Chinese Population Graph by BeunaventuraLongjas

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									     New Markets
     China: The next superpower of outbound tourism?
                  Much has been written about China’s increasing
                  importance on the world stage, and the evidence of
                  growing economic prosperity has led tourism operators
                  to anticipate a big upsurge in outbound Chinese tourists
                  over the coming years. Is this view well-founded, and are
                  the early signs encouraging? Nancy Cockerell,
                  LDR’s Travel Market Commentator, investigates.


                               China’s outbound travel market has been                                                       their recently accorded approved destination          Over the past five years, China’s economy
                               growing by 22% a year since 2000 in terms                                                     status (ADS) from the Chinese authorities.        has already grown by leaps and bounds,
                               of trip volume, so it is little wonder that                                                   (ADS allows a destination to receive Chinese      with GDP growth averaging around 10.5%
                               national tourism organisations (NTOs) and                                                     leisure tour groups.)                             in 2006 and GDP per capita rising by 17%
                               destination suppliers around the world are                                                       The main reason behind the high                to US$2,020. By the end of this decade, per
                               basing so many of their hopes for tourism                                                     expectations is an economic one. Over the         capita income is expected to reach US$2,800
                               development over the next decade on China.                                                    next 50 years China – dubbed one of the           – not a bad performance when one considers
                               Admittedly, their expectations appear to be                                                   BRIC economies alongside Brazil, Russia and       that it was little more than US$1,000 only
                               somewhat unrealistic and there have already                                                   India by Goldman Sachs, the authors of the        four years ago. With such a powerful
                               been disappointments. In both 2005 and                                                        October 2003 report ‘Dreaming with BRICS’         economic engine driving China, it is not
                               2006, for example, China’s annual growth                                                      – is expected to be a major force in the global   surprising that 300 million Chinese have been
                               was well below target for all but a few                                                       economy. In terms of GDP, in US dollar terms,     lifted out of absolute poverty in the last 30
                               European destinations, which were all hyped                                                   China could overtake Germany as soon as           years. And they are all eager to travel.
                               up about the market’s potential following                                                     2007 or 2008, the report said.

                                                                                                                             Changing lifestyles and shifting demographics
                                                                                                                             China’s fast-growing economy and huge domestic market are clearly key factors contributing
                                                                                                                             to the projected future growth in domestic and international tourism demand. But it is also
                       100 %
                                                                                                                             being driven by huge demographic shifts and changing lifestyles.
                                    9                                11
                                                                                              17                       >60
                                                                                                                                In 1994, as Graph 1 shows, the Chinese population was young – 56% of Chinese were
                                                                                                                             29 years old or younger. But the Chinese Government’s ‘one child per family’ ruling has had
                        80 %                                                                                                 a significant impact on the ageing of the population. The highest growth segment of the last
                                                                                                                             decade was the ‘householder’ – the 30-59-year age group. And the main growth segment of
                                   35                                                                                        the next ten years will be the more mature householder – the 40-69-year age group. All other
                                                                                                                             age groups will decline in size and their segment value will therefore not increase in real terms
  P O P U L AT I O N

                        60 %                                                                  48
                                                                                                                             from 2004-14.

                                                                                                                    30-59    Working-age ‘empty-nesters’…
                        40 %
                                                                                                                             The age/lifecycle segment offering the greatest travel growth potential over the next 20 years
                                   56                                                                                        are the working-age ‘empty-nesters’, those whose children are probably more than 20 years old
                                                                     44                                                      and are economically independent. According to statistics published by Asian Demographics,
                        20 %
                                                                                              35                             they already have most of the home ‘durables’ they need, are experiencing rapidly increasing
                                                                                                                             discretionary funds, and are the first wave of educated adults in China.
                                                                                                                                Significantly for travel and tourism, the Chinese mature householder is developing new
                                                                                                                       <30   interests and is now often looking for experiences rather than things.



                                                                                                                             …and the ‘no-child household’
                               Graph 1: Chinese demographics by age                                                          Furthermore, in China we are seeing the emergence of the no-child household (by choice),
                               Sources: International Monetary Fund;
                                                                                                                             as opposed to the one-child household under existing government policy. This means that
                                        The Economist Intelligence Unit
                                                                                                                             a new generation of urban Chinese on the country’s eastern coast will have more time and
                                                                                                                             money to focus on the 4Cs of career, condominium, car and club membership – all elements
                                                                                                                             of status. Marketing to this constituency will require some serious re-engineering of existing
                                                                                                                             promotional models.
Spend (US$million)


                                                                                                                             Asia’s leading travel source
                                                                                                                             China overtook Japan as Asia’s leading outbound travel source in 2002 and has continued to gain

                                                                                                                             share ever since, with preliminary estimates pointing to 34.5 million citizen departures in 2006,

                                                                                                                             up 11%. This compares with 10.5 million in 2000, 4.5 million in 1995 and just 620,000 in 1990.
                                                                                                                                Nevertheless, care must be taken in interpreting the statistics since some 70% of total


                                                                                                                             trips are for Hong Kong and Macau, Special Administrative Regions of China – so not really
                       10000                                                                                                 international destinations at all. And this is in addition to 1.2 billion domestic trips. So this
                                                                                                                             means that China made less than 10.5 million trips to destinations outside Greater China.
% annual change

                                                                                                                             Nevertheless, the absolute number and share are growing fast, even if Europe has yet to
                                                                                                                             benefit strongly.
                                                                                                                                Southeast Asia attracts the bulk of demand for destinations outside Greater China, although




                                                                                                                             the top five destinations – Japan, Thailand, South Korea, Russia and the US – include two





                                                                                                                             outside the region. It should, of course, be noted that, with the exception of Thailand, a
                               Graph 2: Chinese travel expenditure                                                           significant share of trips to these destinations are for business, official or study travel.
                               Sources: CNTA; World Tourism Organization                                                     And the main flows into Russia are land-border crossings into Russia’s Far East.

