Did you know that the Chinese tourism industry is one of the fastest growing in the world? Together with this upsurge is the increase in hotel development, which is at its highest since the end of the country’s Cultural Revolution. What are the circumstances that have led to the spark in the growth of the country’s tourism and hospitality industry? Is this growth one of the moving factors for its rising economy?
The Late Bloomer
Compared to other countries, China can be considered as a late bloomer to the international tourism market. Despite being so, it has undoubtedly become part of the top 10 travel destinations in the world – a distinction it has held since 1994.
One of the reasons being credited for this dominating entry into the international tourism industry is the shift in its policy when it opened its economy some time in 1978. With disposable income becoming available to its citizens, a sizable Chinese domestic and outbound tourism market was created. However, sustainability is another challenge that needs to be hurdled.
As far as Chinese tourism industry is concerned, hotel development is a critical and major factor. Perhaps this is why majority of the hotel industry in China is strongly influenced by international hotel development trends; something that has worked to keep its tourism industry vibrant.
The Chinese tourism and hospitality industry also benefits from outsourcing critical operations that have resulted in sound compensation and incentive management of workers, well-planned travel services, and responsive human resources. It is worthwhile noting that along with tourism, China is also a growing destination for business process outsourcing like the Philippines and India particularly for information technology and manufacturing.
Even if China is considered a late bloomer, it has posted impressive digits. If we are to believe the figures from the China National Tourism Administration, the 4.44 billion domestic travels the country has generated in 2016 is nothing to laugh at. In fact, this alone has generated $MB3.9 trillion in terms of domestic tourism revenue.
Obviously, such a sizeable amount would be enough to stir local economy. When you factor in the additional 260 million inbound and outbound travels, then it isn’t difficult to see why this late bloomer is such a force in the international tourism market.
The expanding middle class households of China are another factor in the rapid growth and developments experienced by the industry. The disposable income that this segment of society has amassed has made not only domestic air travel more affordable, but the impact has even overflowed to road and rail networks.
This means that more and more Chinese families are taking advantage of weekend getaways, short stay packages, and other low cost premium travel packages. For the tourism and hospitality industry, this has given birth to the proliferation of mid-scale hotels that target the Chinese middle class.
Not to be taken aback, the typical holiday group tours still continue. This movement in the tourism industry is partly responsible for sustaining the existence of the traditionally large and luxurious big grand hotels. With more and more Chinese tourists expressing interest in unique travel experiences, it is seen that the Chinese tourism industry will continue to rise.
New Breed of Travelers
The new breed of domestic travelers is seen as responsible for shaping the future of the Chinese tourism industry. This emerging group of travelers will help move the industry towards practical travels and hotels.
It is understood that this demand will co-exists with the traditional tour groups and luxury hotels. But these new breed of travelers have made hoteliers look at the attractive prospects that boutique hotels may bring. These types of hotels focus mainly on creating a unique and memorable experience for its guests by delivering a lifestyle focused on stylish design, sensual cuisine, and amazing locations.
These boutique hotels may also be the right solution to the consistently growing wellness tourism in China. These types of hotels can offer and integrate a variety of health experiences that will allow tourists to experience lifestyle changes through coaching and relaxation that can help to de stress both the body and mind.
Not to be confused with the yoga, spa, and detox programs offered by other wellness resorts, much of the wellness tourism industry in China focuses on a more traditional approach using traditional Chinese medication that is prescribed to the guests by in-house physicians.
Even the eco-resorts in the country bring to focus of environmental sustainability to attract local and foreign travelers. By adhering to green initiatives, many of the players in the hospitality industry have found huge operational savings by investing in the growing environmental tourism market.
Alliances and Ventures
You cannot take away the element of fun from travel, otherwise you will be looking at a doomed tourism and hospitality industry. This is perhaps the reason why these is also a huge spike in the appearance of themed hotels that are fast becoming a constant presence in the country just like the Disneyland Hotel and Toy Story Hotel in Shanghai for example.
Investing on these types of themed tourist attractions can mean tremendous strain on budgets because of competition. However, by using strategic alliances and joint ventures, it has made it possible for China to keep much of its domestic tourists at home. This means that spending is kept within the country instead of competing for it with international brands outside. The Marriot International merger with Starwood Hotels & Resorts Worldwide is one such example. The outsourcing in the Chinese tourism and hospitality industry will result in more high-end brand hotels at lesser cost.
The presence of high-end hospitality brands is nothing new in China. In fact, Sheraton, Hyatt, Intercontinental, and Marriott have been on the scene for a couple of decades now. The difference is that this time, they are more than just hotel managers and operators. Foreign investment is mixing into the capital of local developers to help create and sustain the China’s tourism industry.
Of course, for foreign investors, this comes at a hefty price considering that all lands in China are owned by the government. But the alliance with local developers, especially well-connected ones make it easier to acquire financing and planning approvals from the state-owned banks.
Will the entry of foreign investment give additional boost to the tourism and hospitality industry? With the perception of bureaucracy and protectionism combined with the complex legal system in China, only time will tell.
Are you aware that during recent years the outbound investments of China have been consistently increasing? For example, in 2016, the country’s investments in Europe, the United States, and other overseas markets have reached US$161 billion or roughly 80% higher than what it was in 2015. One major result of such investments was the acquisition of a quarter of the Hilton Worldwide Holdings for roughly US$6.5 billion.
How does investing abroad relate to the outsourcing in the Chinese tourism industry? For one, being part owner of some of the recognizable hotel brands will help develop the local hotels at a lower cost. Part ownership can also help influence the influx of trendier themed hotels to support the growing demand from the Chinese middle class travelers.
With new government-supported areas like Lijiang, Guilin, Xian, Chengdu, and Shangri La, the government will benefit from the additional influence that these overseas investments can bring. As the number of international tourists continue to rise, it is seen that the government will relax its visa issuance guidelines.
The way that it stands, it looks like the Chinese tourism industry will continue to enjoy the increase in both local and international travelers.