2013 European Cities Marketing Presentation

www.china-outbound.com
Prestige, Respect, Investment
How hospitality and service the Chinese way
will ‘make’ or ‘break’ your China business
in the coming years
COTRI China Outbound Tourism Research Institute
Prof. Dr. Wolfgang Georg Arlt

Introduction
Chinese Outbound Tourism – the first 15 years
Chinese Tourists in Europe:
- Market Segments
- Seeking Prestige, Demanding Respect
- Investment and Return on Investment
Chinese Outbound Tourism – the next 5 years
Conclusion
2

Introduction
- Market Segments
Conclusion
3

4
The world's leading independent research institute for information, training,
quality assessment, research and consulting relating to the Chinese outbound
tourism market.
Established: 2004
Headquarter: Heide (Germany)
China offices: Beijing, Shanghai, Guangzhou
COTRI Country Partner in: Belgium, Bosnia-Hercegovina, Croatia, Estonia, Finland,
France, Ireland, Italy, Kosovo, Latvia, Lithuania,
Luxembourg, Macedonia, Mexico, Morocco,
Netherlands, New Zealand, Peru, Romania, Russia,
Serbia, Slovenia, Tunisia, United Kingdom, USA
COTRI Germany Headquarter:
Fritz-Thiedemann-Ring 20
25746 Heide / Germany
Phone +49 481 85 55 523
Fax +49 481 85 55 121
Email info@china-outbound.com
COTRI China Headquarter:
101/2B Gui Gu Liang Cheng
1 Nong Da Nan Rd., Haidian
Beijing 100084 / P.R. of China
Phone +86 134 2603 6722
Email china@china-outbound.com
COTRI Office Shanghai:
Suite 1512 Shui On Plaza
333 Huaihai Rd.
Shanghai 200021
COTRI Office Guangzhou:
Suite 2412 South Tower WTC
371-375 Huanshi East Rd.
Guangzhou 510095

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Prof. Dr. Wolfgang Georg Arlt FRGS
First visit to People’s Republic of China in 1978
1991-1999 owner of Inbound Tour Operator
China -> Europe (offices in Beijing and Berlin)
COTRI founder and director since 2004
Professor for International Tourism Management
at West Coast University of Applied Sciences (Heide)
Visiting Professor at universities in China and
United Kingdom
Fellow Royal Geographical Society (London)
Research Fellow Japanese Society for the Promotion
of Science (Tokyo)
Latest publications:
Guest Editor Special Issue:
China Outbound Tourism,
Tourism Planning & Development
10/2, May 30, 2013
Editor Online quarterly:
China Outbound Market
Intelligence
First issue July 2013

Good news: New Chinese government starting campaign against
conspicuous consumption, but outbound tourism is excepted
January 2013: Chairman of the China National Tourism Administration (CNTA),
Shao Qiwei: “Outbound tourism will boost China’s development in the long-term.
The government, and particularly CNTA, will continue to promote the travelling of
Chinese people abroad as we believe in the mutual benefits of collaboration. By
continuing to send Chinese travellers to Europe, the benefits will eventually flow
back to China.” (Traveldaily Asia)
April 2013: “The 2013 Annual Conference of Boao Forum for Asia opened on the
morning of April 7th in Boao, Hainan. President Xi Jinping said in his keynote
speech at the opening ceremony that China in the next five year .. will invest
US$500 billion in foreign countries, and have probably over 400 million tourists
traveling abroad.” (Xinhua News Agency)
For the first time ever a Chinese communist party leader speaks internationally
– and in a positive way – about outbound tourism. Clear signal: Outbound
travel is political correct and supported by the party and government.
6

More good news: New Chinese government runs campaign against
conspicuous consumption, but outbound tourism is excepted
In first quarter 2013 sales of Ferrrari and other high-end cars as well as exports of
Swiss watches to China drop by 25%
Turnover for high-end restaurants in China collapses, spring delecacies like
„daoyu“ fish and „mingqian“ tea find no market
Military vehicle get new number plates, restrictions on use by civilians and on
high-end cars
7

Growth slowing down…
8

… and China’s HNWIs getting nervous…
9
Survey results from Bank of
China/Hurun (10/2012):
44% of all Chinese with more
than 10 million RMB (app. 1.25
million Euro) in personal wealth
(about one million households)
are considering emigration
85% of all Chinese with more
than one 10 million RMB in
personal wealth are planning to
send their child to study at a
foreign university

… but even more good news: Chinese outbound travel will
continue to expand
10
China’s GDP growth: single digit to stay
Wealth creation slowing down
China’s outbound tourism growth:
double digit continuing
China in Asia-Pacific: most important
global source market for many countries
China in Europe: most important
Asian source market, 2012 +20%

Introduction
- Market Segments
Conclusion
14

Travel has been an important part of the
education process in Imperial China, but
outbound travel has no tradition:
Xu Xiake (1587-1641), China’s most famous
traveller, was no Ibn Battuta or Marco Polo,
he was interested in China only
Exceptions: Buddhist monks and Zheng He
(1371-1433), the “Chinese Columbus”
15

