Deep Dive: Chinese Outbound Tourists—More Diverse, More Sophisticated

Executive Summary

In the past 12 months, more Chinese have traveled overseas compared to the prior year and are continuing to drive retail spending at tourist destinations globally. Chinese outbound tourists will account for an estimated US$315 billion in travel revenue in 2017, according to our estimation, making them the world’s biggest spenders on foreign travel. By 2021, we estimate that 192 million Chinese tourists will travel overseas, and that their total overseas spending will reach US$458 billion.

This is our third annual proprietary survey of Chinese overseas tourists’ travel and spending, jointly conducted with China Luxury Advisors. In this report, we cover the following topics:

• Travel destinations visited in the past 12 months; reasons for selecting the destination for the most recent trip
• Spending in respective areas, products purchased and outlets visited; services used at retailers and their importance
• Frequency and purpose of overseas travel
• Travel arrangements for their most recent and upcoming overseas trip; main information source used for planning their trip
• Demographics including age, gender, income and city of residence

Key Trends Observed

• Chinese outbound tourists have evolved into experienced and sophisticated travelers—some 67% of surveyed tourists have traveled more than once in the past 12 months, visiting an average of 2.3 destinations. Apart from shopping, they crave lifestyle experiences while traveling abroad.
• Japan has emerged as the most popular destination, visited by 55% of surveyed tourists in the past 12 months, followed by Hong Kong (35%) and South Korea (27%).
• Chinese tourists from lower-tier cities have become the growth engine of outbound tourism. Based on their most recent overseas trip, survey respondents said they spent on average US$2,449, 10% higher than tourists from tier-1 cities at US$2,330. They also travel as frequently as their counterparts from tier-one cities, at an average of 1.9 times per year.
• Chinese tourists are extremely mobile-savvy, 98% of surveyed tourists used their smartphone abroad to keep in touch with others and to search for travel-related information. Some 72% of surveyed tourists use online resources such as travel websites, blogs and social media to plan their trips.

Key Findings

Travel Frequency and Arrangement

• The majority of Chinese tourists are now experienced overseas travelers, with 67% of those surveyed having traveled more than once in the past 12 months, visiting an average of 2.3 destinations.
• Traveling as part of a group (35%) is still a popular form of travel arrangement. However, the majority of those surveyed traveled independently without a local guide on their most recent trip, either by buying a travel package (32%), or by making their own travel arrangements (21%).

Destinations

• Japan has emerged as the most popular destination, visited by 55% of surveyed tourists in the past 12 months, followed by Hong Kong (35%) and South Korea (27%).
• Europe (16%) is the top long-haul destination for Chinese tourists, followed by the US (9%).
• Almost all surveyed respondents considered security (96%) as an important factor when choosing the destination for their most recent overseas trip. Tourist spots (94%) and cuisine (88%) are the other important most-mentioned factors.

Spending

• Chinese tourists spent on average US$2,335 during their most recent overseas trip; those from lower-tier cities spent an average of US$2,449, 10% higher than those from tier-1 cities at US$2,330.
• On average, retail purchases accounted for 55% of their spending, or US$1,282 in value. Chinese tourists are craving for lifestyle and experiences as well, with experience related spending, including food and beverage (15%), sightseeing (11%) and entertainment (10%) together accounted for 36% of their expenditure.

Products and Shopping Outlets

• Clothing, footwear and accessories (including handbags) is the most popular category, purchased by 75% of surveyed respondents during their most recent overseas trip. This is closely followed by fragrances and beauty products (66%), and food or drink products (50%).
• Duty free accounts for 29% of Chinese tourists’ retail spending on average, the highest among all retail outlet types, followed by department stores at 18%. These two retail outlets together capture almost half of Chinese tourists’ retail spending.

Information Sources

• Chinese tourists are now mobile-savvy, with 98% of surveyed tourists having used their smartphone abroad to keep in touch with others and to search for travel-related information.
• Online resources such as travel websites, blogs and social media are used by 72% of surveyed respondents to plan their trips.

