opening up international travel.
According to TripAdvisor China, almost half of Chinese visitors to the site are now researching destinations outside Asia, with Paris, Rome, London, Los Angeles and New York amongst the most popular. Predictions suggest that by 2020 Chinese visitors will represent 9% of all North America’s tourists, 19% of Europe’s, and 29% of Australia and New Zealand’s tourists.
As for Europe, the UK saw an 18% increase in Chinese tourists during the first half of this year, 13% of whom combined their trip with at least one other European country. Travel from China to Germany saw a 7% increase within the same period with 34% of these visitors then visiting at least one other European country.
The three segments of the outbound leisure market expected to grow the fastest are affluent youths (18 to 30), senior professionals (45 to 55), and small groups of families and friends (30 to 45 – increasingly travelling independently, but also part of organised tours). Cities are their primary destinations accounting for over 85% of outbound travel and when SAR regions are excluded, it remains that 70% of all outbound travel is to major cities.
When it comes to duration of stay, London is currently one of the top long-haul cities globally, with an average stay of seven nights. Melbourne and Sydney come in a close second, at 6.5 nights.
Shopping remains a key driver in terms of choice of travel destination. Other motives include sightseeing, relaxation and, increasingly, special experiences – thus increasing consideration for destinations such as New Zealand. Perceived safety and ease of visa access are also key.
By 2030, Chinese travellers are expected to spend USD 700 billion annually during overseas trips. Shopping abroad offers consumers the chance to purchase premium goods such as handbags and watches, aided by favourable exchange rates, and at the same time swerve China’s 30% luxury goods tax. Currently this brings the average UK spend of Chinese tourists to £2,174 (200% more than the average visitor).
Understanding how, when and where Chinese consumers pay for goods and services whilst abroad is key to engaging them effectively.
Tmall Global (Alibaba’s international brand shopping division) has launched a service allowing Chinese tourists to prepay for duty-free purchases online before going on vacation, and then picking these up at the airport. Such is the influence of Alibaba that its founders have managed to agree with customs authorities in many cities like Shanghai and Guangzhou to speed up clearance procedures.
Overall transactions with Tmall Global have increased more than 10 times since its launch and more than 100 overseas brands, including some of Europe’s leading supermarkets, are currently waiting in the wings to set up stores on its interface. According to tax rebate company, Global Blue, Chinese global shoppers currently account for nearly 30% of all tax-free shopping worldwide. Some 80% of Chinese travellers make overseas purchases, and nearly 30% base their destination choice on retail opportunities.
Importantly though, retail is no longer confined to airport terminals. Across Asia for example we are seeing the construction of large downtown malls by duty-free operators such as King Power, Shilla and Lotte, featuring on-site luxury hotel accommodation, casino facilities and other premium entertainment. For some luxury brands, up to 50% of their duty-free sales are now attributed to downtown retail.
Another notable insight into the current Chinese mindset is a growing obsession with health products. In the wake of an influx of fake and contaminated wellbeing products on the Chinese market, Australia and Japan – who enjoy unequivocal Chinese consumer trust – are seeing a boom in sales for this sector. Even duty-free retail – traditionally the reserve of luxury goods and perfumes – is increasingly allocating shelf space for vitamin supplements and infant care products. The Chinese appetite for Australian powdered milk is such that supermarket chains Coles and Woolworths have seen the need to introduce a four-tins-per-person limit.
This deeper understanding of the behaviour of Chinese travellers provides new and exciting opportunities for brands. PSI is excited to be helping many of the world’s leading brands explore these opportunities.