- Sunday, September 24, :51:32 AM - Israel Ministry of Tourism IP Address:

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3 Penetrating the Chinese Outbound Tourism Market Successful Practices and Solutions

4 Copyright 2017, World Tourism Organization (UNWTO) Cover photo: copyright Anna Chelnokova Dreamstime Penetrating the Chinese Outbound Tourism Market Successful Practices and Solutions ISBN printed version: ISBN electronic version: Published by the World Tourism Organization (UNWTO). First printing: 2017 All rights reserved. The designations employed and the presentation of material in this publication do not imply the expression of any opinions whatsoever on the part of the Secretariat of the World Tourism Organization concerning the legal status of any country, territory, city or area, or of its authorities or concerning the delimitation of its frontiers or boundaries. The opinions contained in this publication are exclusive from the authors and do not necessarily reflect UNWTO s point of view. World Tourism Organization (UNWTO) Tel.: (+34) Calle Poeta Joan Maragall, 42 Fax: (+34) Madrid Website: Spain omt@unwto.org Citation: World Tourism Organization (2017), Penetrating the Chinese Outbound Tourism Market Successful Practices and Solutions, UNWTO, Madrid. All UNWTO publications are protected by copyright. Therefore, and unless otherwise specified, no part of an UNWTO publication may be reproduced, stored in a retrieval system or utilized in any form or by any means, electronic or mechanical, including photocopying, microfilm, scanning, without prior permission in writing. UNWTO encourages the dissemination of its work and is pleased to consider permissions, licensing, and translation requests related to UNWTO publications. Permission to photocopy this material in Spain must be obtained through: CEDRO, Centro Español de Derechos Reprográficos Tel.: (+34) Calle Monte Esquinza, 14 Fax: (+34) Madrid Website: Spain cedro@cedro.org For authorization of the reproduction of UNWTO works outside of Spain, please contact one of CEDRO s partner organizations, with which bilateral agreements are in place (see: For all remaining countries as well as for other permissions, requests should be addressed directly to

5 Table of contents Acknowledgments 7 Forewords 9 by Taleb Rifai, UNWTO Secretary-General 9 by Huayong Ge, Chairman, China UnionPay 10 Executive summary 11 Introduction 15 Chapter 1 The dynamism of the Chinese outbound tourism market History of the Chinese outbound travel market The trial stage ( ) The second stage ( ) The development stage (2002 to present) The basic structure of China s outbound tourism market The evolution of organized outbound travel Changes in outbound travel types Changes in outbound tourism expenditure Outbound travel destinations Overseas tours Hong Kong, China; Macao, China; and Taiwan Province of China Chinese outbound tourism price index (OPI) China outbound tourism price index of Asian destinations China outbound tourism price index of European destinations China outbound tourism price index of American destinations China outbound tourism price index of Oceania destinations China outbound tourism price index of Middle East and African destinations 34 Chapter 2 Newest trends of the Chinese tourism market Outbound travel market trends General market development trends Tourist product development trends Technological development in tourism sector Factors influencing the China outbound travel market 42

6 2.2 Characteristics of Chinese outbound tourists Overview of changes and characteristics of Chinese tourists Characteristics of Chinese millennial travellers Characteristics of Chinese free independent travel (FIT) market 45 Chapter 3 Analysis of China s outbound tourist-generating regions Segmentation of Chinese outbound tourist-generating regions Tier 1 tourist-generating regions Tier 2 tourist-generating regions Tier 3 tourist-generating regions Outbound traffic organized by travel agencies Outbound traffic of tier 1 tourist-generating regions Outbound traffic of tier 2 tourist-generating regions Outbound traffic of tier 3 tourist-generating regions Features of tourism products in different tourist-generating regions Tier 1 tourist-generating regions Tier 2 tourist-generating regions Tier 3 tourist-generating regions 63 Chapter 4 Successful practices and solutions to penetrate the Chinese outbound tourism market Australia Policies and planning Product development Marketing Technological developments Key solutions Indonesia Policies and planning Product development Marketing Travel facilitation Key solutions Japan Policies and planning Product development Marketing Travel facilitation Technological developments Key solutions Republic of Korea Policies and planning Product development Marketing Travel facilitation 87

7 4.4.5 Technological developments Key solutions Malaysia Policies and planning Product development Marketing Key solutions Maldives Policies and planning Product development Marketing Travel facilitation Key solutions Thailand Policies and planning Product development Marketing Travel facilitation Key solutions France Policies Product development Marketing strategies Travel facilitation Key solutions Switzerland Policies and planning Product development Marketing Travel facilitation Technological development Key solutions Los Angeles (United States of America) Product development Marketing Travel facilitation Technological developments Key solutions 122

8 Chapter 5 Recommendations and conclusion Recommendations: market solutions and approaches to attract Chinese tourists Understand Chinese tourism market Prepare destinations and suppliers on receiving Chinese tourists: provide Chinese friendly services China Outbound Tourism Quality Service Certification Program (QSC Program) Market penetration plan Product development strategy Cooperation with Chinese travel trade Marketing and promotion Conclusion 133 List of acronyms and abbreviations 135 References and bibliography 137

9 T 7 Acknowledgments The present study was carried out by the World Tourism Organization (UNWTO) under the overall supervision and coordination of the Regional Programme for Asia and the Pacific in collaboration with the Programme for Statistics, Trends and Policy. UNWTO extends its deep appreciation to Ms. Xu Fan, Member of UNWTO Panel of Tourism Experts, and to Ivy Alliance Tourism Consulting for their valuable support and contribution. UNWTO also wishes to acknowledge the inputs of Mr. Omar Nawaz, Ms. Harmony Lamm, Ms. Hyeon-Jin Lee and Ms. Thanh Thao Nguyen of the Regional Programme for Asia and the Pacific, and Mr. Michel Julian, Mr. Javier Ruescas and Ms. Julia Baunemann of the Programme for Statistics, Trends and Policy for their research and editorial work.

