Jacques PenhirinKatie Sham

HOW THE CHINESE TRAVELER IS EVOLVINGA pre-COVID analysis

How the Chinese traveler is evolving

© Oliver Wyman 2

Over the past decade, Chinese travelers have played an increasingly important role in global tourism. Alongside the continuous surge in numbers since our inaugural survey in 2016, Chinese travelers have exhibited dramatic changes in terms of their travel behavior, preferences, and spending. As Chinese travelers are a key source of revenue for many industries, including Retail and Consumer Goods, Leisure, Hospitality, and Transportation, it is imperative to understand their spending preferences in detail. To get a more complete picture, Oliver Wyman conducted a survey of 2,000 Chinese consumers who had travelled abroad in the past year.

In 2019, Chinese travelers were a key driving force of global tourism in terms of both numbers and spending. During the year, Chinese travelers accounted for 10 percent of global outbound travelers, and they contributed to 16 percent of global travel expenditure, generating outbound travel expenditure of $245 billion. Travelers from the Chinese Mainland have been vital to the respective tourism of the Hong Kong SAR and Macau SAR, representing more than 70 percent of inbound travelers and 80 percent of tourism spending. Chinese outbound travelers have also had significant positive impacts on the travel industries of several Asian countries and regions, such as Korea, Vietnam, Japan, and Thailand, to name a few, contributing between 25 and 40 percent of the travel spending within each of these places.

Exhibit 1. Chinese travelers are a key driver of global tourism

78 80

Hong Kong

7180

Macau

3439

Korea

3227

Vietnam

3037

Japan

28 31

Thailand

2330

Taiwan

19 16

Singapore

713

USA

6 2

Italy

Chinese mainland travelers as a percent of total inbound travelersChinese mainland travelers' spend as a percent of total travel spend (estimated)

of global outbound travelers in 2019

~10%

Outbound travel & tourism expenditure from Chinese in 2019

US$245 BN

of global travel expenditure in 2019

~16%

Source: CEIC, Government databases, news articles, World Travel and Tourism Council, Statista, Oliver Wyman analysis

© Oliver Wyman 3

How the Chinese traveler is evolving

In 2019, Chinese travelers made a total of around 6.2 billion trips, an increase of 8 percent compared to 2018. The continuing growth was driven by rising disposable incomes, more affordable travel options, and the rapid expansion of online travel agencies.

The vast majority of the trips were domestic. In fact, six billion trips were domestic and only 0.2 billion trips were outbound. In addition, the growth of domestic travel has been outpacing outbound travel, growing at a rate of 8 percent versus 4 percent.

Exhibit 2. Steady annual growth trips made by Chinese travelersNumber of trips by Chinese travelers 2015-2019, millions

Domestic

Overseas

Total

11%

15%

11%

8%

4%

8%

‘17-’18CAGR

‘18-’19CAGR

6,006

2019

6,161

155

4,000

2015

4,117

117

4,440

2016

4,562

122

5,001

2017

5,132

131

5,539

2018

5,689

150

Source: CEIC, Government databases, World Tourism Organization, Statista, Oliver Wyman analysis

How the Chinese traveler is evolving

© Oliver Wyman 4

Outbound travel has benefited from the continuous relaxation of travel policies. As of January 2020, 71 countries had implemented visa-free or visa-on-arrival access to Chinese citizens.

The wider adoption of Chinese mobile payment options around the globe has also made outbound travel easier. As of February 2019, 54 markets, including 28 in Europe and 22 in Asia, had begun accepting Alipay payment options.

Exhibit 3. Significant efforts globally to attract Chinese travelers

Relaxation of entry requirementsfor Chinese citizens

Alipay adoption in 54 marketsas of Feb 2019

More lenient policies on multiple-entry visa validity since 2014

71 countries that allow Chinese citizens to have visa-free/visaon arrival access1

USA extends validity from 1 year to 10 years

South Korea extends validity from 3 years to 5 years

28

222

2

North America

Africa

Asia Pacific

Europe

1. As of Jan, 2020Source: Henley Passport Index, Business Insider, News articles, Oliver Wyman analysis

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How the Chinese traveler is evolving

In terms of the selection of outbound destinations, traditionally popular destinations among Chinese travelers, such as Hong Kong and the US, saw sharp declines in tourist numbers in 2019. This was mainly due to the intense political climate existing in these locations. Hong Kong’s inbound travelers from Chinese Mainland dropped by 14 percent year-on-year due to the social unrest there in the second half of 2019. Meanwhile, the number of trips to the US shrank by 5 percent year-on-year as a result of Sino-US trade tensions. Separately, Japan and Korea retained their popularity as top outbound destinations for Chinese travelers in 2019.

