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New Consumption Boosts Tourism
Shifting spending patterns is redefining China's travel industry
By Wang Jun | NO. 04 JANUARY 25, 2018

Tourists take in Antao Town, a pottery-themed attraction in Chongqing, on December 30, 2017 (XINHUA)

The tourism industry may be the best indicator of the latest consumption trends in China. The data showing how people spent the New Year's Day holiday demonstrate that consumption patterns in the country have changed, and in the coming year even more profound changes will take place in the industrial structure of tourism, which will in turn bring integration, innovation and reorganization to the industry.

Vibrant growth

Figures from the China National Tourism Administration (CNTA) show that the three-day 2018 New Year's Day holiday saw 133 million domestic tourists make trips inside the country, earning revenues of 75.5 billion yuan ($11.63 billion), up by 11.08 percent and 11.22 percent, respectively, year on year.

In fact, in the first half of 2017 alone, Chinese tourists made 2.54 billion domestic trips to the tune of 2.17 trillion yuan ($334.36 billion), and while the figures for the whole year have not yet been released, based on current statistics the number of domestic trips looks sure to surpass 5 billion.

The effervescent growth of the tourism industry is also having a knock on effect elsewhere, boosting associated sectors such as transportation, hospitality and catering.

According to a report jointly released by the China Tourism Academy and Mafengwo.cn, a tourist information-sharing website, China has entered an era of "fragmented traveling," and as the generation born in the 1990s becomes a major force for consumption, the supply chain of the tourism industry is being upgraded, with more transactions conducted through mobile terminals, demand for travel becoming more individualized and more specific products being targeted.

These changes in travel demand have been transmitted to the supply end of the industrial chain. As China's middle class expands, this new group of consumers is driving the emergence of new forms of tourism, triggering a new round of supply-side structural reform in the industry. The 13th Five-Year Plan for the Development of the Tourism Industry issued in December 2016 vowed to intensify the innovation of tourism products and expand new tourism supplies during the 2016-20 period. The upgrading of tourism consumption is now on the way.

'Tourism plus'

With the advancement of supply-side structural reform in the tourism industry, "tourism plus" constitutes a new model integrating travel with other related industries, providing more options for consumers. For instance, study tours have been growing in popularity. According to a report by Economic Information Daily, since 2014 study tours in China have been growing rapidly, with the number of domestic study tours increasing from 1.4 million in 2014 to 3.4 million in 2017, and the number of outbound trips increasing from 350,000 to 850,000. These statistics suggest that more and more Chinese parents are choosing to invest in these kinds of experiences for their children.

Polar tourism, at the high end of the market, is also experiencing explosive growth in the country. The Economic Information Daily reported that the number of Chinese tourists to Antarctica increased from less than 100 in 2008 to 3,944 in 2016, up nearly 40 times in just nine years, making China the second largest source of tourists to the South Pole worldwide.

According to a survey conducted by Tripvivid.com, a travel media platform, several polar tourism service providers in China reported an increase in sales volume in 2017.

Wang Xingbin, a tourism planning expert from the CNTA, said that China's tourism industry maintained medium to high speed growth in 2017, which could not have been achieved without the support of a sound macroeconomy. As people's income and appetite for culture grow, the demand on higher level consumption will naturally expand as people focus more on their quality of life.

The emergence of new industrial forms has brought about the upgrade of consumption demand, but people's requirements in terms of products and their standards in terms of quality are getting higher all the time.

Chinese tourists visit the Jungfraujoch Ice Palace in Switzerland on December 7, 2017 (XINHUA)

Insufficient quality

Over the past 40 years, China has become the largest travel consumer in the world, but it is not yet a major global player in the tourism sector, and imbalance remains in the speed and quality of the industry's growth

According to a report released by the CNTA following a survey for the second quarter of 2017, the average occupancy rate for Chinese hotels with a minimum of three-stars was less than 60 percent, and even in the two largest cities Beijing and Shanghai the rates were only 65.5 percent and 69 percent respectively. In the hotel industry, an occupancy rate of less than 70 percent is usually indicative of meager profits or even financial losses on the part of businesses.

Wang said that China's hospitality industry has been growing apace in recent years, but quality and efficiency remain unsatisfactory, with many hotels running at a loss. This is a problem for the sector as a whole. Without sound economic returns, hotel operators have no incentive to improve service quality, which will continue to foster low occupancy rates in return.

The problems facing the hospitality industry are reflective of the issues facing the tourism industry at large, namely poor quality in spite of high-speed growth. According to Wang, in the future tourism corporations must be prudent in the expansion of their businesses, and must pay attention to improving service quality and efficiency if they are to achieve sustainable growth.

Private investors are also active in the tourism industry. "Last year, investment in tourism was strong. We had thought it would be a reactive kind of growth, but surprisingly, the investment really was booming," said Liu Feng, founder of private tourism investment firm Davost Intelligence.

Liu expects that in 2018 investment in tourism will increase even more, and he believes that cross-industry innovation connected with tourism will be the focus. "Health care and sports tourism, outdoor exercises, and rural activities will attract high investment, and projects involving countryside revitalization will continue to be hotspots for capital," said Liu.

Copyedited by Laurence Coulton

Comments to wangjun@bjreview.com

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