Shopping spend as a percentage of overall travel expenditure by Chinese overseas visitors fell in 2016, according to a new report from global consulting firm Oliver Wyman.
Average trip spend rose +3.5% last year, the company said, but expenditure on shopping declined from 41% to 33% of trip expenditure in the same period.
The report, ‘Prepare for Turbulence: The Chinese Traveler of Today and Tomorrow’, reveals that shopping dropped from the second-biggest motivation for travelling to third, behind sightseeing, recreation and entertainment. The decline was mainly driven by decreased shopping for resale – the so-called ‘daigou’ market – which fell from 8% to 3% year-on-year.
“For a decade, outbound Chinese travellers have been the wind beneath the wings of industries, including air travel, hospitality, department stores and luxury goods,” wrote Oliver Wyman Partner and author of the report Hunter Williams. “Every year sees more outbound Chinese travellers than the last, with the number expected to reach 150 million as early as 2017. These travellers have gained a reputation as big spenders, and many businesses worldwide are targeting them closely.
“However, the rising numbers don’t automatically translate into boosts for travel-related businesses. China is a dynamic, developing country undergoing a wide-ranging social and economic transformation, which is changing how people travel, where they go, and what they do on holiday. As the archetypal Chinese traveller disappears, businesses need to adapt, which means understanding the subtleties and diversities of tourists’ preferences and motivations.
“Chinese travellers continue to shift their spending towards more meaningful experiences such as exquisite dining, extraordinary cultural journeys and even adventurous sports,” said Williams. “At the same time, cross-border e-commerce has grown rapidly, overseas travel has democratised, and there is greater availability of products at home, meaning there is less need for buying overseas for resale”
Travellers who rank shopping as the main reason to travel are generally from lower income brackets than those who rank shopping as the second and third motivations to travel, the report noted. Therefore, the most “intent shoppers” are not the biggest spenders in either shopping or total travel spending.
For example, retail spend as a proportion of overall trip expenditure in the UK declined from 42% to 33% despite the weakness of the Pound following Brexit (23 June, 2016). A particular fall was seen in daigou spend, which dropped from RMB1,800 (US$265) to RMB1,000 (US$147) per person from 2015 to 2016. Similarly, retail spend in the USA dropped from 41% to 28% of travel expenditure with only 5% of respondents ranking shopping as number one reason to go to the country.
The report reveals major shifts in the tastes of Chinese travellers, who are becoming more independent as they become more sophisticated.
“Cookie cutter” holidays have greatly declined in popularity as a result – fewer than 1 in 40 holidays were mostly planned by travel agents in 2016 vs. more than 1 in 7 in 2015. “They are also staying longer in distant locations, traveling more with their families and even spending less on shopping,” wrote Williams. “They now travel more with immediate family and especially children, resulting in growth in average group size from 2.9 to 3.1 travellers per group.”
Shorter trips for short-haul destinations, longer ones for long-haul
In terms of travel duration, Chinese travellers are making shorter trips to Asia and significantly longer trips to long-haul destinations. Hong Kong remains the most popular destination despite seeing a -3% year-on-year drop in Chinese visitors in 2016. Hong Kong is “poised for a comeback”, the report noted, with nearly seven times as many respondents saying their impression of the city had improved (55%) rather than worsened (8%), and the majority perceiving it as “good value”.
The report claimed that South Korea slipped from its position as the top destination last year [the 2017 picture will be much starker due to the THAAD dispute with China – Ed], with the traveller planning to visit rate falling from 31% in 2015 to 17% last year. In contrast, Japan continued to rise, again being the fastest-growing destination and now also the most desired, with +4% year-on-year growth and 29% of respondents planning to visit in 2017.
Domestic travel on the rise
The report said that twice as many trips were made domestically in 2016 compared to 2015, with over 90% of respondents making at least one domestic tourism trip in the past 12 months. On the consumption front, they are much less interested in shopping when travelling domestically and also more price conscious, with 47% of respondents seeking value/price compared with 40% for overseas destinations.
With long-haul destinations becoming more popular among Chinese tourists, Oliver Wyman said it expects that a greater proportion of spend will be allocated to accommodation, dining and entertainment, while shopping spend as a percentage of overall travel spend is likely to continue to decline.
(Source: Moodie Davitt Report)