Implications for Brands and Retailers

• As the market landscape for Chinese tourists transforms and becomes more sophisticated, brands and retailers need to adapt and update their strategy continuously in order to engage this large and growing market of consumers.
• Chinese tourists have diversified demographics and travel experiences, thus have different needs while traveling abroad. Brands and retailers should identify their target tourist segments and cater to their needs accordingly.
• Brands and retailers should engage with Chinese tourists online at every stage of their trip, apart from conventional advertising, encouraging Chinese tourists to share their experiences at retail outlets is more influential, as it directly reaches new potential customers.

Research Overview

This is our third annual proprietary survey of Chinese overseas tourists’ travel and spending, commissioned together with China Luxury Advisors. Apart from last year’s questions including Chinese overseas traveler’s destinations, shopping behavior and future travel plans, this year, we have included additional questions which provide more in-depth information on the reasons and motivations behind their decisions and behavior when traveling overseas, helping retailers to better understand these consumers and how to best meet their needs.

Research Methodology

This year’s data was collected by an online self-completion survey conducted from May 31 to 6 June, achieving a total of n=841 samples. All respondents are mainland Chinese aged 18–59, and have taken at least one overseas trip (including Hong Kong, Macau and Taiwan) with a minimum stay of one night in the past 12 months.

Respondents were asked to answer the survey questions based on their experience in the past 12 months, except for questions related to their future travel plans.

The survey data was weighted according to the age and gender distribution in China’s urban areas, based on the latest available census by the National Bureau of Statistics of China. The survey results show the percentage of respondents who selected a certain response. All figures should be read as a percentage of the respondent base.

Exchange Rates

For our 2017 spending estimates, we used an average foreign exchange rate for May 2016 from S&P Capital IQ when converting the renminbi (CNY, yuan) to the US dollar (USD), resulting in a rate of ¥6.8839 to US$1.00 (¥1 to US$0.1453).

Trends in the Chinese Overseas Travel Market

While the number of outbound tourists and spending by tourists overseas continues to grow, the Chinese tourist market landscape is also transforming. We note the following trends from our survey:

• While group tours account for a large portion of travel arrangements, more Chinese travelers are now making their own travel arrangements in order to enjoy a more personalized travel experience. Also, as a growing number of Chinese tourists become more experienced and repeat travelers, we expect more Chinese tourists to visit offbeat destinations. We look for more tourists to stray off the well-worn path of the first wave of Chinese tourists and for more adventurous travelers to blaze a new path to new tourist destinations and attractions. Yuan Li of Legend Travel also mentioned there is strong interest in Egypt and Africa, especially for those who have already visited Europe and the US.
• Chinese tourists from the lower-tier cities will be the growth engine of outbound tourism, and indeed they are already traveling as much as their counterparts in tier-1 cities. Despite their lower average income, they spend more overseas—our survey shows that their average spending is 10% higher than those from tier-1 cities. This group tends to plan their purchases in advance, and in collaboration with friends and family.
• Foreign-exchange rate fluctuations, although not as significant as other factors when choosing a travel destination, will affect frequent travelers’ decisions when the exchange rates are unfavorable compared to other countries. Short- and long-term fluctuations might lead to swings in Chinese tourism travel patterns.
• Our survey shows that visa policies remain a key consideration in choosing a travel destination, mentioned by 82% of surveyed respondents. In order to attract Chinese tourists, we expect more countries to relax their visa policies for Chinese citizens. For instance, Japan reduced the minimum income requirement for Chinese citizens to apply for multiple-entry visas in January 2015 and the number of visas issued increased 2.9 times during the three months between the announcement date and the end of April.

How Security And Currency Affects Chinese Tourists’ Behavior

Political happenings in the US and Europe have taken center stage in the global landscape in recent months, leaving experts wondering how these political changes will affect the global business climate.

China has been a particular focus of speculation, as political changes affect both the overall balance of power over the long term and global trade in the short term.

One area that is often overlooked by the media is the economic impact of Chinese tourism expenditures on the global economy.