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11 T 9 Foreword by the UNWTO Secretary-General China today is the number 1 outbound tourism market in the world, both in terms of trips abroad and expenditure. China has become a key source market not only for many destinations in Asia and the Pacific but also for destinations in other regions of the world which see a steady influx and growing interest from Chinese tourists. This report provides a global overview on the evolution of the Chinese outbound market and identifies the key trends of this dynamic sector. It includes case studies from seven destinations in Asia and Pacific and three in Europe and the Americas, all of which have successfully developed the Chinese tourism market. These examples, which focus on issues such as product development, market segmentation, demand and supply analysis and, most importantly, marketing and promotion, provide valuable lessons for all destinations aiming to penetrate the Chinese outbound market. Launched on the occasion of the 22nd Session of the UNWTO General Assembly in Chengdu, China, the report Penetrating the Chinese Outbound Tourism Market Successful Practices and Solutions, will surely be of immense relevance for national tourism administrations and destination management organizations throughout the world. I take this opportunity to express UNWTO s appreciation to UnionPay International for their valuable support in making this report possible and to Ivy Alliance Tourism Consulting for their contribution to this publication Taleb Rifai Secretary-General, World Tourism Organization (UNWTO)

12 Foreword by Chairman, China UnionPay Globalization, informatization and consumption upgrade in recent years have spurred the fast growth of the travel industry. Both in China and the rest of the world, tourism is playing a greater role and taking a larger share in the economy, and it is bringing profound social impacts. Innovative payment options and the collaboration between payment service providers and the travel industry are also playing significant roles in stimulating travel spending and facilitating the industry s upgrade. As one of the world s largest bank card organizations, UnionPay has maintained a sound partnership with the World Tourism Organization (UNWTO) since the two inked a Memorandum of Understanding in 2014, and we have been making consistent contributions to the sustainable development of the global travel industry. Today, I m honored to speak on behalf of UnionPay and introduce the research report on China s outbound travel. China s travel industry has been expanding in recent years, thanks to steady economic growth, economic restructuring and the further opening of the domestic tourism market. Consequently, China has become the world s biggest source of outbound tourists and at the same time an ever popular travel destination. China s travel industry will be able to maintain a steady and rapid growth in the foreseeable future. Backed by the ongoing implementation of the Belt and Road Initiative and the introduction of a number of favorable policies, China s travel industry has enormous potential as its citizens are wealthier and willing to spend more on travel, while its tourism infrastructure is continuously upgraded and more tourism resources are being explored. Payment is involved whenever people make purchases. It is always associated with tourists as they travel and spend. As the preferred choice of payment for China s outbound visitors, UnionPay has built an extensive network covering more than 160 countries and regions and UnionPay cards have been issued in more than 40 overseas markets. UnionPay will continue to improve card acceptance services, engage actively in growth of the travel industry, and bring more benefits and premium experience to travellers so that they are willing to pay with UnionPay cards as they enjoy better user experience. This report not only demonstrates the vitality of China s outbound travel, but also underscores its enormous impact on the global travel industry. Here I d like to wish a complete success of the 22nd Session of the UNWTO General Assembly, and I hope this report can serve as a useful point of reference for friends and colleagues from the travel industry. Last but not least, I d like to express my gratitude to Secretary-General Mr. Taleb Rifai and everyone who played a part in the publication of the report. Huayong GE Chairman, China UnionPay Special Ambassador of the International Year of Sustainable Tourism for Development 2017

13 T 11 Executive summary Having loosened policies and facing increased demand, China has developed into the leading force in global tourism. Chinese consumers are growing in both wealth and numbers. Destinations throughout the world are looking to China, optimistic about the future growth of the Chinese outbound tourism market and eager to compete to attract Chinese tourists. This report presents examples of the pragmatic and creative approaches that various destinations have taken to penetrate the Chinese tourism market. It also aims to provide valuable aid to emerging destinations in understanding current and future tourism demand. The report analyses the current market situation, the newest trends in the Chinese tourism market, the characteristics of Chinese outbound tourists and the segmentation of Chinese outbound-tourist-generating regions. The main topics and findings of the market study are summarized here. Chinese outbound tourism: a booming market The substantial growth of Chinese outbound travel started at the turn of the 21st century as the result of increasingly loosened policies, diversifying consumer demands and profound changes in the market. The outbound tourism market developed rapidly, and the number of outbound tourists maintained double-digit percentage growth each year from 2002 to The number of Chinese outbound tourists surpassed a record 100 million in Emerging trends in Chinese outbound tourism market New trends have emerged due to the rapid development of Chinese outbound tourism. The consumptive ideals of Chinese citizens changed from meeting everyday needs to improving the quality of life with ever more people considering travel as an important component of that improvement. A growing number of consumers choose outbound travel as their first choice for holiday. Consumer groups of different age levels entering into the fray have led to the enrichment and diversification of outbound travel products. Although sightseeing tours remain the major product, themed and in-depth tours that offer unique personal experiences of local lifestyles are becoming increasingly popular. The Chinese outbound tourism market is also under transformation from the application and development of new technologies. The conventional distribution channels have been modified with the emergence of online travel agencies and e-commerce platforms. The tourism market has also been reshaped by China s growing market for mobile Internet, mobile applications and cashless mobile payment.