                       The most attractive destination at the present time,
                      in terms of major growth potential, is Hainan Island.

        The Americas overall officially attract a     Increasing demand for resorts                       The ‘Oriental Hawaii’
     modest 2.6% of trips but, since departures
                                                      Ten years ago, the few Chinese who did travel       Hainan, known as the ‘Oriental Hawaii’, is
     count only the first destination/port of
                                                      abroad primarily visited cities, or went touring.   the largest ocean island and the smallest
     call visited, and Chinese often stop over in
                                                      Almost no Chinese would have ventured               land province in China. Located in the south
     Europe en route to the Americas, the share is
                                                      into the sun for fear of losing their cherished     of China and blessed with a magnificent
     probably higher. With the same caveat, Europe
                                                      pale complexions. Yet, especially among the         natural environment, it occupies an area of
     generates less than a 7% share overall.
                                                      younger Chinese, sun and beach holidays are         35,000 square kilometres, offering tourists
                                                      now extremely popular (as are suntans) hence        a particularly mild climate. Sanya, the most
     Chinese are big spenders                                                                             popular destination on the island, is famous for
                                                      the huge growth in demand for destinations
     Chinese ADS groups are widely considered to      such as the Maldives and Thailand.                  its tropical beaches, but the island also offers
     be ‘cheapskate’ since inbound tour operators        Other resort destinations around Asia            a number of cultural attractions, including
     usually have to work with a budget of less       Pacific have also been attracting more and          temples and tombs from the Ming Dynasty.
     than US$70 a day, according to the European      more Chinese tourists, something that is               While numbers of international travellers
     Tour Operators’ Association, to cover            increasingly attracting the attention of hotel      to Hainan are still relatively modest, a
     accommodation, food and beverages and            developers and investors. And where better          growing share of European tour operators,
     sightseeing – a main reason why tour guides      to start developing new resort properties to        including TUI/Thomson and Kuoni Travel, are
     try to make commissions on shopping tours.       attract the Chinese holidaymaker than in            now marketing the destination. Russians
     But the good news for the tourism industry       China itself?                                       were among the first international visitors
     around the world is that the newly emerging         ‘We have a strong interest in building           thanks to an agreement between the Russian
     independent Chinese leisure traveller is         resorts in China,’ says Brian Deeson, Senior        and Chinese governments that gave Russians
     looking for higher quality and is increasingly   Vice President of Accor’s Asia Pacific &            two-week visa-free access to the island.
     prepared to pay for it.                          Greater China division. ‘As the domestic               In addition to Accor, several international
        International travel expenditure by Chinese   market goes from strength to strength, there        brands are already present in the market,
     totalled around US$25 billion last year, up      is a growing demand for resort experiences.’        including Marriott, Sheraton, Hilton and
     15%, or a relatively modest US$725 per                                                               Holiday Inn. Kempinski was the first of several
                                                         In 2006 Accor opened the Sofitel
     capita. But if travel to Hong Kong and Macau                                                         new five-star resort properties scheduled to
                                                      Zhongshan Resort in Nanjing, which boasts
     is excluded from the count, the average                                                              open in 2007. And Ho Kwon Ping, Executive
                                                      a Gary Player-designed Championship Golf
     spend is over US$1,700 – second only to                                                              Chairman of premium resort group, Banyan
                                                      Course, and more similar developments are
     the Japanese.                                                                                        Tree, is developing a 114-room resort on
                                                      planned by the group for the future.
        Increased interest among Chinese tourists                                                         Hainan Island, also scheduled to open this
                                                         ‘But the most attractive destination             year, as well as looking for opportunities in
     for luxury travel destinations, as well as       at the present time, in terms of market             other parts of China. While most expect a
     luxury branded goods, is the reason behind       growth potential, is Hainan Island,’ says           steady increase in international demand as
     the launch of the Asia Luxury Travel Market      Deeson. ‘Yalong Bay has developed into an           awareness of the destination grows, the main
     (ALTM) in Shanghai this coming June.             important holiday destination and we have           interest is in the Chinese market’s potential.
     The first ever event in Asia Pacific aimed       a Grand Mercure resort being built there, as
     exclusively at the luxury end of the travel                                                             Even if only a modest share of China’s
                                                      well as looking at a project in Sanya itself.
     industry, ALTM is the sister event to the                                                            1.2 billion domestic travellers are interested
                                                      The meetings, incentives, conferences and
     successful International Luxury Travel Market                                                        in holiday resorts, it is clearly a market worth
                                                      exhibitions (MICE) market is also becoming
     in Cannes, and will showcase the world’s                                                             pursuing.
                                                      more important for Hainan, and we manage
     most exclusive hotels, resorts and operators     the Sofitel Boao, which has the largest
     of luxurious travel experiences, and provide a   meeting space on the island, as well as             Nancy Cockerell is LDR’s
     forum for buyers and sellers from inside and     extensive resort facilities including two           Travel Market Commentator
     outside the region to meet and do business.      golf courses.’


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