As experts try to forecast how recent political happenings could affect the massive powerhouse of global spending that is China, they need to take into account ease of travel, visa policies and air travel to specific locations. However, perhaps the most important factor in understanding how Chinese tourism behavior will change going forward is in fact Chinese consumer behavior and preferences as they relate to travel.

In order to more accurately forecast changes in this behavior, China Luxury Advisors turned to experts in Chinese tourism—the Chinese travel trade—and interviewed Chinese tour operators around the globe, as well as Chinese tour guides on the ground in the US and Europe. These operators are on the front lines of Chinese tourist behavior on a daily basis, and the most attuned to shifts in behaviors. We asked them how the political climate is shifting consumer tourism behavior, and what they expect to happen in the future:

United States

When asked about the potential impact of the US election on Chinese tourism, many tour operators were skeptical that it would have much of an impact on the prevailing Chinese tourism trend favoring the US, unless tourism visa policies were to change. As David Wang from Galaxy Tour commented, “whoever becomes president does not matter much to Chinese tourists. Chinese still want to travel to the US. However, if tourist visa policies were to become stricter for Chinese citizens, Chinese tourists would not be able to come to the US.”

Benny Feng from NSA International added, “Sino-US tourism is an irresistible trend” and Ma Jie of Lucky Tours commented, “Chinese tourism can contribute a lot to the American economy. The trend of Chinese tourism will not stop.”

The top two concerns for continued strength in Chinese tourism to the US is the impact on the value of the yuan-US dollar exchange rate, and if the political climate were to have any impact on security concerns in the US. Safety is always the number-one concern of Chinese tourists. Any perceived instability would have a negative impact on growth.

David Li from Blue Connection commented, “the political climate itself does not affect tourism, but the currency does. Now it is more expensive to convert yuan to US dollars, so it will be more expensive for Chinese tourists to travel to the US. If this trend continues, the number of tourists coming to the US will decrease.”

Deming Zhu from Shanghai Airlines Travel reiterated this point, “Chinese consumers are more concerned about the exchange rate than the political climate. If the policy of the new president were to drive the yuan down, then it would be bad news for Chinese tourism to the US.”

Europe

While Western Europe is still adjusting to the new world political landscape, Chinese tourists have already changed their behavior significantly in Europe.

A tour operator from Comfort Travel explained, “while Western Europe still dominates the market, Eastern European destinations are gaining in popularity.”

Security issues in France, Belgium and other Western European countries have caused a dramatic shift in European itineraries, favoring locations in Eastern Europe, Northern Europe and the UK. Although Chinese tourism to Western Europe has already seen significant upticks and increases over the past few months, especially when compared to the year-ago period.

Several tour operators also cited the growing popularity of the Nordic countries, especially Denmark and Iceland. In particular, Northern Lights tours are hot products among tour operators in China right now. Chinese online travel agent, Ctrip, recently called Iceland and Hungary the “dark horses” of today’s Chinese tourism market.

Chinese tour operator Spring Tour commented, “Eastern European countries such as the Czech Republic and Russia are growing quickly. We are also seeing secondary European destinations such as Spain gaining in popularity, mostly due to the security issues in France and Belgium.”

Tour operator UTour also commented that the Eastern European destinations of Croatia, Serbia and the Czech Republic are all increasing in popularity among individual travelers.

The Brexit decision has not had a negative impact on Chinese tourism behavior. The UK has in fact experienced a recent increase in Chinese tourism since the decision, as Chinese tourists look to take advantage of the weaker pound.

Other trends that the tour operators are seeing in Europe include an increase in honeymoon tours and family trips, as well as the growing popularity of self-drive trips and photography tours.

Chinese tourists will continue to be wary of security and the euro-yuan exchange rate, both of which will have a big impact on short-term increases and decreases in travel to countries in Europe.

A representative from Spring Tour explained, “if Europe can improve regional security, the Europe market will rebound in 2017.”

A representative from UTour added, “the exchange rate has a significant impact on travel decisions. A weak yuan is likely to slow down outbound travel.”

