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Why the Chinese market represents an economic opportunity for Italian operators_Professor A. Morrison
 

Why the Chinese market represents an economic opportunity for Italian operators_Professor A. Morrison

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Professor Alastair Morrison, Distinguished Professor Emeritus and ITSA President, presents tourism operators 9 excellent reasons to start business in China, 5 challenges to face and 8 reccomandations ...

Professor Alastair Morrison, Distinguished Professor Emeritus and ITSA President, presents tourism operators 9 excellent reasons to start business in China, 5 challenges to face and 8 reccomandations in order to succeed.
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www.mtm.iulm.it

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    Why the Chinese market represents an economic opportunity for Italian operators_Professor A. Morrison Why the Chinese market represents an economic opportunity for Italian operators_Professor A. Morrison Presentation Transcript

    • Why the Chinese marketrepresents an economicopportunity for Italian operatorsIULM, May 27, 2013
    • Congratulazioni!
    • Presentation OutlineThree parts:The reasons: Why should Italy give China a highpriority in international tourism marketing?The challenges: What are some of the majorchallenges in targeting and catering to the Chinesemarket?The recommendations: How can Italy and Italiantourism operators attract a larger share of theoutbound travel market from Mainland China?
    • The ReasonsWhy should Italy give China a high priority ininternational tourism marketing?
    • Increasing GDPgrowth, personal disposableincomes and urbanizationMajor economic and demographic trends:Rapid growth in GDP.High rate of urbanization.Expanding middle class.Increasing household incomes.Increasing disposable incomes.1.35 billion people.635 million urban population(47%).364 million family households.Middle class 2012 = 230 millionMiddle class 2022 = 630 million1. Reason
    • 10.49.37.81.7 1.70.14.230.71.80.4-2.34.5-0.80.21.80.8-0.12.41.82.2-4-20246810122010 2011 2012China France Germany Italy Japan UK USAReal GDP Growth Rates: 2006-2011 (%)
    • Higher educational levels andknowledge/curiosity about theworld outside ChinaMajor education and lifestyle trends:Enrollment in higher education is expanding very rapidly.More Chinese students are studying abroad; according to OECD, 18.2% of thestudents enrolled in member countries are from China – the largest proportion andhighest absolute number of foreign students.The lifestyle trend for greater consumption is growing very fast.Spending on luxury products by the Chinese exceeds all other countries (McKinsey).34.2 million higher-educationstudents in 2012 (Ministry ofEducation China).2,358 higher education institutionsin 2012.$250 billion investment by Chinesegovernment in higher education.2. Reason
    • Rapidly expanding use of theInternet and social mediaMajor online trends:Tremendous growth in micro-blogging by Chinese; 309 million microblog users at theend of 2012, up 19% over 2011.Mobile phone microblog users exploding, at end of 2012 there were 202 million.Online shoppers at 242 million, up 42.9% year-on-year.468 million instant messaging users; 275 million social networking website users.China is the largest Internet usermarket in the world at 564million at end of 2012.Also largest number of mobileInternet users at 420 million.3. Reason
    • 309 millionmicroblogusers564 millionInternet usersin Dec. 2012
    • More purchasing ofinternational product brandsincluding luxury goodsMajor consumer buying trends:The Chinese now account for significant proportions of certain luxury brands’worldwide sales; LV (27%), Gucci (28%), Prada (34%), Burberry (25%), etc.Buying of luxury products when traveling outside out China is growing in popularity; ina recent survey, 75% of Chinese reported buying luxury goods while abroad.“Conspicuous” consumption is veryevident in the expanding middle classof China and also among the verywealthy.Chinese Government taxes onimported luxury products are veryhigh.4. Reason
    • There is hugeworldwide interestin the purchasingof luxury productsby theChinese, bothwhen buying inChina and whentraveling abroad.
    • Fast growing volume ofoutbound travel fromMainland ChinaMajor China outbound travel trends:Rapid growth in outbound travel.Now there are114 ADS-approved countries.58.9% of outbound travelers in 2012 were leaving China for the first time, but thatproportion is falling and “repeaters” are growing.More FIT arrangements is a distinct trend, although Chinese still like group travel.83 million outbound Chinesetravelers in 2012.Total expenditures of $102 billionon international travel in 2012.5. Reason
    • Major Statistics on Outbound TravelThe China outbound market grew by 167.5% from2005 to 2012 and has reached approximately 83million tourists.However, about two-thirds of all these outboundtourists just go to Hong Kong and Macau.It is forecast that there will be at least 155 millionoutbound tourists from China by 2020.Italy attracts a very small proportion of Chineseoutbound tourists (less than 1%), but the volumeis growing.