Before the start of Reform and Opening policy in 1978, travel
and leisure were held in contempt in the P.R. of China
 1983 - 1996 VFR and delegations
1996: 8 mio.
 1997 - 2004 ADS and chaotic growth
2004: 29 mio.
 2005 - 2010 Gaining experience and scope
2010: 57 mio.
 2011 - ? The Second Wave of China‘s
Outbound Tourism:
Sophistication and segmentation
2011: 70 mio.
2012: 83 mio.
2013: 95 mio. e
16

Demand pushing open the gates
After 1989 (Tiananmen movement and Fall of Berlin Wall)
preventing outbound tourism (politically dangerous and
expensive) is no longer feasible
ADS Approved Destination System installed after 1997 to
control and slow down demand for outbound leisure travel –
unsuccessful
Since 2004 incremental paradigm change toward “Soft Power”
approach
Since 2009 government support of outbound tourism – opening
to selected foreign tour operators in 2011 unsuccessful
2013 new party leadership curbing official travels but first time
officially “encouraging” outbound tourism
17

More border-crossings in first quarter of 2013
than in whole year 2003
18

Situation today:
Global No. 1, but only the upper class travelling to Europe
In 2012, 83.2 million border-crossings and 102 billion US$ spending elevate
China to the position as the biggest global outbound tourism source market.
30 million Chinese travels in 2012 went beyond Hong Kong and Macau,
almost double the number of all Japanese outbound trips.
App. 5% of all Mainland Chinese (app. 65 mio.) can afford to travel beyond
Greater China (Hong Kong, Macau, Taiwan).
Number of Chinese US$ millionaires households: 1.3 million, 3‰ of the 400
million households in China
Don’t forget: 83 million border crossings are not done by 83 million different
persons, many frequent travellers (including traders, pilots and prostitutes)
20

Introduction
- Market Segments
Conclusion
21

Increasing segmentation
Chinese tourists are not only growing in numbers, the market is increasingly
segmenting:
Second and Third tier citizens first-time travel overseas in package groups
Experienced repeat travellers, the “New Chinese Tourists” and luxury
travellers moving from “8 countries in 10 days” sightseeing to experience
seeking and from package tour to self- or private group travel
Example Scandinavia – destination for New Chinese Tourists
(turning around Peter’s numbers from previous presentation):
55% of visitors to Scandinavia are repeat visitors to Europe
Majority comes from 1st tier cities Beijing, Shanghai, Guangzhou, Shenzhen
41% have good English language skills
50% of Helsinki visitors are self-organised travellers
61% of Stockholm visitors are self-organised travellers
22

“The” Chinese outbound traveller is not existing (anymore)
Segmentation residence international:
Mainland Chinese – majority just starting to travel internationally, nouveau riche
Hong Kong/Macau/Taiwan – longer travel experience, some old money families
Overseas Chinese – still Chinese but different passport
Temporary Chinese residents – expats and students, keen travellers and multiplier
Segmentation residence inside China:
Sophisticated First tier vs. starry-eyed Second/third tier city inhabitants
Sun-seeking North vs. fun-seeking South
Segmentation lifestyle / travel form:
Package tour traveler – hostage of trodden path offers and the tour guide
Self-/privately organised traveller – why visit the Eiffel tower twice? Looking for
individualisation within (!) the peer group, open for suggestions
Mainland Chinese living temporarily outside of China – frequent travels, looking
for regional differences, hosting other Chinese visitors
23

“The” Chinese traveller is not existing (anymore) - Consequences
TOP 10 European cities will continue to be visited by busloads of
Chinese ticking off sights- and shopping-lists and by MICE visitors,
need extra efforts to attract repeat visitors (Paris? That’s so 2010!)
For European cities beneath the TOP 10 level Chinese outbound
tourism is only just starting. With adapted offers, China-specific
marketing and intra- and interregional cooperation they have the
chance to attract high-spending experience-seeking repeat visitors
(Did you hear about the city with the free Chinese map App? Cool!)
Examples from Chinavia survey:
7 European cities with highest growth rates in Chinese bednights 2011:
Malmö, Salzburg, Bratislava, Gothenburg, Nürnberg, Zagreb, Ljubljana
71% of visitors to Scandinavia visit only Scandinavia during current trip
24

Differences in travel expectations and motivation:
Package group travellers vs. Self-organised travellers
Package-group travellers travel often for the first time to destination
Importance to document: We have been there (for this snapshot)
Strong interest in major sights of major destinations, buying famous brands
Experience during the trip not so important
Self-organised travellers often have a longer travel career, often MICE- or
education-related travel
Importance to document: Differentiation within the group
Looking for authentic (but matching their expectations) European life,
buying lifestyle documents
More likely to have more time and higher information level about offers of
different destinations from extensive Chinese Social Media “research” (for
preparing a trip to Europe average 100 hours online time)
First generation of life-long travelers since childhood starts appearing, a trip
to Seoul starts to be no more exiting than a trip to Sanya/Hainan
25

Introduction
- Market Segments
Conclusion
26

Prestige and Respect
27
Chinese outbound traveller see themselves as – and are told by
their government they are – representatives of their country,
going to potentially hostile alien surroundings.
Showing to the world and to themselves that they have
personally made it but also that CHINA as a nation has made it
(back) to the top is a major part of the fun of traveling and
spending overseas.
Chinese see themselves as victims of western oppression since
the Opium Wars and suspect to be treated as second-class
customers out of racism and envy by the non-Chinese. Their
demand is not to be treated as well as everybody else, but
BETTER than anybody else.

