china tourism and luxury travel

www.diamondshades.com publication 1

Trends Luxury Economy Series

Equity Communications

China Outbound Tourism

&

Profile of the Chinese Luxury Traveller

July 3, 2012

China Outbound Tourism Increasing domestic wealth and the

relaxation of the Chinese government's

position on outbound travel has seen

China emerge as the most important

source market for international tourism,

taking up 30% of recent growth. China

tourism deficit was around US$22.5

billion in 2011 and it is expected to top

US$33 billion in 2012. The Civil

Administration of China is growing its

aircraft fleet so that it can transport 450

million people annually by 2015. China is

expected to increase the number of

airports to 230 by 2015 from the current

185. According to a report by the Boston

Consulting Group, China will have 25

million first time travellers a year for the

next decade. Additionally, the China

outbound tourism market is expected to

grow at least 14% annually to US$248

billion by 2020, becoming the world's

largest.

Figure 140: Number of Outbound Chinese Tourists

Source: China National Tourism Administration

Number of Chinese outbound tourists expected to grow to 120 million by 2020

Figure 141: Chinese Outbound Tourist Spending

Source: China National Tourism Administration



Factors Driving Growth in Chinese Foreign Travel

Increasing incomes

A strengthening Chinese

currency making foreign travel

cheap

Chinese government relaxed

policies on foreign travel,

building more airports

Foreign travel is prestigious

More receptive visa regulations

opening up more destination

markets, virtually all major

markets have moved to simplify

visa procedures for Chinese

Taxes that make luxury goods

+45% expensive on the

mainland

Wider selections, and

diminished threat of knock-offs

and fakes abroad

Chinese credit cards now

accepted in all major markets

Mandarin speaking assistants

available in popular luxury-

shopping destinations

Figure 142: Monthly Income of Chinese Outbound Tourists 2010

Source: CTA 2011, Equity Communications Research Estimates

Figure 143: Number of Mainland Tourists to Hong Kong and Macau

Source: Frost & Sullivan

Figure 144: Retail Sales of Consumer Goods in Hong Kong and Macau

Source: Frost & Sullivan Visitors from the Mainland are responsible for 67% of retail sales, spending an average of US$1 000 per trip.



Profile of the Chinese Luxury Traveller

Incomes in China grew at a faster rate than

GDP between 2001 and 2011. Per its 12th

five-year plan, China is now on a drive to

boost domestic consumption and this will

result in incomes rising even faster for the

next five years. With a population of 1.3

billion, if incomes are rising fast at the base

of the economy, it means that incomes at

the top are increasing even faster.

There are different kinds of Chinese

travellers with different needs and,

continuing with the theme of this report,

we are going to focus on the Chinese

luxury traveller.

The wealthy from China are on the move,

confident in their economic well-being,

snapping up luxuries along the way, and

leaving struggling consumers in

traditionally wealthy markets awestruck.

Luxury follows money and the Chinese

wealthy have lots of it to spend. In the last

two years, we have seen more and more

countries easing entry requirements for the

Chinese traveller. Countries with struggling

economies have now understood that, with

domestic consumer spending still tight,

they need the Chinese purchasing power to

prop up their economies.

Figure 145: Overseas spending during Spring Festival (Chinese New Year) - last three years

Source: World Luxury Association

Figure 146: Chinese wealthy taking more holidays

Source: Hurun Best of the Best Survey



According to the Luxury Institute, the

Chinese consumer now makes 40% of

all luxury sales in Europe with France

benefiting the most. For the US, the

Chinese are the fastest growing tourist

group, regularly spending at least US$6

000 - 50% more than the average of

US$4 000 spent by tourists to the USA.

For Tiffany and Co, the world's best

known luxury jewellery brand, 40% of

all sales in 2011 at their flagship New

York store were to tourists and most of

these tourists were from China. In 2008,

Chinese tourists spent $3.6 billion in the

United States and in 2012 they are

expected to spend $8.4 billion. In 2008,

there were 493 000 Chinese visitors to

the United States. That was the first

year the U.S government allowed

Chinese tour groups to travel to the

country. According to the U.S State

Department, after instituting a friendlier

visa regime, the number of Chinese

visitors is expected to soar to 1.8 million

by 2014.

Figure 147: Number of trips abroad by Chinese wealthy


Figure 148: Popular destinations of Chinese wealthy

Source: Hurun Best of the Best Survey 2012



The Chinese have been exhibiting a large

appetite for prestigious luxury brands in

the last few years. Countries known the

world over for having the best luxury

goods have now moved to provide a

more convenient shopping experience

for the Chinese, hoping for the same

kind of growth experienced by Hong

Kong and Macau since 2003 when the

Chinese government unshackled trips to

the regions by Mainlanders. At least 76%

of Mainlanders who visit Hong Kong and

Macau go there for a better all round

shopping experience and leading luxury

goods companies like LVMH and

Richemont have been scrambling to

open as many stores as the market can

take in Greater China.

A World Luxury Association (WLA)

2010-2011 report shows the minimum

age of China’s luxury consumers has

dropped to 25 in 2010 from 35 in 2007.

Chinese buying takes 62% of European

Market, 33% of North America and 69%

of Hong Kong, Macau, Taiwan.

Figure 149: Chinese wealthy, purpose of leisure travelling


61% of HNWIs plan to spend more on travel in the coming years. This is up from 50% in 2010 and 41% in 2009.

Figure 150: Country Association for different luxury product categories (%)

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