Exhibit 4. Political considerations impacted the selection of outbound destinationsTop 8 outbound destinations, where percentage of respondents had visited. Number of respondents, N=2000

2018

2019

31

24

Hong Kong

Japan

16

21

Korea

Korea

15

21

Japan

Hong Kong

15

15

US

Thailand

9

15

France

Macau

9

14

UK

Singapore

7

14

Macau

Taiwan

14

Taiwan

US

5

Question: Which of the following countries have you visited in the past 12 months?Source: Chinese Traveler Survey, November 2018 & 2019, Oliver Wyman analysis

How the Chinese traveler is evolving

© Oliver Wyman 6

For domestic travel destinations, while key Tier 1 cities, namely Beijing, Guangzhou, and Shanghai, have remained top domestic destinations, Chinese travelers’ preferences in terms of domestic travel themes have started shifting from metropolitan sightseeing to enjoying nature. Leisure explorations to Chongqing, Yunnan, and Sichuan ranked as top domestic travel themes in 2019, followed by those to preserved water towns in Jiangsu and Zhejiang, which are within accessible driving distance from Shanghai.

Exhibit 5. Percentage of top domestic destinations 2019 dominated by Tier 1 citiesNumber of respondents, N=2000

Beijing

34

Chongqing

21

Guangdong

21

Hainan

20

Shanghai

13

Question: Which of the following cities have you visited in the past 12 months?Source: Trustdata, Chinese Traveler Survey, November 2019, Oliver Wyman analysis

Exhibit 6. Domestic travelers increasingly prefer enjoying naturePercentage of preferred themes for domestic travel. Number of respondents, N=2000

Leisure explorationsChongqing, Yunnan, Guizhou, Sichuan, Hubei, Hunan

20

Preserved water townsZhejiang, Jiangsu 18

Tropical coastal citiesHainan, Fujian 16

Ancient wondersTibet, Xinjiang 15

Metropolitan sightseeingBeijing, Shanghai, Guangzhou, Shenzhen 12

Snow scenariesNortheast China 11

Wild desertsShanxi, Shaanxi 9

Question: What destination themes/ styles do you prefer for domestic travel?Source: Chinese Traveler Survey, November 2019, Oliver Wyman analysis

© Oliver Wyman 7

How the Chinese traveler is evolving

In terms of the key decision factors for selecting travel destinations, scenery ranked first for both domestic and outbound travel. While dining experiences and child/family friendliness were also important for the travelers making domestic trips, local culture/history and value for money were the other main priorities for the travelers making outbound trips.

Chinese travelers are big spenders, averagely spending RMB14,000 on each outbound trip and RMB9,000 on each domestic trip. During their outbound trips, Chinese travelers show a high willingness to spend on shopping, with their shopping budgets often matching the combined amount they spend on accommodation, flight tickets, meals, and sightseeing. While domestic travelers also have large shopping budgets, these are proportionally not as large as they are for outbound travelers.

Exhibit 7. Domestic travelers want family-friendly destinations with good scenery and diningKey decision factors for travel destination, weighted score

Outbound travel Domestic travel

1 Scenery 5.0 Scenery 5.0

2 Local culture and history 2.6 Dining 3.1

3 Value-for-money 2.4 Child-/Family-friendliness 2.7

4 Online popularity 2.2 Value-for-money 2.6

5 Dining 2.2 Local culture and history 2.4

6 Child-/Family-friendliness 2.1 Online popularity 2.4

7 Themes (e.g. Film scenes) 1.6 Themes (e.g. Film scenes) 1.6

8 Shopping 1.4 Activities and sports (e.g. Skiing, Golf, Concerts) 1.5

9 Activities and sports (e.g. Skiing, Golf, Concerts) 1.4 Shopping 1.2

Question: What do you look for in a tourist destination? (Top 3)Source: Chinese Traveler Survey, November 2019, Oliver Wyman analysis

Exhibit 8. Chinese travelers are big spenders on traveling and shoppingAverage spend per capita per trip, RMB