14 Characteristics of Chinese outbound tourists To help destinations better target consumer needs and develop differentiated products, this report analyses the characteristics of Chinese outbound tourists, especially the psychographics of Chinese millennials and the development of the Chinese free independent traveller (FIT) market. Chinese tourists are becoming more sophisticated, with increasingly diverse and individualized demands. Chinese millennials make up the bulk of Chinese outbound tourism and FIT market. Chinese millennials have demonstrated some unique characteristics: 1. They perceive travel as more for enjoyment and gaining an authentic life experience than as purchasing a product; 2. Chinese millennials love to share. Tourists born in the 1980s enjoy showing off among friends the local food and wine they have tasted, while the 1990s generation mainly enjoys posting selfies through social media; 3. Chinese millennials demand their products and services be smaller, faster and more flexible, which translates into more personalized, mobile, convenient and efficient; 4. The millennials love shopping and value the freedom of self-expression inherent in creating their own styles; and 5. Internet is an indispensable part of their outbound travel. They are the forerunners of mobile applications and revolutionary payment methods. The Chinese FIT market has expanded greatly in the past decade. The Chinese FIT market is extended to increasingly distant destinations. Tourists now are spread across South-East Asia, Africa, North and South America and even the Polar regions. Outbound self-driving tours are also growing rapidly. Independent travellers rely on Wi-Fi to navigate various destinations. Portable Wi-Fi, portable power sources and selfie sticks have made into the top-10 of travellers mustpack lists. Travellers in the FIT market have a higher demand for travel convenience. Therefore, destinations that provide simplified visa applications and direct air connections are more attractive. Segmented tourist source market The vast Chinese market has a very segmented consumer population based on age, income, education, origin etc. To help better understand the structure and market potential, the report has analysed China s outbound tourism source market by segmenting it into three specific regions (see figures 3.1, 3.2 and 3.3) (tier 1 tourist-generating regions; tier 2 tourist-generating regions; and tier 3 tourist-generating regions) based on per capita GDP, per capita disposable income of urban residents, and the number of affluent people. The structure of outbound traffic has shown that the number of outbound tours operated and organized by tour operators in tier 1 tourist-generating regions accounts for nearly 60% of the country s total. The number of outbound tours organized by travel agencies in the tier 2 and tier 3 tourist-generating regions make up 38% and 2% of the country s total, respectively.

15 T Given the differing levels of market maturity in outbound tourism, the structure of tourism products offered in different source markets varies as follows: 1. In the tier 1 tourist-generating regions, there are increasing demands for high-end and luxury tour products. In-depth tours of single destinations are becoming popular among experienced tourists and repeat travellers who require a unique experience of local history and culture. More tourists seek customized services and tour itinerary arrangements to meet their individual needs. Themed tourism products with well planned route itineraries and dedicated activities are replacing the traditional sightseeing tour packages to become the mainstream in the tier 1 tourist-generating regions; 2. In the tier 2 tourist-generating regions, conventional sightseeing products still occupy an important position. However, with the rapid development of outbound travel in some provinces, quality tourism products receive more and more attention, and consumers increasingly value greater choice of accommodation, dining, and flight and itinerary arrangement; and 3. The outbound tourism of tier 3 tourist-generating regions is in its infancy, and traditional sightseeing products are still the norm. All-inclusive group products with standard itineraries account for a high proportion of the products in the market. Successful practices and solutions to penetrate the Chinese outbound tourism market Many destinations that prospect the Chinese market attach great importance to their marketing and promotional activities, hoping to gain a larger share of the market. This report includes case studies on ten representative destination countries and cities from Asia and the Pacific, Europe and the Americas to showcase the varied marketing solutions and approaches taken to penetrate the Chinese outbound tourism market. The case studies have revealed some important findings: 1. The opening and fast growth of China s outbound tourism has benefited many global destinations with increasing Chinese tourist arrivals and tourism revenues; 2. These destinations have developed long-term tourism development plans and adopted Chinese market-friendly policies and strategies which are vital in tapping into the Chinese market; 3. They have, in addition, given great attention to the changes of Chinese tourists needs and have adopted segmented market strategies for product development with a wide range of themed products to target the needs of different consumers; 4. In terms of marketing and promotion, these destinations have created a strong online presence in China by developing Chinese websites and establishing an active presence in China s social media network to engage directly with Chinese consumers; 5. These destinations have fully capitalized on localized marketing channels, as well as the influence of China s major social media network to carry out flexible, innovative and diverse themed marketing campaigns and promotional activities both online and offline; and 6. Many destinations have also rolled out diverse facilitation services for the Chinese market, which have enhanced the attractiveness and competitiveness of the destinations.