The New Chinese Tourist: Seeking Arts And Culture

The Chinese tourist of today is uniquely different from that of five years ago. Not content to sit on a standard tour bus and visit sites recommended in conventional guide books, visitors from China are increasingly creating their own itineraries and are demanding experiences that are more local, native, cultural and distinctively art focused.

These more experienced travelers are increasingly interested in a more thorough and rounded experience, focused on a particular destination, rather than participate in a typical whirlwind bus tour which leaves little time for in-depth exploration.

Los Angeles Tourism and Convention Board President and CEO Ernest Wooden commented, “we find that 42% of Chinese travelers visit our cultural institutions such as The Getty Center, Los Angeles County Museum of Art (LACMA) and The Broad because history, heritage and iconic masterpieces appeal to them very much.”

Younger travelers who are eager to explore the world, and experience authentic local destinations are particularly inclined to seek out art and cultural experiences. Amrita Banta, Managing Director at Agility Research and Strategy, commented, “Travel experts agree that this new generation of Chinese traveler is more adventurous and wants to experience a new culture. The younger ones go out and are a lot more experimental. They do not have the inhibitions of their parents.”

“Chinese millennial travelers are seeking a much deeper connection with a destination when they travel, and museums usually capture the cultural spirit of a city,” says travel blogger Ana Coppola. “I can travel through history and acquire a much deeper understanding of the city in one afternoon at a museum.”

Kai Zhao, a Chinese tour operator from TTS Travel, remarked, “the younger generation is really interested in arts and cultural destinations that are popular on social media such as Griffith Observatory, Madame Tussauds Hollywood and LACMA.”

Different from museums in China, which are usually run by the government, many museums in the US and Europe are owned and curated privately. “Touring a private museum, whether it is a collection of vintage cars or costumes, is like having a conversation with an interesting person,” says Will Wang, former travel editor at Esquire China. “Each object on display reflects the curator’s or collector’s unique personality and opinion about the world.”

As a result, museums across the globe are seeing increased interest and visitation from Chinese tourists. This expanding demand is presenting arts and cultural destinations with an opportunity to capture the hearts and minds of a new generation of museum and arts patrons. For example, the Museum of Modern Art (MoMA) in New York has seen its visitations from China grow by over 200% in the past five years. Last year, MoMA welcomed 49% more Chinese travelers than the previous year.

In addition to an increase in visitations, museums are also benefiting from elevated sales at gift shops, courtesy of high-spending Chinese tourists, as well as corporate and independent donations from Chinese companies and individuals whose interest in giving back to the arts and participating in global arts initiatives has been steadily accelerating.

Implications For Brands And Retailers

As the Chinese tourist market landscape transforms, brands and retailers need to adapt and continuously update their strategies in order to engage with this large and growing market of consumers.

Catering to the Different Needs of Chinese Tourists

Brands and retailers should avoid stereotyping Chinese tourists, as they become increasingly sophisticated. In addition to differing travel arrangements, Chinese tourists have diversified demographics and travel experience needs.

For instance, our survey shows that one-third of Chinse tourists travel with their children. Brands and retailers may consider creating a family-friendly shopping environment and provide respective facilities in order to cater to the needs of these customers.

Multi-generational family travel also continues to be popular among Chinese tourists—where grandparents, parents and children travel together, especially during the summer months and at Chinese New Year. Brands and retailers should consider providing options for both elderly and young visitors alike.

Target the Right Customers

China is an extremely large and active consumer marketplace, with a myriad of media and marketing choices that can be both overwhelming and expensive. It is critically important for overseas retailers and destinations to choose their marketing methods carefully in order to target the smaller segment of the population who is likely to travel to their tourism destination. Finding the right media and marketing opportunities that produce high return on investment (ROI) results can be tricky, but when done right, can produce impressive ROI. As retailers increasingly hone their targeting skills, they are turning to new digital opportunities to better focus on those travelers who are intending to travel to a certain destination. In order to serve this growing need, both WeChat and Weibo are launching new location-based targeting for their advertising services this summer, allowing retailers and attractions to target Chinese tourists once they have arrived at their destination. We view this as a game changer in terms of providing more accurate targeting and advertising optimization.