Travel & sightseeing (excluding shopping) Shopping

7,000

3,800

7,200

5,200

Outbound Domestic

Question: What was your average spending in this trip (in RMB)?Source: Chinese Traveler Survey, November 2019, Oliver Wyman analysis

How the Chinese traveler is evolving

© Oliver Wyman 8

In terms of booking flights, local booking agencies dominate the market. C-trip and official airline websites are the most common channels through which Chinese travelers book their flights, for both overseas and domestic trips. Closely following these travel-booking resources are Fliggy and Qunar, with Fliggy being more preferred for outbound travel and Qunar more preferred for domestic travel.

For accommodation booking, C-trip is still the most popular booking channel for both overseas and domestic trips. For domestic trips, while Qunar ranks second, Meituan has been gaining market share and is now the third most popular option.

Exhibit 9. Local players dominate the market for booking flights

Percentage of outbound transport bookingRespondents’ top 3 choices

Percentage of domestic transport bookingRespondents’ top 3 choices

Foreign online travel agencies 23

Ctrip 72 Ctrip 67

Fliggy 48 Qunar 44Officialwebsite/app 46 Fliggy 43

Qunar 43 Officialwebsite/app 41

Tuniu 35 Tuniu 36

Offline agents 28 Offline agents 30

Question: Where do you book your flight mostly?Source: Trustdata, Chinese Traveler Survey, November 2019, Oliver Wyman analysis

Exhibit 10. C-trip dominates hotel bookings and Meituan is gaining domestic market share

Percentage of outbound hospitality bookingRespondents’ top 3 choices

Percentage of domestic hospitality bookingRespondents’ top 3 choices

Ctrip 56 Ctrip 43

Fliggy 36 Qunar 40

Qunar 34 Meituan 38Officialwebsite/app 31 Fliggy 36

Airbnb 29 Officialwebsite/app 31

Booking.com 27 Airbnb 23

Offline agents 21 Mafengwo 20

Mafengwo 21 Offline agents 20

Question: Where do you book your stays mostly?Source: Trustdata, Chinese Traveler Survey, November 2019, Oliver Wyman analysis

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How the Chinese traveler is evolving

Chinese travelers are increasingly traveling with a special purpose in mind. Two out of three survey respondents said that they have plans to travel for a particular purpose over the next 12 months, with 39 percent planning special sightseeing trips, such as African safaris. Meanwhile, 36 percent are planning sports-related trips, such as for diving, skiing, and hiking, and 32 percent said they would enjoy a photography tour.

Chinese travelers also wish to place an increasing emphasis on unique local activities and experiences. Survey respondents indicated that they would prefer to try local cuisine and stay in boutique hotels. Compared to 2018, more people learned about specialty travel agencies in 2019. However, the adoption rate is still slow, with less than 1 percent of respondents having previously used such services.

Chinese travelers are hungry for social media worthy moments. On average, they post four times as often on their social-media travel moments when they are on their trips. WeChat is still the most popular social media platform, followed by Weibo, Qzone, and Tiktok.

Chinese travelers value convenience very much. They prefer using the Dianping app to look for food and tourist attractions, and Alipay or WeChat to pay for their purchases. Furthermore, they appreciate it when Chinese signage is posted at overseas tourist destinations.

Exhibit 11. Chinese travelers are hungry for social media worthy moments

Use of social media during travelsPercentage of respondents

WeChat Weibo Qzone Tiktok Dianping Kuaishou Red Zhihu Mafengwo Douban Qunar

70

312727

14 14 11 10 9 7 6

Questions: On which social media platform(s) did you post about your last trip?Source: Chinese Traveler Survey, November 2018 and 2019, Oliver Wyman analysis

How the Chinese traveler is evolving

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TRAVELERS FROM DIFFERENT TIER CITIES EXHIBIT DIFFERENT PREFERENCESIn general, family trips are more common during domestic travel, while travelling with partners or friends is equally common for both domestic and overseas travel. Travelers from Tier 1 and 2 cities tend to conduct more solo trips, while those from Tier 3 and 4 cities tend to conduct more family trips.

In terms of travel spending, Tier 3 and 4 travelers have begun to exhibit higher tourism consumption potential. More than 80 percent of these respondents have increased their travel spending from at least 20 percent to 50 percent in the past 12 months, for both outbound and domestic trips.