16 Recommendations: market solutions and approaches to attract Chinese tourists The report also provides detailed recommendations on strategic planning and marketing approaches when entering the Chinese outbound tourism market. These recommendations draw on the experiences of destinations, featured as case-studies, that have successfully exploited the Chinese outbound tourism market to their advantage. To increase destination awareness or attract more Chinese tourists, national tourism administrations, destination management organizations and tourism stakeholders should take note of the following strategic approaches such as: 1. Studying and appreciating the tourist characteristics and segmentations of sub-markets as the key to successful exploitation of the vast potential of the main Chinese market. Destinations are encouraged to conduct market research to understand the relevant conditions, structures and dynamics of the Chinese outbound tourism market and to identify and analyse target customer groups; 2. Preparing the destination and local tourism suppliers to welcome an influx of Chinese tourists who have their own travel habits and customs. Before entering the Chinese market, destinations are recommended to evaluate whether their local services and infrastructure is ready and prepared to receive Chinese tourists; China ready is not a simple slogan but rather it points out to the capacity of the destination to meet the demand; 3. Developing a phased market entry plan and a regional market penetration plan to explore market potential. For destinations that are less known to Chinese tourists, it would be helpful to develop a phased market entry plan with the primary objective of increasing awareness of the destination amongst the Chinese travel trade and tourists; 4. Creating targeted and differentiated products. This is particularly applicable to destinations that are relatively new to Chinese tourists who should work closely with Chinese travel trade partners to develop tailored packages that feature quality services and accurately identify the correct customer segments especially the high-end and experienced Chinese customers in tier 1 tourist-generating regions; 5. Building close and long-lasting relationships with Chinese tourism stakeholders. Chinese outbound tour operators and travel agencies play an important role in the market and are good intermediaries for any destination that seeks to penetrate the Chinese tourism market or attract more Chinese tourists; 6. Promoting the destinations through different local media channels, taking advantage of new technologies destinations are recommended to establish an online presence in China with a Chinese website and an active presence on China s social media networks; 7. Establishing a presence in China preferably in the main generating areas through national tourism offices, consulates, airline outlets so as to reinforce the marketing and promotional efforts of the destinations; 8. Adopting policies aimed at travel facilitation such as good airline connectivity, smooth and trouble-free visa issuance; and 9. Assuring that safety and security measures are duly respected.

17 T 15 Introduction Asia and the Pacific has a population of 4.1 billion inhabitants, over half (56%) of the world s total. The region has a combined gross domestic product of USD 25.8 trillion (2016), equivalent to one-third of the global economy. 1 Following remarkable growth and development in recent decades, Asia has become the world s largest region in economic terms. Between 2000 and 2015, it recorded the fastest economic growth across world regions, largely driven by China and India, the top and third largest economies in Asia respectively. Other major economies in the region (above USD 1 trillion) are Japan, the Republic of Korea and Australia. China is the largest economy in Asia and the Pacific and the second largest in the world. With a GDP of USD 11.2 trillion (2016), it accounts for about 44% of Asia s economic output and 15% of the world s. China is also the largest country demographically. It has a population of 1.38 billion, equivalent to one-third of the population of Asia and the Pacific. The country s economy has seen rapid growth and internationalization in the last few decades, to become the world s largest manufacturer and exporter of goods. Between 1991 and 2014, China s GDP grew above 7% every year, and above 9% between 2002 and 2011, sometimes in double digits. More recently, the rate of growth has slowed, though GDP still increased 6.9% in 2015 and 6.7% in China s share of the world economy has tripled in the last ten years, from 5% in 2006 to 15% in As a result of remarkable economic growth in a country with the largest population in the world, international travel from China has boomed in the last decade, supported by increased air connectivity, market openness and travel facilitation. In 2012 China became the world s top spender in international tourism and has since led global outbound travel. Tourism expenditure 1 Economic and demographic data compiled by UNWTO according to International Monetary Fund (2017), World Economic Outlook, April 2017, IMF (online), available at: ( ).

