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BEIJING — Many of China’s new jet-setters are ditching the tour bus and opting to go solo, carving out a challenge for retailers who want to capture this growing segment of independent Chinese travelers.
This story first appeared in the January 3, 2014 issue of WWD. Subscribe Today.
Though organized group tours remain dominant for outbound travel, there’s a new wave of intrepid travelers coming down the pipeline who are younger, richer and yearning for unique experiences. Sabrina Zhang, a 30-year-old marketing professional from the port city of Tianjin, fits the profile. After being shepherded across Thailand for two weeks during the Lunar New Year in February, China’s busiest travel period, Zhang vowed to never step foot on another tour bus again.
“I hated it,” Zhang said, explaining how she was forced to eat Chinese food every day and paid for activities she didn’t want to partake in.
To recover, Zhang booked a two-week vacation in June with three friends, stopping in Amsterdam, Barcelona and Paris. Zhang estimated that she spends around 10,000 euros, or $13,570 at current exchange, on luxury goods on each international trip she takes.
“I bought a Versace handbag for 7,000 renminbi [$1,190 at current exchange] in Paris. I saw the same bag [in Tianjin] for over 20,000 renminbi [$3,400],” Zhang said, adding that China’s high taxes on imported goods prompt her to buy abroad.
The majority of Chinese independent travelers are between the ages of 25 and 45, university educated and more demanding as a result of growing up as single children. They also tend to plan trips months in advance and stay in one location longer, according to a recent trend report from travel intelligence company Skift.
In the first five months of the year, the number of Chinese people traveling abroad rose 17.3 percent to 37.5 million, according to the study. It said 83 million Chinese traveled abroad in 2012, spending $102 billion. The government expects the number of Chinese outbound travelers will exceed 100 million by the end of this year, according to Qunar.com, one of China’s leading travel search engines. Qunar estimates that more than 400 million Chinese will travel abroad over the next five years.
Nearly half of Chinese independent travelers spend 9,000 renminbi, or $1,530, a trip, more than the average tourist, who spends 7,500 renminbi, or $1,275, the Skift study said. China’s wealthy are driving outbound travel, and more of them are hitting the millionaire mark every year. The average age of a millionaire in China is 35, according to China Luxury Advisors, a company that helps brands enter the China market.
“Very few Chinese have passports, yet it is still the biggest tourism source country,” said Vincent Trivett, author of the Skift report, titled “Rise of the Chinese Independent Traveler.”
Shopping is a top priority for Chinese travelers since foreign luxury goods — ranging from cosmetics to automobiles — are much more expensive in China. There are hefty Customs duties of up to 65 percent, in addition to consumption tax, which can go up to 45 percent, according to a KPMG study, analyzing the global reach of China’s luxury market.
More affluent Chinese are “partially immigrating,” said Sage Brennan, cofounder of China Luxury Advisors, during an online seminar in November about this new travel trend.
“[They’re] becoming global citizens essentially, buying real estate, sending their kids to school in the U.S., Europe, and really spending more time outside Chinese borders. [It’s] an increasing trend we’ve seen in the past three, four years, and it’s really starting to accelerate,” he said.
The majority of independent outbound travel remains in Asia, to places such as Hong Kong, Korea and Thailand, but other key markets now are Los Angeles and New York City. Boston and Hawaii are shaping up as emerging destinations. In Europe, Paris, London and Frankfurt are popular, said Brennan.
Christine Lu, chief executive officer of luxury travel company Affinity China, noted that independent travelers are interested in customized experiences like private shopping or invitation-only events.
“[Independent travelers] are sophisticated and already well-traveled,” said Lu, explaining how those returning to cities such as Paris or New York for the third or fourth time are looking for access.
The challenge for retailers, Brennan said, is how to engage these travelers who aren’t with the pack, but are renting their own cars, and booking their own accommodations and entertainment. Small groups consisting of four to five people are most common.
Affinity China’s Lu said many independent travelers are traveling for a host of reasons, mainly for investment, immigration or to check out colleges for their kids. But they also want to experience something off the beaten path when they’re away.
“So what we’re finding out now is, and to the disappointment of luxury brands, independent Chinese travelers are more difficult to market to because they’re not all on a bus so you can’t develop a relationship with a tour-guide operator and get a busload of them within a certain time frame to pull up to the store,” said Lu, explaining how many of them already formulate their own opinions about certain brands and target the ones they know and trust.
Brands that already have a presence in China might have an easier time luring Chinese tourists abroad, according to Skift’s Trivett.
“Before [consumers] get on the plane, the brand needs to be the brand of their dreams, and retail presence in China helps,” said Trivett.
Zhang, the tourist from Tianjin, said she was particularly impressed when the staff of a Cartier store in Italy offered her Champagne. But it’s not always like that, she said.
“In Paris, you have to queue up outside the store and inside the store, it felt like a big outlet mall…it was not nice. They were really arrogant and pretentious, the sales ladies,” she said.
A new tourism law in China might prompt even more Chinese to ditch group travel.
The new law, a form of consumer protection action that kicked into effect in October, outlines harsh fines for abusive tour operators, who are traditionally known to sell packaged tours below cost in an effort to recoup their losses through kickbacks and commissions from shops. Since the law came into effect, travel agencies have increased the prices of their tours in order to meet profit margins, making them less of a bargain.
Stories of organized tours’ unexpected detours and add-ons, forced shopping trips and being locked in stores until a certain amount of merchandise was purchased are common, said China Luxury Advisors’ Brennan. More recently, footage of a Chinese tour guide threatening to stab tourists if they didn’t shop enough went viral, becoming another horror story to stack onto the growing list of complaints against underhanded tour operators.
“If a consumer complains, now they can come back and sue those companies where they really never had a law behind them that could back them up if they wanted to do something like that,” Brennan said, adding how some operators have retrenched and are now rethinking their itineraries.