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In November 1983, Guangdong Province, China (PRC) became the first PRC province to undertake an outbound tour to Hong Kong, primarily to allow people to visit friends and relatives (VFR). By 1984, PRC citizens were able to take regular `tours` to both Hong Kong and Macau, both of which are now Special Administrative Regions.
Twenty years later, the trickle of VFR visitors from PRC is now a flood of leisure and business travellers who are changing the way the travel and tourism industry does business. In 2002, PRC`s outbound totalled 16.6 million trips, up 36.8 percent over 2001. That volume, according to PATA`s Strategic Intelligence Centre (SIC), exceeded that of Japan, which recorded 16.523 million outbound trips in 2002.
Even crises seem to be having little impact. In January-August 2003, despite SARS, PRC outbound trips totalled 11.84 million, up 15 percent over the same period in 2002. China National Tourism Administration (CNTA) Policy and Regulation Department Director, Mr. Zhang Jian Zhong, says China has the fastest growth rate and strongest potential as an outbound market.
Phenomenal Growth
What has contributed to this phenomenal growth and what will drive it in the future?
Nations with Approved Destination Status (ADS)
1. Hong Kong 1983 Fully open
2. Macau 1983 Fully open
3. Thailand 1988 Fully open
4. Singapore 1990 Fully open
5. Malaysia 1990 Fully open
6. Philippines 1992 Fully open
7. Australia 1999 Beijing, Shanghai, Guangzhou
8. New Zealand 1999 Beijing, Shanghai, Guangzhou
9. Korea (ROK) 1999 Fully open
10. Japan 2000 Beijing, Shanghai, Guangzhou
11. Vietnam 2000 Fully open
12. Cambodia 2000 Fully open
13. Myanmar 2000 Fully open
14. Brunei 2000 Fully open
15. Nepal 2002 Fully open
16. Indonesia 2002 Fully open
17. Malta 2002 Fully open
18. Turkey 2002 Fully open
19. Egypt 2002 Fully open
20. Germany 2003 Fully open
21. India 2003 Fully open
22. Maldives 2003 Fully open
23. Sri Lanka 2003 Fully open
24. South Africa 2003 Fully open
25. Croatia 2003 Fully open
26. Hungary 2003 Fully open
27. Pakistan 2003 Fully open
28. Cuba 2003 Fully open
Source: CNTA
Steady as She Grows
The adoption of an evolutionary opening-up policy has minimised problems that would have been far worse if the changes were revolutionary. PRC is being careful to ensure a good balance between domestic, inbound and outbound tourism flows, with an obvious view to ensuring that the overall outflow of foreign exchange does not exceed inflow.
As volume grows, the characteristics of PRC`s outbound travellers are also changing. Here are some findings of a survey by China Tourism College President, Prof. Du Jiang:
PRC tourists have a positive attitude toward all the approved destinations. They consider uniqueness to be the most important attribute in a tourist attraction. Hong Kong, Malaysia, Singapore, Korea (ROK) and Australia are the most popular destinations for the following reasons, ranked in order of importance: rich resources, good service, reasonable prices and friendly residents. Most respondents said that package costs were moderate and acceptable.
Official Business
Of PRC`s 16.6 million outbound trips in 2002, about 61 percent were for leisure and 39 percent were for business/official trips. These business/official tours are taken by government ministries, institutions and state enterprises. According to Shanghai Business International Travel Service General Manager, Ms. Ling Jin and China Comfort Travel Assistant President, Dr. Wang Xin Jun, growing Chinese contacts with foreign countries is certain to boost business/official travel.
While growth in business/official travel is not expected to be as high as holiday travel, it is still projected to be more than 10 percent. However, business/official travellers go abroad more frequently than leisure travellers.
Shanghai is a primary source of outbound business/official travel. Emerging as PRC`s commercial hub, Shanghai has established `friendship-city` relationships with eight countries and 24 cities. It is home to many consulates, about 300 foreign financial institutions, 17 foreign bank branches and the offices of more than 5,000 multinational and foreign corporations.
In 2002, more than 15,000 official outbound tour groups were authorised by the Foreign Affairs Ministry of the Shanghai municipal government. Another 150 commercial exhibition tours were organised by the Municipal Trade Promotion Organisation. Other authorised companies sent many more. Even during the SARS crisis, in July 2003, the Shanghai government organised more than 20 business travel groups for sales promotion and communication.