In terms of spending patterns, travelers from Tier 1 and 2 cities prefer to spend more on accommodation, food and beverages, while travelers from Tier 3 and 4 cities prefer to spend more on transport, sightseeing, and activities.

The number of travelers from Tier 3 and 4 cities traveling for special local activities is almost double that of the travelers from Tier 1 and 2 cities. They show a preference to travel for music festivals, concerts, and unique local experiences and sightseeing, such as viewing wild animal migrations. Travelers from Tier 1 and 2 cities, meanwhile, prefer a more relaxing trip that focuses on leisure and entertainment.

Exhibit 12. Travelers from Tier 3 and 4 cities are showing higher tourism consumption potential

Increased less than 20 percent Increased 20-50 percent

Increased more than 100 percentIncreased 80-100 percent

Increased 50-80 percent

Tier1 Tier2 Tier3 Tier4 Tier1 Tier2 Tier3 Tier4

Percentage increase in spending on outbound travel, 2019. Number of respondents, N=2,000

Percentage increase in spending on domestic travel, 2019. Number of respondents, N=2,000

30

59

5 7

32

59

16

65

16

19

61

19

43

51

5

39

51

10

20

67

12

17

63

17

33

12

1 1 13

Questions: How much has your spending on domestic and outbound travels increased in the past 12 months vs 1 year ago?Source: Chinese Traveler Survey, November 2018 and 2019, Oliver Wyman analysis

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How the Chinese traveler is evolving

CONCLUSIONOverall, Chinese tourists are playing an increasingly important role in the global tourism industry, as their travel frequency and purchasing power continue to increase steadily. At the same time, tourist destinations around the globe are aiming to create a more convenient and suitable travel experience for Chinese tourists through the relaxation of visa policies and the prevalence of mobile payments. With this combination, we believe the impact of Chinese tourists on the global tourism industry will continue to grow.

In addition, Chinese tourists continue to show a higher consumption potential. In particular, they are demonstrating more sophisticated needs compared to the past. For example, Chinese tourists are increasingly keen to understand local culture and explore authentic local cuisine to help them achieve a localized experience. They are also showing a higher willingness to travel for non-mainstream sightseeing spots and share social posts with location hash tags. In addition, they are willing to spend more to reward themselves with better service, and they appreciate the convenience of being able to use established mobile apps. Last but not least, sharing social media worthy moments during their trips has become a must. These changes illustrate the growing significance of Chinese tourists’ increasingly cultural, exploratory, individualized, and social needs when they travel.

The survey results show that Chinese consumers have a strong desire to travel and spend, whether they are traveling domestically or abroad. The insights regarding the changing preferences of Chinese tourists can help industry players to seize specific opportunities to grow their businesses. We believe companies in the tourism industry can dial up their efforts to offer boutique or customized travel options that feature unique local experiences of interest.

Oliver Wyman conducted a consumer survey in March, 2020 to understand the impact of COVID-19 and reveal the changes happening to the behavior of Chinese travelers. Please refer to Chinese Travelers Favor Domestic Destinations for more information.

How the Chinese traveler is evolving

© Oliver Wyman 12

ABOUT THE SURVEYThe online questionnaire was fielded in Mainland China in November 2019. Oliver Wyman surveyed 2,000 travelers to understand the evolving preferences of Chinese tourists. Of the 2,000 respondents, 51 percent were male, and 49 percent were female; 73 percent of the respondents had a monthly income between RMB10,000 and RMB30,000.

Exhibit 13. Sample demographicsSample size, N=2000

Monthly disposableincome distribution2

City tierdistribution3

50,000<=

15,000-29,999

30,000-49,999

10,000-14,999

7,500-9,999

5,000-7,499

45-54

40-44

35-39

30-34

25-29

18-24

Agedistribution1

T3 or below

T2

T1

1. Question: how old are you?2. Question: what is your household’s monthly disposable income (pre-tax, including salary, rent, investment income etc)?3. Question: which province and city are you currently living in?Source: Chinese Traveler Survey, November 2019, Oliver Wyman analysis

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AUTHORS

Jacques PenhirinPartner, Retail and Consumer Goodsjacques.penhirin@oliverwyman.com

Katie ShamPrincipal, Retail and Consumer Goodskatie.sham@oliverwyman.com