18 from China surged from USD 24 billion in 2006 (3% of the world s total) to USD 261 billion in 2016, or 21% of the world s international tourism spending. 2 International tourism trends Over 1,235 million international tourist arrivals (overnight visitors) were recorded globally in 2016, some 47 million more than in 2015, or an increase of 3.9%, according to the latest issue of the UNWTO World Tourism Barometer 3. This marks the seventh consecutive year of sustained growth in international tourism, with arrivals increasing by 4% or more every year after the global economic crisis of In 2012, arrivals surpassed the 1 billion mark, with 1,045 million arrivals recorded. A comparable sequence of solid uninterrupted growth has not been recorded since the 1960s. Europe is the most visited region in the world with 615 million arrivals in 2016, equivalent to half of the world s total, followed by Asia and the Pacific which recorded 309 million arrivals or 25%. The Americas welcomed 200 million international tourists or 16% of the global figure. Africa represents 5% of international arrivals and the Middle East 4%. In 2016, Asia and the Pacific (+9%) recorded the highest growth in international arrivals across subregions, fuelled by strong demand from both intra- and inter-regional source markets. Africa (+8%) rebounded after two years of weaker results. In the Americas (+4%) the growth momentum continued, while Europe (+2%) recorded rather mixed results, with some destinations reporting double-digit growth and others declines. Demand in the Middle East (-4%) was also uneven, with solid results in some countries contrasting with a decrease in others. International tourism receipts (earnings at destinations) reached USD 1,220 billion globally in 2016, up USD 24 billion from 2015, or an increase of 2.6% in real terms (using local currencies at constant prices). Growth in tourism receipts has followed the trend in international arrivals, though at a slightly slower pace. While arrivals are 33% higher than in pre-crisis year 2008, international tourism receipts increased 28% in that period. 2 Data as reflected by UNWTO on international tourism receipts and expenditure for China is based on the balance of payments (BOP) travel credit and debit (as with other countries for reasons of consistency and international comparability) reported by the State Administration of Foreign Exchange (SAFE) at ( ). Note that, according to the International Recommendations for Tourism Statistics 2008 (IRTS 2008), the balance of payments includes both business and personal purposes in the travel item. Business travel covers goods and services acquired by persons going abroad for all types of business activities. Personal travel covers goods and services acquired by persons going abroad for purposes other than business, such as vacations, participation in recreational and cultural activities, visits with friends and relations, pilgrimages, and education and health-related purposes. The travel item does not include international passenger transport, which is reported in a separate category in the BOP under transport. See further the International Recommendations for Tourism Statistics 2008 (IRTS 2008) at statistics.unwto.org/content/ methodology-0 ( ) and the IMF Balance of Payments and International Investment Position Manual (BPM6) at ( ). It is therefore to be noted that there is a variance in the data of UNWTO and those produced by China National Tourism Administration for 2014 and subsequent years that may be reflected in the study. 3 World Tourism Organization, UNWTO World Tourism Barometer (online), available at:

19 T By region, Africa (+8%) recorded the fastest growth in receipts in 2016, followed by Asia and the Pacific (+5%), the Americas (+3%), Europe (+1%) and the Middle East (-2%). By subregion, South-East Asia, Oceania and Subsaharan Africa saw the highest increase in earnings last year, all recording 10% growth. Asia and the Pacific trends Inbound tourism Asia and the Pacific is the second most visited region in the world after Europe, and has been one of the fastest growing in recent years. It received 309 million international tourists in 2016, one-fourth of the world s total. In the past ten years Asia outperformed all world regions in terms of growth, with arrivals increasing an average 6% per year between 2006 and 2016, above the world average of 4%. Most countries in Asia and the Pacific have benefited from tourism development in the last decades, enjoying healthy growth in international arrivals, supported by increased capacity, air connectivity and infrastructure development. Since 1990, the Asia Pacific region has seen steady and sometimes exceptional growth in international tourist arrivals, with the exception of a downturn in 2003 following the SARS outbreak, and a smaller decrease in 2009 due to the global economic crisis. In 2002 it became the world s second most visited region, overtaking the Americas. The region s share of worldwide arrivals has increased steadily from 16% in 2000, to 25% in In 2016 Asia and the Pacific recorded a remarkable 9% increase in international arrivals, 25 million more than in 2015, the highest increase across world regions. All four Asian subregions enjoyed strong results, led by Oceania (+10%) and followed closely by South Asia, North-East Asia and South-East Asia, which all recorded a 9% increase in international arrivals. As of 2016, North-East Asia accounts for half of Asia s international arrivals (154 million). South- East Asia accounts for 37% (113 million), South Asia for 8% (26 million) and Oceania for 5% of arrivals (16 million). China is the top destination in Asia and the Pacific and the world s fourth largest, ranked by international tourist arrivals, reporting 59 million international tourists in 2016, up 4% from Thailand is the second largest in Asia and ninth globally, with 33 million arrivals, followed by Malaysia and Hong Kong, China, which are the third and fourth largest in Asia and 12th and 13th globally, each recording about 27 million arrivals. Japan is the fifth major destination in Asia and 16th overall, with 24 million arrivals in Asia and the Pacific s success in inbound tourism is also reflected in its rapid growth in international tourism receipts. Asia and the Pacific accounts for 30% of the world s international receipts, with USD 367 billion earned in This share has almost doubled since the year 2000, when it was 16%. North-East Asia is the highest tourism-earning subregion in Asia, with USD 169 billion earned in 2016 or almost half (46%) of the region s tourism receipts. South-East Asia represents 32% of the region s earnings, Oceania 13% and South Asia 9%.

