DUO Business | Observation
Warwick Powell Sister City Partners
Tourism infrastructure sorely needed Chinese outbound tourism is expected to continue growing at extraordinary rates into the foreseeable future. Credible projections estimate that by 2020, over 200 million Chinese will travel the world each year. It’s way past time for the North to get serious about this burgeoning market, and that means doing things a bit differently. New accommodation options to bolster the case for direct flights are critical if we’re to capitalize on this growth opportunity.
WHERE THINGS STANDS In 2016, more than 1.2 million Chinese travellers visited Australia. And that’s been growing at an incredible clip. That number represents a global market share of around 3% of Chinese travellers. If we’re to continue at this rate, we could expect some 6 million or more Chinese visitors per year by 2020. Chinese travellers are also amongst the biggest spenders when they are on the road. According to Tourism Australia’s China 2020 Strategy Plan, by 2020 Chinese visitors could potentially spend between $7 billion and $9 billion at the upper end of the projected range.
NUMBERS, NUMBERS The potential for growth is staggering. According to merchant bankers Goldman Sachs, a mere 4% of China’s population hold a passport, compared to 35% in the USA. Goldmans expect this figure to reach 12% by 2025. By that time, the number of Chinese residents travelling overseas will almost double from 120 million in 2015 to 220 million. Of these, an estimated 28% are from the ‘urban middle’ class, compared to just 3% from the ‘urban mass’. Two-thirds of current outbound travellers are millennials (15-35 years old). A key driver of the travel bug will be the 74 million millennial college graduates in the coming decade. Goldman Sachs’ estimates actually sees Australia’s share decline, but nonetheless expect that Australia will receive some 2 million Chinese travelers by 2025. The truth lies somewhere in between, I’m sure … so perhaps we could conceivably see some 3-4 million Chinese travellers grace our shores each year between 2020 and 2025. Take a breath and think about it. What these estimates point to is that over that five year period, between 6 million and 20 million Chinese visitors will come to Australia. Boiled down, we’re talking about between 23,000 and 77,000 each and every week. Chinese travellers travel for fun (sports, touring, online gaming, media and eating out), leading to structural upside in fun-related experience-based spending. A secondary factor is to shop, but for millennials this is not the core aspiration. As China gets wealthier, its ‘urban middle’ population will also increase its household wealth. As incomes grow, international travel can be expected to grow commensurately. The ‘urban middle’ population comprises government employees and urban white-collar workers and SME owners. These two cohorts have an estimated working population of 146 million persons today, of which 28% already own passports. Below this group are the ‘urban mass’ group of urban blue collar and migrant workers, comprising a further 246 million workers. A mere 4% of this group holds a passport. As this group increases its household incomes, we can expect the passport ownership rate to increase and drive interest in international travel.
TOURISM FOR THE MASSES, NOT MASS TOURISM These demographic trends and patterns point to a shifting nature of Chinese tourism. Whereas in the past, so-called mass tourism dominate the landscape – characterized by the ubiquitous bus-load of tourists following a flag-waving, megaphone toting, tour guide – what we are increasingly seeing is a more independent approach to travel. Thus, we are witnessing a transition from ‘mass tourism’ to ‘tourism for the masses’. These travellers are organizing their own itineraries. They do so with some assistance from agents, but tend to eschew the mass market wholesale booking agents that have (and continue to) dominate the landscape. Online channels and social media are drivers of choice and decision-making, which means accessing these audiences requires a very different approach to communications and distribution. The growth of contactless payments technologies in China also points to the importance of mobile technologies as a communications channel rather than websites per se. No longer is it enough to run generic television campaigns and promote mass products via wholesale agency channels. This may work for well-known destinations where large volumes can be expected (e.g. Sydney and the Gold Coast), but won’t really make that much sense for regional places that simply don’t generate the volumes that make it worthwhile for wholesale agents to bother with. For these guys, it’s a numbers game, and regional markets are simply too small compared to the low hanging fruit of capital cities and well-known landmarks. Compelling content, distributed via social media platforms and through trusted referral channels will increasingly drive personalized engagement with the independent Chinese traveller audience.