The 2008 Beijing Olympic Games and 2010 Shanghai World Expo will create new opportunities for business/official overseas travel. One Shanghai consultancy company has designed more than 20 professional training programmes to Australia for the Beijing Olympic Games Committee. The German Meisha Conference Corporation of Shanghai has prepared several overseas training programmes for the Shanghai World Fair Committee.
While business/official tours mainly comprise small groups of six or seven people, conference, training and commercial exhibition groups can be comprised of hundreds. The expenses involved are far higher than common overseas tours, largely because they are paid for by organisations and require higher levels of customisation. For the travel agency, organising a business/official tour is more profitable per person than a private holiday.
Government policy has an unusually strong impact on business/official travel. In 1994, for example, the number of official outbound travellers declined when the PRC government placed tighter controls on spending to clamp down on corruption.
Services for business/official overseas tours are provided by five entities: 1) the state-owned service centre or representative office; 2) the commercial consultative corporation dealing with business/official outbound tour affairs; 3) companies handling personal overseas tours; 4) travel agencies, and; 5) offices of foreign travel agencies in PRC.
Travel agencies have only a small proportion of the business/official travel market. The main reasons are as follows:
A number of problems in the business/official travel market sector need addressing:
Ms. Ling and Dr. Wang say it would be ideal if business/official trips could have a clear purpose, include only travellers who have a strong sense of duty, have fixed business destinations and do not add others along the way and clearly distinguish between public and personal expenses. They say that it is their strong belief that in the near future, a state bidding system for business/official outbound tours will be enacted, policy restrictions will be removed for travel agencies that manage them and travel agencies will become the most important professional service body in this market.
Conclusion
In order to further grow the market and boost standards and professionalism, PRC outbound travel executives are suggesting that:
There are problems to overcome for destinations seeking to grow their piece of the PRC market. For some destinations close to PRC, for example, there is a danger of over-dependence on the PRC market and the homogenisation of travel products. There is also the problem of shopping commission or zero-cost tours, resulting from over-competition in the PRC market, that adversely affect a destination`s image. Over-staying PRC travellers and illegal immigration also needs tackling. Despite the pressing problematic issues, the trend is exciting – that at heart of Asia Pacific is potentially the single largest source market in the world by a significant margin.
Case Study: Shenzhen
Located on the south-east coast of PRC, bordering Hong Kong, the city of Shenzhen is positioning itself as the country`s largest port city with sea, land and air transportation linkages. While Beijing and Shanghai may be the political and commercial hubs, Shenzhen authorities note that there are only airports in Beijing and no land-port in Shanghai. They say Shenzhen is perfectly placed to build on its geographical advantage to become a regional and international city and PRC`s biggest outbound tourism distribution centre.
The average disposable income for Shenzhen residents was about US$2,891 in 2002. Outbound trips from all Shenzhen ports totalled 4,605,615 in 2002, a four-fold increase over 1997. Shenzhen is also part of one of the largest economic zones in PRC, the Pearl River Delta Region. Huge streams of people pass through Shenzhen on their way to and from Hong Kong. Many consume local goods and services, generating huge wealth for Shenzhen businesses.
To tap the potential for outbound tourism as a way to develop domestic tourism, the city is working to optimise competitiveness. One recent measure is to develop closer strategic links with Hong Kong under the One Cosmopolis of Two Cities concept. In recent years, the central government has signed a Closer Economic Partnership Arrangement (CEPA) with the Hong Kong Government and allowed residents of Beijing, Shanghai and Guangdong Province to travel to Hong Kong using only their personal identity cards. As one of PRC`s pioneer cities in outbound tourism services, Shenzhen tourism administrators claim to have rich experience in macro-economic regulation and policy-making.
City tourism administrators are working to address a number of competitive disadvantages compared to other PRC cities. Shenzhen faces competition from existing and emerging port cities. Most foreign embassies and consulates are located in Beijing, Shanghai and Guangzhou, making it more convenient in those cities for tourists to obtain exit visas. As the number of port cities increase, some have opened direct air services to Hong Kong. Meanwhile, the 20 year old port facilities at Luohu and Huanggang in Shenzhen need upgrading. Their handling capacity has far surpassed that for which they were designed.
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The editor and PATA`s Strategic Intelligence Centre welcome your comments and feedback. Please contact Mr. John Koldowski via e-mail at johnk@pata.th.com or Mr. Imtiaz Muqbil at imtiaz@loxinfo.co.th
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