20 Outbound tourism China is the world s top spender in international tourism since 2012, following ten years of doubledigit growth in expenditure. Boosted by rising disposable incomes, improved travel facilitation, the lower cost of air transport and the easing of travel restrictions, outbound tourism has grown exponentially over the last two decades. Chinese international tourism expenditure surged from just USD 13 billion in 2000 to USD 261 billion in Spending in 2016 alone increased 12% in real terms. China is also the largest generator of trips in Asia and the world, with 135 million outbound trips in 2016 (+6% from 2015), 4 though much of this travel corresponds to land crossings for very short periods of stay to Hong Kong, China. (Note that China has revised its international tourism expenditure series downwards retrospectively for 2015 and for 2014, after an upward revision last year, due to adjustments in methodology.) This increasing demand for international travel is benefiting many destinations in Asia and around the world. International tourism spending from China currently generates some 21% of tourism receipts in destinations worldwide. Like most source markets, the majority of Chinese tourists travel to destinations within their own region, boosting receipts particularly in Hong Kong, China; Macao, China; Taiwan Province of China; the Republic of Korea; Japan; Cambodia; Viet Nam; Thailand; Malaysia; Singapore and Indonesia. Among other important source markets in Asia and the Pacific are the Republic of Korea (second largest in Asia), which spent USD 27 billion on international tourism in 2016 (+8% from 2015); Australia (third) with USD 25 billion (+6%); and Hong Kong, China, the fourth largest, with USD 24 billion in international tourism expenditure (+5%). Singapore is the fifth largest tourism spender in Asia and the Pacific, with a figure of USD 22 billion in 2016 (+1% from 2015). Demand for international travel from Asia and the Pacific has surged in recent years, and international tourism expenditure from the region now accounts for over two-thirds of the world total. Rapid economic growth in a region with over half the world s population, coupled with increased air connectivity, market openness and travel facilitation, are expected to continue fuelling international travel from Asia and the Pacific, especially from large emerging markets such as China. 4 Data as reflected by UNWTO on international trips by Chinese travellers is based on data reported by the National Bureau of Statistics of China, data.stats.gov.cn/english/easyquery.htm?cn=c01 ( ), as well as included in table 17-9 of the China Statistical Yearbook 2016 at ( ). Data for 2016 has been taken from section VII of the Statistical Communiqué of the People s Republic of China on the 2016 National Economic and Social Development at ( ). According to the China Statistical Yearbook 2016, Explanatory Notes on Main Statistical Indicators, ndsj/2016/html/zbe17.htm ( ), the number of Chinese residents going abroad (Chinese outbound visitors) refers to the number of Chinese (Mainland) residents going to other countries, Hong Kong, China; Macao, China; and Taiwan Province of China for official or private purposes, for sight-seeing, vacation, visiting relatives, medical treatment, shopping, attending conference, or to engage in economic, cultural, sports and religious activities (namely the Chinese outbound visitors). In compiling statistics, each time of leaving is counted as one person-time. It is therefore to be noted that there is a variance in the data of UNWTO and those produced by China National Tourism Administration for 2014 and subsequent years that may be reflected in the study.

21 T Chinese tourism China outbound tourism: leading force of international tourism development Today, China is the world s largest source market of outbound tourists. Since the early 1990s, tourism in China has greatly expanded with the further development of China s reform and opening. China has emerged as not only the region s but also the world s fastest growing source market. It has been the top spender in international tourism since Chinese expenditure surged from USD 13 billion in 2000, to USD 55 billion in 2010, to a staggering USD 165 billion in China accounts for more than half of all tourism expenditures from Asia and the Pacific markets (59%) and generates around 24% of global tourist receipts. This growth consolidates China s position as the number one source market in the world since 2012, following a trend of double-digit growth in tourism expenditure every year since A market with huge potential and opportunities China is the most populous country in the world. The potential for Chinese travel abroad is immense considering that just 6% of the population (81.4 million people) has a passport as of The exponential growth of the Chinese outbound travel market and the huge market potential will generate tremendous business opportunities for international tourism destinations and local tourism suppliers and service providers. China has adopted a selective and incremental approach to the liberalization of overseas pleasure travel. China introduced and formalized the Approved Destination Status (ADS) programme in 1990s, which allows approved destinations to market group leisure tours in Mainland China and Chinese nationals to travel on group tours to an ADS country. 6 Since then, a total of 150 international destinations have entered into bilateral tourism arrangements with the Chinese Government under the scheme. More and more worldwide destinations have increased investment in expanding business in China s outbound tourism market. The competition among destinations for market share and high-value Chinese customers has become much fiercer. How to successfully penetrate the Chinese outbound tourism market China is a vast country with uneven economic development among provinces and cities. The outbound travel demand, spending power and consumption preferences of Chinese tourists vary from region to region. New trends have emerged due to the fast development of Chinese outbound tourism. How to successfully penetrate the Chinese outbound tourism market or grow market share poses great challenges to destinations. Destinations need to understand the dynamism of the Chinese travel market and be equipped with fundamental knowledge on pragmatic marketing approaches and solutions such as how to advertise destination in China, how to develop tailored products, how to engage with Chinese tourists and how to facilitate travel of Chinese tourists. 5 World Tourism Organization ( ), UNWTO World Tourism Barometer, volumes 2 13, UNWTO, Madrid. 6 Arita, S.; Edmonds, C.; La Croix, S. and Mak, J. (2011), Impact of Approved Destination Status on Chinese travel abroad: an economic analysis, Tourism Economics, 2011, volume 17 (5), Wayne, pp

22 Many destinations have successfully expanded business into the Chinese market by developing a Chinese market-focused strategic plan and taking tailored marketing approaches to adapt to the characteristics of the Chinese market. This report analyses the pragmatic and creative approaches that representative destinations in Asia and the Pacific, Europe and the Americas have taken to penetrate and leverage the Chinese tourism market. The analysis and summarization of their successful solutions focus on such key areas as strategic planning, product development, marketing, technological development and travel facilitation. The study on the marketing and product solutions practiced by these destinations is a valuable aid to destinations in understanding and fomenting current and future tourism demand. The study also provides successful examples and useful advice to new destinations when they tap into the Chinese tourism market.

