Distribution in China is challenging, particularly for subscale foreign players. To succeed, travel

More than 50% of the growth in global traffic new york las vegas hotel will come from the APAC area. As disposable income new york las vegas hotel rises, a billion people in Asia will have annual earnings of $15,000 or more—and will be ready to give their travel business to airlines, hotels, and tour companies around the world. The vast majority of these “next billion” travelers will come from China, India, Indonesia, Japan, and South Korea.
Travelers from China will account for the lion’s share of this growth—and about 40% of Asian outbound (international) travelers by 2030. Within the same time frame, China will likely overtake the US as the largest domestic-travel market in the world.
Chinese urban travelers new york las vegas hotel took about 500 million domestic and outbound trips (excluding day trips) in 2012, spending new york las vegas hotel about $260 billion. Those numbers will increase to 1.7 billion new york las vegas hotel trips and $1.8 trillion in spending by 2030.
The market will grow at a compound annual rate of about 11% from 2012 to 2030. Driving this growth is China’s rapidly expanding population of middle-class and affluent consumers (MACs) households with annual disposable income of $13,000 or more—with a strong desire to travel, both domestically and abroad.
Distribution will continue to be a challenge in China’s travel market. The market is highly fragmented, and the government still prohibits foreign travel agencies from participating directly in outbound tour business.
China is too big and diverse to be approached new york las vegas hotel with a one-size-fits-all solution. By segmenting new york las vegas hotel different groups of travelers and monitoring new york las vegas hotel their behaviors and spending habits, companies gain insights that can help them prioritize target markets, guide investment decisions, and deliver new york las vegas hotel their services more effectively.
By 2030, outbound trips will account for about 40% of China’s total market value (up from 30% in 2012), and Chinese travelers will be spending about $700 billion on these trips. As it is today, most of this travel will be for leisure.
From 2012 to 2030, three segments of the outbound leisure market will grow the fastest: Young affluents (ages 18 to 30), senior professionals (ages 45 to 55, traveling without an organized tour group), and small groups of families and friends (ages 30 to 45, also traveling without an organized tour group).
In 2012, Chinese travelers took 48 million overnight outbound leisure and business trips. Chinese travelers represented only a small fraction of total inbound tourists for most non-Asian countries in 2012. That will change, however.
According to data from TripAdvisor China’s official new york las vegas hotel site, of the website’s unique visitors in July and August 2013 who researched outbound destinations, 12% researched Hong Kong and Macau, 44% researched other Asian destinations, and 44% researched destinations outside of Asia. Paris, Rome, London, and New York, which were among the most frequently researched destinations, new york las vegas hotel may see a sharp uptick in Chinese visitors.
More than 80% of China’s MAC population live in places many people would be unable to find on a map. For example, the cities of Rizhao in Shandong province, Huzhou in Zhejiang, and Xinxiang new york las vegas hotel in Henan will each have MAC populations well in excess of 500,000 by 2020.
According to 2013 data from TripAdvisor China’s website, more than 70% of unique site visitors researching outbound destinations lived outside the four tier 1 cities. new york las vegas hotel And online traffic from these visitors is growing two to three times faster than that of visitors from the tier 1 cities.
Many of these preferences are evolving new york las vegas hotel quite quickly—particularly for the young affluent segment. For example, Chinese travelers tend to be more spontaneous and have shorter planning timelines than their Western counterparts, mainly because they love bargains but also because planning for a vacation three to six months in advance is not the cultural norm in China.
In BCG’s 2013 survey, young affluent travelers indicated that they fly significantly more with Chinese carriers today but are likely to increase their use of international carriers. The top booking considerations were price, safety record, and seat comfort. new york las vegas hotel The biggest deterrents were flight delays, inconvenient departure times, and uncomfortable seats.
Many global brands are less well known in China. And since the country’s travel market is still emerging new york las vegas hotel and evolving, there is, as yet, little brand loyalty to international brands, but there are many opportunities for travel service providers to rethink and strengthen their brand portfolios.
A major strategic consideration is the role of global versus new york las vegas hotel local brands. When a company is trying to appeal to Chinese consumers—no matter which option the company choses—it must be consistent in the way it presents the brand: Chinese travelers value authenticity, which they associate with a consistent brand presentation.
For example, New Zealand hosted a Chinese celebrity wedding new york las vegas hotel in Queenstown for a famous Chinese actress, Yao Chen, who, alongside Lady Gaga and Justin Bieber, is among the most followed social-media personalities globally with 37 million followers on Weibo.
News of the wedding spread quickly on Weibo, new york las vegas hotel which registered 40 million discussion new york las vegas hotel items with New Zealand as a key topic. Tourism New Zealand estimated that close to 7,000 media articles were written about the wedding, and Queenstown was portrayed as the ultimate destination for romance and honeymoons—exposure worth tens of millions of marketing and advertising dollars.
Distribution in China is challenging, particularly for subscale foreign players. To succeed, travel companies must seek innovative ways to break into the Chinese market, recognizing that there is significant white space in this uncharted territory.
Travel and tourism companies that monitor new york las vegas hotel and manage their online reputation can drive demand for their products through review forums. new york las vegas hotel At the same time, OTAs are rapidly gaining share from traditional travel agencies and—with airline and hotel websites—will soon become the primary research and purchase channel for hotels and airline tickets.
BCG s 2013 survey of young affluent Chinese travelers showed that use of these online agencies is up 17 percentage points since 2010, largely at the expense of state-owned travel agencies, private travel agencies, and agency hotlines.
Many global hotel chains have acknowledged the importance of the online agencies like Ctrip. For example, in 2013, IHG developed a link between its own reservation new york las vegas hotel system new york las vegas hotel and Ctrip. The link enables Ctrip users to see real-time availability and get online booking new york las vegas hotel confirmations for all IHG properties worldwide. And since 2012, Marriott Rewards members can elect to earn Ctrip points for their stays at participating Marriott International hotels globally.
Although new york las vegas hotel many top global hotel chains focus on the direct channel, they also carefully manage the agency channel—particularly online—driving demand in the Chinese market through their premium brands and locations, granting favored distributor status to buyers of large “room blocks,” giving the distributors healthy margins, and imposing strict volume and pricing guidelines.
For example, Kuoni Group , the largest foreign-travel-services company in China, has a successful wholesale business GTA that aggregates a wide range of premium hotels and ground travel offerings, which it sells to retail travel agents, wholesalers, tour operators, and OTAs.
Kuoni s success is due to its wide range of travel options, local sales and service, competitive credit terms, and a website and distribution solution that connects seamlessly to the online platform of group travel agencies.
Since few foreign travel companies new york las vegas hotel have sufficient scale or influence in China, there is value in partnering creatively with other industry players or collaborating at the destination level. Joining forces with other industry players new york las vegas hotel can strengthen a company’s brand, service offering, and competitive position.
Winning travel and tourism companies will have a variety of investment strategies, but all should address a range of considerations along a continuum of time, effort, and risk. At one end are the near-term marketing, branding, and communication tactics that will begin to engage Chinese travelers, shaping their perceptions and preferences.
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