Chinese tourists' spending may slow

By LIA ZHU in San Francisco | | Updated: 2016-12-21 06:04

US retailers and brands are being advised to upgrade their Chinese consumer strategies and tactics and heed changes in market factors, such as currency exchange rates, to court Chinese travelers, the world's largest group of spenders.

Chinese tourists are projected to spend $349 billion per year by 2020 when the number of Chinese overseas tourists is expected to reach 186 million, according to a report recently released by Fung Business Intelligence Centre (FBIC), a Hong Kong-based retail and technology think tank, and China Luxury Advisors (CLA), a US consulting firm.

The report is based on a survey conducted from March 28 to April 12 of 877 Chinese Internet users, who, in their 20s and 30s, had net annual household income of $9,432 or more.

The report noted that the US was the most popular travel destination among those surveyed, with 13.2 percent of them saying that their most recent trip was to the US. Last year's survey showed that number at 3.2 percent.

The increase was a result of "the relaxed visa regime and the US-China joint marketing effort to increase tourism", according to the report. The two countries declared 2016 the US-China Tourism Year after agreeing to extend the duration of visas for short-term business travelers, tourists and students to 10 years in 2014.

The increase in the number of travelers to the US is a key reason the average retail spend per trip has increased year after year, said the report, which shows that Chinese travelers to the US spent 46.6 percent more per trip than the average Chinese overseas tourist did.

Despite the surging numbers of Chinese consumers shopping overseas, the consulting firms said the average spend per tourist could stagnate in coming years through 2020, though not in the immediate future.

Major brands and the Chinese government are taking measures to decrease the price differential between markets, providing fewer incentives to stock up when traveling; on the other hand, cross-border e-commerce is making it easier for Chinese shoppers to buy the brands they want at overseas prices without leaving the country, said the report.

While rising middle-class incomes position millions of Chinese to take their first overseas trips, the per-capita spending growth is likely to moderate with the expected increase in middle-income tourists, according to the report.

"Chinese consumers now care a lot more about overall experience and authenticity. They want to purchase brands that are authentic to the local culture. Brands should focus on its own heritage and customer service when engaging Chinese visitors," said Charlie Gu, director of China Luxury Advisors.

The draw of the national parks is taking Chinese visitors off the beaten path, bringing new business growth to locations beyond the US gateway cities of Los Angeles, New York and San Francisco, said the report.

Salt Lake City, Utah, was a good example, which has enjoyed a surge of Chinese tourists passing through en route to Yellowstone National Park, one of the most aspirational attractions for Chinese travelers visiting the US.

Retailers are also advised to continually upgrade their Chinese consumer strategies to ensure that they are not relying on outdated methods that ignore the rising number of experienced, young individual travelers.

They are encouraged to use digital customer acquisition strategies to capture Chinese travelers' attention even before these tourists go abroad. Companies should continue to leverage digital platforms, such as WeChat, to augment the in-store customer experience and provide after-sales customer service, said the report.

Currency exchange rates also are an important factor to adjust pricing strategies in different regions accordingly.

"Exchange rate is often a key consideration for Chinese travelers when planning a trip abroad. A favorable exchange will definitely incentivize Chinese travelers to visit certain destinations," said Gu.


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