23 T 21 Chapter 1 The dynamism of the Chinese outbound tourism market Summary This chapter provides an historical review of outbound tourism from China. China outbound tourism development has gone hand in hand with the rapid growth of China s economy and the opening of policies. Starting with travel to visit relatives in 1983, it has evolved from touring the border area to the current outbound travel market. As the number of destinations keeps increasing, Chinese travellers are seen everywhere around the globe. Profound changes of consumptive ideals and patterns are taking place. China outbound travel is entering into an era of mass tourism that consists largely of individual consumers. Key words Visiting relatives tour; and Touring the border areas. Key messages Number of Approved Destination Status (ADS) countries for Chinese citizens has increased to 150; In 2014, the number of outbound tourists reached 104 million; and In 2014, Chinese outbound tourists spent a total of USD 165 billion overseas (according to UNWTO). 1.1 History of the Chinese outbound travel market The trial stage ( ) During this initial trial stage, it became possible to visit relatives and tour the border areas, which laid the foundation for outbound tourism. The scope of permissible travel for the purpose of visiting relatives was expanded gradually. In 1983, Chinese residents were allowed to go to Hong Kong, China; and Macao, China, to visit their relatives. This was the beginning of visiting friends and relatives travel (VFR). Thereafter they were allowed to go to Thailand, Singapore, Malaysia and the Philippines. At the beginning, they had to join tour groups organized by travel agencies appointed by the Government, but the procedure gradually became more simplified. Table 1.1 Visiting relatives travel destinations opening and timing, Year November 1983 Destination Trial: citizens from Guangdong province were allowed to travel to Hong Kong, China; and Macao, China, to visit relatives Open: Thailand for Chinese citizens to visit relatives. October 1990 July 1992 Open: Singapore and Malaysia for Chinese citizens to visit relatives. Open: the Philippines for Chinese citizens to visit relatives. Source: The official document regarding opening the relative-visiting travel of Hong Kong, China; and Macao, China, for Chinese citizens was issued by the State Council and has never been published. Therefore, the document is only available on the official website of the State Council.

24 22 Penetrating the Chinese Outbound Tourism Market Successful Practices and Solutions In addition to VFR travel, in November 1987, the Government gave approval to the city of Dandong in Liaoning Province to organize one-day tours to the city of Sinuiju in the Democratic People s Republic of Korea. This was the beginning of border tourism. By the first half of 1998, with the approval of the Government, the provinces of Heilongjiang, Inner Mongolia, Liaoning, Jilin, Xinjiang, Yunan and Guangxi, as well as other autonomous regions, had border tours to the Russian Federation, Mongolia, the Democratic People s Republic of Korea, Kazakhstan, Kyrgyzstan, Myanmar and Viet Nam. The border tours came in 56 varieties, from one-day tours to eight-day tours. Table 1.2 Border tour destinations opening and timing, Year Destination November 1987 Open: border tour between China and the Democratic People s Republic of Korea. April 1992 Open: border tour between China and Mongolia. September 1992 Open: border tour between China and the Russian Federation. Open: border tour between China and Viet Nam. February 1993 Open: border tour between China and Lao People s Democratic Republic. Open: border tour between China and Myanmar. Source: China National Tourism Administration, The Yearbook of China Tourism Statistics, editions , China Travel & Tourism Press, Beijing. According to the official outbound travel statistics from the China National Tourism Administration (CNTA), the number of outbound tourists grew from 3.74 million in 1993 to 5.06 million in 1996, a 36% increase of market size within four years. 1 Table 1.3 Outbound tourism market development, Outbound passengers (million) Annual growth (%) Sources: 1) China National Tourism Administration (1994), The Yearbook of China Tourism Statistics, p. 21, China Travel & Tourism Press, Beijing, p ) China National Tourism Administration (1995), The Yearbook of China Tourism Statistics, p. 23, China Travel & Tourism Press, Beijing, p ) China National Tourism Administration (1996), The Yearbook of China Tourism Statistics, p. 24, China Travel & Tourism Press, Beijing, p ) China National Tourism Administration (1997), The Yearbook of China Tourism Statistics, p. 17, China Travel & Tourism Press, Beijing, p The second stage ( ) In the second stage, outbound tourism was officially opened and the number of outbound destinations increased each year. It was a period of rapid growth for outbound tourism. On 1 July 1997, the Government promulgated its Interim Provisions Concerning the Management of Outbound Travel of Chinese Citizens. Under, visiting relatives tourism received official 1 China National Tourism Administration, The Yearbook of China Tourism Statistics, editions , China Travel & Tourism Press, Beijing.

