A Non Conventional Cash Flow Pattern Associated With Capital China’s Outbound Tourists

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China’s Outbound Tourists

Go West, Young Man

Outbound tourism continues to outpace even the most positive predictions of a decade ago as Chinese travelers reach the furthest reaches with wanderlust in their hearts and wallets stuffed in their pockets.

“To be wise a man must read ten thousand books and travel ten thousand miles.” Li Bai (Tang Dynasty Poet)

“After hearing so much about the beauty of Europe on TV and in magazines, we saved up for three years to pay for our vacation there in June this year. When we arrived in Paris, we expected something really grand but the hotel rooms were small. The food was poor, the people we met a little It was cold and we didn’t feel very safe in some parts of the city.” Mr. from Shanghai who went to Europe for the first time in 2005.

This reaction in Europe is not unusual from Chinese tourists who are used to their own country, with low-cost high-quality hotels, clean and modern transport systems and extremely low crime rates.

A few years ago, the number of Chinese tourists going abroad was so small that their opinions and experiences were not taken into account by the European industry.

However, now the numbers are starting to look impressive and early travelers in the travel industry in Europe Mr. Liu and others like him are trying to figure out what can be done to improve their experiences.

China is now the fastest growing market for the European travel industry and with the right approach, hotels, B&Bs, shops and attractions across Europe stand to profit hugely from this newly opened market.

market

Last year, about 31 million Chinese traveled abroad. Mainly, they visited other Asian destinations such as Hong Kong, Macao, Singapore, Thailand, Malaysia and South Korea, but two million Chinese also traveled to Europe and this figure is expected to increase every year. By 2020, Europe can expect 13 million Chinese visitors annually.

Travel is particularly fashionable during China’s so-called ‘Golden Weeks’ – February, May and October. The working week in China is now officially limited to five days and the minimum annual leave entitlement is 14 days, with extended holiday periods.

In 2005, travel guide publisher Lonely Planet announced that it would publish some editions of its books in Chinese. The three places where Chinese editions of the travel book will be published are Great Britain, Germany and Australia.

However, it is not all plain sailing. The European PR machine is struggling with some unfortunate stereotypes when it comes to Chinese views of Europe and its people. “London is foggy, Paris is expensive, Rome is dirty and Madrid is dangerous” – and these are the opinions not only of those who have not yet visited, but also of those who have voiced their voices in a series of customer focus groups we have conducted. Recently.

Travel agency

The overall picture of the Chinese travel industry is one of strong growth driven by rising income levels, easing travel restrictions and more vacation periods. Only certain licensed travel agencies are eligible to operate international outbound travel services and, in 1997, there were only 67 outbound travel agencies in China; By 2004, this number had increased to 528. Recent years have seen the privatization and restructuring of formerly state-owned agencies.

However, the agency market is fragmented and there are few national players. It remains dominated by state-owned agencies, many with outdated attitudes to service. Private and foreign capital flows into the industry are being encouraged by the Chinese government but many of the tours offered by existing agencies are unimaginative in content and style and the reality is that the industry has a long way to go before it can truly serve. needs of its customers.

Currently, 90 percent of Chinese people who travel abroad go on group tours, and travel agencies typically receive a commission of about 5-20 percent on the retail price of the tour.

Independent travel is generally not popular and one important explanation for this is language. The Chinese education system’s emphasis on foreign language reading and writing makes communication skills poor even for those who score well in English. For the majority of the Chinese population, communicating in another language is not an option. Given that Europe’s tourism literature and road and airport signs are not yet written in Chinese, these countries are even more closed to the average tourist.

Passport and Paperwork

Traditionally, Chinese citizens are not allowed to travel freely and do not have passports to do so. The situation has changed drastically in the last three years.

After much negotiation, China has signed ‘Approved Destination Status’ (ADS) agreements with more than a hundred partners, including some European countries. ADS facilitates the exit process for Chinese tourists, allowing them to travel on ordinary passports and apply for tourist visas.

Without an ADS, Chinese residents can only travel on a visa for business, study or visiting relatives. With the ADS, individual Chinese passport holders with financial resources have no restrictions on foreign travel, provided they can obtain the individual visas required for entry into the countries they are traveling to. The only restriction is to travel as part of an official tour group and have an escort present when the group is abroad.

For European countries, ADS means countries can legally promote mass leisure travel through distribution and sales channels, including wholesalers and travel agents, as well as promote the destination and its products to Chinese consumers.*

History:

1983 Chinese mainlanders were first allowed to visit HK and Macao for private business

2003 allowed Chinese citizens to apply for private passports using their residence permits, providing the public with an option for international travel.

2004 Germany becomes the first EU country to welcome Chinese tourists

Facts:

· After obtaining a passport, Chinese citizens can apply for a visa to travel as they wish

· For ADS countries, they can apply for tourist visa and for non-ADS countries, they need to get business or visa especially for visiting friends and relatives. (In case of Schengen countries, one visa allows entry to all countries that are part of the Schengen Agreement)

· Although free travel to destination countries is permitted after obtaining a visa, if traveling in a tour group it is standard practice for the tour guide to hold the passports of all group members.

· Travel agents in China who ‘lose’ their group members while in Europe are quickly blacklisted with the visa issuing operations of embassies and consulates in China. The number of ADS-approved tour operators permanently or temporarily blacklisted is steadily increasing.

Purchase

Another way for European businesses to take advantage of China’s growing wealth and newfound freedom in travel is through shopping. Although the number of tourists is not high, the level of spending by Chinese tourists to Europe is.

A trip to Europe is the first time Chinese people go abroad, and their spending patterns can be irrational. Some buy anything they can’t buy in China. Spending by Chinese tourists often does not reflect income levels, but it can be misleading to look at household income or even the level of disposable income of China’s population. Many spend far more than they estimate.

According to French tourism authorities, the average tourist from China to France spends US$3,000 per visit. In contrast, visitors from North America and Europe spend an average of just US$1,000.

challenges

China clearly has huge potential but is proving a difficult market for many European operators.

One of the ironies of the European tourism industry is that if the customers are European, it is heavily regulated; But if customers are buying their products outside the EU, some rules apply.

One factor helping to drive prices down is competition from creative Chinese operators in Europe. These agents are willing to use informal networks of business contacts that bypass many of the normal requirements of group tourism. Established tour operators find it difficult to compete on price with China Town agencies that supply mini-buses driven by local waiters, and this situation is unlikely to change unless Chinese tourists themselves demand more. The good news is that we think Chinese tourists will demand more soon.

Other challenges:

– Short term bookings

– Constant changes in programs

-Unfair competition from small cash paying agents

– Lack of understanding from Chinese agents regarding long journey controls regarding driving hours (Hopefully the new EU driving law will provide a level playing field for all operators to implement appropriate travel plans.)

– Insufficient knowledge of Europe among Chinese sellers

– different habits and tastes of Chinese tourists (behavior in hotels and restaurants is different from what is expected in Europe)

– Lack of knowledge of European law by Chinese tour operators.

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