    • 31.03 34.5240.9545.84 47.6657.3970.25831550204060801001201401601802005 2006 2007 2008 2009 2010 2011 2012 2020Outbound Tourism Market from China (millions)
    • World’s #1 Source Market
    • May be traveling abroad for the first time; so geared up to splurge.Import taxes on foreign goods in China are very high.May be buying items for friends and work colleagues (or to resell in China).Gift-giving has a strong tradition in China.
    • Hong Kong39%Macau28%Taiwan3%Japan3%S. Korea3%Vietnam2%Other22%China Outbound Tourism: Market Shares byDestination (%)Italy ranks about19th
    • Outbound incentivetravel trips from Chinaare also rapidlygrowing.More Chineseattending conferencesand meetings abroad.Expansion of studytours abroad bycompanies andgovernment agenciesas well.
    • Traditional preference forEurope as a tourismdestinationMajor outbound destination trends:France, Hong Kong, USA, and Italy are the first-choice shopping destinations forChinese luxury travelers.A survey conducted for the U.S. Travel Association indicated that 5% of the Chineserespondents were likely to visit Italy in the next two years (France was 12% and UKwas 6%).Recent survey by theChina Tourism Academyshowed that 54% of Chinaluxury travelers mostdesired overseasdestination in the next yearwas Europe.6. Reason
    • Knowledge of thehistory, culture, food and wineof ItalyMajor knowledge trends:The Chinese increasingly are recognizing the rich history andculture of Italy as represented by destinations such as Venice,Rome and Florence.There are also becoming increasingly aware of the Italiancuisine and wines. Italian food is considered to be very healthy.Increase in wine consumption and interest in wines of Italy.Italy is also considered a romantic destination by Chinese.7. Reason
    • Association of Italy with highfashion and designMajor image trends in China about Italy:Italy is strongly associated with high fashion along withFrance, USA and UK. Many Italian fashion brands arealready well-known and highly sought after.Italy rated highest for “famous for Arts” by Chinese in aKPMG survey. Rated second highest after France for“famous for luxury design” and “famous for fashiondesign” (chart on following slide).8. Reason
    • KPMG Survey ResultsItaly rated highest for “famous for arts” and “romantic.”Italy rated second highest for “famous for luxury design” and“famous for fashion design.”
    • Association of Italy with highfashion and design8. ReasonThe Essence of theEconomic Opportunity!
    • Many overseas Chinese living inItalyMajor emigration and study abroad trends:There are over 200,000 Chinese living in Italy.There are also many Chinese students who are registered at universities and collegesin Italy. In 2010-2011, there were 5,293 Chinese students in Italian universities.An estimated 10% of China’s 10 million graduates per year are planning to studyabroad.9. Reason
    • The ChallengesWhat are some of the major challenges in targetingand catering to the Chinese market?
    • Fierce competition from all the world’smajor destinations1.Challenge
    • Not a uniform market!China is a very large country with a hugeand very diverse population.It cannot be treated as one uniformmarket, but has to be segmented intosmaller parts and targeted. This presents amajor challenge for destination marketers.There are significant differences by regions(e.g., north vs. middle vs. south vs. west)and cities; age groupings; foreign travelexperience; tour groups vs. FIT; interests;household income levels; Internet users vs.non-users, etc.)2.Challenge
    • Differences by regions and cities2.ChallengeChina has 160cities with morethan 1 millionpeopleThree economicpowerhouses –Bohai; Yangtze;Pearl
    • The Chinese seniors market – more mobile andwilling to travel for new experiencesDifferences by age groupings
    • Young market
    • DifferencesbyexperiencesInexperiencedTravelersExperienced massmarket travelersExperienced affluenttravelersAttitudesandaspirationsTravel is forsightseeing – themore the better.Travelling around theworld is a lifetimedreamTravel is to explorecities outsidenearby regions.Outbound travelis an indication ofstatus and specialoccasions.Travel is good forrelaxation andstress relief.Prefer to return toplaces that offerrelaxing activitiesand a slower pace of life.TripactivitiesPacked schedules ofmust-see sites.Historical andmuseums.Sightseeing andrelaxing.Entertainment, shopping,and luxury accommodationsrather than overscheduledsightseeing.TripplanningTravel agencies forpackaged tours andbooking assistance.Word of mouth,TV, and websites.Fewer packaged toursand more independentlyplanned trips. Onlinesearch and booking.Websites are the main channelfor travel planning. Premiumtheme-based tour packages foroutbound trips.Share ofMarketDeclining Stable Growing2010 56% 23% 21%2020 33% 26% 41%