Focusing More on Experiences

Our survey shows that the majority of Chinese tourists expect services that enhance their shopping experience, such as Chinese-speaking staff, payment by UnionPay and on-site tax refund services. Most surveyed respondents also mentioned having used these services, indicating major retailers and brands are already offering them.

In addition to improving the shopping experience, retailers and brands can consider partnering with leading tourist attractions and restaurants, providing an all-around experience from catering to shopping to entertainment in order to differentiate themselves from competitors.

Food and dining are key areas to entice Chinese tourists, who are looking for both Chinese and Asian food options, as well as unique local experiences such as local seafood and delicacies, or fun dining experiences such as having tea and macaroons at the renowned LaDurée in Paris.

Engage with Chinese Tourists Online

Brands and retailers should engage with Chinese tourists online at every stage of their trip, as our survey shows that the majority of Chinese tourist use online resources the most when they research travel destinations and plan trips, and rely on their smartphones while abroad.

Since the majority of Chinese tourists use smartphones to keep in touch with others, brands and retailers can encourage and incentivize them to share their experiences at retail outlets, which is more influential than traditional online advertisements or sponsored content.

Create Immersive Mobile Experiences

The prevalence of mobile engagement throughout the travel journey is perhaps the primary message from our recent research. It is critical for retailers and destinations to adopt an immersive mobile experience both online and offline, including:

1. Ensure that their destination provides Chinese-language information that is mobile-optimized and easily accessible in both China and in the destination market: Retailers and destinations need to make it easy for tourists to both do pre-trip research and in-destination information gathering. Brands and retailers should test their websites in China to ensure accessibility and speed is up to Chinese consumer standards.
2. Mobile payment: Mobile payment is almost ubiquitous in China, but is still in its emerging stages overseas. With the recent emergence of overseas payment platforms that allow for overseas vendors to receive mobile payments in their local currency, we expect to see a rapid increase in the incidence of overseas mobile payments at key destinations for Chinese tourists. Electronics retailers in Japan have already seen tremendous growth from the adoption of mobile payment, and other retailers should expect to see similar growth upon implementation.
3. Offline-to-online mobile integration: Retailers and destinations should provide an immersive offline-to-online mobile retail experience to provide on-site services to Chinese tourists and to create fun and engaging methods to connect with Chinese travelers and collect data and CRM contacts.

Provide Relevant and Engaging Content

Today’s Chinese travelers want to be inspired and excited by traveling and shopping. Some brands and retailers have already been working with Chinese social media influencers to bring their retail destination to life and create engaging and unique content to inspire these global shoppers. For example, Spanish department store El Corte Inglés brought online influencer Crystal Mu to Madrid over Chinese New Year this year, producing a photo shoot and inspiration video, along with online contest and content on Weibo, WeChat and Instagram. This allowed El Corte Inglés to not only raise awareness of their retail destination, but to inspire Chinese consumers on a more emotional level and to create desire and intent to travel via Chinese social media channels.

About Fung Global Retail & Technology

Fung Global Retail & Technology is a think tank that follows emerging retail and technology trends. The team’s researchers and analysts, based in New York, London and Hong Kong, specialize in the ways retail and technology intersect, and in building collaborative communities.

Managing Director Deborah Weinswig leads the team. A former top Wall Street and retail technology analyst, Weinswig publishes ongoing thematic and global market research on topics such as the Internet of Things, digital payments, omnichannel retail, luxury and fashion trends, and disruptive technologies in addition to advising startups around the globe.

About China Luxury Advisors

China Luxury Advisors is a boutique consultancy that helps brands, retailers, tourism organizations and destinations increase their business with Chinese customers. Visit www.chinaluxuryadvisors.com for more information or contact:

Renee Hartmann at renee@chinaluxuryadvisors.com

+1-415-448-7179