Where is the Chinese tourists' money going?

The Wenyi tribe?

Looking past the media hype and the glittering headlines, it is fascinating to find out who, in the tourism industry, benefits the most today and who will tomorrow. No question that Chinese tourists are big shoppers of luxury goods, but do they also spend lavishly in the other sectors of the tourism industry and in other locations than their top 5 or 10 favorite destinations? That is where the anecdotal nature of the media stories fails to match with factual numbers. The numbers are up there, they are big and growing, but the media stories obscure the real picture of where most of that money goes.

The common misconception

The Chinese tourists projected in most media stories make up only about 15% of the market [1] and their spending pattern is significantly different from that of the majority. The stories about the very big spenders, about 2% of the market, are all about the $50,000 designer purses and other superlative luxury goods, yet much of that money is spent on gambling in Macao and Las Vegas!

"We've done a survey of 41 cities in China and people say they want to go sightseeing or experience different cultures, but ultimately all they want to do is shop and gamble," said Aaron Fischer, CLSA's head of consumer and gaming research. [2]

And gamble they do! Macao ranks 5th in the world for International Tourism Receipts according to UNTWO [3]. More than the UK and not far from France. And Las Vegas is the most popular US destination for Chinese tourists, more popular even than Bangkok which is amazing considering the visa barriers to the USA and the short distance to Thailand, their favorite destination in South-East Asia
As for shopping, they are not really going to France or UK, most of them are going specifically to Paris and London for luxury shopping with maybe a half day of sightseeing to experience the different cultures. Quite accurately reflecting what Aaron Fischer said above.

So, while it is indeed true that a category of Chinese tourists spends a massive amount of money, the tourism industry as a whole, with the exception of Macao, Las Vegas and a few fashionable cities, only marginally benefits in related employment and services.

Identifying the most valuable tourists for your business

The true value and the future of outbound Chinese tourism comes from the far greater number of tourists of lesser means. The UNWTO identify three key groups of Chinese tourists: The Hedonists, described above; the Traditionalists and the ‘Wenyi’ (Literary) tribe [4].

Historically, the Traditionalists have been the bread and butter of group tours to both Europe and Asia, Thailand particularly, because their sheer numbers made up for their low spending. While they will continue to account for a very significant share of air tickets and hotel beds for the foreseeable future, they will decline in relative importance as the gradual shift to individual travel takes place, as it has in all other markets after a few years of group travel, and as the shift is further accelerated by the recent ban on zero-cost tours in China.

The evolution of the Traditionalists

The converging changes in travel with the rise of LCC (low Cost Carriers) in China and in Asia in general along with the fast adoption of online travel booking will both accelerate individual travel and diversify choices of destinations, attractions and interests. That will be the most beneficial effect for the largest range of tourism stakeholders with smaller hotels, resorts and local operators becoming able to reach and attract Chinese tourists directly through a much broader offering of services. Larger properties will also benefit with higher average rates on individual bookings than they can achieve on groups. Secondary destinations will also be able to compete effectively for a share of the traffic, something that is very difficult for them to achieve with groups who tend to keep within the well-traveled and more popular itineraries.

You can reach the pot of gold at the end of the rainbow!

In the spirit of Irish leprechaun, you should be looking for members of the ‘Wenyi’ tribe, which the UNWTO report [4] describe as follow:

The ‘Wenyi’ tribe, a rapidly expanding group of young professionals, is characterised by the pursuit of freedom, quality of life, experience, uniqueness and self-realisation. Culture is a very important way to achieve this and it is also reflected in their shopping habits: they want to buy products that tell a story, and mostly focus on design items, books or music.

Which are pretty much the same expectations than that of comparable western tourists. The important difference being that the Wenyi tribe is already large and is growing at double digits rate to quickly become the most important tourists for many destinations. Their travel and leisure interests are far more diverse and explorative, greatly enlarging the reach of even relatively obscure tourism attractions or activities. And, unlike the other two groups, many of them have at least elementary knowledge of a second language which greatly improves the ability of the smaller tourism stakeholder to reach them.

One last number showing the potential for the future: “Only around 5% of China’s population now own passports, and most of those who travel go to Hong Kong or Macau.” [5].

References:

[1] Chinese International Travel Monitor 2014 (CITM)
http://press.hotels.com/citm/

[2] Hey big spenders! Chinese travelers spend over $1,000 a day, CNBC, 17 July 2014
http://www.cnbc.com/id/101843609

[3] Tourism Highlights 2014, UNWTO
http://mkt.unwto.org/publication/unwto-tourism-highlights-2014-edition

[4] Global Report on Shopping Tourism 2014, UNWTO
http://affiliatemembers.unwto.org/publication/global-report-shopping-tourism

[5] Coming to a beach near you, The Economist, 19 April 2014
http://www.economist.com/news/international/21601028-how-growing-chinese-middle-class-changing-global-tourism-industry-coming