25 The dynamism of the Chinese outbound tourism market 23 recognition. Consequently, Hong Kong, China; Macao, China; Thailand; Singapore; Malaysia and the Philippines became outbound destinations. Visiting relatives tours, as a special concept, came to an end with the Approved Destination Status (ADS) scheme replacing it. From , the Republic of Korea, Australia, New Zealand, Japan, Viet Nam, Cambodia, Myanmar, Brunei Darussalam, Malta, Indonesia, Turkey and Nepal became ADS outbound destinations of Chinese tourists. Of the seven countries bordering China which were opened to border tourism in 1998, Vietn Nam and Myanmar became ADS in Over the decade since the start of border tourism, many changes took place with border tourism: 1. More and more people who did not live in the border areas made border travels; 2. The border travel routes extended from border cities to the inland; and 3. The average stay of border tourists in foreign countries increased from one day to eight days. In many ways, the rise of border travel and outbound travel are closely linked. Table 1.4 Year that countries were added to the Approved Destination Status (ADS), Year Destination 1983 Hong Kong, China; and Macao, China Thailand Malaysia and Singapore Philippines Republic of Korea Australia and New Zealand Brunei Darussalam, Cambodia, Japan, Myanmar and Viet Nam Indonesia, Malta, Nepal and Turkey. Note: The years listed above indicated the time when bilateral exchange of notes or official signature took effect. The actual start of ADS travel may be launched at a later date. Sources: China National Tourism Administration (1999), The Yearbook of China Tourism Statistics, China Travel & Tourism Press, Beijing, p. 18. China National Tourism Administration (2000), The Yearbook of China Tourism Statistics, China Travel & Tourism Press, Beijing, pp. 18 and 19. By 2001, there were 18 ADS countries. From there, outbound tourism grew very quickly. Outbound passengers rose from 5.32 million in 1997 to million in In other words, the outbound market size expanded by 2.3 times. Table 1.5 Outbound tourism market development, Outbound passengers (million) Annual growth (%) Source: China National Tourism Administration, The Yearbook of China Tourism Statistics, editions , China Travel & Tourism Press, Beijing.

26 24 Penetrating the Chinese Outbound Tourism Market Successful Practices and Solutions The development stage (2002 to present) The defining characteristics of this stage are: a quick increase in the number of outbound destinations, rapid growth of outbound tourism, relaxation of government policies, and diversification of passenger demands. These resulted in profound changes in the outbound market. The number of ADS outbound destinations has grown quickly since Seven countries were added that year, and five more were added in A drastic rise took place in 2004, when 61 countries were added to the ADS list. By the end of 2014, there were 150 international destinations to which Chinese citizens could travel. Today, Chinese travellers are seen in all regions of the world. Table 1.6 China outbound Approved Destination Status (ADS) open timing, Year Destination 2002 Egypt, Germany, India, Maldives, the Russian Federation, South Africa and Sri Lanka Cuba, Croatia, Hungary, Jordan and Pakistan Antigua and Barbuda, Argentina, Austria, Bahamas, Barbados, Belgium, Brazil, Chile, Cook Islands, Cyprus, Czech Republic, Denmark, Dominica, Ecuador, Ethiopia, Estonia, Fiji, Finland, France, Guyana, Greece, Iceland, Ireland, Italy, Jamaica, Kenya, Lao People s Democratic Republic, Latvia, Liechtenstein, Lithuania, Luxembourg, Mauritius, Mexico, Morocco, Netherlands, Norway, Peru, Poland, Portugal, Romania, Saint Lucia, Saipan (United States of America), Seychelles, Slovakia, Slovenia, Spain, Suriname, Sweden, Switzerland, Tanzania, Tonga, Trinidad and Tobago, Tunisia, Ukraine, United Arab Emirates, United Kingdom, Vanuatu, Zambia and Zimbabwe Andorra, Antigua and Barbuda, Bangladesh, Bulgaria, Grenada, Monaco, Namibia, Oman, Syrian Arab Republic, Uganda, and Venezuela Cape Verde, Ecuador, French Polynesia, Ghana, Guyana, Israel, Mali, Montenegro, Papua New Guinea, United Arab Emirates and United States of America Canada, Democratic People s Republic of Korea, Iran, Lebanon, Micronesia, Uzbekistan and Serbia Cameroon, Columbia, Madagascar, Rwanda and Samoa. Note: The years listed above indicated the time when bilateral exchange of notes or official signature took effect. The actual start of ADS travel may be launched at a later date. Sources: China National Tourism Administration (2004), The Yearbook of China Tourism Statistics, China Travel & Tourism Press, Beijing, p. 18. China National Tourism Administration (2005), The Yearbook of China Tourism Statistics, China Travel & Tourism Press, Beijing, p. 18. China National Tourism Administration (2006), The Yearbook of China Tourism Statistics, China Travel & Tourism Press, Beijing, p. 18. China National Tourism Administration (2009), The Yearbook of China Tourism Statistics, China Travel & Tourism Press, Beijing, p. 17. During this stage, the outbound travel market developed rapidly, and the number of outbound tourists maintained double-digit growth every year from 2002 to 2013, reaching a record 107 million in China National Tourism Administration, The Yearbook of China Tourism Statistics, editions , China Travel & Tourism Press, Beijing.