    • Language, cultural and dining/drinkingdifferences3.ChallengeChinese prefer to speak and readMandarin or Cantonese; not manyknow English very well and muchfewer have mastered Italian.Major cultural differencesbetween China and Italy. Chinesemore of a collectivist culture, sotend to be more willing to dothings in groups when traveling.Food is extremely important!Dining and drinking are majorsocial activities for the Chinese; away of having fun and sometimes“showing off.” Dining can be verynoisy and animated.
    • Little things count (for Chinese travelers)4.ChallengeSlippers; toothbrush & toothpaste Electric kettle; tea serviceRound dining tables Sockets for Chinese plugsPlaying cards& Chinesesnacks inguest rooms
    • Dealing with unusual and “rude”behavior5.ChallengeOn September 22, the twogovernment departmentsexposed 10 sorts of badbehaviors, SouthernWeekend reported onSeptember 28."Littering", "spitting", "snatching bus seats", "queue-jumping", "taking off shoesand socks inpublic", "speakingloudly", "bad temper andcursing", "smoking in non-smoking areas" and manyothers are listed in "TheFrequent Bad Behaviors ofChinese Citizens Who TravelAbroad", enumeratingcomplaints by netizens.
    • The RecommendationsHow can Italy and Italian tourismoperators attract a larger share of theoutbound travel market from MainlandChina?
    • Increased investment inmarketing in MainlandChina1.RecommendationItaly must invest more in marketing itstourism in Mainland China if it wants toachieve a larger market share.Competitive destinations have a greaterpresence in China and are spendingsignificantly more in appealing to Chineseoutbound travelers.Examples of online and offline promotion toChinese market from South Africa andMalaysia shown on next slide.
    • South Africa Tourism Chinese website andSina Weibo pageTourismMalaysiaexhibits atBeijingshoppingmall
    • Integrated and concertedpromotional campaignacross multiple partners2.RecommendationThe present tourism marketingand promotions from Italy arefragmented without a concertedthrust; this is not the most effectiveapproach to marketing in China.A partnership approach involvingmultiple regions and tourismcompanies is highlyrecommended.
    • Association with fashionand automobile brandsneeds more attention3.RecommendationItalian fashion and automobiles have high awareness amongChinese consumers as luxury items.However all brands and products are being marketedseparately and not in combinations that might be moreattractive to Chinese consumers.A co-branding approach is recommended, possibly combiningtourism regions and cities with fashiongoods, autos, wine, food products, etc.
    • Popularize Italian winesand food in China4.RecommendationItalian food is enjoying greaterpopularity in China, especiallypasta and pizza.Italian wines are not particularlypopular now and lag well behindFrance and other countries.Staging Italian wine and foodfestivals in the larger cities suchas Shanghai, Beijing, andGuangzhou will be a great idea.
    • Make visa acquisitioneasier for Chinese atItalian consulates andembassies5.RecommendationIt is difficult and often a frustrating experience for Chinesecitizens to get visas for Italy.Immediate attention needs to be given to the current system ofscreening applicants to speed up visa approval times and togive Chinese citizens a better impression of Italy and itswillingness to welcome them as tourists.Given that the Chinese today are notoriously “last-minute”planners, systems such as Visa on Arrival (VOA) are verypopular (e.g., Thailand, Maldives, Bali, etc.)
    • “Our (Italian) systemcontinues to look at theChinese through anobsolete lens: seeingthem as potential illegalimmigrants hockingcounterfeit bags andsweaters on the streetsof Naples, or huddled inPrato, the textile-producing town nearFlorence that hosts Italy’slargest Chinesecommunity.”
    • Consider the VFRmarket based onChinese living in Italy6.RecommendationChinese people are very family-oriented and want to visit their familyand friends living abroad.A special program should beconsidered of working with theChinese living in Italy to invite theirfamily and friends to visit them.This program could be launched viathe Chinese social media usingmicro-blogging and chat websites.
    • What about Marco Polo?He’s so well known inChina7.RecommendationMarco Polo is alegendary figure inChinese history and hislife in China is especiallycelebrated in the YangtzeRiver Delta.Cooperation with citiessuch asSuzhou, Hangzhou andYangzhou is a great idea.
    • Back-to-back WorldExpos – Surely a greatopportunity?Recommendation8.Surely the holding of the 2010and 2015 World Expos inShanghai and Milanrespectively offers a unique andhuge opportunity for the twocities to cooperate.A joint marketing campaign for2014-2015 is suggested andalso a “sister city” arrangement.
    • Contact informationAlastair M. Morrison, Ph.D.Distinguished Professor of Hospitality and Tourism ManagementPresident, International Tourism Studies Association (ITSA)Marriott Hall, Purdue UniversityWest Lafayette, IN 47907-2059, USAE-mail: alastair@purdue.edu; alastair@belletourism.comPhone: 1-765-409-0004 (USA)Tel: 13761855678 (in China)©2013 Alastair M. Morrison