Prestige and Respect
28
Chinese outbound traveller are looking for signs of respect.
Even English speaking visitors will be happy to see Chinese
language information materials, even Muesli-munching Chinese
will be happy to see chuk (Congee) on the breakfast buffet.
Emphasising historical and current connections between the
destination and China or recent visits (because of good luck or
because you paid for it) of Chinese celebrities, a Chinese flag,
all helps to show respect
Visibly caring for the Chinese visitors, by Quality Labels, by
engagement in Chinese Social Media, by teaching staff a few
words of Chinese and not to annoying sophisticated Chinese by
telling them that they fear the number “4” – helps too.

Example MICE
29
Winner of Chinese Tourists Welcoming Award 2013
Regularly hosting Chinese corporate delegations as well as public
exhibitions. Examples:
Yoga Lin, Taiwanese music star first ever UK concert 2012
Red Bull China, sports competition during 2012 Olympics
Jinling Figurative Paintings of China 2012, a public art exhibition,
initiated by Chinese Artists Association, Jiangsu
Guanghua Int. Nursing Conference 2013 (4000 participants)
CHW features Europe’s largest domed ceiling
Become part of CHW’s rich history of events & famous speakers:
First ever meeting of the United Nations, 1946
Churchill, Khrushchev, Blair, HM The Queen, Bruce Willis

Example COTRI Chinese Tourists Welcoming City Label
30
Visibility of engagement for
the Chinese market in offline
and online trade publications
and Social Media
Physical and electronic label
Memberships in CTW City Label
Network
Free represenation in three
Chinese tourism fairs
Giving prestige, showing
Respect to Chinese visitors

Example TripShow.com
31
CTW City Label
Network members
marked with
specific badge on
TripShow.com

Introduction
- Market Segments
Conclusion
32

33
Travelling to Europe means for Chinese
outbound travellers first of all:
Investment
in
- Personal prestige within
the group
- Self-esteem
- Social capital
- Learning
But also:
- Business opportunities
- Investment in real estate
and companies

Return on Investment
34
If inter-continental travel is investment, the services and products
offered should be organised in a way to guarantee the Chinese
visitor a good Return on Investment (ROI):
Value for money and for time
Guaranteed quality as seen from a Chinese point of view
No more time spent on an activity as needed for prestige gain
Supporting the bragging value of a place/an activity/a product:
famous, typical, oldest/highest/awarded, celebrities choice,
unusual (but not unknown), authentic (but not against
expectation) hard to get, VIP only, as seen in TV and movies
Connecting fun und investment
Giving face to China and all Chinese
Safe and without risk

Introduction
- Market Segments
Conclusion
35

Chinese Outbound Travel 2017 (barring Wild Card events)
1. Chinese transcontinental travellers are not travelling for fun, but for
confirmation of their abilities. Therefore even with a slowing Chinese
economy, in 2017 we will witness 170 million outbound travels, double the
number of 2012.
Half of the 170 million travels will go beyond Greater China
2. Package group travel will be seen even more as less prestigeous travel form
mainly for less sophisticated newcomers. Half of the travels will be either
self-organised or customised flexible offers for small groups of friends,
family or colleagues
Tour operators and tour guides will stop dominating the high-end of the
market
3. European cities of different sizes will be more successful in attracting
Chinese visitors and MICE events in very varying degrees
Adaptation and commitment will decide who is hot and who is not
36

Introduction
- Market Segments
Conclusion
37

5 insights about the Second Wave of Chinese Outbound Travel
1. Chinese outbound travellers will continue to gain importance in terms of
number of visitors, bednights and amount spent per person per trip also
for non-Asian destinations  ignoring or dismissing them is not an option
2. Distinguishing between the segments of the Chinese market is essential
 averages won’t help you to understand the different customer groups
3. Chinese are not coming to Europe for holidays. In different forms, gaining
prestige, self-esteem and knowledge are main motivators for package
group members, self-organised travellers and MICE customers alike
 learning to adapt your offers and stories to cater to the fulfillment of
these motivations will attract Chinese tourists also to “smaller” cities
4. Chinese are first-generation affluent, “money-rich” but “time-poor”
 help them choosing, offer them more value for money, not discounts
5. Chinese will be Chinese, with growing experience and language skills they
insist more, not less, to see signs of appreciation of the Chinese culture
 signalise your extra attunement and commitment to Chinese visitors
38

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Thank you for your attention!
Looking forward to your questions and comments.
Contact
Prof. Dr. Wolfgang Georg Arlt
Tel. +49 481 8555 523
Mail arlt@china-outbound.com

2013 European Cities Marketing Presentation

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